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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 2000
Commission File Number: 0-25574
TELECOMMUNICATIONS INCOME FUND X, L.P.
(Exact name of Registrant as specified in its charter)
Iowa 42-1401715
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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")
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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 July 17, 2000, 88,747 units were issued and outstanding. Based on the book
value at June 30, 2000 of $64.33 per unit, the aggregate market value at July
17, 2000 was $5,709,095.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
INDEX
Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statements of Net Assets (Liquidation Basis)-
June 30, 2000 and December 31, 1999 3
Statements of Income and Comprehensive Income (Loss)
(Going Concern Basis)- three and six months ended
June 30, 1999 4
Statements of Changes in Net Assets (Liquidation
Basis)-three and six months ended June 30, 2000 5
Statements of Cash Flows-six months ended June 30, 2000
and 1999 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Signatures 11
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF NET ASSETS (UNAUDITED)
(Liquidation Basis) (Liquidation Basis)
June 30, 2000 December 31, 1999
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ASSETS
Cash and cash equivalents $ 789,721 $ 4,147
Marketable equity security 55,207 305,952
Not readily marketable equity securities 1,796,718 778,602
Net investment in direct financing
leases and notes receivable (Note B) 4,817,488 10,652,042
Other assets 51,268 88,212
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TOTAL ASSETS 7,510,402 11,828,955
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LIABILITIES
Line of credit agreement (Note C) -0- 2,556,214
Outstanding checks in excess of
bank balance 456,687 37,127
Due to affiliates -0- 317,474
Distributions payable to partners -0- 199,762
Accrued expenses and other liabilities 152,423 153,769
Lease security deposits 69,522 133,376
Reserve for estimated costs during the
period of liquidation 367,264 550,000
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TOTAL LIABILITIES 1,045,896 3,947,722
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NET ASSETS $ 6,464,506 $ 7,881,233
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See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(GOING CONCERN BASIS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
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Revenues:
Lease income $ 350,295 $ 749,198
Interest income 37,770 92,112
Gain on lease terminations 28,874 30,609
Other 2,949 13,568
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Total revenues 419,888 885,487
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Expenses:
Management fees 45,525 100,413
Administrative services 21,000 42,000
Interest 50,139 85,006
Professional fees 14,046 61,100
Provision for possible losses 12,851 76,954
Other 35,980 54,136
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Total expenses 179,541 419,609
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Net income 240,347 465,878
Other comprehensive loss:
Unrealized loss on available-
for-sale securities (566,581) (1,890)
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Comprehensive income (loss) $ (326,234) $ 463,988
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Net income per partnership unit $ 2.69 $ 5.21
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Weighted average partnership
units outstanding 89,283 89,377
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See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 2000
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Net assets at beginning of period $ 6,595,802 $ 7,881,233
Income from direct financing leases,
interest, and other income 194,037 285,798
Distributions to partners (900,000) (2,400,000)
Withdrawals of limited partners -0- (4,109)
Change in estimate of liquidation
value of net assets 574,667 701,584
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Net assets at end of period $ 6,464,506 $ 6,464,506
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See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
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OPERATING ACTIVITIES
Net Income/changes in net assets
excluding withdrawals and
distributions $ 987,382 $ 465,878
Adjustments to reconcile to net cash
from operating activities:
Amortization -0- 6,292
Provision for possible losses -0- 76,954
Gain on lease terminations -0- (30,609)
Liquidation basis adjustments (701,584) -0-
Changes in operating assets and
liabilities:
Other assets 36,944 (21,744)
Outstanding checks in excess of
bank balance 419,560 (436,199)
Due to affiliates (317,474) (6,796)
Accrued expenses and other
liabilities (1,346) 5,297
Reserve for estimated costs
during the period of liquidation (182,736) -0-
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Net cash from operating activities 240,746 59,073
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INVESTING ACTIVITIES
Acquisitions of, and purchases of
equipment for, direct financing leases -0- (2,310,351)
Repayments of direct financing leases 1,175,984 1,087,202
Proceeds from early termination of
direct financing leases and notes 4,725,128 631,823
Net lease security deposits repaid (63,854) (10,502)
Issuance of notes receivable (135,000) (776,082)
Repayments of notes receivable 2,655 127,122
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Net cash from investing activities 5,704,913 (1,250,788)
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FINANCING ACTIVITIES
Borrowings from line of credit 346,936 4,148,220
Repayments of line of credit (2,903,150) (1,747,983)
Distributions and withdrawals
paid to partners (2,603,871) (1,236,800)
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Net cash from financing activities (5,160,085) 1,163,437
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Net increase (decrease) in cash and
cash equivalents 785,574 (28,278)
Cash and cash equivalents at
beginning of period 4,147 67,570
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Cash and cash equivalents at
end of period $ 789,721 $ 39,292
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 55,620 $ 70,299
Unrealized loss on securities
available for sale -0- (1,890)
Non-cash conversion of leases to
notes and not readily marketable
equity securities 2,437,062 -0-
See accompanying notes.
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TELECOMMUNICATIONS INCOME FUND X, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
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 six months ended June
30, 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 December 31, 1999, 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 as of
December 31, 1999 and periods subsequent thereto 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:
(Liquidation Basis) (Liquidation Basis)
June 30, 2000 December 31, 1999
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Minimum lease payments
receivable $ 2,702,763 $ 12,223,103
Estimated unguaranteed
residual values 354,159 645,025
Unamortized initial direct costs 3,796 24,022
Unearned income (469,672) (2,354,280)
Notes receivable 3,311,865 1,773,820
Adjustment to net realizable value (1,085,423) (1,659,648)
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Net investment in direct
financing leases and
notes receivable $ 4,817,488 $ 10,652,042
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Note C -- CREDIT ARRANGEMENT
The Partnership had a line-of-credit agreement with a bank carrying interest at
1% over prime. The agreement was amended August 26, 1998 to extend the maturity
date to June 30, 2000, reduce the borrowing amount to the lesser of $4.0
million, or 40% of the Partnership's Qualified Accounts, as defined in the
agreement, and require minimum monthly interest payments of $4,000 beginning in
December 1998. The agreement was cancelable by the lender after giving a 90-day
notice and was collateralized by substantially all assets of the Partnership.
The line-of-credit was guaranteed by the General Partner and certain affiliates
of the General Partner. The line-of-credit was paid off in full during the first
quarter of 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On December 31, 1999, 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 as of
December 31, 1999 and periods subsequent thereto 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 $285,798 in
income from direct financing leases, notes receivable, and other income during
the first six months of 2000. This represents an annualized return on average
net assets of approximately 8.4%.
Management increased its estimate of the liquidation value of net assets during
the first six months of 2000 by $701,584. This was due primarily to changes in
the estimated net realizable values of equity securities held by the
Partnership. The Partnership has accrued the estimated expenses of liquidation,
which is $367,264 at June 30, 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.
In June, 2000, the Partnership's leases with Murdock Communications Corporation
("Murdock") were converted to notes and stock as part of a restructuring. At the
time of the restructuring, the Partnership's net investment, after accruing for
related property taxes, in the contracts totalled $2,437,062. The Partnership
received two notes and carries these at a discounted cost totalling $1,535,828
and 289,046 shares of preferred stock in Actel Integrated Communications, Inc.
("Actel"), a not readily marketable security. The carrying value of the Actel
preferred stock is $1,656,234, resulting in an increase in management's
estimated liquidation value of net assets of $755,000.
As of June 30, 2000 there were three 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 June 30, 2000 was $2,075,724. One customer has contracts that are
past due, with the net investment totalling $2,061,359, which accounts for
approximately 36% of the Partnership's lease and notes receivable portfolio as
of June 30, 2000. The payments that are past due for this customer total
$532,750 as of June 30, 2000. Management believes its reserve is adequate
related to this customer.
The Partnership's portfolio of leases and notes receivable are concentrated in
pay telephones and the notes receivable of Murdock (an entity in the
telecommunications industry), representing approximately
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51% and 27%, respectively, of the portfolio at June 30, 2000. As noted in the
preceding paragraph, one other customer accounts for approximately 36% of the
Partnership's portfolio at June 30, 2000 and is past due. No other customers
account for more than 10% of the Partnership's portfolio.
YEAR 2000 ISSUE
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.
LIQUIDITY AND CAPITAL RESOURCES
Early contract terminations in the first six months of 2000 resulted in cash
proceeds of $4,725,128. The proceeds were used to pay off the Partnership's
line-of-credit, a note payable to the General Partner, and make distributions to
partners.
The Partnership had a line-of-credit agreement with a bank carrying interest at
1% over prime. The agreement was amended August 26, 1998 to extend the maturity
date to June 30, 2000, reduce the borrowing amount to the lesser of $4.0
million, or 40% of the Partnership's Qualified Accounts, as defined in the
agreement, and require minimum monthly interest payments of $4,000 beginning in
December 1998. The agreement was cancelable by the lender after giving a 90-day
notice and was collateralized by substantially all assets of the Partnership.
The line-of-credit was guaranteed by the General Partner and certain affiliates
of the General Partner. The line-of-credit was paid off in full during the first
quarter of 2000.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EQUITY PRICE SENSITIVITY
The table below provides information about the Partnership's marketable and not
readily marketable equity securities that are sensitive to changes in prices.
The table presents the carrying amount and fair value at June 30, 2000.
Carrying Amount Fair Value
Common Stock-Murdock $ 55,207 $ 55,207
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Total Marketable Equity Security $ 55,207 $ 55,207
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Carrying Amount Fair Value
Common Stock-Murdock $ 140,484 $ 140,484
Preferred Stock-Actel 1,656,234 1,656,234
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Total Not Readily Marketable $ 1,796,718 $ 1,796,718
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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 portfolio is derived from the underlying
ability of the entity invested in to satisfy debt obligations and its ability to
maintain or improve equity values. The Partnership's holdings of equity
securities are in emerging companies whose prices can be volatile. At June 30,
2000, the total amount at risk was $1,851,925. The Partnership holds 159,975
shares of Murdock Communications Corporation ("Murdock") as available for sale
and 432,525 shares as not readily marketable, due to restrictions imposed by
rule 144 of the Securities and Exchange Commission. At June 30, 2000, the market
price of Murdock was $.41 per share.
INTEREST RATE SENSITIVITY
The table below provides information about the Partnership's notes receivable
that are sensitive to changes in interest rates. The table presents the
principal amounts and related weighted average interest rates by expected
maturity dates as of June 30, 2000.
Expected Fixed Rate Average
Maturity Date Notes Receivable Interest Rate
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2000 $ 250,484 13.3%
2001 859,960 13.3%
2002 263,154 13.1%
2003 1,938,267 12.8%
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Total $ 3,311,865
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Fair Value $ 3,311,865
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The Partnership manages interest rate risk, its primary market risk exposure
with respect to notes receivable, by limiting the terms of notes receivable to
no more than five years.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
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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 X, L.P.
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(Registrant)
Date: August 7, 2000 Ronald O. Brendengen /s/
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Ronald O. Brendengen, Chief Financial
Officer, Treasurer
Date: August 7, 2000 Daniel P. Wegmann /s/
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Daniel P. Wegmann, Controller
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