10-Q 1 c62119e10-q.txt QUARTERLY REPORT 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, 2001 Commission File Number: 0-25574 TELECOMMUNICATIONS INCOME FUND X, L.P. (Exact name of Registrant as specified in its charter) Iowa 42-1401715 ----------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 Tama Street, Marion, Iowa 52302 (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 ----- ----- As of April 25, 2001, 88,194 units were issued and outstanding. Based on the book value at March 31, 2001 of $22.81 per unit, the aggregate market value at April 25, 2001 was $2,011,705. 2 TELECOMMUNICATIONS INCOME FUND X, L.P. INDEX

2 3 TELECOMMUNICATIONS INCOME FUND X, L.P. STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (UNAUDITED)

See accompanying notes. 3 4 TELECOMMUNICATIONS INCOME FUND X, L.P. STATEMENT OF CHANGES IN NET ASSETS (LIQUIDATION BASIS) (UNAUDITED) Three Months Three Months Ended Ended March 31, 2001 March 31, 2000 -------------- -------------- Net assets at beginning of period $ 4,825,280 $ 7,881,233 Income from direct financing leases, interest, and other income 62,014 91,761 Distributions to partners (599,864) (1,500,000) Withdrawals of limited partners (2,640) (4,109) Change in estimate of liquidation value of net assets (2,271,630) 126,917 ----------- ----------- Net assets at end of period $ 2,013,160 $ 6,595,802 =========== =========== See accompanying notes. 4 5 TELECOMMUNICATIONS INCOME FUND X, L.P. STATEMENTS OF CASH FLOWS (UNAUDITED)

See accompanying notes. 5 6 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 generally accepted accounting principles in the United States 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, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. 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, 2000. 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 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. Management decreased its estimate of the liquidation value of net assets during the first quarter of 2001 by $2,271,630. This decrease is primarily due to the write-off of securities the Partnership held in Actel Integrated Communications Inc. ("Actel") and loans to Murdock Communications Corporation ("Murdock"). On April 11, 2001, Actel filed for Chapter 11 bankruptcy. The Partnership had a realized loss of $947,658 to write-off the carrying value of its 421,181 shares of Actel preferred stock. The Partnership also had a provision for possible loan and lease losses of $910,000 to write-off its remaining carrying value of notes receivable of Murdock. Murdock's primary asset was the preferred stock of Actel. Another lessee of the Partnership, LIDS Corporation, filed for Chapter 11 bankruptcy during the quarter, resulting in a charge to the provision for possible loan and lease losses of $200,000. 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:

6 7 Note C -- CREDIT ARRANGEMENTS SA Communications filed a suit against the Partnership, the General Partner, and others alleging the Partnership received a preference of approximately $45,000 prior to the filing of its petition in bankruptcy. The Partnership maintains that it was receiving regular monthly payments and there was no preference. Negotiations are in progress with the bankruptcy trustee. No loss, if any, has been recorded in the financial statements with respect to this matter. The General Partner has approximately $2,200,000 of notes payable and redeemable preferred stock maturing in 2001 and may not have sufficient liquid assets to repay such amounts. The General Partner is pursuing additional financing, refinancing, and asset sales to meet its obligations. No assurance can be provided that the General Partner will be successful in its efforts. 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 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 $62,014 in income from direct financing leases, notes receivable, and other income during the first quarter of 2001. This represents an annualized return on average net assets of approximately 7.3%. Management decreased its estimate of the liquidation value of net assets during the first quarter of 2001 by $2,271,630. This decrease is primarily due to the write-off of securities the Partnership held in Actel Integrated Communications Inc. ("Actel") and loans to Murdock Communications Corporation ("Murdock"). On April 11, 2001, Actel filed for Chapter 11 bankruptcy. The Partnership had a realized loss of $947,658 to write-off the carrying value of its 421,181 shares of Actel preferred stock. The Partnership also had a provision for possible loan and lease losses of $910,000 to write-off its remaining carrying value of notes receivable of Murdock. Murdock's primary asset was the preferred stock of Actel. Another lessee of the Partnership, LIDS Corporation, filed for Chapter 11 bankruptcy during the quarter, resulting in a charge to the provision for possible loan and lease losses of $200,000. The Partnership has accrued the estimated expenses of liquidation, which is $316,342 at March 31, 2001. The General Partner reviews this estimate and will adjust quarterly, as needed. The Partnership will continue to make distributions to the partners as leases, notes receivable, and equipment 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. 7 8 As of March 31, 2001, there were two 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, 2001 was $58,970. 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, notes receivable, and equipment under operating leases are concentrated in pay telephones and industrial equipment, representing approximately 70% and 12%, respectively, of the portfolio at March 31, 2001. Three customers account for approximately 71% of the Partnership's portfolio of leases and notes receivable at March 31, 2001. One of these customers, LIDS Corporation, filed for bankruptcy during the first quarter of 2001, and accounted for approximately 24% of the Partnership's portfolio of leases and notes receivable at March 31, 2001. 8 9 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 March 31, 2001. Carrying Amount Fair Value --------------- ------------- Common Stock-Murdock $ 7,403 $ 7,403 ---------- ---------- Total Available-for-Sale $ 7,403 $ 7,403 ========== ========== Carrying Amount Fair Value --------------- ------------ Common Stock-Murdock $ 17,919 $ 17,919 --------- ---------- Total Not Readily Marketable $ 17,919 $ 17,919 ========= ========== 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 common equity values. The Partnership holds 165,900 shares of Murdock as available for sale and 426,600 shares as not readily marketable, due to restrictions imposed by rule 144 of the Securities and Exchange Commission. Murdock is an emerging company whose stock price can be volatile. At March 31, 2001, the total amount at risk was $25,322. 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 March 31, 2001. Expected Fixed Rate Average Maturity Date Notes Receivable Interest Rate ------------- ---------------- ------------- 2001 $ 5,791 14.5% 2002 10,007 14.5% ------------- Total $ 15,798 ============= Fair Value $ 15,798 ============= 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 and generally requiring full repayment ratably over the term of the note. PART II Item 1. Legal Proceedings None. 9 10 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. (Registrant) Date: May 4, 2001 /s/ Ronald O. Brendengen -------------------------------------------- Ronald O. Brendengen, Chief Financial Officer, Treasurer Date: May 4, 2001 /s/ Daniel P. Wegmann -------------------------------------------- Daniel P. Wegmann, Controller Date: May 4, 2001 /s/ Timothy J. White -------------------------------------------- Timothy J. White, President 10

TELECOMMUNICATIONS INCOME FUND X LP 10-Q