FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 33-21267 CSA Income Fund Limited Partnership III (Exact name of registrant as specified in its charter) Massachusetts 04-3002909 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 22 Batterymarch St., Boston, Massachusetts 02109 (Address of principal executive offices) (Zip Code) (617) 357-1700 (Registrant's telephone number, including area code) 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 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: PART I - FINANCIAL INFORMATION CSA INCOME FUND LIMITED PARTNERSHIP III CSA INCOME FUND LIMITED PARTNERSHIP III STATEMENTS OF FINANCIAL POSITION AS OF JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 ______________________________________________________________________ (Unaudited) June 30, December 31, 1996 1995 Assets Cash and cash equivalents $ 855,607 $ 6,210,985 Rentals receivable 347,471 5,928 Accounts receivable-affiliates 1,915,709 200,169 Interest receivable 5,667 15,626 Notes receivable-lessee 85,000 85,000 Remarketing receivables 53,883 234,381 Rental equipment, at cost 29,169,944 26,648,802 Less accumulated depreciation (12,264,160) (15,490,492) Net rental equipment 16,905,784 11,158,310 Total assets $ 20,169,121 $ 17,910,399 Liabilities and partners' capital Accounts payable-affiliates $ - $ 37,928 Accounts payable-other 26,178 36,803 Accrued management fees 33,832 49,632 Deferred income 333,685 450,786 Notes payable 8,939,714 5,609,093 Limited recourse notes payable 26,059 38,009 Total liabilities 9,359,468 6,222,251 Partners' capital: General Partner: Capital contribution 1,000 1,000 Cumulative net income 9,646 3,279 Cumulative cash distributions (346,512) (331,360) (335,866) (327,081) Limited Partners (500,000 units): Capital contributions net of offering costs 44,539,778 44,539,778 Cumulative net income 954,956 324,666 Cumulative cash distributions (34,349,215) (32,849,215) 11,145,519 12,015,229 Total Partners' capital 10,809,653 11,688,148 Total liabilities and partners' capital $ 20,169,121 $ 17,910,399 CSA INCOME FUND LIMITED PARTNERSHIP III STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 ______________________________________________________________________ THREE MONTHS SIX MONTHS 1996 1995 1996 1995 Revenues: Rental income $ 1,681,627 $ 2,421,434 $ 3,344,418 $ 5,295,202 Interest income 23,240 45,119 80,645 95,702 Gain on sale of equipment 332,190 212,397 259,089 294,407 Exchange gain (loss) on foreign currency (1,057) 1,640 (1,736) 9,850 Total revenues 2,036,000 2,680,590 3,682,416 5,695,161 Costs and expenses: Depreciation and amortization 1,395,275 1,872,012 2,553,098 4,063,400 Interest 118,552 99,059 233,731 207,046 Management fees 84,081 121,072 167,221 264,760 Storage and Refurbishment 7,000 5,000 12,000 10,000 General and administrative 39,222 67,694 79,709 108,510 Total expenses 1,644,130 2,164,837 3,045,759 4,653,716 Net income $ 391,870 $ 515,753 $ 636,657 $ 1,041,445 Net income allocation: General Partner $ 3,919 $ 5,158 $ 6,367 $ 10,414 Limited Partners 387,951 510,595 630,290 1,031,031 $ 391,870 $ 515,753 $ 636,657 $ 1,041,445 Net income per Limited Partnership Unit $ .78 $ 1.02 $ 1.26 $ 2.06 Number of Limited Partnership Units 500,000 500,000 500,000 500,000 CSA INCOME FUND LIMITED PARTNERSHIP III STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 ______________________________________________________________________ THREE MONTHS SIX MONTHS 1996 1995 1996 1995 Cash flows from operations: Cash received from rental of equipment $ 1,672,902 $ 1,683,469 $ 2,877,337 $ 3,773,369 Cash paid for operating and management expenses (156,159) (175,012) (285,355) (371,137) Interest paid (112,094) (31,961) (221,226) (76,467) Interest received 20,525 45,119 90,604 95,702 Net cash from operations 1,425,174 1,521,615 2,461,360 3,421,467 Cash flow from investments: Value added tax deposits - - - 239,724 Purchase of equipment (4,925,192) (355,580) (9,318,385) (355,580) Sale of equipment 1,165,963 171,710 1,451,596 1,138,009 Net cash from (used by) investments (3,759,229) (183,870) (7,866,789) 1,022,153 Cash flows from financing: Accounts payable - equipment purchases (1,331,217) - - (98,995) Advances to/from affiliates (2,474,079) (290,180) (1,753,468) (283,403) Proceeds from notes payable 4,749,792 258,537 4,749,792 258,537 Repayment of notes payable (764,403) (527,043) (1,431,121)(1,662,644) Payment of cash distributions (757,576) (757,576) (1,515,152)(1,515,152) Net cash from used by financing (577,483) (1,316,262) 50,051 (3,301,657) Net change in cash (2,911,538) 21,483 (5,355,378) 1,141,963 Cash at beginning of period 3,767,145 4,190,926 6,210,985 3,070,446 Cash at end of period $ 855,607 $ 4,212,409 $ 855,607$ 4,212,409 CSA INCOME FUND LIMITED PARTNERSHIP III NOTE TO FINANCIAL STATEMENTS ______________________________________________________________________ The quarterly financial statements have been prepared by the Partnership without audit. Certain information and footnote disclosures normally included in the annual financial statements have been condensed or omitted from the accompanying statements. For such information, reference should be made to the financial statements and notes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 1995. In the General Partner's opinion, the unaudited financial statements reflect all adjustments necessary to present fairly the financial position of CSA Income Fund Limited Partnership III as of June 30, 1996 and December 31, 1995 and the results of operations and cash flows for the periods presented therein. CSA INCOME FUND LIMITED PARTNERSHIP III GENERAL PARTNER'S DISCUSSION OF OPERATIONS ______________________________________________________________________ Rental income was $1,681,627 and $2,421,434 and net income was $391,870 and $515,753 for the quarters ended June 30, 1996 and 1995, respectively. For the six months ended June 30, 1996 and June 30,1995, gross rental income was $3,344,418 and $5,295,202 and net income was $636,657 and $1,041,445, respectively. The decrease in gross rental income and net income is attributable to the expected occurrence of reduced rental rates for re-leased equipment and to the ongoing sale of equipment from the Partnership's portfolio. However, the Partnership continues actively to seek out additional lease opportunities and has acquired $4,393,193 and $4,925,192 of equipment during the first and second quarters of 1996, respectively. The Partnership generated $3,912,956 from operations and sale of equipment during the six months ended June 30, 1996. The Partnership used these funds, proceeds from equipment financings and cash on hand to acquire additional equipment of $9,318,385, make payments on notes payable of $1,431,121 and make distributions to partners of $1,515,152. The Partnership's results of operations and liquidity in future periods will be dependent upon the addition of leased equipment, the sale and/or re-lease of equipment as it comes off lease and the level of debt service. The Partnership distributed $.50 per Limited Partnership Unit on the 15th of April, May, and June. To date, the Partnership has made cash distributions to the Limited Partners ranging from 61% to 77% of their initial investment, depending on when the Limited Partner entered the Partnership. The objective of the Partnership is to return the Limited Partners' investment through current cash distributions and provide a return on this investment by continued distributions as long as the equipment continues to be leased. However, revenues generated by the Partnership from lease renewals and remarketings after the initial lease terms have been lower than anticipated as a result of rapid technological obsolescence in high technology equipment. While the General Partner continues to pursue additional lease opportunities to increase the Partnership's distributions, based on an analysis of the remaining assets in the Partnership's portfolio, the General Partner presently estimates that the continued cash distributions may not fully return the entire initial investment of the Limited Partners and/or a return thereon. The General Partner will continue to report on the Limited Partners' return of investment with each cash distribution. CSA INCOME FUND LIMITED PARTNERSHIP III PART II ______________________________________________________________________ Item 1 - Legal Proceedings 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 - Exhibit 27. Financial Data Schedule. (b) Reports on Form 8-K - No reports have been filed on Form 8-K during this quarter. 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. CSA Income Fund Limited Partnership III (Registrant) By its General Partner, CSA Equity Funds, Inc. Date: August 9, 1996 /s/ J. Frank Keohane President and Principal Executive Officer Date: August 9, 1996 /s/ Richard F. Sullivan Vice President Principal Accounting and Finance Officer