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 June 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 (I.R.S. Employer Identification Number)
incorporation or organization)
2855 Mitchell Drive, Suite 215, Walnut Creek, California 94598
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(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
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LEASTEC INCOME FUND III
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
(UNAUDITED)
June 30 December 31
1995 1994
---------- -----------
ASSETS:
Cash $ 954,414 $ 645,072
Accounts receivable 76,091 49,871
Net investment in direct financing 1,345,006 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 $3,362
in 1995 and $-0- in 1994 -0- -0-
---------- ----------
Total assets $2,375,511 $2,995,710
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Payables to affiliates $ 59,749 $ 71,257
Accounts payable 50,668 105,393
Deposits 197,526 264,829
Prepaid rental income -0- 4,609
Distributions payable 631,574 468,421
Notes payable -0- 44,864
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Total liabilities 939,517 959,373
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Partners' Capital:
Partners' capital 1,435,994 2,036,337
---------- ----------
Total partners' capital 1,435,994 2,036,337
---------- ----------
Total liabilities &
partners' capital $2,375,511 $2,995,710
========== ==========
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)
Six Months Quarter
Ended Ended
June 30 June 30
--------- ---------
1995 1994 1995 1994
--------------------- --------------------
REVENUE:
Rental income $118,385 $ 393,414 $ 50,220 $178,866
Direct financing lease income 191,120 245,259 103,572 114,474
Gain on sale of equipment 112,731 336,550 98,895 328,596
Interest income 8,840 6,077 4,064 3,474
Other income 124,963 60,865 121,976 57,932
-------- ---------- -------- --------
Total revenues 556,039 1,042,165 378,727 683,342
-------- ---------- -------- --------
EXPENSES:
Depreciation -0- 109,392 -0- 44,383
Management fees 91,940 142,576 56,055 92,096
General & administrative 97,167 97,225 50,063 53,547
Data processing 16,946 33,987 8,273 22,101
lnterest expense 3,064 14,165 1,044 3,017
-------- ---------- -------- --------
Total expenses 209,117 397,345 115,435 215,144
-------- ---------- -------- --------
Net Income $346,922 $ 644,820 $263,292 $468,198
======== ========== ======== ========
Net income per limited $ 4.40 $ 8.18 $ 3.34 $ 5.94
partnership unit ======== ========== ======== ========
The accompanying notes are an integral
part of these condensed financial statements.
3
LEASTEC INCOME FUND III
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months
Ended
June 30
-------
1995 1994
----------- ------------
Cash flows from operating activities:
Net income $ 346,922 $ 644,820
Adjustments to reconcile net income
to net cash provided by operating
activities:
Accumulated depreciation -0- 109,392
Gain on disposition of equipment (112,731) (336,550)
Other income -0- (7,839)
Change in assets and liabilities:
Increase in accounts receivable (26,220) (115,757)
Increase (decrease) in payable
to affiliates (11,508) 74,478
Decrease in accounts payable (54,725) (61,081)
Decrease in deposits (67,303) (42,352)
Decrease in prepaid rental income (4,609) (182)
Increase in distributions payable 163,153 105,382
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Net cash provided by operating
activities 232,979 370,311
---------- -----------
Cash flows from investing activities:
Proceeds from disposition of
equipment 126,364 323,264
Decrease in net investment in
direct financing leases 942,128 826,116
---------- -----------
Net cash provided by investing
activities 1,068,492 1,149,380
---------- -----------
Cash flows from financing activities:
Repayment of notes payable (44,864) (122,196)
Net distributions to partners (947,265) (1,221,438)
---------- -----------
Net cash used in financing activities (992,129) (1,343,634)
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Net increase in cash 309,342 176,057
Cash at beginning of period 645,072 726,178
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Cash at end of period $ 954,414 $ 902,235
========== ===========
The accompanying notes are an integral
part of these condensed financial statements.
4
LEASTEC INCOME FUND III
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995, JUNE 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 June 30, 1995, June 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.
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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. 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 leases were fully depreciated in the first half of 1995. 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 fluctuate 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 $346,922 or $4.40 per Limited
Partnership Unit for the six months ended June 30, 1995 as compared to net
income of $644,820 or $8.18 per Limited Partnership Unit for the six months
ended June 30, 1994.
Total revenues for the six months ended June 30, 1995 were $556,039 compared
to $1,042,165 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 with the gradual liquidation of the
Registrant's lease portfolio. There was a significant increase in other income
from $60,865 for the six months ended June 30, 1994 to $124,963 for the same
period in 1995. Virtually all of the other income for the six months ended June
30, 1995 was caused by the 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 June 30, 1994 to June 30, 1995
($245,259 to $191,120 respectively). The net investment in direct financing
leases decreased from $3,334,476 at June 30, 1994 to $1,345,006 at June 30,
1995.
Interest income increased because the Registrant held slightly higher cash
balances due to equipment and lease sales during the first six months of 1995 as
compared to the same period in
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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 six months ended June 30, 1995 were $209,117 compared
to $397,345 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 June 30, 1994 to June 30, 1995
($14,165 to $3,064 respectively). The note payable balance was $58,145 as of
June 30, 1994 compared to a note payable balance of $-0- as of June 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 June 30, 1995.
The gain on sale of equipment for the six months ended June 30, 1995 of
$112,731 decreased from $336,550 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 remained relatively unchanged decreasing
slightly from $97,225 for the first six months of 1994 to $97,167 for the same
period in 1995.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities for the six months ended June 30, 1995
was $232,979 compared to $370,311 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 $1,149,380 in the second
quarter of 1994 to $1,068,492 for the second quarter 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 six months ended June 30, 1994 totaled
approximately $323,264 resulting in a $336,550 gain after depreciation expense
was taken compared to $126,364 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 six months ended June 30,1995 as compared to $122,196 for the same period in
the prior year.
As of June 30,1995, the Fund's partners were allocated cash distributions of
$631,574 payable on July 14, 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 increased from $726,178 at December 31, 1993 to $902,235 at
June 30, 1994 and decreased to $645,072 at December 31, 1994 then increased to
$954,414 at June 30, 1995.
7
The cash position as of June 30, 1995 was $954,414. The General Partner
anticipates that funds from operations will be adequate to cover all operating
expenses and future needs of the Partnership during 1995.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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None.
Item 2. Changes in Securities
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None.
Item 3. Defaults Upon Senior Securities
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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.
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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: August 11, 1995 By:
-----------------------------------------
Ernest V. Lavagetto, President
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