================================================================================
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 September 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 - SEPTEMBER 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - September 30, 1996 and December 31, 1995
STATEMENTS OF OPERATIONS - For the three months ended September 30, 1996
and 1995 and the nine months ended September 30, 1996 and 1995
STATEMENT OF PARTNERS' EQUITY - For the nine months ended
September 30, 1996
STATEMENTS OF CASH FLOWS - For the nine months ended
September 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
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-A,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
September 30, December 31,
1996 1995
----------- -----------
ASSETS
Cash and cash equivalents ................... $ 2,921,373 $ 177,089
Leased equipment - net of accumulated
depreciation of $1,884,745 and $5,392,575
and allowance for equipment impairment
of $245,821 and $1,699,977 .............. 296,749 2,078,535
Accounts receivable ......................... 119,381 333,283
Other receivables ........................... 11,233 7,284
----------- -----------
$ 3,348,736 $ 2,596,191
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Distributions payable ....................... $ 2,827,030 $ 100,606
Accounts payable and accrued expenses ....... 22,429 47,987
Due to affiliates ........................... 4,882 4,208
Note payable ................................ -- 231,176
----------- -----------
Total liabilities ........................ 2,854,341 383,977
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (19,920 units issued
and outstanding) ......................... 588,057 2,288,698
General partners' deficit ................... (93,662) (76,484)
----------- -----------
Total partners' equity ................... 494,395 2,212,214
----------- -----------
$ 3,348,736 $ 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 nine months ended
September 30, September 30,
----------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Revenues
Rental .............................................. $ 18,951 $ 234,156 $ 324,555 $ 701,038
Interest ............................................ 34,800 3,085 41,573 8,369
----------- ----------- ----------- -----------
53,751 237,241 366,128 709,407
----------- ----------- ----------- -----------
Costs and expenses
Depreciation ........................................ 66,371 144,498 339,183 433,493
General and administrative .......................... 21,600 19,740 48,192 66,242
Fees to affiliates .................................. 2,843 11,930 21,999 34,085
Interest ............................................ -- 3,489 -- 20,857
Provision for equipment impairment .................. -- 100,000 -- 100,000
Operating ........................................... -- 500 -- 500
----------- ----------- ----------- -----------
90,814 280,157 409,374 655,177
----------- ----------- ----------- -----------
(37,063) (42,916) (43,246) 54,230
Gain on disposition of equipment ............................ 1,450,746 -- 1,464,336 --
----------- ----------- ----------- -----------
Net income (loss) ........................................... $ 1,413,683 $ (42,916) $ 1,421,090 $ 54,230
=========== =========== =========== ===========
Net income (loss) attributable to
Limited partners .................................... $ 1,399,546 $ (42,487) $ 1,406,879 $ 53,688
General partners .................................... 14,137 (429) 14,211 542
----------- ----------- ----------- -----------
$ 1,413,683 $ (42,916) $ 1,421,090 $ 54,230
=========== =========== =========== ===========
Net income (loss) per unit of limited partnership
interest (19,920 units outstanding) ................. $ 70.25 $ (2.13) $ 70.63 $ 2.70
=========== =========== =========== ===========
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 nine months
ended September 30, 1996 ................................... 1,406,879 14,211 1,421,090
Distributions to partners for the nine
months ended September 30, 1996
($156.00 per limited partnership unit) ..................... (3,107,520) (31,389) (3,138,909)
----------- ----------- -----------
Balance, September 30, 1996 ...................................... $ 588,057 $ (93,662) $ 494,395
=========== =========== ===========
See notes to financial statements.
INTEGRATED RESOURCES
AMERICAN LEASING INVESTORS VII-A,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the nine months ended
September 30,
--------------------------
1996 1995
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income ........................................ $ 1,421,090 $ 54,230
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation ............................ 339,183 433,493
Provision for equipment impairment ...... -- 100,000
Gain on disposition of equipment ........ (1,464,336) --
Changes in assets and liabilities
Accounts receivable .......................... 213,902 123,611
Other receivables ............................ (3,949) (36,227)
Accounts payable and accrued expenses ........ (25,558) (17,482)
Due to affiliates ............................ 674 838
----------- -----------
Net cash provided by operating activities 481,006 658,463
----------- -----------
Cash flows from investing activities
Proceeds from disposition of equipment ............ 2,906,939 15,475
Other non-operating payments ...................... -- (500)
----------- -----------
Net cash provided by investing activities 2,906,939 14,975
----------- -----------
Cash flows from financing activities
Distributions to partners ......................... (412,485) (241,455)
Principal payments on notes payable ............... (231,176) (431,634)
----------- -----------
Net cash used in financing activities ... (643,661) (673,089)
----------- -----------
Net increase in cash and cash equivalents ............... 2,744,284 349
Cash and cash equivalents, beginning of period .......... 177,089 198,252
----------- -----------
Cash and cash equivalents, end of period ................ $ 2,921,373 $ 198,601
=========== ===========
Supplemental disclosure of cash flow information
Interest paid ..................................... $ 7,712 $ 37,379
=========== ===========
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 nine months ended September 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 is also party to an administrative
services agreement with Wexford Management LLC ("Wexford") pursuant to
which Wexford 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. During the nine months ended September 30, 1996,
reimbursable expenses to Wexford by the Partnership amounted to
$17,799.
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. including its interests in
Equipment Management, the Corporate General Partner and IREG through
liquidation; however, there can be no assurance of the timing of such
transaction or the effect it may have on the Partnership.
The Partnership has a management agreement with IREG, pursuant to which
IREG receives 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 nine
months ended September 30, 1996 and 1995, the Partnership incurred
expenses of $12,601 and $23,186, 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 nine months ended September 30, 1996 and 1995, the
Partnership incurred partnership management fees of $9,398 and $10,899,
respectively. Such amounts are included in fees to affiliates in the
statements of operations.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
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.
In September 1996, an affiliate of Presidio purchased 40 units of the
Partnership from various other limited partners, which equals less than
1% of the outstanding limited partnership units.
4 DISTRIBUTIONS TO PARTNERS
Distributions payable to the Limited Partners and General Partners of
$2,798,760 ($140.50 per unit) and $28,270, respectively, at September
30, 1996, were paid in November 1996.
5 DUE TO AFFILIATES
The amounts due to affiliates of $4,882 and $4,208 at September 30,
1996 and December 31, 1995 represents the following:
September 30, December 31,
1996 1995
------------- ------------
Partnership management fees .................... $2,465 $4,208
Equipment management fees ...................... 2,417 --
------ ------
$4,882 $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
provided for the sale of 324 dry van piggyback trailers (the
"Trailers") upon their return from the lessee pursuant to its lease
with the Partnership (the "Lease"). The purchase price of each Trailer
was to be determined by its redelivery date, declining from $2,575 to
$1,990 per Trailer over the course of the year. Redelivery of the
Trailers commenced on or about January 2, 1996, and was scheduled to
continue through the earlier of the date at which all Trailers had been
redelivered and December 31, 1996. The basic term of the Lease expired
on December 31, 1995, but each Trailer remains subject to the Lease,
with specified per diem rentals payable, until such date as it has been
redelivered by the lessee in compliance with the return conditions
defined in the Lease. At present, the return dates of the Trailers
which remain on lease have not been finalized, and it is likely that a
small number of Trailers may remain subject to the Lease through early
1997.
As of September 30, 1996, 147 trailers had been transferred to and
accepted by Purchaser, for sales proceeds aggregating $356,940. At the
time of the sale the net carrying value of the 147 Trailers was
$305,004. The 147 Trailers had originally been acquired in January 1986
for an aggregate purchase cost of $2,015,907, inclusive of associated
costs.
The Agreement had provided for a schedule of purchases based on the
Trailer's redelivery dates in order to effect a sale of the
Partnership's remaining assets by December 31, 1996. The Purchaser had
failed or refused to adhere to this schedule and had otherwise
defaulted in its obligations under the Agreement, citing in part a
declining market for the Trailers. When it became apparent that the
Purchaser was unable or unwilling to cure its defaults, the Partnership
terminated the Agreement, effective November 7 1996.
The Partnership has subsequently entered in an agreement in principle
with another unaffiliated third party which calls for such party to
acquire all of the remaining Trailers on a single purchase date and to
assume the Partnership's rights and obligations as lessor under the
Lease. The purchase price for each Trailer is $1,400. From October 1 to
November 13, 1996, the Partnership closed the sale of 177 trailers for
aggregate sales proceeds of $306,330. Such equipment had net carrying
values aggregating $285,478 when sold.
On June 30, 1996, the lease of a certain Seismic Vessel (the "Seismic
Vessel") owned by the Partnership expired in accordance with its lease.
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 $140.50 per unit of
limited partnership interest totaling $2,827,030 for the quarter ended
September 30, 1996. The source of the distribution was primarily cash
from sales generated during the current quarter. At September 30, 1996,
the Partnership had operating reserves of $200,111 which was comprised
of undistributed cash from operations of $100,521, 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 nine 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
provided for the sale of 324 dry van piggyback trailers (the
"Trailers") upon their return from the lessee pursuant to its lease
with the Partnership (the "Lease"). The purchase price of each Trailer
was to be determined by its redelivery date, declining from $2,575 to
$1,990 per Trailer over the course of the year. Redelivery of the
Trailers commenced on or about January 2, 1996, and was scheduled to
continue through the earlier of the date at which all Trailers had been
redelivered and December 31, 1996. The basic term of the Lease expired
on December 31, 1995, but each Trailer remains subject to the Lease,
with specified per diem rentals payable, until such date as it has been
redelivered by the lessee in compliance with the return conditions
defined in the Lease. At present, the return dates of the Trailers
which remain on lease have not been finalized, and it is likely that a
small number of Trailers may remain subject to the Lease through early
1997.
As of September 30, 1996, 147 trailers had been transferred to and
accepted by Purchaser, for sales proceeds aggregating $356,940. At the
time of the sale the net carrying value of the 147 Trailers was
$305,004. The 147 Trailers had originally been acquired in January 1986
for an aggregate purchase cost of $2,015,907, inclusive of associated
costs.
The Agreement had provided for a schedule of purchases based on the
Trailer's redelivery dates in order to effect a sale of the
Partnership's remaining assets by December 31, 1996. The Purchaser had
failed or refused to adhere to this schedule and had otherwise
defaulted in its obligations under the Agreement, citing in part a
declining market for the Trailers. When it became apparent that the
Purchaser was unable or unwilling to cure its defaults, the Partnership
terminated the Agreement, effective November 7 1996.
Liquidity and Capital Resources (continued)
The Partnership has subsequently entered in an agreement in principle
with another unaffiliated third party which calls for such party to
acquire all of the remaining Trailers on a single purchase date and to
assume the Partnership's rights and obligations as lessor under the
Lease. The purchase price for each Trailer is $1,400. From October 1 to
November 13, 1996, the Partnership closed the sale of 177 trailers for
aggregate sales proceeds of $306,330. Such equipment had net carrying
values aggregating $285,478 when sold.
The sale of the remaining trailers on November 13, 1996 completes the
liquidation of the Partnership's equipment portfolio. The Managing
General Partner will prepare a final accounting of the assets and
liabilities and 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
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 September 30, 1996.
Results of Operations
Net income increased for the quarter and nine months ended September
30, 1996 as compared with the prior year's periods, primarily due to
the sales of the Seismic Vessel and Trailers. The gain recognized for
the quarter and nine months ended September 30, 1996 was reduced by a
decrease in revenues partially offset by an overall decrease in
expenses.
Liquidity and Capital Resources (continued)
The Partnership's rental revenues decreased for the quarter and nine
months ended September 30, 1996, due to a reduction of Trailers on
lease. During the quarter ended September 30, 1996, 93 Trailers were
returned by the lessee and sold as discussed previously.
Expenses decreased for the quarter and nine months ended September 30,
1996 in comparison to the prior year's periods. There was no interest
expense for the quarter and nine months ended September 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 nine months ended
September 30, 1996 relating to the sales of the Seismic Vessel and the
Trailers as previously discussed. 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: Current report on Form 8-K dated July 1, 1996
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: November 12, 1996