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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 0-14462
INTEGRATED RESOURCES AMERICAN LEASING INVESTORS VII-C,
A California Limited Partnership
(Exact name of registrant as specified in its charter)
CALIFORNIA 13-3244534
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue, Greenwich, CT 06830
(Address of principal executive offices)
(203) 862-7000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check 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 [ ]
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INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-C,
A CALIFORNIA LIMITED PARTNERSHIP
FORM 10-Q - MARCH 31, 1996
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 1996 and December 31, 1995
STATEMENTS OF OPERATIONS - For the three months ended
March 31, 1996 and 1995
STATEMENT OF PARTNERS' EQUITY - For the three months ended
March 31, 1996
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 1996 and 1995
NOTES TO FINANCIAL STATEMENTS
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-C,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
March 31 December 31,
1996 1995
----------- -----------
ASSETS
Leased equipment - net of accumulated depreciation
of $6,495,501 and $6,358,255 and allowance for
equipment impairment of $500,000 .............. $ 3,674,689 $ 3,811,935
Cash and cash equivalents ........................ 366,238 397,722
Other receivables and prepaid expenses ........... 1,591 1,825
----------- -----------
$ 4,042,518 $ 4,211,482
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Deferred income .................................. $ 722,614 $ 963,485
Accounts payable and accrued expenses ............ 30,582 41,568
Due to affiliates ................................ 99 4,281
----------- -----------
Total liabilities ............................. 753,295 1,009,334
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (23,961 units issued
and outstanding) .............................. 3,375,144 3,288,940
General partners' deficit ........................ (85,921) (86,792)
----------- -----------
Total partners' equity ........................ 3,289,223 3,202,148
----------- -----------
$ 4,042,518 $ 4,211,482
=========== ===========
See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-C,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the three months ended
March 31,
--------------------------
1996 1995
-------- --------
Revenues
Rental ........................................... $240,871 $267,716
Other - principally interest ..................... 4,834 6,177
-------- --------
245,705 273,893
-------- --------
Costs and expenses
Depreciation ..................................... 137,246 160,053
General and administrative ....................... 15,782 27,794
Fees to affiliates ............................... 4,818 5,354
Operating ........................................ 784 614
Interest ......................................... -- 46,909
-------- --------
158,630 240,724
-------- --------
Net income ......................................... $ 87,075 $ 33,169
======== ========
Net income attributable to
Limited partners ................................. $ 86,204 $ 32,837
General partners ................................. 871 332
-------- --------
$ 87,075 $ 33,169
======== ========
Net income per unit of limited partnership
interest (23,961 units outstanding) .............. $ 3.60 $ 1.37
======== ========
See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-C,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY
Limited General Total
Partners' Partners' Partners'
Equity Deficit Equity
---------- ---------- ----------
Balance, January 1, 1996 ............ $3,288,940 $ (86,792) $3,202,148
Net income for the three months
ended March 31, 1996 ........... 86,204 871 87,075
---------- ---------- ----------
Balance, March 31, 1996 ............. $3,375,144 $ (85,921) $3,289,223
========== ========== ==========
See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-C,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
---------------------------
1996 1995
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income .................................................. $ 87,075 $ 33,169
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation ......................................... 137,246 160,053
Amortization of deferred income ...................... (240,871) --
Changes in assets and liabilities
Other receivables and prepaid expenses ................... 234 88
Account receivable ....................................... -- 267,717
Accounts payable and other expenses ...................... (10,986) 5,397
Due to affiliates ........................................ (4,182) --
Accrued interest payable ................................. -- (67,627)
--------- ---------
Net cash (used in) provided by operating activities (31,484) 398,797
--------- ---------
Cash flows from investing activities
Other non-operating receipts ................................ -- 1,144
--------- ---------
Cash flows from financing activities
Principal payments on note payable .......................... -- (412,294)
--------- ---------
Net decrease in cash and cash equivalents ........................ (31,484) (12,353)
Cash and cash equivalents, beginning of period ................... 397,722 465,120
--------- ---------
Cash and cash equivalents, end of period ......................... $ 366,238 $ 452,767
--------- ---------
Supplemental disclosure of cash flow information
Interest paid ............................................... $ -- $ 114,536
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See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-C,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (none of which
were other than normal recurring accruals) necessary for a fair
presentation of such financial information have been included. The
accompanying financial statements, footnotes and discussion should be
read in conjunction with the financial statements, related footnotes
and discussions contained in the Integrated Resources American Leasing
Investors VII-C, A California Limited Partnership (the "Partnership")
annual report on Form 10-K for the year ended December 31, 1995. The
results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Leased equipment
The cost of leased equipment represents the initial cost of the
equipment to the Partnership plus miscellaneous acquisition and closing
costs, and is carried at the lower of depreciated cost or net
realizable value.
Depreciation is computed using the straight-line method, over the
estimated useful lives of such assets (10 to 15 years for
transportation equipment).
When equipment is sold or otherwise disposed of, the cost and
accumulated depreciation (and any related allowance for equipment
impairment) are removed from the accounts and any gain or loss on such
sale or disposal is reflected in operations. Normal maintenance and
repairs are charged to operations as incurred. The Partnership provides
allowances for equipment impairment based upon a quarterly review of
all equipment in its portfolio, when management believes that, based
upon market analysis, appraisal reports and leases currently in place
with respect to specific equipment, the investment in such equipment
may not be recoverable.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The corporate general partner of the Partnership, ALI Capital Corp.
(the "Corporate General Partner"), the managing general partner of the
Partnership, ALI Equipment Management Corp. ("Equipment Management")
and Integrated Resources Equipment Group, Inc. ("IREG") are wholly
owned subsidiaries of Presidio Capital Corp. ("Presidio"). Z Square G
Partners II was the associate general partner of the Partnership
through February 27, 1995. On February 28, 1995, Presidio Boram Corp.,
a subsidiary of Presidio, became the associate general partner. Other
limited partnerships and similar investment programs have been formed
by Equipment Management or its affiliates to acquire equipment and,
accordingly, conflicts of interest may arise between the Partnership
and such other limited partnerships. Affiliates of Equipment Management
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
have also engaged in businesses related to the management of equipment
and the sale of various types of equipment and may transact business
with the Partnership.
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, Presidio will control the Partnership through
its direct or indirect ownership of all the shares of Equipment
Management, the Corporate General Partner and, as of February 28, 1995,
the associate general partner. Presidio is managed by Presidio
Management Company, LLC ("Presidio Management"), a company controlled
by a director of Presidio. Presidio Management is responsible for the
day-to-day management of Presidio and, among other things, has
authority to designate directors of Equipment Management, the Corporate
General Partner and the associate general partner. In March 1996,
Presidio Management assigned its agreement for the day-to-day
management of Presidio to Wexford Management LLC ("Wexford").
Presidio is a liquidating company. Although Presidio has no immediate
plans to do so, it will ultimately seek to dispose of the interests it
acquired from Integrated Resources, Inc. through liquidation; however,
there can be no assurance of the timing of such transaction or the
effect it may have on the Partnership.
In March 1995, Presidio elected new directors for Equipment Management.
Wexford Management Corp., formerly Concurrency Management Corp.,
provides management and administrative services to Presidio, its direct
and indirect subsidiaries, as well as to the Partnership. Effective
January 1, 1996, Wexford Management Corp. assigned its agreement to
provide management and administrative services to Presidio and its
subsidiaries to Wexford. During the three months ended March 31, 1996,
reimbursable expenses to Wexford by the Partnership amounted to $4,904.
At the present time, the level of fees payable to IREG for services
rendered to the Partnership and other affiliated equipment leasing
partnerships is declining. The effect of this situation cannot be
determined at this point. The management agreements between the
Partnership and IREG may be terminated by either party to such
agreements.
The Partnership has a management agreement with IREG, pursuant to which
IREG would receive 5% of annual gross rental revenues on operating
leases; 2% of annual gross rental revenues on full payout leases which
contain net lease provisions; and 1% of annual gross rental revenues if
services are performed by third parties under the active supervision of
IREG, as defined in the Limited Partnership Agreement. During the three
months ended March 31, 1996 and 1995, the Partnership incurred expenses
of $4,818 and $5,354, respectively, for such management services.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
During the operating and sale stage of the Partnership, IREG is
entitled to a partnership management fee equal to 4% of distributable
cash from operations, as defined in the Limited Partnership Agreement,
subject to increase after the limited partners have received certain
specified minimum returns on their investment. No such amounts were
incurred during the three months ended March 31, 1996 and 1995.
The general partners are entitled to 1% of distributable cash from
operations and cash from sales and an allocation of 1% of taxable net
income or loss of the Partnership.
During the operating and sale stage of the Partnership, IREG may be
entitled to receive certain other fees, which are subordinated to the
receipt by the limited partners of their original invested capital and
certain specified minimum returns on their investment.
Upon the ultimate liquidation of the Partnership, the general partners
may be required to remit to the Partnership certain payments
representing capital account deficit restoration based upon a formula
provided within the Limited Partnership Agreement. Such restoration
amount may be less than the recorded general partners' deficit, which
could result in distributions to the limited partners of less than
their recorded equity.
In April 1995, Equipment Management and certain affiliates entered into
an agreement with Fieldstone Private Capital Group, L. P.
("Fieldstone") pursuant to which Fieldstone performs certain management
and administrative services relating to the Partnership as well as
certain other partnerships in which Equipment Management serves as
general partner. Substantially all costs associated with the retention
of Fieldstone will be paid by Equipment Management.
4 EQUIPMENT LEASE PREPAYMENT
In December 1985, the Partnership, through an equipment trust of which
it is the sole beneficiary, acquired a Boeing 727-200 Aircraft (the
"Aircraft") and immediately leased the Aircraft back to Piedmont
Aviation, Inc. (the "Aircraft Lease"). The Partnership provided a
portion of the purchase price by utilizing approximately 30% of the net
proceeds from the Partnership's offering of units of limited
partnership interest. The balance was provided by the Partnership
assuming a loan from an unaffiliated third party lender (the "Lender").
The loan, which was nonrecourse, was anticipated to be self-liquidating
by the application of rentals due over the life of the Aircraft Lease.
Subsequent to 1985, the operations of Piedmont were merged into USAir
Group, Inc ("USAir").
Since 1989, USAir has continued to experience significant financial
difficulty. In early 1995, USAir publicly announced that it anticipated
reducing its fleet size and during 1995, planned to retire or dispose
of 21 aircraft including its six remaining 727-200 aircraft. During the
quarter ended June 30, 1995, USAir indicated that the Aircraft would
require a heavy maintenance check under the USAir maintenance program.
Rather than perform such heavy maintenance, USAir grounded the
Aircraft.
4 EQUIPMENT LEASE PREPAYMENT (continued)
During 1995, the Partnership and USAir entered into an agreement (the
"Agreement") that provided for a restructuring of the Aircraft Lease.
Pursuant to the terms of the Agreement, USAir made a payment to the
Lender equal to the outstanding principal balance plus interest which
accrued through October 30, 1995 in the amount of $1,482,058. This
payment fully retired the associated nonrecourse debt and relieved
USAir of all future Basic Rent obligations due under the Aircraft
Lease. Additionally, pursuant to the terms of the Agreement, USAir
commenced a world-wide remarketing effort directed toward the sale of
the Aircraft.
The Partnership's ability to realize a return on the Aircraft which is
the Partnership's last remaining asset and which represented
approximately 44% of the original equipment owned by the Partnership,
on an original cost basis, is not determinable at this time.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership did not make a cash distribution with respect to the
quarter ended March 31, 1996. As of March 31, 1996, the Partnership had
operating reserves of approximately $337,000 which was comprised of
undistributed cash from operations and sales of approximately $217,000,
as well as general working capital reserves of $119,795.
In December 1985, the Partnership, through an equipment trust of which
it is the sole beneficiary, acquired a Boeing 727-200 Aircraft (the
"Aircraft") and immediately leased the Aircraft back to Piedmont
Aviation, Inc (the "Aircraft Lease"). The Partnership provided a
portion of the purchase price by utilizing approximately 30% of the net
proceeds from the Partnership's offering of units of limited
partnership interest. The balance was provided by the Partnership
assuming a loan from an unaffiliated third party lender (the "Lender").
The loan, which was nonrecourse, was anticipated to be self-liquidating
by the application of rentals due over the life of the Aircraft Lease.
Subsequent to 1985, the operations of Piedmont were merged into USAir
Group, Inc ("USAir").
Since 1989, USAir has continued to experience significant financial
difficulty. In early 1995, USAir publicly announced that it anticipated
reducing its fleet size and during 1995, planned to retire or dispose
of 21 aircraft including its six remaining 727-200 aircraft. During the
quarter ended June 30, 1995, USAir indicated that the Aircraft would
require a heavy maintenance check under the USAir maintenance program.
Rather than perform such heavy maintenance, USAir grounded the
Aircraft.
During 1995, the Partnership and USAir entered into an agreement (the
"Agreement") that provided for a restructuring of the Aircraft Lease.
Pursuant to the terms of the Agreement, USAir made a payment to the
Lender equal to the outstanding principal balance plus interest which
accrued through October 30, 1995 in the amount of $1,482,058. This
payment fully retired the associated nonrecourse debt and relieved
USAir of all future Basic Rent obligations due under the Aircraft
Lease. Additionally, pursuant to the terms of the Agreement, USAir
commenced a world-wide remarketing effort directed toward the sale of
the Aircraft.
The aircraft industry is highly competitive. Realizable values from
sale or re-lease of aircraft vary considerably, depending upon the type
of aircraft, the condition of the aircraft, the number of such type of
aircraft available for sale or re-lease, and the nature of the
prospective user. Additionally, the necessity of complying with FAA
noise and maintenance requirements will have an adverse impact on the
Partnership's capability to release or sell the Aircraft at the
expiration or sooner termination of its lease. In the future, liquidity
and distribution levels may fluctuate based upon (i) the results of the
Partnership's efforts to sell or re-lease the Aircraft when the lease
relating to such aircraft expires and (ii) requirements for operating
reserves, if any.
Liquidity and Capital Resources (continued)
The Partnership's ability to realize a return on the Aircraft which is
the Partnership's last remaining asset and which represented
approximately 44% of the original equipment owned by the Partnership,
on an original cost basis, is not determinable at this time.
Since cash generated from operations has reached minimal levels and the
costs associated with making quarterly cash distributions remain fixed,
the managing general partner of the Partnership decided to discontinue
quarterly cash distributions (except that it is anticipated that cash
from sales will be distributed with respect to the quarter in which a
sale is made) and instead make periodic cash distributions based upon
the accumulation of cash in the Partnership. It is the Partnership's
intention to maintain reserves (including general working capital
reserves) sufficient to support the Partnership's future operations.
At the present time, the level of fees payable to IREG for services
rendered to the Partnership and other affiliated equipment leasing
partnerships is declining. The effect of this situation cannot be
determined at this point. The management agreements between the
Partnerships and IREG may be terminated by either party to such
agreements.
In April 1995, the Managing General Partner and certain affiliates
entered into an agreement with Fieldstone pursuant to which Fieldstone
performs certain management and administrative services relating to the
Partnership as well as certain other partnerships in which the Managing
General Partner serves as general partner. Substantially all costs
associated with the retention of Fieldstone will be paid by the
Managing General Partner.
On February 28, 1995, Presidio Boram Corp., a subsidiary of Presidio,
became the Associate General Partner, upon the withdrawal of Z Square
Partners II, the former Associate General Partner.
The Partnership had no outstanding material commitments for capital
expenditures as of March 31, 1996.
Results of Operations
Net income increased for the quarter ended March 31, 1996 as compared
with the comparable prior year's period, as a result of a reduction in
depreciation and other expenses, offset slightly by a reduction in
rental revenues.
The Partnership's rental revenues decreased for the quarter ended March
31, 1996, as compared with the prior year's period due to the
restructuring of the USAir lease, effective July 1, 1995.
Expenses decreased in the quarter ended March 31, 1996 in comparison to
the comparable prior year's period. There was no interest expense for
the quarter ended March 31, 1996 due to the retirement of the
nonrecourse debt associated with the Aircraft Lease on October 30,
1995. Fees to affiliates and depreciation expense decreased, resulting
from the restructuring of the USAir lease during the quarter ended
September 30, 1995. Administrative expenses decreased for the quarter
ended March 31, 1996 when compared with the prior year's period.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Integrated Resources
American Leasing Investors VII-C,
a California Limited Partnership
By: ALI Equipment Management Corp.
Managing General Partner
/S/ Douglas J. Lambert
--------------------------------------------
Douglas J. Lambert
President (Principal Executive and Financial
Officer)
Date: May 15, 1996