<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 MARCH 31, 2000
Commission File Number 0-21458
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TELECOMMUNICATIONS INCOME FUND IX, L.P.
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(Exact name of Registrant as specified in its charter)
Iowa 42-1367356
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Tama Street, Marion, Iowa 52302
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 447-5700
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
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As of April 20, 2000, 67,028 units were issued and outstanding. Based on the
book value at March 31, 2000 of $16.89 per unit, the aggregate market value at
April 20, 2000 was $1,132,103.
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TELECOMMUNICATIONS INCOME FUND IX, L.P.
INDEX
Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statements of Net Assets - March 31, 2000 and
December 31, 1999 (Liquidation Basis) 3
Statement of Changes in Net Assets - three months ended
March 31, 2000 and 1999 (Liquidation Basis) 4
Statements of Cash Flows - three months ended
March 31, 2000 and 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 8
Part II. OTHER INFORMATION
Item 1. Legal proceedings 8
Signatures 9
2
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TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
(Liquidation Basis) (Liquidation Basis)
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 36,221 $ 135,796
Marketable equity security 14,042 31,394
Not readily marketable equity securities 227,334 268,620
Net investment in direct financing leases
and notes receivable (Note B) 364,070 382,027
Equipment leased under operating leases 775,597 775,597
Other assets 81 -0-
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TOTAL ASSETS 1,417,345 1,593,434
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LIABILITIES
Outstanding checks in excess of bank balance 458 94,490
Trade accounts payable 6,805 9,535
Due to affiliates -0- 477
Accrued expenses and other liabilities 23,779 21,075
Lease security deposits 18,888 18,888
Reserve for estimated costs during the
period of liquidation 234,682 259,000
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TOTAL LIABILITIES 284,612 403,465
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NET ASSETS $ 1,132,733 $ 1,189,969
============= =============
</TABLE>
See accompanying notes.
3
<PAGE> 4
TELECOMMUNICATIONS INCOME FUND IX, LP.
STATEMENT OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Net assets at beginning of period $ 1,189,969 $ 2,721,580
Income from direct financing leases 4,318 53,470
Interest and other income 5,385 14,597
Withdrawals of limited partners (3,933) (760,000)
Change in estimate of liquidation value of net assets (63,006) 50,812
----------- -----------
Net assets at end of period $ 1,132,733 $ 2,068,327
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
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<S> <C> <C>
OPERATING ACTIVITIES
Changes in net assets excluding distributions and withdrawals $ (53,303) $ 68,067
Adjustments to reconcile to net cash from operating activities:
Liquidation basis adjustments 63,006 -0-
Non-cash dividend income (2,707) -0-
Changes in operating assets and liabilities:
Other assets (81) -0-
Due from affiliates -0- (45,000)
Outstanding checks in excess of bank balance (94,032) (89,627)
Trade accounts payable (2,730) 44,121
Due to affiliates (477) -0-
Accrued expenses 2,704 (3,051)
Reserve for estimated costs during the period of liquidation (24,318) (74,882)
----------- -----------
Net cash from operating activities (111,938) (100,372)
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INVESTING ACTIVITIES
Repayments of direct financing leases and notes 16,296 233,180
Proceeds from sale of direct financing leases -0- 15,077
Security deposits paid -0- (24,587)
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Net cash from investing activities 16,296 223,670
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FINANCING ACTIVITIES
Distributions and withdrawals paid to partners (3,933) (712,132)
----------- -----------
Net cash from financing activities (3,933) (712,132)
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Net decrease in cash and cash equivalents (99,575) (588,834)
Cash and cash equivalents at beginning of period 135,796 711,589
----------- -----------
Cash and cash equivalents at end of period $ 36,221 $ 122,755
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Other changes in estimate of liquidation value of net assets $ -0- $ 8,435
</TABLE>
See accompanying notes.
5
<PAGE> 6
TELECOMMUNICATIONS INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
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 three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000. For further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1999.
On May 1, 1998, the Partnership ceased reinvestment in equipment and leases and
began the orderly liquidation of the Partnership in accordance with the
partnership agreement. As a result, the unaudited financial statements have been
presented under the liquidation basis of accounting. Under the liquidation basis
of accounting, assets are stated at their estimated net realizable values and
liabilities include estimated costs associated with carrying out the plan of
liquidation.
NOTE B -- NET INVESTMENT IN DIRECT FINANCING LEASES AND NOTES RECEIVABLE
The Partnership's net investment in direct financing leases and notes receivable
consists of the following:
<TABLE>
<CAPTION>
(Liquidation Basis) (Liquidation Basis)
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Minimum lease payments receivable $ 543,915 $ 562,302
Estimated unguaranteed residual values 29,955 29,955
Unearned income (100,108) (104,530)
Unamortized initial direct costs 503 607
Notes receivable 25,377 32,835
Adjustment to estimated net realizable value (135,572) (139,142)
--------- ---------
Net investment in direct financing
leases and notes receivable $ 364,070 $ 382,027
========= =========
</TABLE>
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On May 1, 1998, the Partnership ceased reinvestment in equipment and leases and
began the orderly liquidation of the Partnership in accordance with the
partnership agreement. As a result, the unaudited financial statements have been
presented under the liquidation basis of accounting. Under the liquidation basis
of accounting, assets are stated at their estimated net realizable values and
liabilities include estimated costs associated with carrying out the plan of
liquidation.
As discussed above, the Partnership is in liquidation and does not believe a
comparison of results would be meaningful. The Partnership realized $9,703 in
income from direct financing leases, notes receivable, and other income during
the first quarter of 2000. This represents an annualized return on average net
assets of approximately 3.3%. Also, management decreased its estimate of the
liquidation value of net assets during the first quarter of 2000 by $63,006,
primarily due to the decreased market value of the Partnership's equity
securities. The Partnership has accrued the estimated expenses of liquidation,
which is $234,682 at March 31, 2000. The General Partner reviews this estimate
and will adjust quarterly, as needed.
The Partnership will continue to make distributions to the partners as leases
and notes receivable are collected or sold and other assets are sold. The
valuation of assets and liabilities necessarily requires many estimates and
assumptions and there are uncertainties in carrying out the liquidation of the
Partnership's net assets. The actual value of the liquidating distributions will
depend on a variety of factors, including the actual timing of distributions to
the partners. The actual amounts are likely to differ from the amounts presented
in the financial statements.
As of March 31, 2000 there were six customers with payments over 90 days past
due. When payments are past due more than 90 days, the Partnership discontinues
recognizing income on those contracts. The Partnership's net investment in these
contracts at March 31, 2000 was $327,118. One customer has two contracts past
due with a total net investment of $222,941, which represents 61% of the
Partnership's net investment in direct financing leases and notes receivable of
$364,070. Management believes its reserve is adequate related to these
customers. Management will continue to monitor the past due contracts and take
the necessary steps to protect the Partnership's investment.
The Partnership's portfolio of leases and notes receivable are concentrated in
pay telephones and computer equipment, representing approximately 72% and 11%,
respectively, of the portfolio at March 31, 2000. One customer accounts for
approximately 61% of the Partnership's portfolio at March 31, 2000. This
customer is past due, as mentioned above.
YEAR 2000 ISSUE
As of the date of this filing, the Partnership and its General Partner have
encountered no problems relating to the year 2000 issue. The Partnership and its
General Partner are not aware of any year 2000 problems or situations
encountered by its customers, vendors, affiliates, or others.
7
<PAGE> 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EQUITY PRICE SENSITIVITY
The tables provide information about the Partnership's marketable and not
readily marketable equity securities that are sensitive to changes in prices.
The tables present the carrying amounts and fair values as of March 31, 2000.
Carrying Amount Fair Value
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Common Stock-Murdock $ 14,042 $ 14,042
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Available-for-sale securities $ 14,042 $ 14,042
=========== ===========
Carrying Amount Fair Value
--------------- ----------
Common Stock-Murdock $ 35,734 $ 35,734
Preferred Stock-Murdock 191,600 191,600
----------- -----------
Not readily marketable securities $ 227,334 $ 227,334
=========== ===========
The Partnership's primary market risk exposure with respect to equity securities
is equity price. The Partnership's general strategy in owning equity securities
is long-term growth in the equity value of emerging companies in order to
increase the rate of return to the limited partners over the life of the
Partnership. The primary risk of the securities held is derived from the
underlying ability of the entity invested in to satisfy debt obligations and its
ability to maintain or improve common equity values. Since the investments are
in an emerging company, the equity price can be volatile. The Partnership holds
15,548 shares of Murdock Communications Corporation ("Murdock") as available for
sale and 42,039 shares as not readily marketable, due to restrictions imposed by
rule 144 of the Securities and Exchange Commission. At March 31, 2000, the
market price of Murdock was $1.06 per share. As of April 20, 2000, the price of
Murdock had dropped approximately 40% to $.64 per share. The effect of this
decrease in market price decreases the book value of the Partnership units by
$.36, or 2.1% of the total liquidation value. At March 31, 2000, the total
amount at risk was $241,376.
PART II
ITEM 1. LEGAL PROCEEDINGS
Telcom Management Systems filed a suit against the Partnership, the General
Partner, and others in Federal Court in Dallas, Texas during February 1998. The
plaintiffs purchased equipment from the Partnership out of a bankruptcy for
approximately $450,000. They alleged that when they attempted to sell the
equipment at a later date, the Partnership had not provided good title. The
General Partner filed a Motion for Summary Judgement, which is still pending.
After filing the suit, the plaintiff transferred assets in lieu of bankruptcy.
The bankruptcy trustee is now reviewing the transfer to determine if the
transfer was done in fraud of creditors. The bankruptcy court has granted
several extensions and the litigation is on hold until the trustee makes a
decision, then the Motion for Summary Judgement must be responded to. No loss,
if any, has been recorded in the financial statements with respect to this
matter.
8
<PAGE> 9
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.
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(Registrant)
Date: May 4, 2000 /s/ Ronald O. Brendengen
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Ronald O. Brendengen, Chief Financial Officer, Treasurer
Date: May 4, 2000 /s/ Daniel P. Wegmann
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Daniel P. Wegmann, Controller
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements of Telecommunications Income Fund IX, L.P. as of
March 31, 2000, and is qualified in its entirety by reference to such financial
statements. The Partnership is in the liquidation phase and as such has prepared
the financial statements under liquidation basis accounting.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 36,221
<SECURITIES> 241,376
<RECEIVABLES> 364,070
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 775,597
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,417,345
<CURRENT-LIABILITIES> 284,612
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,132,733<F1>
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Net Assets
</FN>
</TABLE>
