<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997 Commission File Number 0-21458
-------
TELECOMMUNICATIONS INCOME FUND IX, L.P.
---------------------------------------
(Exact name of Registrant as specified in its charter)
Iowa 42-1367356
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Second Street S.E., Cedar Rapids, Iowa 52401
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 365-2506
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interest (the "Units")
------------------------------------------
Title of Class
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filings requirements for the past 90 days.
Yes X No
----- -----
As of October 31, 1997, 67,879 Units were issued and outstanding. Based on the
original sales price of $250 per Unit, the aggregate market value at October
31, 1997 was $16,969,750.
<PAGE> 2
2
TELECOMMUNICATIONS INCOME FUND IX, L.P.
INDEX
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. Financial Statements (unaudited).
Balance sheets - September 30, 1997 and December 31, 1996.
Statements of income - three months ended September 30, 1997
and three months ended September 30, 1996. Nine months ended
September 30, 1997 and nine months ended September 30, 1996.
Statement of changes in partners' equity - nine months ended
September 30, 1997.
Statements of cash flows - nine months ended September 30, 1997
and nine months ended September 30, 1996.
ITEM 2. Management's discussion and analysis of financial condition and
results of operations.
SIGNATURES
<PAGE> 3
3
TELECOMMUNICATIONS INCOME FUND IX, L.P.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 480,896 $ 497,144
Available-for-sale security 52,867 60,310
Net investment in direct
financing leases (Note B) 12,347,034 13,575,298
Notes receivable 162,505 -0-
Allowance for possible lease losses (307,172) (244,814)
------------ ------------
Notes receivable and direct 12,202,367 13,330,484
financing leases net
Equipment leased under operating
leases, less accumulated depreciation
of $196,200 at September 30, 1997
and $23,144 at December 31, 1996 1,106,597 1,307,948
Equipment held for sale 131,029 164,487
Intangibles 4,500 7,615
Other assets 189,438 274,191
------------ ------------
TOTAL ASSETS $ 14,167,694 $ 15,642,179
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Line of credit agreement (Note C) $ 683,418 $ 1,060,490
Trade accounts payable 53,325 4,059
Due to affiliates 26,160 47,719
Accrued expenses and other liabilities 8,400 61,352
Lease security deposits 431,124 439,033
Note payable -0- 845,149
------------ ------------
Total Liabilities 1,202,427 2,457,802
PARTNERS' EQUITY, 100,000 units authorized
General partner, 40 units issued
and outstanding 11,710 11,832
Limited partners: 67,839 units in 1997
and 67,862 units in 1996 issued and
outstanding 12,980,528 13,192,649
Gain on redemption of units 575 -0-
Unrealized loss on available-for-sale
security (27,546) (20,104)
------------ ------------
Total partners' equity 12,965,267 13,184,377
------------ ------------
TOTAL LIABILITIES & PARTNERS' EQUITY $ 14,167,694 $ 15,642,179
============ ============
</TABLE>
See accompanying notes.
<PAGE> 4
4
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
INCOME:
Lease income $480,725 $703,225
Interest income 5,150 42,967
Gain on lease terminations 468,399 -0-
Other 27,314 12,736
-------- --------
Total Income 981,588 758,928
-------- --------
EXPENSES:
Management fees 74,856 84,515
Administrative services 21,000 22,495
Interest 40,634 135,683
Professional fees 27,000 12,223
Provision for possible
losses (Note B) 18,360 52,116
Depreciation 76,254 85,281
Other 44,833 10,878
-------- --------
Total expenses 302,937 403,191
-------- --------
Net income $678,651 $355,737
======== ========
Net income per partnership unit $ 10.00 $ 5.23
======== ========
Weighted average partnership
units outstanding 67,879 68,007
</TABLE>
See accompanying notes.
<PAGE> 5
5
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
INCOME:
Lease income $1,660,200 $ 2,061,517
Interest income 8,300 86,870
Gain on lease terminations 486,921 45,800
Other 33,476 47,253
---------- -----------
Total Income 2,188,897 2,241,440
---------- -----------
EXPENSES:
Management fees 223,193 240,723
Administrative services 66,822 58,935
Interest 136,560 379,170
Professional fees 68,131 87,038
Provision for possible
losses (Note B) 57,283 160,915
Depreciation 230,808 239,160
Other 85,028 55,448
---------- -----------
Total expenses 867,825 1,219,389
---------- -----------
Net income $1,321,072 $1,022,051
========== ==========
Net income per partnership unit $ 19.46 $ 15.03
========== ==========
Weighted average partnership
units outstanding 67,892 68,007
</TABLE>
See accompanying notes.
<PAGE> 6
6
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
General Gain on on Available
Partner Limited Partners Redeemed for-Sale Partners'
(40 Units) Units Amount Units Security Equity
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $11,832 67,862 $13,192,649 $ --- $(20,104) $13,184,377
Change in unrealized loss on
available-for-sale security --- --- --- --- 2,366 2,366
Distributions (300) --- (508,965) --- --- (509,265)
Net income 197 --- 334,488 --- --- 334,685
------- ------ ----------- ------ -------- -----------
Balance at March 31, 1997 11,729 67,862 13,018,172 --- (17,738) 13,012,163
Change in unrealized loss on
available-for-sale security --- --- --- --- 4,104 4,104
Distributions (300) --- (508,908) --- --- (509,208)
Redeemed Units --- (23) (5,750) --- --- (5,750)
Gain on redeemed units --- --- --- 575 --- 575
Net income 2nd quarter 1997 181 --- 307,555 --- --- 307,736
------- ------ ----------- ------ -------- -----------
Balance at June 30, 1997 11,610 67,839 12,811,069 575 (13,634) 12,809,620
Change in unrealized loss on
available-for-sale security -0- -0- -0- -0- (13,912) (13,912)
Distributions (300) -0- (508,792) -0- -0- (509,092)
Net income 3rd quarter 1997 400 -0- 678,251 -0- -0- 678,651
------- ------ ----------- ------ -------- -----------
Balance at September 30, 1997 $11,710 67,839 $12,980,528 $ 575 $(27,546) $ 12,965,267
======= ====== =========== ====== ======== ============
</TABLE>
See accompanying notes.
<PAGE> 7
7
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,321,072 $ 1,022,051
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred organization costs 3,115 3,971
Provision for possible losses 57,283 160,915
Depreciation 230,808 239,160
Gain on lease terminations (486,921) (39,133)
Changes in operating assets and liabilities:
(Increase) decrease in other assets 84,753 (132,022)
Increase in outstanding checks in
excess of cash -0- 312,107
Increase (decrease) in trade accounts
payable excluding equipment
purchase cost accrued 49,266 (3,771)
(Decrease) in due to affiliates (21,559) (171,069)
(Decrease) in accrued expenses (52,952) (42,290)
----------- -----------
Net cash provided by operating activities 1,184,865 1,349,919
INVESTING ACTIVITIES
Acquisitions of, and purchases of equipment
for direct financing leases (3,200,429) (4,497,038)
Purchase of equipment for an operating lease -0- (9,802)
Repayments of direct financing leases 2,414,325 2,562,170
Proceeds from sale or termination of
direct financing leases 2,450,406 2,000,372
Advances on notes receivable (165,000) (185,522)
Repayments on notes receivable 2,495 -0-
Net security deposits collected (repaid) (7,909) (66,910)
----------- -----------
Net cash used in investing activities 1,553,888 (196,730)
FINANCING ACTIVITIES
Distributions paid to partners (1,527,565) (1,530,159)
Redemption of partnership units (5,175) -0-
Repayment of note payable (845,189) (284,825)
Net proceeds from (payments on)
line-of-credit borrowings (377,072) 499,929
----------- -----------
Net cash used by financing activities (2,755,001) (1,315,055)
----------- -----------
Net decrease in cash and cash equivalents (16,248) (161,866)
Cash and cash equivalents at
beginning of period 497,144 161,866
----------- -----------
Cash and cash equivalents at end of period $ 480,896 $ -0-
=========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest $ 149,623 $ 237,074
Non-cash activities:
Direct financing lease restructured as
a note receivable -0- 1,370,346
Repossession of equipment formerly
under lease -0- 200,209
Reclassification of direct financing
lease to other receivable -0- 350,000
Forfeiture of security deposit upon
write-off of lease -0- 32,585
Publicly traded common stock received
as part of a restructured lease -0- 94,605
Operating lease restructured as a
direct financing lease -0- 561,899
Deferred gain recorded as part of a
lease restructured -0- 200,009
</TABLE>
See accompanying notes.
<PAGE> 8
8
TELECOMMUNICATIONS INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1996.
NOTE B -- NET INVESTMENT IN DIRECT FINANCING LEASES
Components of the net investment in direct financing leases are as follows:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Lease payments receivable $ 13,779,138 $ 15,905,074
Estimated unguaranteed residual values of
leased equipment 1,482,516 1,740,217
Unearned lease income (2,945,636) (4,077,214)
Unamortized initial direct costs 31,016 7,221
Allowance for possible losses (307,172) (244,814)
------------ ------------
Net investment in direct financing leases $ 12,039,862 $ 13,330,484
============ ============
</TABLE>
At December 31, 1996, management had charged $135,000 to the loss reserve for
the expected loss on the re-marketing of assets leased to United Tele-Systems.
These assets were subsequently sold to another customer and the lawsuit was
dismissed with no additional loss to the Partnership.
At December 31, 1996, the Partnership had recorded an operating lease with
Custom Communications Network ("CCN") with a value net of depreciation of
$1,273,463. At September 30, 1997, the value of this lease was $1,102,597.
The equipment under this lease is being depreciated under the straight-line
method over its estimated remaining life. Depreciation expense in 1997
amounted to $196,200. Under the operating lease, CCN was to pay the
Partnership an amount based on a percent of CCN's monthly net cash proceeds
from operating the pay phone route. The Partnership has received $104,477 in
1997 from CCN under this arrangement. CCN has not made a payment since July
1997. Management is currently seeking to sell this equipment, but as of
September 30, 1997 has not found a buyer. Management estimates the fair market
value of the equipment to be its carrying value at September 30, 1997.
At December 31, 1996, the Partnership had approximately $164,000 of equipment
(net of depreciation) classified as being held for sale. The equipment is
currently being depreciated under the straight-line method at a rate of $3,618
per month. Management is continuing in its efforts to sell this equipment.
The remaining net equipment cost, which relates to hotel satellite television
equipment, is expected by management to be recovered through the sale of the
equipment.
<PAGE> 9
9
NOTE C - CREDIT ARRANGEMENTS
The Partnership has a line-of-credit agreement with a bank that allows the
Partnership to borrow the lesser of $6.25 million, or 32% of the Partnership's
Qualified Accounts, as defined in the agreement. The line-of-credit originally
expired on November 30, 1997 and carries interest at 1% over prime (9.50% at
September 30, 1997). The agreement carries a minimum interest charge of $7,500
per month. The agreement is cancelable by the lender after giving a 90-day
notice and is secured by substantially all assets of the Partnership. This
line-of-credit is guaranteed by the General Partner and certain affiliates of
the General Partner.
The Partnership has extended the agreement with the lender through April 30,
1998. The agreement was amended with the bank and reduced the line-of-credit
to the lessor of $2 million, or 32% of the Partnership's Qualified Accounts.
The minimum interest charge was also reduced to $3,000 per month.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS THREE MONTHS ENDED NINE MONTHS ENDED
- -------------------------------------------------------------------------------
September 30 September 30
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Description:
Lease income $480,725 $703,225 $1,660,200 $2,061,517
Management fees 74,856 84,515 223,193 240,723
Interest expense 40,634 135,683 136,560 379,170
Professional Fees 27,000 12,223 68,131 87,038
Provision for possible losses 18,360 52,116 57,283 160,915
Depreciation 76,254 85,281 230,808 239,160
Gain on lease terminations 468,399 -0- 486,921 45,800
Other expense 44,833 10,878 85,028 55,448
</TABLE>
Lease income declined during the nine month and three month periods ended
September 30, 1997 as compared to the same periods in 1996 due to the decrease
in net investment in direct financing leases. The decrease in net investment
in direct financing leases is attributable to the early termination of certain
leases in 1997 at the request of the lessee which enabled the Partnership to
recognize total gains on those terminations of $486,921.
Management fees are paid to the General Partner and represent 5% of the gross
rental payments received. Rental payments decreased from $4,814,460 in the
nine months ended September 30, 1996 to $ 4,463,860 for the nine months ended
September 30, 1997. These decreases are attributable to the early terminations
of leases as well as the termination of fully mature leases. The Partnership
has reinvested the cash received on these pay-offs, which occurred periodically
over the nine months.
The decrease in interest expense is a result of the Partnership borrowing less
funds to acquire equipment for investment in direct financing leases. In
addition, the Partnership has used the proceeds of lease terminations to reduce
the balance of its line of credit.
<PAGE> 10
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
Currently the Partnership provides for possible lease losses at a rate of 1.5%
of equipment purchased for investment in leases. This amounts to $57,283 for
the nine months ended September 30, 1997. As discussed in previous reports,
the Partnership realized losses of $124,233 on leases associated with Value
Added Communications as of September 30, 1996. The allowance for possible
lease losses is based upon a continuing review of past lease loss experience,
current economic conditions and the underlying lease asset value of the
portfolio. At the end of each quarter, a review of the allowance account is
conducted. At a minimum, it is the Partnership's desire to maintain a loss
reserve equal to 1.5 percent of the Partnership's investment in leases and
notes, exclusive of any specific reserves. The Partnership currently has a
loss reserve (exclusive of specific reserves) of $298,347. Based on 1.5
percent of the lease and note portfolio, the Partnership should have a minimum
of $206,207 in the loss reserve. Management has determined the loss reserve
account is adequate at September 30, 1997.
At September 30, 1997, the allowance for possible lease losses was comprised of
a general reserve of $280,101 and a specific reserve of $8,825 for United
Tele-Systems and a specific reserve of $21,996 for Custom Communications
Network. The specific reserve of $8,825 was established to cover anticipated
legal costs associated with the sale of the United Tele-Systems equipment.
Lease payments receivable of 31 or more days past due amounted to $372,923 at
September 30, 1997. This represents 2.71% of the Partnership's lease payments
receivable.
The Partnership pays property taxes on equipment leased to customers. The
Partnership then collects the property taxes paid to various government
jurisdictions from the leases. The Partnership has been unable to collect all
of the property taxes it has paid on the behalf of customers leasing equipment
from the Partnership. As a result, a charge of $31,410 has been made to reflect
what management believes is not collectible. The Partnership has and will
continue to pursue the collection of this receivable. Any amounts collected
will serve as a recovery against amounts previously written off. There remains
approximately $170,000 of property tax receivable on the Partnership's books at
September 30, 1997.
The Partnership paid $21,000 to the General Partner for administrative services
for the nine months ended September 30, 1997.
<TABLE>
<CAPTION>
Nine Months Ended
LIQUIDITY AND CAPITAL RESOURCES September 30, 1997 September 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Major Cash Sources:
- -------------------
Principal portion of lease
payments received $2,414,325 $2,562,170
Proceeds received on sale of leases 2,450,406 2,000,372
Net proceeds from debt -0- 215,104
Major Cash Uses:
- ----------------
Net payments on debt 1,222,261 -0-
Purchase of equipment and leases 3,200,429 4,497,038
Distributions to partners 1,527,565 1,530,159
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
The Partnership decreased the amount owed on a $6.25 million line-of-credit
agreement by $377,072 in the nine month period ended September 30, 1997,
leaving an outstanding balance at September 30, 1997 of $683,418. In August,
1995, the Partnership borrowed $1,350,000 from a bank under terms of a
long-term note payable for purposes of investing in additional leases. The
balance due on this note payable at eptember 30, 1997 was $-0-.
The Partnership's line of credit agreement is cancelable by the lender after
giving a 90-day notice. The agreement originally matured in November 1997.
The Partnership has extended the agreement with the lender through April 30,
1998. The agreement was amended with the bank and reduced the line-of-credit
to the lessor of $2 million, or 32% of the Partnership's Qualified Accounts.
The minimum interest charge was also reduced to $3,000 per month. Management
believes that amounts available under the line of credit are adequate for the
foreseeable future.
At the present time the Partnership has encountered competition, however the
Partnership is able to obtain its desired lease rates.
The Partnership is required to establish working capital reserves of no less
than 1% of the gross proceeds to satisfy general liquidity requirements,
operating costs for equipment, and the maintenance and refurbishment of
equipment. At September 30, 1997 that working capital reserve, as defined,
would be $169,698. The Partnership has these funds readily available under its
line-of-credit.
Equipment purchases for investment in direct financing leases has declined. As
the Partnership approaches the liquidation phase of its life, less equipment
will be purchased for investment in leases. All net proceeds from the sale of
Partnership units have been used to acquire equipment. Equipment purchases are
now funded through available excess operating cash and borrowed funds.
At September 30, 1997 adequate cash is being generated to make projected
distributions.
At any time after October 30, 1996, but no later than April 30, 1998, the
Partnership will cease reinvestment in equipment and leases and will begin the
orderly liquidation of Partnership assets. The Partnership must dissolve on
December 31, 1999, or earlier, upon the occurrence of certain events. To date,
the General Partner has made preliminary inquiries of certain parties with
respect to a method of liquidation of all or a portion of the Partnership's
assets. No agreements, however, have been entered into and the General Partner
will continue to pursue the best possible liquidation scenario on behalf of the
Partnership.
<PAGE> 12
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
------------------------------------------
(Registrant)
Date November 11, 1997 Ronald O. Brendengen/s/
----------------- -----------------------------------------
Ronald O. Brendengen, Chief Financial
Officer, Treasurer
Date November 11, 1997 Daniel P. Wegmann/s/
----------------- -----------------------------------------
Daniel P. Wegmann, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE UNAUDITED BALANCE
SHEETS OF TELECOMMUNICATIONS INCOME FUND IX, L.P. AS OF SEPTEMBER 30, 1997, AND
THE UNAUDITED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 480,896
<SECURITIES> 52,867
<RECEIVABLES> 12,509,539
<ALLOWANCES> (307,172)
<INVENTORY> 0
<CURRENT-ASSETS> 12,736,130
<PP&E> 1,433,826
<DEPRECIATION> (196,200)
<TOTAL-ASSETS> 14,167,694
<CURRENT-LIABILITIES> 771,303
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 12,965,267
<TOTAL-LIABILITY-AND-EQUITY> 14,167,694
<SALES> 0
<TOTAL-REVENUES> 2,188,897
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 673,982
<LOSS-PROVISION> 57,283
<INTEREST-EXPENSE> 136,560
<INCOME-PRETAX> 1,321,072
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,321,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,321,072
<EPS-PRIMARY> 19.46
<EPS-DILUTED> 19.46
</TABLE>
