10-Q 1 c71291e10vq.txt QUARTERLY REPORT 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 JUNE 30, 2002 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 July 15, 2002, 86,930 units were issued and outstanding. Based on the book value at June 30, 2002 of $3.20 per unit, the aggregate market value at July 15, 2002 was $278,176. TELECOMMUNICATIONS INCOME FUND X, L.P. INDEX Page ---- Part I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Statements of Net Assets (Liquidation Basis)- June 30, 2002 and December 31, 2001 3 Statement of Changes in Net Assets (Liquidation Basis)- three months ended and six months ended June 30, 2002 and 2001 4 Statements of Cash Flows-six months ended June 30, 2002 and 2001 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 Certification of Chief Executive Officer 10 Certification of Chief Financial Officer 11 2 TELECOMMUNICATIONS INCOME FUND X, L.P. STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (UNAUDITED) June 30, 2002 December 31, 2001 ------------- ----------------- ASSETS Cash and cash equivalents $ 65,105 $ 46,197 Marketable equity security 16,922 11,281 Not readily marketable equity security 40,957 27,305 Net investment in direct financing leases and notes receivable (Note B) 288,000 492,538 Other assets 105,579 116,328 -------- -------- TOTAL ASSETS 516,563 693,649 -------- -------- LIABILITIES Accounts payable and accrued expenses 71,372 62,963 Lease security deposits 6,982 21,982 Reserve for estimated costs during the period of liquidation 160,000 175,000 -------- -------- TOTAL LIABILITIES 238,354 259,945 -------- -------- CONTINGENCY (Note C) NET ASSETS $278,209 $433,704 ======== ======== See accompanying notes. 3 TELECOMMUNICATIONS INCOME FUND X, L.P. STATEMENT OF CHANGES IN NET ASSETS (LIQUIDATION BASIS) (UNAUDITED)

See accompanying notes. 4 TELECOMMUNICATIONS INCOME FUND X, L.P. STATEMENTS OF CASH FLOWS (UNAUDITED)

See accompanying notes. 5 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 six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the financial statements and notes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 2001. 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. 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:

Note C - CONTINGENCY The General Partner's parent has approximately $2.2 million of unsecured subordinated debt due on December 31, 2002 and may not have sufficient liquid assets to repay such amounts. The General Partner's parent is pursuing additional financing, refinancing, and asset sales to meet its obligations. No assurance can be provided that the General Partner's parent will be successful in its efforts. The inability of the General Partner to continue as a going concern as a result of the parent's inability to restructure its debts would require the Partnership to elect a successor general partner. 6 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 $14,727 in income from direct financing leases, notes receivable, and other income during the first six months of 2002. This represents an annualized return on average net assets of approximately 8.3%. Management decreased its estimate of the liquidation value of net assets during the first six months of 2002 by $168,939, resulting primarily from an increase in the allowance for possible loan and lease losses of $95,000 and an increase in the reserve for estimated costs during the period of liquidation of $97,074. The Partnership has accrued the estimated expenses of liquidation, which is $160,000 at June 30, 2002. 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 other assets are collected or 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 June 30, 2002, one customer had payments over 90 days past due and the Partnership has discontinued recognizing income on this contract. The Partnership's net investment in this contract, which is with Bax Group, Inc., was $25,397 at June 30, 2002. The Bax Group has filed for bankruptcy and the Partnership estimates that proceeds will total approximately $8,000 on this contract. Another lessee, Alpha Tel-Com, filed for bankruptcy during 2001, had a net investment of $371,840 at March 31, 2002, representing approximately 61% of the Partnership's portfolio of direct financing leases and notes receivable at that time. The value of the phones under the Alpha Tel-Com deteriorated significantly, with the Partnership realizing approximately $125,000 from the sale of the equipment during the second quarter of 2002. Approximately $113,000 of these proceeds was financed to a new customer under a note agreement. The deterioration of equipment values for Bax Group and Alpha Tel-Com resulted in the Partnership increasing the allowance for possible loan and lease losses by $95,000 during the first six months of 2002. Management believes its reserves are adequate as of June 30, 2002. Management will continue to monitor any 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, representing approximately 97% of the portfolio at June 30, 2002. Two customers account for approximately 83% of the Partnership's portfolio of leases and notes receivable at June 30, 2002. 7 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK EQUITY PRICE SENSITIVITY The tables below provide information about the Partnership's marketable and not readily marketable equity securities that are sensitive to changes in prices as of June 30, 2002.

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 companies invested in to satisfy debt obligations and their ability to maintain or improve common equity values. The Partnership holds 165,900 shares of Murdock as marketable and 426,600 shares as not readily marketable, due to restrictions imposed by Rule 144 of the Securities and Exchange Commission. Murdock is a shell company with no operations whose stock price can be volatile. At June 30, 2002, the total amount at risk was $57,879. 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, 2002.

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. 8 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: August 9, 2002 /s/ Ronald O. Brendengen ------------------------------------ Ronald O. Brendengen, Chief Financial Officer, Treasurer Date: August 9, 2002 /s/ Daniel P. Wegmann ------------------------------------ Daniel P. Wegmann, Controller 9 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Telecommunications Income Fund X (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas J. Berthel, Chief Executive Officer of Berthel Fisher & Company Leasing, Inc., General Partner of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbaines-Oxley Act of 2002, that: (1) The Company's Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. August 9, 2002 /s/ Thomas J. Berthel ------------------------------------ Thomas J. Berthel President and Chief Executive Officer Berthel Fisher & Company Leasing, Inc. General Partner Telecommunications Income Fund X, L.P. 10 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Telecommunications Income Fund X (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ronald O. Brendengen, Chief Financial Officer of Berthel Fisher & Company Leasing, Inc., General Partner of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbaines-Oxley Act of 2002, that: (1) The Company's Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. August 9, 2002 /s/ Ronald O. Brendengen -------------------------------------- Ronald O. Brendengen Chief Financial Officer Berthel Fisher & Company Leasing, Inc. General Partner Telecommunications Income Fund X, L.P. 11

TELECOMMUNICATIONS INCOME FUND X LP 10-Q