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. 0-16513
American Income Partners III-C Limited Partnership
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2979663
- ------------------------------- ------------------
(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 PARTNERS III-C 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 PARTNERS III-C LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
1996 1995
ASSETS:
Cash and cash equivalents $ 717,131 $ 763,103
Rents receivable, net of allowance for doubtful accounts
of $20,000 at December 31, 1995 - 11,190
Due from Buyer 623,076 -
Accounts receivable--affiliate 1,498,364 28,196
Equipment at cost, net of accumulated depreciation
of $5,067,104 at December 31, 1995 - 2,452,884
---------- ----------
Total assets $2,838,571 $3,255,373
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Notes payable $ - $ 27,614
Accounts payable 56,705 -
Accrued interest - 148
Accrued liabilities 51,007 21,914
Accrued liabilities--affiliate 16,115 15,007
Deferred rental income - 29,337
Cash distributions payable to partners 2,439,682 146,615
---------- ----------
Total liabilities 2,563,509 240,635
---------- ----------
PARTNERS' CAPITAL (DEFICIT):
General Partner (167,167) (139,770)
Limited Partnership Interests (774,130 Units;
initial purchase price of $25 each) 442,229 3,154,508
---------- ----------
Total partners' capital 275,062 3,014,738
---------- ----------
Total liabilities and partners' capital $2,838,571 $3,255,373
---------- ----------
---------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
AMERICAN INCOME PARTNERS III-C 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 $357,660 $176,168 $638,526 $612,290
Interest income 14,919 10,963 34,196 33,744
Gain on sale of equipment 87,495 43,360 126,535 346,438
-------- -------- -------- --------
Total income 460,074 230,491 799,257 992,472
-------- -------- -------- --------
EXPENSES:
Depreciation 73,073 110,171 256,617 331,784
Write-down of equipment - - 400,000 -
Interest expense 229 668 936 3,075
Equipment management fees--affiliate 17,883 8,808 31,926 30,614
Operating expenses--affiliate 79,549 10,354 116,542 66,159
-------- -------- -------- --------
Total expenses 170,734 130,001 806,021 431,632
-------- -------- -------- --------
NET INCOME (LOSS) $289,340 $100,490 $ (6,764) $560,840
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ 0.37 $ 0.13 $ (0.01) $ 0.72
-------- -------- -------- --------
-------- -------- -------- --------
CASH DISTRIBUTIONS DECLARED PER LIMITED PARTNERSHIP UNIT $ 3.12 $ 0.31 $ 3.50 $ 0.94
-------- -------- -------- --------
-------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
AMERICAN INCOME PARTNERS III-C 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 (loss) $ (6,764) $ 560,840
Adjustments to reconcile net income (loss) to cash from operating activities-
Depreciation 256,617 331,784
Write-down of equipment 400,000 -
Gain on sale of equipment (126,535) (346,438)
Decrease in allowance for doubtful accounts (20,000) (30,000)
Changes in assets and liabilities-
Decrease (increase) in-
Rents receivable 31,190 237,916
Accounts receivable--affiliate (215,733) 108,599
Increase (decrease) in-
Accounts payable 56,705 -
Accrued interest (148) (11,484)
Accrued liabilities 29,093 (1,750)
Accrued liabilities--affiliate 1,108 (1,949)
Deferred rental income (29,337) 20,404
--------- -----------
Cash from operating activities 376,196 867,922
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from equipment sales 45,291 346,438
--------- -----------
Cash from investing activities 45,291 346,438
--------- -----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Principal payments--notes payable (27,614) (336,620)
Distributions paid (439,845) (879,693)
--------- -----------
Cash used in financing activities (467,459) (1,216,313)
--------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (45,972) (1,953)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 763,103 837,988
--------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 717,131 $ 836,035
--------- -----------
--------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1,084 $ 14,559
--------- -----------
--------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
As discussed in Note 1, the Partnership entered into a sales transaction to
dispose of its equipment portfolio. This transaction was closed on
September 30, 1996. The Partnership received net sales proceeds of
$623,076 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.
As discussed in Notes 1 and 4, the Partnership entered into an additional
sale transaction to dispose of its interest in an aircraft leased to
Northwest Airlines, Inc. This transaction was settled on September 30,
1996. The net sales proceeds of $1,254,435 were deposited into an escrow
account and transferred to the Partnership on October 3, 1996. This amount
has been included in Accounts Receivable--Affiliate on the Statement of
Financial Position at September 30, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
AMERICAN INCOME PARTNERS III-C 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, excluding its interest in an aircraft, for $623,076
(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) and certain of which entered into a collective purchase and
sale agreement with Northwest Airlines Inc. (NWA) to sell all or a
portion of their equipment assets (the Sale Assets). Certain of these
partnerships, including the Partnership, sold their collective interest
in a McDonnell Douglas MD-82 aircraft (NWA Aircraft) to NWA. The net
consideration for this aircraft was allocated first to remaining lease
rental obligations and second to sale proceeds. The Partnership's
proportionate share of this consideration was $1,433,012, including
$1,254,435 representing net sale proceeds (see Notes 3 and 4).
The Managing 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 $2,439,682 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 $275,000 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 PARTNERS III-C 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 transactions 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 $ 717,131
Due from Buyer 623,076
Accounts receivable--affiliate 1,498,364
----------
Total assets $2,838,571
----------
----------
Liabilities:
Accounts payable $ 56,705
Accrued liabilities 51,007
Accrued liabilities--affiliate 16,115
Cash distributions payable to partners,
including contingency reserve 2,714,744
----------
Total liabilities $2,838,571
----------
----------
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
$715,000 invested in reverse repurchase agreements.
7
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(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. Lease rentals, representing early termination
rents, were recognized as revenue in the period in which they were
received.
As discussed in Note 1, the Partnership realized $178,577 of early
termination rents in connection with the sale of the NWA Aircraft.
(4) EQUIPMENT
The following is a summary of equipment owned by the Partnership
immediately prior to the sales transactions described in Note 1.
LEASE TERM EQUIPMENT,
EQUIPMENT TYPE (MONTHS) AT COST
Aircraft 36-108 $ 5,665,903
Retail store fixtures 1-84 341,058
Materials handling 1-84 310,658
Locomotives 57-60 254,360
Manufacturing 60 202,552
Medical 56-60 162,007
-----------
Total equipment cost 6,936,538
-----------
Accumulated depreciation (5,143,984)
-----------
Equipment, net of accumulated depreciation $ 1,792,554
-----------
-----------
As discussed in Note 1, on September 30, 1996, the Partnership sold all
of the foregoing equipment for $1,877,511, including $1,254,435 of net
sales proceeds related to the NWA Aircraft.
8
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(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 $ 31,926 $30,614
Administrative charges 20,052 15,039
Reimbursable operating expenses due to third parties 96,490 51,120
-------- -------
Total $148,468 $96,773
-------- -------
-------- -------
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, including the sales
transaction described in Note 1, 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 $1,498,364 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.
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 $623,076. In a separate transaction, the
Partnership and certain of the Other Affected Partnerships sold their
entire interest in the NWA Aircraft to the lessee and agreed to
terminate the lease agreement for total proceeds of $13,200,000, of
which the Partnership's proportionate share, net of associated costs,
was determined to be $1,433,012, including early
9
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(5) RELATED PARTY TRANSACTIONS (Continued)
termination rents of $178,577. The Partnership's proportionate share in
both transactions 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, excluding the NWA Aircraft, 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 transactions (see Note 1) will directly
reduce the Partnership's reserve amount. All costs arising as a result
of the sales transactions 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 by one of the affiliated partnerships
is reduced below zero, the reserve amounts of the Partnership and the
remaining 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 $275,000 and was deposited in the reserve
account in November 1996.
In connection with the wind-up effort, AFG Leasing Incorporated, the
Managing General Partner of the Partnership, was merged with and into
AFG Leasing IV Incorporated effective October 17, 1996. Accordingly,
AFG Leasing IV Incorporated became the Managing 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 PARTNERS III-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The 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 1987 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. 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 (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, excluding the NWA Aircraft, 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 $623,076.
In a separate transaction, the Partnership and certain of the Other Affected
Partnerships sold their entire interest in the NWA Aircraft to the lessee and
agreed to terminate the lease agreement for total proceeds of $13,200,000, of
which the Partnership's proportionate share, net of associated costs, was
determined to be $1,433,012, including early termination rents of $178,577.
The Partnership's proportionate share, net of associated costs, in both
transactions is net of certain third-party advisory fees incurred in
connection with the equipment sales.
The Managing 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
(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 $2,439,682 to the Partners. The distribution approximates
all of the Partnership's available cash, net of estimated wind-up costs and a
contingency
11
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
(Continued)
OVERVIEW (Continued)
reserve. In November 1996, the contingency reserve of $275,000 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).
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
transactions 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.
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1996, the Partnership
recognized lease revenue of $357,660 and $638,526, respectively, compared to
$176,168 and $612,290 for the same periods in 1995. The increase in lease
revenue from 1995 to 1996 resulted from the recognition of $178,577 in lease
revenue related to early termination rents associated with the sale of the
NWA Aircraft. This was partially offset by renewal lease term expirations
and the sale of equipment. The Partnership also earned interest income from
temporary investments of rental receipts and equipment sales 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.
During the three months ended September 30, 1996, the Partnership sold
equipment in the normal course of business with a net book value of $3,713 to
existing lessees and third parties. These sales resulted in a net gain, for
financial statement purposes, of $2,538 compared to a net gain of $43,360 on
equipment which had been fully depreciated for the same period in 1995.
12
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
(Continued)
RESULTS OF OPERATIONS (Continued)
During the nine months ended September 30, 1996, the Partnership sold
equipment in the normal course of business with a net book value of $3,713 to
existing lessees and third parties. These sales resulted in a net gain, for
financial statement purposes, of $41,578 compared to a net gain of $346,438
on equipment which had been fully depreciated for the same period in 1995.
In connection with the September 30, 1996 sales transactions discussed above,
the Partnership realized a net gain of $84,957.
Depreciation expense for the three and nine months ended September 30, 1996
was $73,073 and $256,617, respectively, compared to $110,171 and $331,784 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 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.
During the nine months ended September 30, 1996, the Partnership recorded a
write-down, representing an impairment in value, pertaining to its interest
in a Lockheed L-1011 aircraft. This adjustment was precipitated by
continuing deterioration in the secondary market for wide-body aircraft of
this type. Several air carriers have reduced their commitment to the L-1011,
and a major domestic air carrier is expected to retire eleven L-1011 aircraft
from its fleet. Further, it appeared that future demand for this type of
aircraft would be weak, consisting principally of air cargo or operators of
passenger charters. In consideration of such circumstances and in accordance
with Financial Accounting Standards Board Statement No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF, the Partnership reduced the carrying value of its L-1011 aircraft
interest to its estimated current fair market value. This resulted in a
write-down of $400,000, representing $0.51 per limited partnership unit.
Interest expense was $229 and $936 or less than 1% of lease revenue for each
of the three and nine month periods ended September 30, 1996, respectively,
compared to $668 and $3,075 or less than 1% of lease revenue for each of the
same periods in 1995.
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
22.2% and 18.3% of lease revenue for the three and nine months ended
September 30, 1996, respectively, compared to 5.9% and 10.8% 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.
13
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
(Continued)
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 has been 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 net cash inflows of
$376,196 during the nine months ended September 30, 1996, compared to
$867,922 for the same period in 1995.
Cash realized from asset disposal transactions, excluding the sales
transactions on September 30, 1996, is reported under investing activities on
the accompanying Statement of Cash Flows. During the nine months ended
September 30, 1996 and 1995, the Partnership realized $45,291 and $346,438,
respectively, in equipment sale proceeds during the normal course of business.
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 were retired in 1996.
On September 30, 1996, the Partnership recorded a receivable in the amount of
$1,433,012 in connection with the disposal of the NWA Aircraft. The
Partnership also recorded a receivable in the amount of $623,076 in
connection with the sale of its remaining equipment portfolio. 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 sales transactions and liquidation will be used to
fund existing obligations, including costs of the wind-up effort and sales
transactions 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 PARTNERS III-C 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 PARTNERS III-C 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
-----------------
16