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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 March 31, 1996 Commission file number 299435
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 (I.R.S. 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.
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Part 1. Financial Information
LEASTEC INCOME FUND III
A California Limited Partnership
CONDENSED BALANCE SHEETS
(Unaudited)
March 31 December 31
1996 1995
ASSETS:
Cash $ 536,193 $ 706,443
Accounts receivable 78 87,417
Net investment in direct financing leases 354,556 541,980
Equipment on operating leases, net of
accumulated depreciation of $6,166
in 1996 and $6,166 in 1995 0 0
Equipment held for sale or lease, net of
accumulated depreciation of $-0- in
1996 and $-0- in 1995. 0 0
________ _________
Total assets $ 890,827 $1,335,840
======== =========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Payables to affiliates $ 2,767 $ 2,767
Accounts payable 40,442 64,323
Deposits 34,285 43,818
Prepaid rental income 1,779 2,944
Distributions payable 263,158 368,421
Notes payable 0 0
_______ _______
Total liabilities 342,431 482,273
_______ _________
Partners' capital:
Partners' capital 548,396 853,567
_______ _________
Total partners' capital 548,396 853,567
_______ _________
Total liabilities & partners' capital $890,827 $1,335,840
======== =========
The accompanying notes are an integral
part of these condensed financial statements.
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LEASTEC INCOME FUND III
A California Limited Partnership
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months
Ended
March 31
1996 1995
____ ____
Revenue:
Rental income $ 78 $ 68,165
Direct financing lease income 10,176 87,548
Gain (loss) on sale of equipment 0 13,836
Interest income 2,977 4,776
Other income 6,601 2,987
______ _______
Total revenues 19,832 177,312
______ _______
Expenses:
Management fees 14,519 35,885
General & administrative 40,528 47,104
Data processing 6,798 8,673
lnterest expense 0 2,020
______ _______
Total expenses 61,845 93,682
______ _______
Net Income (loss) $(42,013) $83,630
====== =======
Net income (loss) per limited
partnership unit $ (0.53) $ 1.06
======= =======
The accompanying notes are an integral
part of these condensed financial statements.
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LEASTEC INCOME FUND III
A California Limited Partnership
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended
March 31
1996 1995
____ ____
Cash flows from operating activities:
Net income $ (42,013) 83,630
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss on disposition of equipment 0 (13,836)
Change in assets and liabilities:
Decrease (increase) in accounts receivable 87,339 (31,064)
Decrease in payable to affiliates 0 (14,735)
Decrease in accounts payable (23,881) (55,630)
Decrease in deposits (9,533) (8,888)
Decrease) in prepaid rental income (1,165) (2,722)
Decrease in distributions payable (105,263) (152,631)
_______ _______
Net cash used by operating activities (94,516) (195,876)
_______ _______
Cash flows from investing activities:
Proceeds from disposition of equipment 0 13,836
Decrease in net investment in direct
financing leases 187,424 356,876
_______ _______
Net cash provided by investing activities 187,424 370,712
_______ _______
Cash flows from financing activities:
Repayment of notes payable 0 (17,654)
Net distributions to partners (263,158) (315,789)
_______ _______
Net cash used in financing activities (263,158) (333,443)
_______ _______
Net decrease in cash (170,250) (158,607)
Cash at beginning of period 706,443 645,072
_______ _______
Cash at end of period $ 536,193 $ 486,465
======= =======
The accompanying notes are an integral
part of these condensed financial statements.
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LEASTEC INCOME FUND III
A California Limited Partnership
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1996, March 31, 1995 and December 31, 1995
(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
March 31, 1996, March 31, 1995 and December 31, 1995.
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 1996 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.
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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. This is the Registrant's final year of
operation.
All of the Registrant's operating leases have terminated. As operating
leases terminate, the equipment is sold. The remaining 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 Partners will not receive a 100% return of
their original investment because of shortfalls in portfolio performance
during the life of the Partnerhsip.
The Registrant reported a net loss of $42,013 or $0.53 per Limited
Partnership Unit for the three months ended March 31, 1996 as compared to net
income of $86,630 or $1.06 per Limited Partnership Unit for the three months
ended March 31, 1995.
Total revenues for the three months ended March 31, 1996, were $19,832
compared to $177,312 for the same period in the prior year. This decrease
reflects a reduced rental income from both operating and finance leases due to
the gradual liquidation of the Registrant's lease portfolio. Revenue derived
from the Fund's equipment management activities comprised 85% of the total
income for the period, with the remaining 15% being interest income.
Direct financing lease income decreased from March 31, 1995, to March 31,
1996, ($84,548 to $10,176 respectively). The net investment in direct
financing leases decreased from $541,980 at March 31, 1995, to $354,556 at
March 31, 1996.
Interest income decreased because the Registrant held lower cash balances
due to distributions to Partners and lease termination's during the first
three months of 1996 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.
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Total expenses for the three months ended March 31, 1996, were $61,845
compared to $93,682 for the same period in the prior year. Management fees,
interest, and general and administrative costs comprised 89% of the total
expenses. Interest expense decreased from March 31, 1995, to March 31, 1996,
($2,020 to $-0- respectively).
General and administrative costs decreased from $47,104 for the first
three months of 1995 to $40,528 for the same period in 1996. The variable
expenses of the Registrant have been reduced steadily as the liquidation
progressed. There are certain fixed expenses caused by to the Partnership
Agreement's requirements for, Regulatory and Partner reporting which will
continue at this level until the Registrant's final close of operations.
Liquidity and Capital Resources
_______________________________
Cash used by operating activities for the three months ended March 31,
1996, was $94,516 compared to $195,876 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 $ 370,712 in the
first quarter of 1995 to $187,424 for the first quarter of 1996, reflecting
lease termination and fluctuation 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.
Cash provided by investing activities was used to repay notes payable of
$17,654 in the first three months of 1995 compared to $-0- for the same period
in 1996.
As of March 31,1996, the Fund's partners were allocated cash distributions
of $263,158 payable on April 15, 1996. The size of investor distributions
depend on the timing of lease termination's and collections of rents. As a
result of the decreasing portfolio of leases, this amount can be expected to
gradually decrease during 1996.
The cash balance decreased from $645,072 at December 31, 1994, to $486,465
at March 31, 1995, and increased to $706,443 at December 31, 1995, then
decreased to $536,193 at March 31, 1996.
The cash position as of March 31, 1996, was $536,193. The General Partner
anticipates that funds from operations will be adequate to cover all operating
expenses of the Partnership during 1996.
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PART II. OTHER INFORMATION
Item 1. Legal Proceeding
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
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.
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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: April 28, 1996 By: _____________________________
Ernest V. Lavagetto, President