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. 0-20030
American Income Fund I-D, a Massachusetts Limited Partnership
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(Exact name of registrant as specified in its charter)
Massachusetts 04-3122696
- -------------------------------------- ---------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Boston, MA 02114
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(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 FUND I-D,
a Massachusetts 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 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
PART II. OTHER INFORMATION:
Items 1--6 14
2
AMERICAN INCOME FUND I-D
a Massachusetts 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...................................... $ 1,545,385 $ 1,627,768
Rents receivable............................................... 477,890 580,171
Accounts receivable--affiliate................................. 234,162 146,455
Equipment at cost, net of accumulated depreciation of
$14,341,517 and $13,935,898 at March 31, 1997 and
December 31, 1996, respectively.............................. 14,210,833 15,009,966
------------- -------------
Total assets.............................................. $ 16,468,270 $ 17,364,360
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LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Notes payable.................................................. $ 6,861,580 $ 7,780,603
Accrued interest............................................... 68,765 100,187
Accrued liabilities............................................ 18,500 22,750
Accrued liabilities--affiliate................................. 50,468 34,144
Deferred rental income......................................... 71,001 117,405
Cash distributions payable to partners......................... 218,296 218,296
------------- -------------
Total liabilities......................................... 7,288,610 8,273,385
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Partners' capital (deficit):
General Partner.............................................. (458,822) (463,256)
Limited Partnership Interests
(829,521.30 Units; initial purchase price of $25 each)....... 9,638,482 9,554,231
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Total partners' capital................................... 9,179,660 9,090,975
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Total liabilities and partners' capital................... $ 16,468,270 $ 17,364,360
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The accompanying notes are an integral part
of these financial statements.
3
AMERICAN INCOME FUND I-D
a Massachusetts Limited Partnership
STATEMENT OF OPERATIONS
for the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
----------- ------------
Income:
Lease revenue.................................. $ 1,151,969 $ 1,165,575
Interest income................................ 22,843 61,698
Interest income--affiliate..................... -- 4,605
Gain on sale of equipment...................... 68,709 --
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Total income................................. 1,243,521 1,231,878
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Expenses:
Depreciation and amortization.................. 756,910 1,000,579
Interest expense............................... 90,258 110,255
Equipment management fees--affiliate........... 42,772 32,451
Operating expenses--affiliate.................. 46,600 31,453
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Total expenses............................... 936,540 1,174,738
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Net income....................................... $ 306,981 57,140
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----------- -----------
Net income
per limited partnership unit................... 0.35 $ 0.07
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Cash distribution declared
per limited partnership unit................... $ 0.25 $ 0.25
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The accompanying notes are an integral part
of these financial statements.
4
AMERICAN INCOME FUND I-D,
a Massachusetts 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......................................................... $ 306,981 $ 57,140
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization.................................. 756,910 1,000,579
Gain on sale of equipment...................................... (68,709) --
Changes in assets and liabilities
Decrease (increase) in:
rents receivable............................................... 102,281 50,869
accounts receivable--affiliate................................. (87,707) 96,300
Increase (decrease) in:
accrued interest............................................... (31,422) 17,092
accrued liabilities............................................ (4,250) 5,258
accrued liabilities--affiliate................................. 16,324 8,081
deferred rental income......................................... (46,404) 32,587
----------- -----------
Net cash from operating activities........................... 944,004 1,267,906
----------- -----------
Cash flows from (used in) investing activities:
Purchase of equipment............................................ -- (63,243)
Proceeds from equipment sales.................................... 110,932 --
----------- -----------
Net cash from (used in) investing activities................. 110,932 (63,243)
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Cash flows used in financing activities:
Principal payments--notes payable................................ (919,023) (852,783)
Distributions paid............................................... (218,296) (272,869)
----------- -----------
Net cash used in financing activities........................ (1,137,319) (1,125,652)
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Net increase (decrease) in cash and cash equivalents............... (82,383) 79,011
Cash and cash equivalents at beginning of period................... 1,627,768 407,253
----------- -----------
Cash and cash equivalents at end of period......................... $ 1,545,385 $ 486,264
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest......................... $ 121,680 $ 93,163
----------- -----------
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Supplemental disclosure of investing and financing activities:
At December 31, 1995, the Partnership held $1,882,960 in a special-purpose
escrow account pending the completion of an aircraft exchange (See Results
of Operations). The Partnership completed the exchange in March 1996
obtaining interests in aircraft at an aggregate cost of $7,535,530, utilizing
cash of $1,946,203 (including the escrowed funds) and third party financing
of $5,589,327.
The accompanying notes are an integral part
of these financial statements.
5
AMERICAN INCOME FUND I-D,
a Massachusetts 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
- ------------
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.
NOTE 3--REVENUE RECOGNITION
- ---------------------------
Rents are payable to the Partnership monthly, quarterly or semi-annually and
no significant amounts are calculated on factors other than the passage of time.
Rents from Reno Air, Inc. ("Reno Air"), as provided for in the lease agreement,
are adjusted monthly for changes in the London Inter-Bank Offered Rate
("LIBOR"). Future rents from Reno Air, included below, reflect the most recent
LIBOR effected rental payment. The leases are accounted for as operating leases
and are noncancellable. Rents received prior to their due dates are deferred.
Future minimum rents of $9,036,202 are due as follows:
For the year ending March 31, 1998 $ 3,175,378
1999 2,029,980
2000 1,275,761
2001 839,426
2002 839,426
Thereafter 876,231
-----------
Total $ 9,036,202
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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 FUND I-D,
a Massachusetts Limited Partnership
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
LEASE TERM EQUIPMENT
EQUIPMENT TYPE (MONTHS) AT COST
- ------------------- ------------- -------------
Aircraft........................................................ 39-81 $ 10,081,685
Vessels......................................................... 72 5,091,464
Construction & mining........................................... 11-72 4,893,321
Materials handling.............................................. 1-60 4,647,416
Trailers/intermodal containers.................................. 36-99 2,155,360
Furniture & fixtures............................................ 60-90 713,683
Computers & peripherals......................................... 18-60 366,040
Retail store fixtures........................................... 48 316,563
Photocopying.................................................... 24-48 119,685
Communications.................................................. 13-63 95,022
Tractors & heavy duty trucks.................................... 60-78 62,319
Research & test................................................. 24 9,792
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Total equipment cost.................................. 28,552,350
Accumulated depreciation.................................. (14,341,517)
-------------
Equipment, net of accumulated depreciation...................... $ 14,210,833
-------------
-------------
At March 31, 1997, the Partnership's equipment portfolio included equipment
having a proportionate original cost of $17,831,788, representing approximately
62% of total equipment cost.
The summary above includes equipment held for sale or re-lease with a cost
and net book value of approximately $2,785,000 and $244,000, respectively, at
March 31, 1997. The General Partner is actively seeking the sale or re-lease of
all equipment not on lease. See also Note 8--Subsequent Event.
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 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....................... $ 42,772 $ 32,451
Administrative charges.......................... 9,756 5,250
Reimbursable operating expenses
due to third parties.......................... 36,844 26,203
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Total.................................. $ 89,372 $ 63,904
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--------- ---------
7
AMERICAN INCOME FUND I-D,
a Massachusetts Limited Partnership
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
During the three months ended March 31, 1996, the Partnership earned
interest income of $4,605 on a note receivable from EFG resulting from a
settlement with ICCU Containers S.p.A., a former lessee of the Partnership and
an affiliate of which was a former partner in American Finance Group.
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 $234,162 by EFG for such funds and
the interest thereon. These funds were remitted to the Partnership in April
1997.
NOTE 6--NOTES PAYABLE
- ---------------------
Notes payable at March 31, 1997 consisted of installment notes of $6,861,580
payable to banks and institutional lenders. The installment notes bear interest
rates ranging between 7.5% and 8.95%, except for one note which bears a
fluctuating interest rate based on LIBOR plus a margin (5.7% at March 31, 1997).
All of the installment notes are non-recourse and are collateralized by the
equipment and assignment of the related lease payments. Generally, the
installment notes will be fully amortized by noncancellable rents. However, the
Partnership has balloon payment obligations at the expiration of the respective
primary lease terms related to aircraft leased by Finnair OY and Reno Air of
$1,367,145 and $823,037, respectively. The carrying amount of notes payable
approximates fair value at March 31, 1997.
The annual maturities of the installment notes payable are as follows:
For the year ending March 31, 1998 $ 1,794,658
1999 1,220,431
2000 2,064,918
2001 352,038
2002 380,710
Thereafter 1,048,825
-----------
Total $ 6,861,580
-----------
-----------
NOTE 7--LEGAL PROCEEDINGS
On July 27, 1995, EFG, on behalf of the Partnership and other EFG-sponsored
investment programs, filed an action in the Commonwealth of Massachusetts
Superior Court Department of the Trial Court in and for the County of Suffolk,
for damages and declaratory relief against a lessee of the Partnership,
National Steel Corporation ("National Steel"), under a certain Master Lease
Agreement ("MLA") for the lease of certain equipment. EFG is seeking the
reimbursement by National Steel of certain sales and/or use taxes paid to the
State of Illinois and other remedies provided by the MLA. On August 30, 1995,
National Steel filed a Notice of Removal which removed the case to the United
States District Court, District of Massachusetts. On September 7, 1995, National
Steel filed its Answer to EFG's Complaint along with Affirmative Defenses and
Counterclaims, seeking declaratory relief and alleging breach of contract,
implied covenant of good faith and fair dealing and specific performance. EFG
filed its Answer to these counterclaims on September 29, 1995. Though the
parties have been discussing settlement with respect to this matter for some
time, to date, the negotiations have been unsuccessful. Notwithstanding these
discussions, EFG recently filed an Amended and Supplemental Complaint alleging a
further default by National Steel under the MLA and EFG recently filed a Summary
Judgment on all claims and
8
AMERICAN INCOME FUND I-D,
a Massachusetts Limited Partnership
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
counterclaims. The matter remains pending before the Court. The Partnership
has not experienced any material losses as a result of this action.
NOTE 8--SUBSEQUENT EVENT
- ------------------------
On April 30, 1997, the vessel partnerships, in which the Partnership and
certain affiliated investment programs are limited partners and through which
the Partnership and the affiliated investment programs shared economic interests
in three cargo vessels (the "Vessels") leased by KGJS/Gearbulk Holdings Limited
(the "Lessee"), exchanged their ownership interests in the Vessels for 1,987,000
shares of common stock in Banyan Strategic Land Fund II ("Banyan") and a
purchase money note of $8,219,500 (the "Note"). Banyan is a Delaware corporation
organized on April 14, 1987 and has its common stock listed on NASDAQ. Banyan
holds certain real estate investments, the most significant being a 274 acre
site near Malibu, California ("Rancho Malibu").
The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Banyan and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Banyan or by any other party that otherwise would not have
been paid to EFG had the Partnership sold its beneficial interest in the Vessels
directly to the Lessee. The Lessee prepaid all of its remaining contracted
rental obligations and purchased the Vessels in two closings occurring on May 6,
1997 and May 12, 1997. The above-referenced Note was repaid with $3,800,000 of
cash and delivery of a $4,419,500 note from Banyan (the "Banyan Note").
As a result of the exchange transaction and its original 66.15% beneficial
ownership interest in Dove Arrow, one of the three Vessels, the Partnership
received $846,747 in cash and is the beneficial owner of 407,970 shares of
Banyan common stock and holds a beneficial interest in the Banyan Note of
$898,406.
Cash equal to the amount of the Banyan Note is being held by Banyan in a
segregated account pending the outcome of certain shareholder proposals.
Specifically, as part of the exchange, Banyan agreed to seek consent ("Consent")
from its shareholders to: (1) amend its certificate of incorporation and by-
laws; (2) make additional amendments to restrict the acquisition of its common
stock in a way to protect Banyan's net operating loss carry-forwards, and (3)
engage EFG to provide administrative services to Banyan, which services EFG will
provide at cost. If the Consent is not obtained, repayment of the Banyan Note
will be accelerated and repaid from the cash held in the segregated account. If
the Consent is obtained, the Banyan Note will be amortized over three years and
bear an annual interest rate of 10%.
In connection with the Banyan transaction, Gary D. Engle, President and
Chief Executive Officer of EFG, joined the Board of Directors of Banyan and
James A. Coyne, Senior Vice President of EFG became Banyan's Chief Operating
Officer. The agreement also provides that a majority of the Board of
Directors remain independent of Banyan and EFG. Provided Consent is received
by October 31, 1997, Banyan has agreed to declare a $0.20 per share dividend
to be paid on all shares, including those beneficially owned by the
Partnership.
The General Partner believes that the underlying tangible assets of Banyan,
particularly the Rancho Malibu property, can be sold or developed on a tax free
basis due to Banyan's net operating loss carryforwards and can provide an
attractive economic return to the Partnership.
9
AMERICAN INCOME FUND I-D,
a Massachusetts Limited Partnership
Form 10-Q
PART 1. 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 1991 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. The value of the
Partnership's equipment portfolio decreases over time due to depreciation
resulting from age and usage of the equipment, as well as technological changes
and other market factors. In addition, the Partnership does not replace
equipment as it is sold; therefore, its aggregate investment value in equipment
declines from asset disposals occurring in the normal course of business. As a
result of the Partnership's age and a declining equipment portfolio, the General
Partner is evaluating a variety of transactions that will reduce the
Partnership's prospective costs to operate as a publicly registered limited
partnership and, therefore, enhance overall cash distributions to the limited
partners. Such a transaction may involve the sale of the Partnership's remaining
equipment or a transaction that would allow for the consolidation of the
Partnership's expenses with other similarly-organized equipment leasing
programs. In order to increase the marketability of the Partnership's remaining
equipment, the General Partner expects to use the Partnership's available cash
and future cash flow to retire indebtedness. This will negatively effect
short-term cash distributions.
RESULTS OF OPERATIONS
- ---------------------
For the three months ended March 31, 1997, the Partnership recognized
lease revenue of $1,151,969 compared to $1,165,575 for the same period in
1996. The decrease in lease revenue from 1996 to 1997 reflects the effects of
primary lease term expirations and the sale of equipment. The decrease was
largely offset by the effects of an aircraft exchange which concluded in
March 1996. As a result of this exchange, the Partnership replaced its
ownership interest in a Boeing 747-SP aircraft, with interests in six other
aircraft (three Boeing 737 aircraft leased by Southwest Airlines, Inc., two
McDonnell Douglas MD-82 aircraft leased by Finnair OY and one McDonnell
Douglas MD-87 aircraft leased by Reno Air, Inc.). The Southwest Aircraft were
exchanged into the Partnership in 1995, while the Finnair Aircraft and the
Reno Aircraft were exchanged into the Partnership on March 25 and March 26,
1996, respectively. Accordingly, revenue for the first quarter of 1996
reflected only a portion of the rents ultimately earned from the like kind
exchange. In aggregate, the replacement aircraft generated approximately
$395,000 of lease revenue during the first quarter of 1997 compared to
approximatly $127,000 for the same period in 1996. In the future, lease
revenue will continue to decline due to primary and renewal lease term
expirations and the sale of equipment.
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.
Interest income for the three month period ended March 31, 1997 was $22,843
compared to $61,698 for the same period in 1996. Interest income is typically
generated from temporary investment of rental receipts and equipment sale
proceeds in short-term instruments. Interest income in 1996 included interest of
$54,300 earned on cash held in a special-purpose escrow account in connection
with the like-kind exchange transaction,
10
AMERICAN INCOME FUND I-D,
a Massachusetts Limited Partnership
Form 10-Q
PART I. FINANCIAL INFORMATION
discussed above. During the three months ended March 31, 1996, the Partnership
earned interest income of $4,605 on a note receivable from EFG resulting from a
settlement with ICCU Containers S.p.A., a former lessee of the Partnership and
an affiliate of which was a former partner in American Finance Group. All
amounts due from EFG pursuant to this note had been received at
December 31, 1996. The amount of future interest income is expected to
fluctuate in relation to prevailing interest rates, the collection of lease
revenue, and the proceeds from equipment sales.
In 1997, the Partnership sold equipment having a net book value of $42,223
to existing lessees and third parties. These sales resulted in a net gain, for
financial statement purposes, of $68,709. There were no equipment sales during
the three months ended March 31, 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.
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
future gains or losses reported in the financial statements may not be
indicative of the total residual value the Partnership achieved from leasing the
equipment.
Depreciation and amortization expense for the three months ended March 31,
1997 was $756,910 compared to $1,000,579 for the same period in 1996. 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 at the date of
primary lease expiration on a straight-line basis over such term. For purposes
of this policy, estimated residual values represent equipment values at the date
of the primary lease expiration. To the extent that equipment 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 $90,258 or 7.8% of lease revenue for the three months
ended March 31, 1997 compared to $110,255 or 9.5% of lease revenue for the same
period in 1996. Interest expense is expected to continue to decline in amount
and as a percentage of lease revenue as the principal balance of notes payable
is reduced through the application of rent receipts to outstanding debt. In
addition, the General Partner expects to use a portion of the Partnership's
available cash and future cash flow to retire indebtedness (see Overview).
Management fees were approximately 3.7% of lease revenue during the three
months ended March 31, 1997 compared to 2.8% of lease revenue for the same
period in 1996. 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.
11
AMERICAN INCOME FUND I-D,
a Massachusetts Limited Partnership
Form 10-Q
PART I. FINANCIAL INFORMATION
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. Collectively, operating expenses represented 4.1% of lease revenue
during the three months ended March 31, 1997 compared to 2.7% of lease revenue
for the same period in 1996. The increase in operating expenses from 1996 to
1997 was due principally to costs incurred in connection with the remarketing of
certain equipment. 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 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 $944,004 and $1,267,906 during 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 continue to decline as the Partnership
experiences a higher frequency of remarketing events.
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 expended for equipment acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Statement of Cash Flows. During the three months ended March 31,
1996, the Partnership expended $63,243 in connection with the like-kind exchange
transaction referred to above. During the three months ended March 31, 1997, the
Partnership realized $110,932 in equipment sale proceeds. There were no
equipment sales during 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.
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. Each note payable is recourse
only to the specific equipment financed and to the minimum rental payments
contracted to be received during the debt amortization period (which period
generally coincides with the lease rental term). As rental payments are
collected, a portion or all of the rental payment is used to repay the
associated indebtedness. In future periods, the amount of cash used to repay
debt obligations is scheduled to decline as the principal balance
12
AMERICAN INCOME FUND I-D,
a Massachusetts Limited Partnership
Form 10-Q
PART I. FINANCIAL INFORMATION
of notes payable is reduced through the collection and application of rents.
However, the amount of cash used to repay debt obligations may fluctuate due to
the use of the Partnership's available cash and future cash flow to retire
indebtedness (see Overview). In addition, the Partnership has balloon payment
obligations at the expiration of the respective primary lease terms related to
the Finnair Aircraft and the Reno Aircraft of $1,367,145 and $823,037,
respectively.
Cash distributions to the General and Limited Partners 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 $218,296. In accordance with the Amended and
Restated Agreement and Certificate of Limited Partnership, the Limited Partners
were allocated 95% of these distributions, or $207,381, and the General Partner
was allocated 5%, or $10,915. The first quarter 1997 cash distribution was paid
on April 14, 1997.
Cash distributions paid to the Limited Partners 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 quarterly cash
distributions will occur during the life of the Partnership.
13
AMERICAN INCOME FUND I-D,
a Massachusetts Limited Partnership
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response:
Refer to Note 7 herein.
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
14
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 FUND I-D, a Massachusetts Limited Partnership
By: AFG Leasing VI Incorporated, a Massachusetts
corporation and the General Partner of
the Registrant.
By: /s/ Michael J. Butterfield
-----------------------------------------------------
Michael J. Butterfield
Treasurer of AFG Leasing VI Incorporated
(Duly Authorized Officer and
Principal Accounting Officer)
Date: May 15, 1997
----------------------------------------------------
By: /s/ Gary Romano
----------------------------------------------------
Gary M. Romano
Clerk of AFG Leasing VI Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 15, 1997
----------------------------------------------------
15