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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 June 30, 1996
Commission file number 0-14461
INTEGRATED RESOURCES AMERICAN LEASING INVESTORS VII-A,
A California Limited Partnership
(Exact name of registrant as specified in its charter)
CALIFORNIA 13-3244529
(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 [ ]
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-A,
A CALIFORNIA LIMITED PARTNERSHIP
FORM 10-Q - JUNE 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - June 30, 1996 and December 31, 1995
STATEMENTS OF OPERATIONS - For the three months ended June 30, 1996
and 1995 and the six months ended June 30, 1996 and 1995
STATEMENT OF PARTNERS' EQUITY - For the six months ended June 30, 1996
STATEMENTS OF CASH FLOWS - For the six months ended June 30, 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
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-A,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
June 30, December 31,
1996 1995
----------- -----------
ASSETS
Leased equipment - net of accumulated
depreciation of $5,125,307 and $5,392,575
and allowance for equipment impairment
of $1,624,981 and $1,699,977 .......................................... $ 1,680,263 $ 2,078,535
Cash and cash equivalents ................................................. 259,965 177,089
Accounts receivable ....................................................... 134,375 333,283
Other receivables ......................................................... 965 7,284
----------- -----------
$ 2,075,568 $ 2,596,191
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Distributions payable ..................................................... $ 140,848 $ 100,606
Accounts payable and accrued expenses ..................................... 17,737 47,987
Due to affiliates ......................................................... 9,240 4,208
Note payable .............................................................. -- 231,176
----------- -----------
Total liabilities ...................................................... 167,825 383,977
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (19,920 units issued
and outstanding) ....................................................... 1,987,271 2,288,698
General partners' deficit ................................................. (79,528) (76,484)
----------- -----------
Total partners' equity ................................................. 1,907,743 2,212,214
----------- -----------
$ 2,075,568 $ 2,596,191
=========== ===========
See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-A,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the three months ended For the six months ended
June 30, June 30,
--------------------------- --------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Revenues
Rental ..................................................... $ 136,336 $ 233,441 $ 305,604 $ 466,882
Interest ................................................... 3,393 2,571 6,773 5,284
--------- --------- --------- ---------
139,729 236,012 312,377 472,166
--------- --------- --------- ---------
Costs and expenses
Depreciation ............................................... 132,235 144,498 272,812 288,995
General and administrative ................................. 9,942 24,751 26,592 46,502
Fees to affiliates ......................................... 9,505 11,077 19,156 22,155
Interest ................................................... -- 8,684 -- 17,368
--------- --------- --------- ---------
151,682 189,010 318,560 375,020
--------- --------- --------- ---------
(11,953) 47,002 (6,183) 97,146
Gain on disposition of equipment ................................ 7,971 -- 13,590 --
--------- --------- --------- ---------
Net (loss) income ............................................... $ (3,982) $ 47,002 $ 7,407 $ 97,146
========= ========= ========= =========
Net (loss) income attributable to
Limited partners ........................................... $ (3,942) $ 46,532 $ 7,333 $ 96,175
General partners ........................................... (40) 470 74 971
--------- --------- --------- ---------
$ (3,982) $ 47,002 $ 7,407 $ 97,146
========= ========= ========= =========
Net (loss) income per unit of limited partnership
interest (19,920 units outstanding) ........................ $ (0.20) $ 2.34 $ 0.37 $ 4.83
========= ========= ========= =========
See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-A,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY
Limited General Total
Partners' Partners' Partners'
Equity Deficit Equity
----------- ----------- -----------
Balance, January 1, 1996 ...................................... $ 2,288,698 $ (76,484) $ 2,212,214
Net income for the six months
ended June 30, 1996 ...................................... 7,333 74 7,407
Distributions to partners for the six
months ended June 30, 1996
($15.50 per limited partnership unit) .................... (308,760) (3,118) (311,878)
----------- ----------- -----------
Balance, June 30, 1996 ........................................ $ 1,987,271 $ (79,528) $ 1,907,743
=========== =========== ===========
See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-A,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the six months ended
June 30,
----------------------------------
1996 1995
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income ................................................................ $ 7,407 $ 97,146
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation ....................................................... 272,812 288,995
Gain on disposition of equipment ................................... (13,590) --
Changes in assets and liabilities
Accounts receivable .................................................... 198,908 (41,285)
Other receivables ...................................................... 6,319 300
Accounts payable and accrued expenses .................................. (30,250) (7,046)
Due to affiliates ...................................................... 5,032 --
--------- ---------
Net cash provided by operating activities .......................... 446,638 338,110
--------- ---------
Cash flows from investing activities
Proceeds from disposition of equipment .................................... 139,050 15,475
Other non-operating payments .............................................. -- 400
--------- ---------
Net cash provided by investing activities .......................... 139,050 15,875
--------- ---------
Cash flows from financing activities
Distributions to partners ................................................. (271,636) (160,970)
Principal payments on notes payable ....................................... (231,176) (212,248)
--------- ---------
Net cash used in financing activities .............................. (502,812) (373,218)
--------- ---------
Net increase (decrease) in cash and cash equivalents ........................... 82,876 (19,233)
Cash and cash equivalents, beginning of period ................................. 177,089 198,252
--------- ---------
Cash and cash equivalents, end of period ....................................... $ 259,965 $ 179,019
========= =========
Supplemental disclosure of cash flow information
Interest paid ............................................................. $ 7,712 $ 20,011
========= =========
See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-A,
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 (consisting only
of 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-A, 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 six months ended June 30, 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 (20 years for the seismic vessel
and 13 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,
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
accordingly, conflicts of interest may arise between the Partnership
and such other limited partnerships. Affiliates of Equipment Management
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 six months ended June 30, 1996,
reimbursable expenses to Wexford by the Partnership amounted to
$12,316.
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 six
months ended June 30, 1996 and 1995, the Partnership incurred expenses
of $12,223 and $15,448, respectively, for such management services.
During the operating and sale stage of the Partnership, IREG is
entitled to a partnership management fee equal to 4% of distributions
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.
During the six months ended June 30, 1996 and 1995, the Partnership
incurred partnership management fees of $6,933 and $6,707,
respectively. Such amounts are included in fees to affiliates in the
statements of operations.
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.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
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 DISTRIBUTIONS TO PARTNERS
Distributions payable to the Limited Partners and General Partners of
$139,440 ($7.00 per unit) and $1,408, respectively, at June 30, 1996,
were paid in August 1996.
5 DUE TO AFFILIATES
The amounts due to affiliates of $9,240 and $4,208 at June 30, 1996 and
December 31, 1995 represents the following:
June 30, December 31,
1996 1995
---------- ----------
Partnership management fees $ 7,202 $ 4,208
Equipment management fees 2,038 -
---------- ----------
$ 9,240 $ 4,208
========== ==========
6 EQUIPMENT SALES - 1996
On February 8, 1996, the Partnership entered into an agreement (the
"Agreement") with an unaffiliated third party (the "Purchaser") which
provides for the sale of 324 dry van piggyback trailers (the
"Trailers") upon their return from the lessee. Pursuant to the terms of
the Agreement, redelivery of the Trailers commenced on or about January
2, 1996 and will continue through the earlier of the date at which all
Trailers have been delivered and December 31, 1996. In addition, the
basic term of the lease expired effective December 31, 1995, but each
Trailer remains subject to the terms of its lease until the date it is
redelivered by lessee in compliance with the return conditions defined
in the lease agreement. At present, the return dates of the Trailers
which remain on lease have not been finalized. As of June 30, 1996, 54
Trailers have been transferred to and accepted by Purchaser for a
purchase price of $2,575 each.
6 EQUIPMENT SALES - 1996 (continued)
The 54 Trailers were sold for sales proceeds aggregating $139,050. At
the time of the sale, the net carrying value of the 54 Trailers was
$125,460. The 54 had originally been acquired in January 1986 for an
aggregate purchase cost of $740,537, inclusive of associated
acquisition costs.
7 SUBSEQUENT EVENT
On June 30, 1996, the lease of a certain Seismic Vessel (the "Seismic
Vessel") owned by the Partnership expired in accordance with its terms.
On July 1, 1996, the lessee, Western Atlas International, purchased the
Seismic Vessel for sales proceeds of $2,550,000. At the time of the
sale, such equipment had a net carrying value of approximately
$1,137,600.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership declared a cash distribution of $7.00 per unit of
limited partnership interest totaling $140,848 for the quarter ended
June 30, 1996. The source of the distribution was primarily cash from
operations and cash from sales generated during the current quarter. At
June 30, 1996, the Partnership had operating reserves of $227,480 which
was comprised of undistributed cash from operations of $127,892, as
well as the general working capital reserve of $99,590.
The Partnership's cash from operations available for distributions and
to pay operating expenses during the first six months of 1996 was
provided from cash generated by the lease of a certain Seismic Vessel
(the "Seismic Vessel") to Western Atlas International ("Western
Atlas"). Such lease expired June 30, 1996 in accordance with its terms.
On July 1, 1996, Western Atlas purchased the Seismic Vessel for sales
proceeds of $2,550,000. At the time of sale, such equipment had a net
carrying value of $1,137,600.
On February 8, 1996, the Partnership entered into an agreement (the
"Agreement") with an unaffiliated third party (the "Purchaser") which
provides for the sale of 324 dry van piggyback trailers (the
"Trailers") upon their return from the lessee. Pursuant to the terms of
the Agreement, redelivery of the Trailers commenced on or about January
2, 1996 and will continue through the earlier of the date at which all
Trailers have been delivered and December 31, 1996. In addition, the
basic term of the lease expired effective December 31, 1995, but each
Trailer remains subject to the terms of its lease until the date it is
redelivered by lessee in compliance with the return conditions defined
in the lease agreement. At present, the return dates of the Trailers
which remain on lease have not been finalized. As of June 30, 1996, 54
Trailers have been transferred to and accepted by Purchaser for a
purchase price of $2,575 each.
It is the Partnership's intention to maintain reserves (including the
general working capital reserve) sufficient to support the
Partnership's future obligations. In the future, liquidity and
distribution levels may fluctuate based upon (i) the net proceeds from
the sale of the Seismic Vessel on July 1, 1996 available for
distribution. (ii) closing the sale of the Trailers as mentioned above,
and (iii) requirements for operating reserves, if any.
Upon the sale of the remaining assets, the Partnership will have
liquidated all of its equipment portfolio. The Managing General Partner
will then prepare a final accounting of the assets and liabilities and
will commence the dissolution and termination of the Partnership and
make a final distribution to partners.
At present, 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.
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
Liquidity and Capital Resources (continued)
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 G
Partners II, the former Associate General Partner.
Inflation and changing prices have not had any material effect on the
Partnership's revenues since its inception, nor does the Partnership
anticipate any material effect on its business from these factors.
The Partnership had no outstanding material commitments for capital
expenditures as of June 30, 1996.
Results of Operations
Net income decreased for the quarter and six months ended June 30, 1996
as compared with the prior year's periods, primarily due to a decrease
in revenues partially offset by an overall decrease in expenses.
The Partnership's rental revenues decreased for the quarter and six
months ended June 30, 1996, due to a reduction of Trailers on lease.
During the quarter ended June 30, 1996, 20 Trailers were returned by
the lessee and sold as discussed previously.
Expenses decreased for the quarter and six months ended June 30, 1996
in comparison to the prior year's periods. There was no interest
expense for the quarter and six months ended June 30, 1996, due to the
repayment of the principal amount of outstanding indebtedness by the
application of rental payments on the leveraged transaction with
respect to the trailers. The debt on such transaction was retired on
January 2, 1996. Depreciation expense decreased as a result of the
Trailer sales. Fees to affiliates decreased due to the reduction in
equipment management fees as a result of the decrease in rentals on
which such fees are based.
A gain was recognized during the quarter and six months ended June 30,
1996 relating to the Trailer sales. No gain was recognized in the
comparable prior year periods.
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-A,
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: August 13, 1996