SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995 Commission file
number 2-99435
Leastec Income Fund III, A California Limited Partnership
(Exact name of registrant as specified in its charter)
California 68-0066209
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) number)
2855 Mitchell Drive, Suite 215, Walnut Creek, California 94598
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 938-3443
- -----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
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
filing requirements for the past 90 days.
Yes X No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS: N/A
Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Sections 12,
13, or 15 (d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a
court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS: N/A
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest practicable date.
1
Part 1. Financial Information
------------------------------------
LEASTEC INCOME FUND III
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
(UNAUDITED)
September 30 December 31
1995 1994
------------ ------------
ASSETS:
Cash $ 555,161 $ 645,072
Accounts receivable 3,747 49,871
Net investment in direct financing 1,021,790 2,300,767
leases
Equipment on operating leases, net of
accumulated depreciation of $6,166
in 1995 and $ 2,169,621 in 1994 0 0
Equipment held for sale or lease, net of
accumulated depreciation of $-0- in
1995 and $-0- in 1994 0 0
---------- ----------
Total assets $1,580,698 $2,995,710
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Payables to affiliates $ 55,739 $ 71,257
Accounts payable 53,957 105,393
Deposits 56,946 264,829
Prepaid rental income 0 4,609
Distributions payable 263,158 468,421
Notes payable 0 44,864
---------- ----------
Total liabilities 429,800 959,373
---------- ----------
Partners' capital:
Partners' capital 1,150,898 2,036,337
---------- ----------
Total partners' capital 1,150,898 2,036,337
---------- ----------
Total liabilities & partners'capital $1,580,698 $2,995,710
========== ==========
<FN>
The accompanying notes are an integral
part of these condensed financial statements.
LEASTEC INCOME FUND III
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Quarter
Ended Ended
September 30 September 30
1995 1994 1995 1994
------------------- ------------------
REVENUE:
Rental income $134,139 $ 364,068 $ 15,754 $(29,346)
Direct financing lease income 204,854 345,419 13,734 100,160
Gain (loss) on sale of
equipment 112,731 333,186 0 (3,364)
Interest income 12,657 9,214 3,817 3,137
Other income 147,508 70,728 22,545 9,863
-------- ---------- -------- --------
Total revenues 611,889 1,122,615 55,850 80,450
-------- ---------- -------- --------
EXPENSES:
Depreciation 0 120,637 0 11,245
Management fees 118,166 132,987 26,226 (9,589)
General & administrative 142,955 186,383 45,788 89,158
Data processing 22,597 38,027 5,651 4,040
lnterest expense 3,186 11,015 122 (3,150)
-------- ---------- -------- -------
Total expenses 286,904 489,049 77,787 91,704
-------- ---------- -------- --------
Net Income (loss) $324,985 $ 633,566 $(21,937) $(11,254)
======== ========== ======== ========
Net income (loss) per limited
partnership unit $ 4.12 $ 8.04 $ (.28) $ (.14)
======== ========== ======== ========
<FN>
The accompanying notes are an integral
part of these condensed financial statements.
LEASTEC INCOME FUND III
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended
September 30
1995 1994
--------- -----------
Cash flows from operating activities:
Net income $ 324,985 $ 633,566
Adjustments to reconcile net income
to net cash provided by operating activities:
Accumulated depreciation 0 120,637
Gain on disposition of equipment (112,731) (333,186)
Other income 0 (2,802)
Change in assets and liabilities:
(Increase) decrease in accounts receivable 46,124 (96,809)
Increase (decrease) in payable to affiliates (15,518) 19,042
Decrease in accounts payable (51,436) (62,216)
Decrease in deposits (207,883) (73,794)
Increase (decrease) in prepaid rental income (4,609) 6,522
Decrease in distributions payable (205,263) (163,158)
---------- ----------
Net cash provided (used) by operating
activities (226,331) 47,802
---------- ----------
Cash flows from investing activities:
Proceeds from disposition of equipment 89,050 321,854
Proceeds from sale of direct financing leases 37,313 0
Decrease in net investment in direct
financing leases 1,265,345 1,261,710
----------- ----------
Net cash provided by investing activities 1,391,708 1,583,564
Cash flows from financing activities:
Repayment of notes payable (44,864) (118,364)
Net distributions to partners (1,210,424) (1,689,740)
----------- ----------
Net cash used in financing activities (1,255,288) (1,808,104)
----------- ----------
Net decrease in cash (89,911) (176,738)
Cash at beginning of period 645,072 726,178
----------- ----------
Cash at end of period $ 555,161 $ 549,440
=========== ===========
<FN>
The accompanying notes are an integral
part of these condensed financial statements.
LEASTEC INCOME FUND III
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995, SEPTEMBER 30, 1994 AND DECEMBER 31, 1994
(UNAUDITED)
1. Basis of Condensed Financial Statement Preparation
In the opinion of the General Partner, the accompanying
unaudited condensed financial statements contain all
adjustments (consisting principally of normal, recurring
accruals) necessary to present fairly the financial position
of Leastec Income Fund III (the Partnership) as of September
30, 1995, September 30, 1994 and December 31, 1994.
As provided for in the Partnership agreement and offering
document, the Partnership engaged in leasing activities which
intended to be completed in approximately eleven years from
its inception at which time all remaining partnership assets
will have been liquidated and cash proceeds distributed to the
registrant's partners. The Partnership has presented its 1995
financial statements to reflect its leasing activities on a
basis consistent with prior periods.
2. Wind Down Phase
The Registrant has ceased acquisition of new capital equipment
and is in the process of liquidating its lease portfolio. It
is intended that the Registrant will be fully liquidated at
the end of its eleventh full year of operation, December 1996.
LEASTEC INCOME FUND III
A CALIFORNIA LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operation
The Registrant has been winding down operations since 1993 by
discontinuing new leasing activities and returning cash available
from operations to the Registrant's Partners. Although the
Registrant has until December 1997 to liquidate operations, the
Registrant intends to be fully liquidated by December 1996. In
order to complete the liquidation of all assets by the end of
1996, it is the General Partner's policy to allow the early
termination of leases when requested as well as to seek the sale
of leased assets in which the lease may extend beyond December
1996. The General Partner does not anticipate that the cash
proceeds from liquidation will return 100% of the investors
original capital contribution.
The majority of the Registrant's operating leases have
terminated. The remaining lease was fully depreciated by the end
of 1994. As operating leases terminate, the equipment is sold.
The remaining balance of the lease portfolio is invested in
Direct Finance leases which terminate with the lessee's
contractually required purchase of equipment. The income and
expenses of the Registrant are steadily declining as the lease
portfolio size declines. The cash balances and related interest
income fluctuates according to the cash flow from rents and
equipment and finance lease sales during each quarter. Cash is
distributed to the Partners according to their respective tax
basis capital accounts.
The Registrant reported a net income of $324,985 or $4.12 per
Limited Partnership Unit for the nine months ended September 30,
1995 as compared to net income of $633,566 or $8.04 per Limited
Partnership Unit for the nine months ended September 30, 1994.
Total revenues for the nine months ended September 30, 1995,
were $611,889 compared to $1,122,615 for the same period in the
prior year. This decrease reflects a reduced rental income from
both operating and finance leases as well as a smaller gain on
sale of equipment due to the gradual liquidation of the
Registrant's lease portfolio. There was a significant increase in
other income from $70,728 for the nine months ended September 30,
1994, to $147,508 for the same period in 1995. Virtually all of
the other income for the nine months ended September 30, 1995,
was caused by non-recurring early termination fees on a direct
finance lease with Paradigm Technology. Revenue derived from the
Fund's equipment management activities comprised 98% of the total
income for the period, with the remaining 2% being interest
income.
Direct financing lease income decreased from September 30,
1994, to September 30, 1995, ($345,419 to $204,854 respectively).
The net investment in direct financing leases decreased from
$2,898,882 at September 30, 1994, to $1,021,790 at September 30,
1995.
Interest income increased because the Registrant held slightly
higher cash balances due to equipment and lease sales during the
first nine months of 1995 as compared to the same period in the
prior year. All available cash is being paid out in distributions
to the Fund's partners on a quarterly basis.
Total expenses for the nine months ended September 30, 1995,
were $286,904 compared to $489,049 for the same period in the
prior year. Depreciation, management fees, interest, and general
and administrative costs comprised 92% of the total expenses.
Interest expense decreased from September 30, 1994, to September
30, 1995, ($11,015 to $3,186 respectively). The note payable
balance was $61,977 as of September 30, 1994, compared to a note
payable balance of $-0- as of September 30, 1995.
The equipment on operating leases was fully depreciated at the
end of 1994 giving a balance net of accumulated depreciation of
zero for both December 31, 1994 and September 30, 1995.
The gain on sale of equipment for the nine months ended
September 30, 1995, of $112,731 decreased from $333,186 for the
same period in 1994. As the Registrant draws nearer to complete
liquidation more leases and underlying equipment will be sold
causing fluctuations between periods in the gain on sale of
equipment.
General and administrative costs decreased from $186,383 for
the first nine months of 1994 to $142,955 for the same period in
1995.
Liquidity and Capital Resources
- -------------------------------
Cash used by operating activities for the nine months ended
September 30, 1995, was $226,331 compared to cash provided of
$47,802 for the same period in the prior year. The decrease in
cash from operating activities reflects the continued winding
down of the operating lease portfolio.
Cash provided by investing activities decreased from
$1,583,564 in the third quarter of 1994 to $1,391,708 for the
third quarter of 1995, reflecting primarily the inter-period
fluctuations in equipment sales and the aging of rental receipts
from the direct finance lease portfolio. As rental payment on
finance leases are received, the cash is broken up into income
and return of principal. As a finance lease ages the income
portion of the rental receipts decreases and the return of
principal portion increases.
Sales proceeds of equipment for the nine months ended
September 30, 1994 totaled approximately $321,854 resulting in a
$333,186 gain after depreciation expense was taken compared to
$89,050 resulting in a gain of $112,731 for the same period this
year.
Cash provided by investing activities was used to repay
$44,864 of debt during the nine months ended September 30,1995 as
compared to $118,364 for the same period in the prior year.
As of September 30,1995, the Fund's partners were allocated
cash distributions of $263,158 payable on October 13, 1995. The
size of investor distributions depend on the timing of equipment
sales and collections of rents. As a result of the decreasing
portfolio of leases, this amount can be expected to gradually
decrease during 1995 and 1996 and to be variable in amount from
quarter to quarter depending on the timing of equipment sales.
The cash balance decreased from $726,178 at December 31, 1993,
to $549,440 at September 30, 1994, and increased to $645,072 at
December 31, 1994, then decreased to $555,161 at September 30,
1995.
The cash position as of September 30, 1995, was $555,161. The
General Partner anticipates that funds from operations will be
adequate to cover all operating expenses and future needs of the
Partnership during 1995.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
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None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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.
LEASTEC INCOME FUND III
(Registrant)
LEASTEC CORPORATION
(General Partner)
Date: October 31, 1995 By: Ernest V. Lavagetto
Ernest V. Lavagetto,
President