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, 1998
------------------
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, 1998 Commission File No. 33-35148
American Income Fund I-B, a Massachusetts Limited Partnership
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3106525
- ----------------------------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88 Broad Street, Boston, MA 02110
- ----------------------------------- ---------
(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 |_|
1
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
FORM 10-Q
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position
at March 31, 1998 and December 31, 1997 3
Statement of Operations
for the three months ended March 31, 1998 and 1997 4
Statement of Cash Flows
for the three months ended March 31, 1998 and 1997 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-B,
a Massachusetts Limited Partnership
STATEMENT OF FINANCIAL POSITION
March 31, 1998 and December 31, 1997
(Unaudited)
March 31, December 31,
1998 1997
---------- ----------
ASSETS
Cash and cash equivalents $1,483,627 $1,442,855
Rents receivable 31,527 30,351
Accounts receivable - affiliate 21,336 76,072
Equipment at cost, net of accumulated depreciation
of $3,408,478 and $3,333,813 at March 31, 1998
and December 31, 1997, respectively 1,158,228 1,232,893
---------- ----------
Total assets $2,694,718 $2,782,171
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
Notes payable $ -- $ 22,990
Accrued interest -- 195
Accrued liabilities 9,852 9,200
Accrued liabilities - affiliate 8,023 15,272
Deferred rental income -- 20,866
Cash distributions payable to partners 56,588 56,588
---------- ----------
Total liabilities 74,463 125,111
---------- ----------
Partners' capital (deficit):
General Partner (186,357) (184,517)
Limited Partnership Interests
(286,711 Units; initial purchase price of $25 each) 2,806,612 2,841,577
---------- ----------
Total partners' capital 2,620,255 2,657,060
---------- ----------
Total liabilities and partners' capital $2,694,718 $2,782,171
---------- ----------
---------- ----------
The accompanying notes are an integral part
of these financial statements.
3
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
STATEMENT OF OPERATIONS
for the three months ended March 31, 1998 and 1997
(Unaudited)
1998 1997
-------- --------
Income:
Lease revenue $113,543 $152,335
Interest income 18,950 21,299
Gain on sale of equipment -- 29,282
-------- --------
Total income 132,493 202,916
-------- --------
Expenses:
Depreciation 74,665 116,043
Interest expense -- 16,485
Equipment management fees - affiliate 4,612 6,633
Operating expenses - affiliate 33,433 17,528
-------- --------
Total expenses 112,710 156,689
-------- --------
Net income $ 19,783 $ 46,227
-------- --------
-------- --------
Net income
per limited partnership unit $ 0.07 $ 0.15
-------- --------
-------- --------
Cash distribution declared
per limited partnership unit $ 0.19 $ 0.25
-------- --------
-------- --------
The accompanying notes are an integral part
of these financial statements.
4
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1998 and 1997
(Unaudited)
1998 1997
----------- -----------
Cash flows from (used in) operating activities:
Net income $ 19,783 $ 46,227
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 74,665 116,043
Gain on sale of equipment -- (29,282)
Changes in assets and liabilities
Decrease (increase) in:
rents receivable (1,176) (40,621)
accounts receivable - affiliate 54,736 38,122
Increase (decrease) in:
accrued interest (195) 8,774
accrued liabilities 652 (4,250)
accrued liabilities - affiliate (7,249) 4,405
deferred rental income (20,866) (20,865)
----------- -----------
Net cash from operating activities 120,350 118,553
----------- -----------
Cash flows from (used in) investing activities:
Purchase of equipment -- (75,957)
Proceeds from equipment sales -- 33,444
----------- -----------
Net cash used in investing activities -- (42,513)
----------- -----------
Cash flows used in financing activities:
Principal payments - notes payable (22,990) (146,744)
Distributions paid (56,588) (75,451)
----------- -----------
Net cash used in financing activities (79,578) (222,195)
----------- -----------
Net increase (decrease) in cash and cash equivalents 40,772 (146,155)
Cash and cash equivalents at beginning of period 1,442,855 1,938,967
----------- -----------
Cash and cash equivalents at end of period $ 1,483,627 $ 1,792,812
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 195 $ 7,711
----------- -----------
----------- -----------
The accompanying notes are an integral part
of these financial statements.
5
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
Notes to the Financial Statements
March 31, 1998
(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 1997 Annual Report. Except as disclosed herein, there
has been no material change to the information presented in the footnotes to the
1997 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, 1998 and December 31, 1997 and results of operations for
the three month periods ended March 31, 1998 and 1997 have been made and are
reflected.
NOTE 2 - CASH
At March 31, 1998, the Partnership had $1,354,225 invested in federal
agency discount notes and reverse repurchase agreements secured by U.S. Treasury
Bills or interests in U.S. Government securities.
NOTE 3 - REVENUE RECOGNITION
Rents are payable to the Partnership monthly or quarterly and no
significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of $537,134
are due as follows:
For the year ending March 31, 1999 $ 185,582
2000 170,743
2001 113,306
2002 51,540
2003 15,963
---------
Total $ 537,134
---------
---------
NOTE 4 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at March
31, 1998. Remaining Lease Term (Months), as used below, represents the number of
months remaining from March 31, 1998 under contracted lease terms and is
presented as a range when more than one lease agreement is contained in the
stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale or re-lease or being leased on a month-to-month
basis. In the opinion of EFG, the acquisition cost of the equipment did not
exceed its fair market value.
6
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
Notes to Financial Statements
(Continued)
Remaining
Lease Term Equipment
Equipment Type (Months) at Cost
- ------------------------- -------- -------
Aircraft 0 $ 2,641,262
Materials handling 0-26 688,078
Trailers/intermodal containers 0-57 620,259
Research & test 0-22 508,837
Communications 0 68,604
Construction & mining 0 39,666
------------
Total equipment cost 4,566,706
Accumulated depreciation (3,408,478)
------------
Equipment, net of accumulated depreciation $ 1,158,228
------------
------------
At March 31, 1998, the Partnership's equipment portfolio included
equipment having a proportionate original cost of $2,792,790 representing
approximately 61% of total equipment cost.
The summary above includes fully depreciated equipment held for
re-lease or sale with an original cost and net book value of approximately
$2,641,000 and $734,000, respectively, at March 31, 1998. This equipment
represents the Partnership's proportionate interest in two Fairchild Metro
III aircraft formerly leased to Horizon Air Industries, Inc. The General
Partner is currently holding discussions with a third party related to the
sale of the Fairchild Metro III aircraft and is actively seeking the sale or
re-lease of all other equipment not on lease. In addition, the summary above
includes equipment being leased on a month-to-month basis.
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, 1998 and 1997 which were paid or accrued by the Partnership to EFG or
its Affiliates, are as follows:
1998 1997
------- -------
Equipment management fees $ 4,612 $ 6,633
Administrative charges 14,262 7,968
Reimbursable operating expenses
due to third parties 19,171 9,560
------- -------
Total $38,045 $24,161
------- -------
------- -------
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, 1998, the Partnership was owed $21,336 by EFG for such funds and
the interest thereon. These funds were remitted to the Partnership in April
1998.
7
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
Notes to Financial Statements
(Continued)
NOTE 6 - LEGAL PROCEEDINGS
On or about January 15, 1998, certain plaintiffs (the "Plaintiffs") filed
a class and derivative action, captioned Leonard Rosenblum, et al. v. Equis
Financial Group Limited Partnership, et al., in the United States District Court
for the Southern District of Florida (the "Court") on behalf of a proposed class
of investors in 28 equipment leasing programs sponsored by EFG, including the
Partnership (collectively, the "Nominal Defendants"), against EFG and a number
of its affiliates, including the General Partner, as defendants (collectively,
the "Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had
filed an earlier derivative action, captioned Leonard Rosenblum, et al. v. Equis
Financial Group Limited Partnership, et al., in the Superior Court of the
Commonwealth of Massachusetts on behalf of the Nominal Defendants against the
Defendants. Both actions are referred to herein collectively as the "Class
Action Lawsuit."
The Plaintiffs have asserted, among other things, claims against the
Defendants on behalf of the Nominal Defendants for violations of the Securities
Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary
duty, and violations of the partnership or trust agreements that govern each of
the Nominal Defendants. The Defendants have denied, and continue to deny, that
any of them have committed or threatened to commit any violations of law or
breached any fiduciary duties to the Plaintiffs or the Nominal Defendants.
On March 9, 1998, counsel for the Defendants and the Plaintiffs entered
into a Memorandum of Understanding setting forth the terms pursuant to which a
settlement of the Class Action Lawsuit is intended to be achieved and which,
among other things, is expected to reduce the burdens and expenses attendant to
continuing litigation. The Memorandum of Understanding represents a preliminary
step towards a comprehensive Stipulation of Settlement between the parties that
must be presented to and approved by the Court as a condition precedent to
effecting a settlement. The Memorandum of Understanding (i) prescribes a number
of conditions necessary to achieving a settlement, including providing the
partners (or beneficiaries, as applicable) of the Nominal Defendants with the
opportunity to vote on any settlement and (ii) contemplates various changes
that, if effected, would alter the future operations of the Nominal Defendants.
With respect to the Partnership and 10 affiliated partnerships (hereafter
referred to as the "Exchange Partnerships"), the Memorandum of Understanding
provides for the restructuring of their respective business operations into a
single successor company whose securities would be listed and traded on a
national stock exchange. The partners of the Exchange Partnerships would receive
both common stock in the new company and a cash distribution in exchange for
their existing partnership interests. Such a transaction would, among other
things, allow for the consolidation of the Partnership's operating expenses with
other similarly-organized equipment leasing programs. To the extent that the
parties agree upon a Stipulation of Settlement that is approved by the Court,
the complete terms thereof will be communicated to all of the partners (or
beneficiaries) of the Nominal Defendants to enable them to vote thereon.
There can be no assurance that the parties will agree upon a Stipulation
of Settlement, or that it will be approved by the Court, or that the outcome of
the voting by the partners (or beneficiaries) of the Nominal Defendants,
including the Partnership, will result in a settlement finally being effected or
in the Partnership being included in any such settlement. The General Partner
and its affiliates, in consultation with counsel, concur that there is a
reasonable basis to believe that a Stipulation of Settlement will be agreed upon
by the parties and approved by the Court. In the absence of a Stipulation of
Settlement approved by the Court, the Defendants intend to defend vigorously
against the claims asserted in the Class Action Lawsuit. The General Partner and
its affiliates cannot predict with any degree of certainty the ultimate outcome
of such litigation.
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
8
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
Notes to Financial Statements
(Continued)
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 discussed settlement with respect to this matter
for some time, the negotiations were unsuccessful. Notwithstanding these
discussions, EFG recently filed an Amended and Supplemental Complaint alleging
further default under the MLA and EFG recently filed a motion for Summary
Judgment on all claims and counterclaims. The Court held a hearing on EFG's
motion in December 1997 and the Court recently entered a decision dismissing
certain of National Steel's counterclaims and finding in favor of EFG on certain
issues and in favor of National Steel on other issues. The Partnership does not
anticipate that it will experience any material losses as a result of this
action.
9
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Certain statements in this quarterly report of American Income Fund I-B
Limited Partnership (the "Partnership") that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made herein. These factors include, but are not limited to, the
outcome of the Class Action Lawsuit described in Note 6 to the accompanying
financial statements, and the ability of Equis Financial Group Limited
Partnership (formerly American Finance Group), a Massachusetts limited
partnership ("EFG"), to collect all rents due under the attendant lease
agreements and successfully remarket the Partnership's equipment upon the
expiration of such leases.
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. EFG's computer
programs were designed and written using four digits to define the applicable
year. As a result, EFG does not anticipate system failure or miscalculations
causing disruptions of operations. Based on recent assessments, EFG determined
that minimal modification of software is required so that its network operating
system will function properly with respect to dates in the year 2000 and
thereafter. EFG believes that with these modifications to the existing operating
system, the Year 2000 Issue will not pose significant operational problems for
its computer systems. EFG will utilize internal resources to upgrade software
for Year 2000 modifications and anticipates completing the Year 2000 project by
December 31, 1998, which is prior to any anticipated impact on its operating
system. The total cost of the Year 2000 project is expected to be insignificant
and have no effect on the results of operations of the Partnership.
Three months ended March 31, 1998 compared to the three months ended March 31,
1997:
Overview
The Partnership was organized in 1990 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment subject
to lease agreements with third parties. The 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. The Partnership's stated investment objectives
and policies contemplated that the Partnership would wind-up its operations
within approximately seven years of its inception. Presently, the Partnership is
a Nominal Defendant in a Class Action Lawsuit. The outcome of the Class Action
Lawsuit could alter the nature of the Partnership's organization and its future
business operations. See Note 6 to the accompanying financial statements.
Results of Operations
For the three months ended March 31, 1998, the Partnership recognized
lease revenue of $113,543, compared to $152,335 for the same period in 1997. The
decrease in lease revenue from 1997 to 1998 was expected and resulted
principally from lease term expirations and the sale of equipment. The
Partnership also earns interest income from temporary investments of rental
receipts and equipment sales proceeds in short-term instruments.
The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are owned by an affiliated equipment leasing program
10
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
FORM 10-Q
PART I. FINANCIAL INFORMATION
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.
During the three months ended March 31, 1997, the Partnership sold
equipment having a net book value of $4,162 to existing lessees and third
parties. These sales resulted in a net gain, for financial statement purposes,
of $29,282. There were no equipment sales for the three months ended March 31,
1998.
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 revenues generated from that asset, together
with its residual value. The latter consists of cash proceeds realized upon the
asset's sale in addition to all other cash receipts obtained from renting the
asset on a re-lease, renewal or month-to-month basis. The Partnership classifies
such residual rental payments as lease revenue. Consequently, the amount of gain
or loss reported in the financial statements is not necessarily indicative of
the total residual value the Partnership achieved from leasing the equipment.
Depreciation expense for the three months ended March 31, 1998 was $74,665
compared to $116,043 for the same period in 1997. For financial reporting
purposes, to the extent that an asset is held on primary lease term, the
Partnership depreciates the difference between (i) the cost of the asset and
(ii) the estimated residual value of the asset on a straight-line basis over
such term. For purposes of this policy, estimated residual values represent
estimates of equipment values at the date of primary lease expiration. To the
extent that an asset is held beyond its primary lease term, the Partnership
continues to depreciate the remaining net book value of the asset on a
straight-line basis over the asset's remaining economic life.
Interest expense was $16,485 or 10.8% of lease revenue during the three
months ended March 31, 1997. There was no interest expense during the same
period in 1998 as the Partnership's notes payable were fully amortized on
January 1, 1998.
Management fees were approximately 4.1% and 4.4% of lease during the three
months ended March 31, 1998 and 1997, respectively. Management fees and are
based on 5% of gross lease revenue generated by operating leases and 2% of gross
lease revenue generated by full payout leases.
Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as printing,
distribution and remarketing expenses. In certain cases, equipment storage or
repairs and maintenance costs may be incurred in connection with equipment being
remarketed. The increase in operating expenses from 1997 to 1998 was due
primarily to an increase in administrative charges and costs incurred in
connection with the remarketing efforts related to two Fairchild Metro III
aircraft formerly leased to Horizon Air Industries, Inc., in which the
Partnership holds a proportionate interest (see Note 4 to the
11
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
FORM 10-Q
PART I. FINANCIAL INFORMATION
accompanying financial statements). 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 $120,350 and $118,553 in the three
months ended March 31, 1998 and 1997, respectively. Future renewal, re-lease and
equipment sale activities will cause a decline in the Partnership's lease
revenues and corresponding sources of operating cash. Overall, expenses
associated with rental activities, such as management fees, and net cash flow
from operating activities will also decline as the Partnership experiences a
higher frequency of remarketing events.
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,
1997, the Partnership expended $75,957 to upgrade certain research and test
equipment and realized $33,444 in equipment sale proceeds. There were no
equipment acquisitions or sales during the same period in 1998. 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. The Partnership's notes payable
were fully amortized on January 1, 1998.
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, 1998, the Partnership declared
total cash distributions of Distributable Cash From Operations and Distributable
Cash From Sales and Refinancings of $56,588. In accordance with the Amended and
Restated Agreement and Certificate of Limited Partnership, the Limited Partners
were allocated 95% of these distributions, or $53,759 and the General Partner
was allocated 5%, or $2,829. The first quarter 1998 cash distribution was paid
on April 14, 1998.
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
12
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
FORM 10-Q
PART I. FINANCIAL INFORMATION
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, as well as the outcome of the Class Action Lawsuit described in Note
6 to the accompanying financial statements. The General Partner anticipates that
cash proceeds resulting from the collection of contractual rents and the outcome
of residual activities will satisfy the Partnership's future expense
obligations. However, the amount of cash available for distribution in future
periods will fluctuate. Equipment lease expirations and asset disposals will
cause the Partnership's net cash from operating activities to diminish over
time; and equipment sale proceeds will vary in amount and period of realization.
In addition, the Partnership may be required to incur asset refurbishment or
upgrade costs in connection with future remarketing activities. Accordingly,
fluctuations in the level of future quarterly cash distributions are
anticipated.
13
AMERICAN INCOME FUND I-B,
a Massachusetts Limited Partnership
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response:
Refer to Note 6 to the financial statements 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-B, 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, 1998
-----------------------------------------
By: /s/ Gary Romano
-----------------------------------------
Gary M. Romano
Clerk of AFG Leasing VI Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 15, 1998
-----------------------------------------
15