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 September 30, 1997 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 STATEMENTS OF FINANCIAL POSITION AS OF (Unaudited) September 30, December 31, 1997 1996 Assets Cash and cash equivalents $ 221,650 $ 450,785 Rentals receivable 67,581 128,676 Accounts receivable-affiliates 38,736 1,140,003 Notes receivable-lessee 18,226 39,118 Remarketing receivables 2,121 42,808 Rental equipment, at cost 35,669,488 35,231,829 Less accumulated depreciation(12,915,033) (11,121,318) Net rental equipment 22,754,455 24,110,511 Total assets $ 23,102,769 $ 25,911,901 Liabilities and partners' capital Liabilities: Accounts payable - other $ 51,122 $ 25,064 Accrued management fees 33,147 29,853 Deferred income 93,053 206,291 Notes payable 15,440,589 16,116,034 Total liabilities 15,617,911 16,377,242 Partners' capital (deficit): General Partner: Capital contribution 1,000 1,000 Cumulative net gain 267,960 12,047 Cumulative cash distributions (384,390) (361,663) (115,430) (348,616) Limited Partners (500,000 units): Capital contributions net of offering costs 44,539,778 44,539,778 Cumulative net gain 1,159,725 1,192,712 Cumulative cash distributions (38,099,215) (35,849,215) 7,600,288 9,883,275 Partners' capital 7,484,858 9,534,659 Total liabilities and partners' capital $ 23,102,769 $ 25,911,901 CSA INCOME FUND LIMITED PARTNERSHIP III STATEMENTS OF OPERATIONS (Unaudited) Quarters Ended Nine Months Ended September September September September 30, 1997 30, 1996 30, 1997 30,1996 Revenues: Rental income $ 2,565,381 $1,988,222 $7,865,919 $5,332,640 Interest income 1,947 25,276 21,724 105,921 Gain on sale of equipment 44,584 838 255,913 259,927 Gain (loss) on foreign currency 2,437 (3,706) 6,874 (5,442) Total revenues 2,614,349 2,010,630 8,150,430 5,693,046 Costs and expenses: Depreciation 2,243,729 1,441,138 6,489,409 3,994,236 Interest 323,377 179,620 904,267 413,351 Management fees 128,269 99,411 393,296 266,632 Storage and Refurbishment - 7,000 3,253 19,000 General and administrative 43,670 38,235 137,279 117,944 Total expenses 2,739,045 1,765,404 7,927,504 4,811,163 Net income (loss) $ (124,696)$ 245,226 $ 222,926 $ 881,883 Net income (loss) allocation: General Partner $ 44,584 $ 2,452 $ 255,913 $ 8,819 Limited Partners (169,280) 242,774 (32,987) 873,064 $ (124,696)$ 245,226 $ 222,926 $ 881,883 Net income (loss) per Limited Partnership Unit $ (.34)$ .49 $ (.07)$ 1.75 Number of Limited Partnership Units 500,000 500,000 500,000 500,000 CSA INCOME FUND LIMITED PARTNERSHIP III STATEMENTS OF CASH FLOWS (Unaudited) Quarters Ended Nine Months Ended September September September September 30, 1997 30, 1996 30, 1997 30, 1996 Cash flows from operations: Cash received from rental of equipment $ 2,531,115 $ 1,997,001 $ 7,768,563 $ 4,877,596 Cash paid for operating and management expenses (146,939) (137,748) (504,476) (423,103) Interest paid (323,377) (179,620) (904,267) (413,351) Interest received 1,947 21,103 21,724 111,707 Net cash from operations 2,062,746 1,700,736 6,381,544 4,152,849 Cash flows from investments: Purchase of equipment (33,522) (856,865) (5,661,691) (10,175,250) Sale of equipment 229,938 30,046 877,025 1,490,889 Net cash from (used by) investments 196,416 (826,819) (4,784,666) (8,684,361) Cash flows from financing: Proceeds from notes receivable 3,555 - 20,892 - Advances from (to) affiliates 63,613 1,282,788 1,101,266 (470,680) Proceeds from notes payable 388,795 1,666,225 5,648,889 6,416,017 Repayment of notes payable (2,164,469) (1,104,590) (6,324,333) (2,535,711) Payment of cash distributions (757,575) (757,575) (2,272,727) (2,272,727) Net cash from (used by) financing (2,466,081) 1,086,848 (1,826,013) 1,136,899 Net change in cash and cash equivalents (206,919) 1,960,765 (229,135) (3,394,613) Cash and cash equivalents at beginning of period 428,569 855,607 450,785 6,210,985 Cash and cash equivalents at end of period $ 221,650 $ 2,816,372 $ 221,650 $ 2,816,372 CSA INCOME FUND LIMITED PARTNERSHIP III NOTE TO FINANCIAL STATEMENTS The quarterly financial statements of the Partnership presented herein are without audit except for the December 31, 1996 Balance Sheet. 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, 1996. 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 September 30,1997 and September 30, 1996 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 $2,565,381 and $1,988,222 and net income (loss) was ($124,696) and $245,226 for the quarters ended September 30, 1997 and 1996, respectively. For the nine months ended September 30, 1997 and September 30, 1996, rental income was $7,865,919 and $5,332,640 and net income was $222,926 and $881,883, respectively. The increase in rental income in 1997 is attributable to the $25,321,247 of new equipment leased during 1996 and 1997. The decrease in net income is primarily attributable to the increase in depreciation and interest expense associated with the new equipment leases. The Partnership generated $7,258,569 from operations and the sale of equipment during the nine months ended September 30, 1997. The Partnership used these funds and proceeds from equipment financings to acquire additional equipment of $5,661,691, make scheduled debt payments of $6,324,333 and pay cash distributions to the partners of $2,272,727. As previously reported, the General Partner has started the process of Winding-Up the Partnership and expects to complete such by late 1998. The Partnership has over ninety active leases of which the General Partner intends to negotiate ultimate lease and equipment disposition. Distributions may fluctuate from the Wind-Up stage proceeds, however the current intent of the General Partner is to maintain a 6% distribution level for the near future. The Partnership distributed $.50 per Limited Partnership Unit on the 15th of July, August and September. To date, the Partnership has made cash distributions to the Limited Partners ranging from 68% to 84% of their initial investment, depending on when the Limited Partner entered the Partnership. As previously reported, certain revenues generated by the Partnership from lease renewals and remarketings after the initial lease terms were lower than anticipated as a result of more rapid technological obsolescence in high technology equipment. Also as previously reported, the General Partner still 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: 11/14/97 /s/ J. Frank Keohane J. Frank Keohane, President Principal Executive Officer Date: 11/14/97 /s/ Richard P. Timmons Richard P. Timmons, Corporate Controller Principal Financial Officer