UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 March 31, 1997 Commission File No. 0-19134
American Income Partners V-C Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-3077437
(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 V-C LIMITED PARTNERSHIP
FORM 10-Q
INDEX
Page
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position
at March 31, 1997 and December 31, 1996 3
Statement of Operations
for the three months ended March 31, 1997 and 1996 4
Statement of Cash Flows
for the three months ended March 31, 1997 and 1996 5
Notes to the Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II. OTHER INFORMATION:
Items 1 - 6 12
2
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
March 31, 1997 and December 31, 1996
(Unaudited)
March 31, December 31,
1997 1996
--------- ------------
ASSETS
Cash and cash equivalents $1,438,131 $1,584,360
Rents receivable, net of allowance for doubtful
accounts of $15,000 11,834 37,611
Accounts receivable - affiliate 103,242 76,774
Equipment at cost, net of accumulated depreciation
of $7,840,688 and $7,893,295 at March 31, 1997
and December 31, 1996, respectively 718,532 943,331
---------- ----------
Total assets $2,271,739 $2,642,076
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
Notes payable $ -- $ 329,370
Accrued interest -- 2,609
Accrued liabilities 26,670 26,950
Accrued liabilities - affiliate 18,724 14,814
Deferred rental income 9,750 33,634
Cash distributions payable to partners 110,184 110,184
---------- ----------
Total liabilities 165,328 517,561
---------- ----------
Partners' capital (deficit):
General Partner (926,189) (925,284)
Limited Partnership Interests
(930,443 Units; initial purchase
price of $25 each) 3,032,600 3,049,799
---------- ----------
Total partners' capital 2,106,411 2,124,515
---------- ----------
Total liabilities and partners' capital $2,271,739 $2,642,076
---------- ----------
---------- ----------
The accompanying notes are an integral part
of these financial statements.
3
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
for the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
---- -----
Income:
Lease revenue $287,759 $724,023
Interest income 19,878 14,748
Gain on sale of equipment 18,276 78,602
-------- --------
Total income 325,913 817,373
-------- --------
Expenses:
Depreciation 146,509 359,664
Interest expense 4,587 13,318
Equipment management fees - affiliate 11,551 40,593
Operating expenses - affiliate 71,186 81,713
-------- --------
Total expenses 233,833 495,288
-------- --------
Net income $92,080 $322,085
-------- --------
-------- --------
Net income
per limited partnership unit $0.09 $0.33
-------- --------
-------- --------
Cash distribution declared
er limited partnership unit $0.11 $0.37
-------- --------
-------- --------
The accompanying notes are an integral part
of these financial statements.
4
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
---- ----
Cash flows from (used in) operating activities:
Net income $ 92,080 $ 322,085
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 146,509 359,664
Gain on sale of equipment (18,276) (78,602)
Changes in assets and liabilities
Decrease (increase) in:
rents receivable 25,777 (30,798)
accounts receivable - affiliate (26,468) (183,365)
Increase (decrease) in:
accrued interest (2,609) (874)
accrued liabilities (280) 35,750
accrued liabilities - affiliate 3,910 28,391
deferred rental income (23,884) 114,681
---------- ----------
Net cash from operating activities 196,759 566,932
---------- ----------
Cash flows from investing activities:
Proceeds from equipment sales 96,566 102,230
---------- ----------
Net cash from investing activities 96,566 102,230
---------- ----------
Cash flows used in financing activities:
Principal payments - notes payable (329,370) (78,149)
Distributions paid (110,184) (489,707)
---------- ----------
Net cash used in financing activities (439,554) (567,856)
---------- ----------
Net increase (decrease) in cash and cash
equivalents (146,229) 101,306
Cash and cash equivalents at beginning of period 1,584,360 1,173,376
---------- ----------
Cash and cash equivalents at end of period $1,438,131 $1,274,682
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 7,196 $ 14,192
---------- ---------
---------- ---------
The accompanying notes are an integral part
of these financial statements.
5
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
Notes to the Financial Statements
March 31, 1997
(Unaudited)
NOTE 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 1996 Annual Report. Except
as disclosed herein, there has been no material change to the information
presented in the footnotes to the 1996 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at March 31, 1997 and December 31, 1996 and results of operations
for the three month periods ended March 31, 1997 and 1996 have been made and
are reflected.
NOTE 2 - CASH
At March 31, 1997, the Partnership had $1,325,000 invested in reverse
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities.
NOTE 3 - REVENUE RECOGNITION
Rents are payable to the Partnership monthly or quarterly and no
significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable.
Rents received prior to their due dates are deferred. Future minimum rents
of $ 982,918 are due as follows:
For the year ending March 31, 1998 $730,312
1999 189,310
2000 31,648
2001 31,648
--------
Total $982,918
--------
--------
NOTE 4 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at March
31, 1997. In the opinion of Equis Financial Group Limited Partnership
("EFG"), (formerly American Finance Group), the acquisition cost of the
equipment did not exceed its fair market value.
6
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
Lease Term Equipment
Equipment Type (Months) at Cost
- ---------------------------- ---------- ---------
Construction and mining 6-84 $ 2,550,457
Aircraft 1-36 2,132,292
Communications 12-84 1,737,032
Retail store fixtures 12-72 1,144,958
Materials handling 1-60 750,338
Motor vehicles 36 238,583
Computers and peripherals 12-60 5,560
-----------
Total equipment cost 8,559,220
Accumulated depreciation (7,840,688)
-----------
Equipment, net of accumulated depreciation $ 718,532
-----------
-----------
At March 31, 1997, the Partnership's equipment portfolio included equipment
having a proportionate original cost of $2,132,292, representing
approximately 25% of total equipment cost.
The summary above includes equipment held for re-lease or sale with a cost
and net book value of approximately $845,000 and $83,000, respectively, at
March 31, 1997. The equipment includes the Partnership's proportionate
interest in a Boeing 727-251 Advanced aircraft (the "Aircraft"), formerly
leased to Northwest Airlines, Inc., having a cost and net book value of
approximately $649,000 and $83,000, respectively, at March 31, 1997. This
aircraft was returned upon expiration of its lease term on November 30, 1995
and is currently undergoing heavy maintenance expected to cost the
Partnership approximately $77,000, all of which was accrued or incurred at
March 31, 1997. The Partnership has experienced delays in the completion of
the Aircraft's heavy maintenance. The Partnership entered into a new
18-month lease agreement with Transmeridian Airlines, to re-lease the
Aircraft at a base monthly rent to the Partnership of $4,800 for 8 months and
$4,200 for 10 months, effective upon completion of heavy maintenance.
NOTE 5 - RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Partnership are paid by EFG on
behalf of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during each of the three month
periods ended March 31, 1997 and 1996, which were paid or accrued by the
Partnership to EFG or its Affiliates, are as follows:
1997 1996
----- ----
Equipment management fees $11,551 $ 40,593
Administrative charges 8,187 5,250
Reimbursable operating expenses
due to third parties 62,999 76,463
------- --------
Total $82,737 $122,306
------- --------
------- --------
7
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the
Partnership. At March 31, 1997, the Partnership was owed $103,242 by EFG for
such funds and the interest thereon. These funds were remitted to the
Partnership in April 1997.
8
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1996:
OVERVIEW
The Partnership was organized in 1990 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.
Accordingly, the General Partner is pursuing the remarketing of all of the
Partnership's remaining equipment and expects to engage an investment advisor
to provide assistance and evaluate alternative remarketing strategies.
Currently, the General Partner anticipates that it will wind-up the
operations of the Partnership and make a liquidating distribution to the
Partners, net of any cash reserves which the General Partner may consider
appropriate, within the next twelve months and possibly by December 31, 1997.
RESULTS OF OPERATIONS
For the three months ended March 31, 1997, the Partnership recognized
lease revenue of $287,759 compared to $724,023 for the same period in 1996.
The decrease in lease revenue from 1996 to 1997 was expected and resulted
principally from renewal lease term expirations and the sale of equipment.
The Partnership also earns interest income from temporary investments of
rental receipts and equipment sales proceeds in short-term instruments.
The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are owned by an affiliated equipment leasing program
sponsored by EFG. Proportionate equipment ownership enables the Partnership
to further diversify its equipment portfolio by participating in the
ownership of selected assets, thereby reducing the general levels of risk
which could result from a concentration in any single equipment type,
industry or lessee. The Partnership and each affiliate individually report,
in proportion to their respective ownership interests, their respective
shares of assets, liabilities, revenues, and expenses associated with the
equipment.
For the three months ended March 31, 1997, the Partnership sold equipment
having a net book value of $78,290 to existing lessees and third parties.
These sales resulted in a net gain, for financial statement purposes, of
$18,276 compared to a net gain of $78,602 on equipment having a net book
value of $23,628 for the same period in 1996.
It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Partnership, as such transactions will be
dependent upon the condition and type of equipment being sold and its
marketability at the time of sale. In addition, the amount of gain or loss
reported for financial statement purposes is partly a function of the amount
of accumulated depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological
advances, and many other events can converge to enhance or detract from asset
values at any given time. EFG attempts to monitor these changes in order to
identify opportunities which may be advantageous to the Partnership and which
will maximize total cash returns for each asset.
9
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset,
together with its residual value. The latter consists of cash proceeds
realized upon the asset's sale in addition to all other cash receipts
obtained from renting the asset on a re-lease, renewal or month-to-month
basis. The Partnership classifies such residual rental payments as lease
revenue. Consequently, the amount of gain or loss reported in the financial
statements is not necessarily indicative of the total residual value the
Partnership achieved from leasing the equipment.
Depreciation expense was $146,509 and $359,664 for the three months ended
March 31, 1997 and 1996, respectively. For financial reporting purposes, to
the extent that an asset is held on primary lease term, the Partnership
depreciates 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. For purposes of this policy, estimated residual values represent
estimates of equipment values at the date of primary lease expiration. To the
extent that an asset is held beyond its primary lease term, the Partnership
continues to depreciate the remaining net book value of the asset on a
straight-line basis over the asset's remaining economic life.
Interest expense was $4,587 or 1.6% of lease revenue for the three months
ended March 31, 1997 compared to $13,318 or 1.8% of lease revenue for the
same period in 1996. The Partnership's notes payable were fully amortized
during the three months ended March 31, 1997.
Management fees were approximately 4% of lease revenue for the three months
ended March 31, 1997 compared to 5.6% for the same period in 1996. Management
fees during the three months ended March 31, 1996 included $7,731, resulting
from an underaccrual in 1995. Management fees are based on 5% of gross lease
revenue generated by operating leases and 2% of gross lease revenue generated
by full payout leases.
Operating expenses consist 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 may be incurred in connection with
equipment being remarketed. Significant operating expenses were incurred in
1996 and 1997 due to heavy maintenance and airframe overhaul costs incurred
or accrued in connection with the Partnership's interests in two Boeing 727
aircraft. Certain of the costs incurred in the first quarter of 1996 were
subsequently reimbursed by the former lessee of the related aircraft. In
1996, the Partnership entered into a new 36-month lease agreement with
Sunworld International Airlines, Inc. to re-lease one of the aircraft at a
base rent to the Partnership of $3,900 per month (see discussion below
relating to the second aircraft). The amount of future operating expenses
cannot be predicted with certainty; however, such expenses are usually higher
during the acquisition and liquidation phases of a partnership. Other
fluctuations typically occur in relation to the volume and timing of
remarketing activities.
LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS
The Partnership by its nature is a limited life entity which was
established for specific purposes described in the preceding "Overview". As
an equipment leasing program, the Partnership's principal operating
activities derive from asset rental transactions. Accordingly, the
Partnership's principal source of cash from operations is generally provided
by the collection of periodic rents. These cash inflows are 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 $196,759 and $566,932 for the three months ended March 31, 1997
and 1996, respectively. Future renewal, re-lease and equipment sale
activities will cause a decline in the Partnership's lease revenue and
corresponding sources of operating cash. Overall, expenses associated with
rental activities, such as management fees, and net cash flow from operating
activities will also decline as the Partnership experiences a higher
frequency of remarketing events.
10
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
Ultimately, the Partnership will dispose of all assets under lease. This
will occur principally through sale transactions whereby each asset will be
sold to the existing lessee or to a third party. Generally, this will occur
upon expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of
an asset. Such circumstances are infrequent and usually result in the
collection of stipulated cash settlements pursuant to terms and conditions
contained in the underlying lease agreements.
Cash realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During the three
months ended March 31, 1997, the Partnership realized $96,566 in equipment
sale proceeds compared to $102,230 for the same period in 1996. Future
inflows of cash from asset disposals will vary in timing and amount and will
be influenced by many factors including, but not limited to, the frequency
and timing of lease expirations, the type of equipment being sold, its
condition and age, and future market conditions.
On November 30, 1995, upon the expiration of its lease term, Northwest
Airlines, Inc., returned a Boeing 727-251 Advanced aircraft (the "Aircraft")
in which the Partnership has a 6% ownership interest. The aircraft had a
cost and net book value to the Partnership of approximately $649,000 and
$83,000, respectively, at March 31, 1997. The Aircraft is currently
undergoing heavy maintenance expected to cost the Partnership approximately
$77,000, all of which was incurred or accrued at March 31, 1997. The
Partnership has experienced delays in the completion of the Aircraft's heavy
maintenance. The Partnership entered into a new 18-month lease agreement
with Transmeridian Airlines, to re-lease the Aircraft at a base monthly rent
to the Partnership of $4,800 for 8 months and $4,200 for 10 months,
effective upon completion of heavy maintenance.
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. The Partnership's notes
payable were fully amortized during the three months ended March 31, 1997.
Cash distributions to the General Partner and Recognized Owners are
declared and generally paid within fifteen days following the end of each
calendar quarter. The payment of such distributions is presented as a
component of financing activities. For the three months ended March 31, 1997,
the Partnership declared total cash distributions of Distributable Cash From
Operations and Distributable Cash From Sales and Refinancings of $110,184. In
accordance with the Amended and Restated Agreement and Certificate of Limited
Partnership, the Recognized Owners were allocated 95% of these distributions,
or $104,675, and the General Partner was allocated 5%, or $5,509. The first
quarter 1997 cash distribution was paid on April 14, 1997.
Cash distributions paid to the Recognized Owners consist of both a return
of and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation
of renewal and/or re-lease rents, and the residual value realized for each
asset at its disposal date. Future market conditions, technological changes,
the ability of EFG to manage and remarket the assets, and many other events
and circumstances, could enhance or detract from individual asset yields and
the collective performance of the Partnership's equipment portfolio.
The future liquidity of the Partnership will be influenced by the
foregoing and will be greatly dependent upon the collection of contractual
rents and the outcome of residual activities. The General Partner
anticipates that cash proceeds resulting from these sources will satisfy the
Partnership's future expense obligations. However, the amount of cash
available for distribution in future periods will fluctuate. Equipment lease
expirations and asset disposals will cause the Partnership's net cash from
operating activities to diminish over time; and equipment sale proceeds will
vary in amount and period of realization. In addition, the Partnership may
be required to incur asset refurbishment or upgrade costs in connection with
future remarketing activities. Accordingly, fluctuations in the level of
future quarterly cash distributions are anticipated.
11
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
FORM 10-Q
PART II. FINANCIAL 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
12
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 V-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: May 15, 1997
---------------------------------------
By: /s/ Gary Romano
---------------------------------------
Gary M. Romano
Clerk of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 15, 1997
---------------------------------------
13