UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 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 _____________________
_____________________
For Quarter Ended September 30, 1996 Commission File No. 0-15320
American Income 4 Limited Partnership
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2917030
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Boston, MA 02114
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
-------------------------
- -----------------------------------------------------------------------------
(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
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 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 ___ No ___
AMERICAN INCOME 4 LIMITED PARTNERSHIP
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Statement of Financial Position at September 30, 1996 and
December 31, 1995 3
Statement of Operations for the Three and Nine Months Ended
September 30, 1996 and 1995 4
Statement of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 5
Notes to the Financial Statements 6-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-14
PART II. OTHER INFORMATION
ITEMS 1-6 15
AMERICAN INCOME 4 LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
1996 1995
ASSETS:
Cash and cash equivalents $ 378,184 $ 338,294
Rents receivable, net of allowance for doubtful
accounts of $32,500 at December 31, 1995 - 24,584
Due from Buyer 2,855,665 -
Accounts receivable--affiliate 51,491 148,983
Equipment at cost, net of accumulated depreciation of
$8,090,953 at December 31, 1995 - 3,342,128
---------- ----------
Total assets $3,285,340 $3,853,989
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
---------- ----------
Notes payable $ - $ 91,441
Accrued interest - 1,132
Accrued liabilities 77,914 20,000
Accrued liabilities--affiliate 10,289 10,156
Deferred rental income - 209,149
Cash distributions payable to partners 2,868,689 252,525
---------- ----------
Total liabilities 2,956,892 584,403
---------- ----------
PARTNERS' CAPITAL (DEFICIT):
General Partner (172,378) (142,967)
Limited Partnership Interests (80,000 Units; initial
purchase price of $250 each) 500,826 3,412,553
---------- ----------
Total partners' capital 328,448 3,269,586
---------- ----------
Total liabilities and partners' capital $3,285,340 $3,853,989
---------- ----------
---------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
AMERICAN INCOME 4 LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
INCOME:
Lease revenue $243,377 $344,918 $679,115 $1,061,354
Interest income 4,315 4,571 10,291 12,757
Gain on sale of equipment 52,871 14,500 52,871 96,134
-------- -------- -------- ----------
Total income 300,563 363,989 742,277 1,170,245
-------- -------- -------- ----------
EXPENSES:
Depreciation 132,559 208,312 519,707 624,937
Interest expense - 1,832 816 10,582
Equipment management fees--affiliate 12,169 17,246 33,956 53,068
Operating expenses--affiliate 111,497 22,330 159,239 72,434
-------- -------- -------- ----------
Total expenses 256,225 249,720 713,718 761,021
-------- -------- -------- ----------
NET INCOME $ 44,338 $114,269 $ 28,559 $409,224
-------- -------- -------- ----------
-------- -------- -------- ----------
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 0.55 $ 1.41 $ 0.35 $ 5.06
-------- -------- -------- ----------
-------- -------- -------- ----------
CASH DISTRIBUTIONS DECLARED PER
LIMITED PARTNERSHIP UNIT $ 35.50 $ 3.12 $ 36.75 $ 9.38
-------- -------- -------- ----------
-------- -------- -------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
AMERICAN INCOME 4 LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 28,559 $ 409,224
Adjustments to reconcile net income to cash from operating activities-
Depreciation 519,707 624,937
Gain on sale of equipment (52,871) (96,134)
Decrease in allowance for doubtful accounts (32,500) -
Changes in assets and liabilities-
Decrease (increase) in-
Rents receivable 57,084 1,370
Due from Buyer (5,774) -
Accounts receivable--affiliate 97,492 (2,808)
Increase (decrease) in-
Accrued interest (1,132) (785)
Accrued liabilities 57,914 250
Accrued liabilities--affiliate 133 5,128
Deferred rental income (209,149) (44,336)
--------- ---------
Cash from operating activities 459,463 896,846
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from equipment sales 25,401 96,134
--------- ---------
Cash from investing activities 25,401 96,134
--------- ---------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Principal payments--notes payable (91,441) (196,944)
Distributions paid (353,533) (757,576)
--------- ---------
Cash used in financing activities (444,974) (954,520)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 39,890 38,460
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 338,294 299,032
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 378,184 $ 337,492
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1,948 $ 11,367
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
As discussed in Note 1, the Partnership entered into a sale transaction to
dispose of its equipment portfolio. This transaction was closed on
September 30, 1996. The Partnership received net sales proceeds of
$2,849,891 that were deposited into an escrow account and transferred to
the Partnership on October 3, 1996. This amount has been reflected as Due
from Buyer on the Statement of Financial Position at September 30, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
AMERICAN INCOME 4 LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
(1) BASIS OF PRESENTATION
The financial statements presented herein are prepared in conformity
with generally accepted accounting principles and the instructions for
preparing Form 10-Q under Rule 10-01 of Regulation S-X of the Securities
and Exchange Commission, and are unaudited. As such, these financial
statements do not include all information and footnote disclosures
required under generally accepted accounting principles for complete
financial statements, and accordingly, the accompanying financial
statements should be read in conjunction with the footnotes presented in
the 1995 Annual Report. Except as disclosed herein, there has been no
material change to the information presented in the footnotes to the
1995 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at September 30, 1996 and December 31, 1995 and results of
operations for the three and nine month periods ended September 30, 1996
and 1995 have been made and are reflected.
On September 30, 1996, the Partnership sold all of its remaining equipment
assets for $2,849,891 (see Notes 4 and 5). In October 1996, the
Partnership filed Form 8-K, which provided a description of the remarketing
process and the terms of sale. The entire remarketing effort was
undertaken jointly by 15 individual equipment leasing programs, consisting
of the Partnership and 14 affiliated partnerships, each of which
individually executed separate purchase and sale agreements with RSL
Finance Limited Partnership II (the Buyer) to sell all or a portion of
their equipment assets (the Sale Assets). In addition, the Buyer also
purchased certain of the Partnership's rents receivable equal to $5,774 at
September 30, 1996.
The General Partner anticipates that the Partnership will be dissolved on
or before December 31, 1996, in accordance with the Partnership's Amended
and Restated Agreement and Certificate of Limited Partnership. Prior to
December 31, 1996, the General Partner will wind-up the operations of the
Partnership and make a liquidating distribution of $2,868,689 to the
Partners. The distribution approximates all of the Partnership's available
cash net of estimated wind-up costs and a contingency reserve. In November
1996, the contingency reserve of $325,000 was deposited into a separate
account to cover any unforeseen liabilities that may arise in future
periods. At such time as the General Partner considers appropriate, any
balance in the reserve account will be distributed to the Partners
according to their respective ownership interests in the Partnership at the
date of its dissolution (see Note 6).
6
AMERICAN INCOME 4 LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(1) BASIS OF PRESENTATION (Continued)
The financial statements presented have been prepared on a going-concern
basis through September 30, 1996. Due to the imminent dissolution of the
Partnership requiring liquidation and distribution of its net assets, a
statement of net assets in liquidation as of September 30, 1996 is
presented below. This statement is prepared based on anticipated
liquidating values of assets and liabilities. Management has determined
the liquidating values of amounts receivable based on collectibility of
balances prior to any final distribution and termination of the
Partnership. Accrued liabilities have been estimated based on the existing
obligations and anticipated fees and costs associated with the sales
transaction and the wind-up effort. Cash distributions to partners,
including contingency reserves, may vary depending upon the realization of
the amounts estimated by management. Values estimated by management may be
different from actual amounts.
Assets:
Cash and cash equivalents $ 378,184
Due from Buyer 2,855,665
Accounts receivable--affiliate 51,491
----------
Total assets $3,285,340
----------
----------
Liabilities:
Accrued liabilities $ 77,914
Accrued liabilities--affiliate 10,289
Cash distributions payable to partners,
including contingency reserve 3,197,137
----------
Total liabilities $3,285,340
----------
----------
Net assets $ -
----------
----------
(2) CASH
The Partnership invests excess cash with large institutional banks in
reverse repurchase agreements with overnight maturities. The reverse
repurchase agreements are secured by U.S. Treasury Bills or interests in
U.S. Government securities. At September 30, 1996, the Partnership had
$375,000 invested in reverse repurchase agreements.
(3) REVENUE RECOGNITION
Rents were payable to the Partnership monthly, quarterly or semiannually,
and no significant amounts were calculated on factors other than the
passage of time. The leases were accounted for as operating leases and
were noncancelable. Rents received prior to their due dates were deferred.
7
AMERICAN INCOME 4 LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(4) EQUIPMENT
The following is a summary of equipment owned by the Partnership
immediately prior to the sales transaction described in Note 1.
LEASE TERM EQUIPMENT
EQUIPMENT TYPE (MONTHS) AT COST
Aircraft 36-60 $ 8,630,452
Flight simulators 60 2,409,250
Trailers and intermodal containers 48-60 119,952
-----------
Total equipment cost 11,159,654
Accumulated depreciation (8,337,233)
----------
Equipment, net of accumulated depreciation $ 2,822,421
-----------
-----------
As discussed in Note 1, on September 30, 1996, the Partnership sold all of
the foregoing equipment for $2,849,891.
(5) RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Partnership are paid by American
Finance Group (AFG) on behalf of the Partnership, and AFG is reimbursed at
its actual cost for such expenditures. Fees and other costs incurred
during each of the nine month periods ended September 30, 1996 and 1995,
which were paid or accrued by the Partnership to AFG or its Affiliates, are
as follows:
1996 1995
Equipment management fees $ 33,956 $ 53,068
Administrative charges 21,000 15,750
Reimbursable operating expenses due to third parties 138,239 56,684
-------- --------
Total $193,195 $125,502
-------- --------
-------- --------
Administrative charges and reimbursable operating expenses due to third
parties in 1996 include all costs anticipated in connection with the
Partnership's wind-up and dissolution.
All rents and proceeds from the sale of equipment are paid directly to
either AFG or to a lender. AFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the
Partnership. At September 30, 1996, the Partnership was owed $51,491 by
AFG for such funds and the interest thereon. These funds were remitted to
the Partnership in October 1996. The sales proceeds due from the Buyer
were deposited into the escrow account subsequent to September 30, 1996.
8
AMERICAN INCOME 4 LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(5) RELATED PARTY TRANSACTIONS (Continued)
The remarketing effort described in Note 1 was undertaken jointly by 15
individual equipment leasing programs, consisting of the Partnership and 14
affiliated partnerships (Other Affected Partnerships). Collectively, the
Partnership and the Other Affected Partnerships offered for sale all or a
portion of their equipment assets. Thirteen of the programs, including the
Partnership, sold all of their equipment assets and are expected to wind up
business operations by December 31, 1996; the remaining two programs, which
will continue their business operations beyond December 31, 1996, sold only
their interest in assets owned jointly with one or more of the 13 programs
anticipating wind-up by December 31, 1996. Substantially all of the
Partnership's equipment assets of material value represented partial
ownership interests whereby the Partnership owned less than a 100% interest
in the equipment it sold. The remaining interests in such assets were
owned by one or more of the Other Affected Partnerships. Ultimately, the
Sale Assets were sold for an aggregate adjusted sale price of approximately
$32,997,000, of which the Partnership's proportionate share, net of
associated costs, was determined to be $2,849,891. The Partnership's
proportionate share in this transaction is net of certain third-party
advisory fees incurred in connection with the equipment sales.
The Buyer is a limited partnership established to acquire the Sale Assets
and has no direct affiliation with the Partnership, the Other Affected
Partnerships, the General Partner or AFG. The sole general partner of the
Buyer is RSL Holdings, Inc. (RSL). An affiliate of RSL purchased a
significant limited partnership interest in a direct-participation
equipment leasing program co-sponsored by AFG in 1992. AFG acquired this
interest in 1993 for cash and assumption of indebtedness. There have been
no other business dealings between the Buyer and AFG and their affiliates.
(6) SUBSEQUENT EVENTS
On October 10, 1996, the General Partner entered into a Cross Partnership
Agreement with general partners of certain other affiliated partnerships.
Under this agreement, each of the general partners has agreed to set aside
a contingency reserve amount for future liabilities and deposit that amount
into an account that may be accessed by any of the general partners to fund
any and all obligations contemplated under the Cross Partnership Agreement.
Any obligation of the Partnership that is not associated with the sales
transaction (see Note 1) will directly reduce the Partnership's reserve
amount. All costs arising as a result of the sales transaction will be
allocated against the reserve amount of the Partnership and other
affiliated partnerships. If the reserve amount contributed by the
Partnership is reduced below zero, the reserve amounts contributed by the
general partners of certain other affiliated partnerships shall be debited
on a pro rata basis to cover the deficit. If the reserve amount
contributed
9
AMERICAN INCOME 4 LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(6) SUBSEQUENT EVENTS (Continued)
by one of the affiliated partnerships is reduced below zero, the reserve
amounts of the Partnership and the other affiliated partnerships shall be
debited on a pro rata basis to cover the deficit. Upon termination of the
contingency reserve account, any monies remaining will be distributed to
those partnerships with positive balances. The Partnership's reserve
amount under this agreement was determined to be $325,000 and was deposited
in the reserve account in November 1996.
In connection with the wind-up effort, certain general partner interests in
AFG Leasing Associates II, the General Partner of the Partnership,
[including the general partner interest owned by Geoffrey A. MacDonald,]
were transferred to AFG Leasing IV Incorporated, resulting in AFG Leasing
IV Incorporated and AFG Leasing Incorporated being the two general partners
of AFG Leasing Associates II. AFG Leasing Incorporated then merged with
and into AFG Leasing IV Incorporated effective October 17, 1996.
Accordingly, AFG Leasing IV Incorporated became the sole General Partner of
the Partnership commencing October 17, 1996. AFG Leasing IV Incorporated
was established in 1987 and is also the general partner or managing general
partner of certain other affiliated partnerships sponsored by AFG.
10
AMERICAN INCOME 4 LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 1996 Compared To the Three and Nine
Months Ended September 30, 1995:
OVERVIEW
The Partnership was organized in 1986 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment
subject to lease agreements with third parties. The Partnership's stated
investment objectives and policies contemplated that the Partnership would
wind up its operations within approximately seven years of its inception.
On September 30, 1996, the Partnership sold all of its remaining equipment
assets for $2,849,891. The remarketing effort described in Note 1 was
undertaken jointly by 15 individual equipment leasing programs, consisting of
the Partnership and 14 affiliated partnerships (Other Affected Partnerships).
Collectively, the Partnership and the Other Affected Partnerships sold all or
a portion of their equipment assets (Sale Assets). Thirteen of the programs,
including the Partnership, sold all of their equipment assets and are
expected to wind up business operations by December 31 1996; the remaining
two programs, which will continue their business operations beyond December
31, 1996, sold only their interest in assets owned jointly with one or more
of the 13 programs anticipating wind-up by December 31, 1996. Substantially
all of the Partnership's equipment assets of material value represented
partial ownership interests whereby the Partnership owned less than a 100%
interest in the equipment it sold. The remaining interests in such assets
were owned by one or more of the Other Affected Partnerships. Ultimately,
the Sale Assets were sold for an aggregate adjusted sale price of
approximately $32,997,000, of which the Partnership's proportionate share,
net of associated costs, was determined to be $2,849,891. The Partnership's
proportionate share in this transaction is net of certain third-party
advisory fees incurred in connection with the equipment sales. In addition,
the Buyer also purchased certain of the Partnership's rents receivable equal
to $5,774 at September 30, 1996.
The General Partner anticipates that the Partnership will be dissolved on or
before December 31, 1996, in accordance with the Partnership's Amended and
Restated Agreement and Certificate of Limited Partnership ("the Partnership
Agreement"). Prior to December 31, 1996, the General Partner will wind up
the operations of the Partnership and make a liquidating cash distribution of
$2,868,689 to the Partners. The distribution reflects all of the
Partnership's available cash, net of estimated wind-up costs and a
contingency reserve. In November 1996, the contingency reserve of $325,000
was deposited in a separate account to cover any unforeseen liabilities that
may arise in future periods. At such time as the General Partner considers
appropriate, any balance in the reserve account will be distributed to the
Partners according to their respective ownership interests in the Partnership
at the date of its dissolution (see Note 6 to the financial statements).
11
AMERICAN INCOME 4 LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
OVERVIEW (Continued)
The financial statements presented have been prepared on a going-concern
basis through September 30, 1996. Due to the imminent dissolution of the
Partnership requiring liquidation and distribution of its net assets,
management has determined the liquidating values of amounts receivable based
on collectibility of balances prior to any final distribution and termination
of the Partnership. Accrued liabilities have been estimated based on the
existing obligations and anticipated fees and costs associated with the sales
transaction and the wind-up effort. Cash distributions to partners,
including contingency reserves, may vary depending on the realization of the
amounts estimated by management. Values estimated by management may be
different from actual amounts.
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1996, the Partnership
recognized lease revenue of $243,377 and $679,115, respectively, compared to
$344,918 and $1,061,354 for the same periods in 1995. The decrease in lease
revenue from 1995 to 1996 was expected and resulted from renewal lease term
expirations and the sale of equipment. The Partnership also earned interest
income from temporary investments of rental receipts and equipment sale
proceeds in short-term instruments.
Prior to the sale of the Partnership's assets, the Partnership's equipment
portfolio included certain assets in which the Partnership held a
proportionate ownership interest. In such cases, the remaining interests
were owned by AFG or an affiliated equipment leasing program sponsored by
AFG. Proportionate equipment ownership enabled the Partnership to further
diversify its equipment portfolio by participating in the ownership of
selected assets, thereby reducing the general levels of risk that could
result from a concentration in any single equipment type, industry or lessee.
The Partnership and each affiliate individually reported, in proportion to
their respective ownership interests, their respective shares of assets,
liabilities, revenues and expenses associated with the equipment.
For each of the three and nine months ended September 30, 1996, the
Partnership sold fully depreciated equipment in the normal course of
business, which resulted in a net gain, for financial statement purposes, of
$25,401. For the three and nine months ended September 30, 1995, the
Partnership sold fully depreciated equipment which resulted in net gains, for
financial statement purposes, of $14,500 and $96,134, respectively. In
connection with the September 30, 1996 sale transaction discussed above, the
Partnership sold equipment having a net book value of $2,822,421 which
resulted in a net gain of $27,470.
12
AMERICAN INCOME 4 LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
RESULTS OF OPERATIONS (Continued)
Depreciation expense for the three and nine months ended September 30, 1996
was $132,559 and $519,707, respectively, compared to $208,312 and $624,937
for the same periods in 1995. For financial reporting purposes, to the
extent that an asset was held on primary lease term, the Partnership
depreciated the difference between (i) the cost of the asset and (ii) the
estimated residual value of the asset at the date of primary lease expiration
on a straight-line basis over such term. To the extent that equipment was
held beyond its primary lease term, the Partnership continued to depreciate
the remaining net book value of the asset on a straight-line basis over the
asset's remaining economic life.
There was no interest expense for the three months ended September 30, 1996.
Interest expense was $1,832 or less than 1% of lease revenue for the same
period in 1995. Interest expense was $816 and $10,582 or less than 1% and 1%
of lease revenue for the nine months ended September 30, 1996 and 1995,
respectively.
Management fees were 5% of lease revenue during each of the periods ended
September 30, 1996 and 1995.
Operating expenses consisted principally of administrative charges,
professional service costs, such as audit and legal fees, as well as
printing, distribution and remarketing expenses. In certain cases, equipment
storage or repairs and maintenance costs were incurred in connection with
equipment being remarketed. Collectively, operating expenses represented
45.8% and 23.5% of lease revenue for the three and nine months ended
September 30, 1996, respectively, compared to 6.5% and 6.8% of lease revenue
for the same periods in 1995. Operating expenses for the three and nine
month periods ended September 30, 1996 included all costs anticipated in
connection with the Partnership's wind-up and dissolution.
LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS
The Partnership, by its nature, is a limited-life entity that was established
for specific purposes described in the preceding "Overview." As an equipment
leasing program, the Partnership's principal operating activities have been
derived from asset rental transactions. Accordingly, the Partnership's
principal source of cash from operations was provided from the collection of
periodic rents. These cash inflows were used to satisfy debt service
obligations associated with leveraged leases and to pay management fees and
operating costs. Operating activities generated a net cash inflow of
$459,463 and $896,846 for the nine months ended September 30, 1996 and 1995,
respectively.
Cash realized from asset disposal transactions, excluding the sales
transaction on September 30, 1996, has been reported under investing
activities on the accompanying Statement of Cash Flows. During the nine
months ended September 30, 1996 and 1995, the Partnership realized $25,401
and $96,134, respectively, in equipment sales proceeds during the normal
course of business.
13
AMERICAN INCOME 4 LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS (Continued)
The Partnership obtained long-term financing in connection with certain
equipment leases. The repayments of principal related to such indebtedness
are reported as a component of financing activities. All of the
Partnership's outstanding debt obligations have been retired.
On September 30, 1996, the Partnership recorded a receivable of $2,849,891 in
connection with the sale of all of its remaining equipment assets. These
proceeds were deposited into an escrow account and transferred to the
Partnership on October 3, 1996. In conjunction with this transaction, the
General Partner has commenced the dissolution and liquidation of the
Partnership. The aggregate funds from the sale transaction and liquidation
will be used to fund existing obligations, including estimated costs of the
wind-up effort and sales transaction, and to establish a contingency reserve
to cover any unforeseen liabilities. The remaining funds, including any
unutilized contingency reserves, will be distributed to the Partners in
accordance with the terms of the Partnership Agreement and related agreements.
14
AMERICAN INCOME 4 LIMITED PARTNERSHIP
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: None.
Item 2. Changes in Securities
Response: None.
Item 3. Defaults upon Senior Securities
Response: None.
Item 4. Submission of Matters to a Vote of Security Holders
Response: None.
Item 5. Other Information
Response: None.
Item 6(a). Exhibits
Response: None.
Item 6(b). Reports on Form 8-K
Response: None.
15
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity
and on the date indicated.
AMERICAN INCOME 4 LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporated, a Massachusetts
corporation and the General Partner of the Registrant.
By: /s/ Michael J. Butterfield
--------------------------
Michael J. Butterfield
Treasurer of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Accounting Officer)
Date: November 19, 1996
-----------------
By: /s/ Gary M. Romano
------------------
Gary M. Romano
Clerk of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: November 19, 1996
-----------------
15