United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 01-13532
EQUIPMENT ASSET RECOVERY FUND, L.P.
Exact Name of Registrant as Specified in its Charter
TEXAS 11-2661586
State or Other Jurisdiction I.R.S. Employer Identification No.
of Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 ____
Balance Sheets At March 31, At December 31,
1996 1995
Assets
Equipment, at cost:
Construction cranes $ 15,851,978 $ 16,307,334
Vehicles and equipment 128,761 128,761
15,980,739 16,436,095
Less: accumulated depreciation (9,814,101) (9,781,264)
6,166,638 6,654,831
Cash and cash equivalents 1,263,528 1,118,831
Accounts receivable, net of
allowance for doubtful accounts
of $10,000 in 1996 and 1995 392,543 272,837
Organization and loan closing costs,
net of accumulated amortization of
$258,897 in 1996 and $242,372 in 1995 305,363 321,888
Other assets 228,795 53,124
Total Assets $ 8,356,867 $ 8,421,511
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued
expenses $ 381,800 $ 434,799
Deferred management fee 1,939,979 1,889,818
Loans payable 3,885,120 4,452,545
Accrued interest 25,955 _
Due to affiliates 184,250 175,331
Deferred income taxes 829,716 619,320
Total liabilities 7,246,820 7,571,813
Minority interest 1,182,071 1,265,001
Partners' Deficit:
General Partner (72,024) (415,303)
Limited Partners _ _
Special Limited Partner _ _
Total Partners' deficit (72,024) (415,303)
Total Liabilities and Partners'
Deficit $ 8,356,867 $ 8,421,511
Consolidated Statements of Partners' Deficit
For the three months ended March 31, 1996
Special
General Limited Limited
Partners Partners Partner Total
Balance at December 31, 1995 $ (415,303) $ _ $ _ $ (415,303)
Net Income 343,279 _ _ 343,279
Balance at March 31, 1996 $ (72,024) $ _ $ _ $ (72,024)
Consolidated Statements of Operations
For the three months ended March 31, 1996 1995
Income
Rental revenues $ 1,287,373 $ 1,185,109
Interest income 14,974 14,537
Other income 5,020 7,751
Total income 1,307,367 1,207,397
Expenses
Rental expenses $ 340,829 $ 294,472
General, selling and administrative 409,537 432,639
Depreciation and amortization 294,775 316,471
Interest expense 86,753 141,786
Management fee 65,160 60,478
Total expenses 1,197,054 1,245,846
Income (loss) from operations 110,313 (38,449)
Other Income
Gain on sale of cranes 360,432 426,699
Net Income before Minority Interest
and Provision for Income Taxes 470,745 388,250
Minority Interest 82,930 39,204
Income before Provision for Income Taxes 553,675 427,454
Provision for Income Taxes, deferred 210,396 27,000
Net Income $ 343,279 $ 400,454
Net Income (Loss) Allocated:
To the General Partners $ 343,279 $ 425,649
To the Limited Partners _ (24,933)
To the Special Limited Partners _ (262)
$ 343,279 $ 400,454
Per limited partnership unit
(32,722 outstanding) $ _ $ (.76)
Consolidated Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net income $ 343,279 $ 400,454
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on sale of cranes (360,432) (426,699)
Minority interest (82,930) (39,204)
Depreciation and amortization 294,775 316,471
Increase (decrease) in cash
arising from changes in operating
assets and liabilities
Accounts receivable, net (119,706) (22,054)
Other assets (175,671) 16,526
Accounts payable and accrued expenses (52,999) (202,080)
Deferred management fee 50,161 45,478
Accrued interest 25,955 (50,012)
Due to affiliates 8,919 (12,331)
Deferred income taxes 210,396 27,000
Net cash provided by operating activities 141,747 53,549
Cash Flows From Investing Activities
Proceeds from sale of cranes 570,375 652,892
Net cash provided by investing activities 570,375 652,892
Cash Flows From Financing Activities
Proceeds from long-term debt 149,247 _
Principal payments on long-term debt (716,672) (853,125)
Net cash used for financing activities (567,425) (853,125)
Net increase (decrease) in cash 144,697 (146,684)
Cash and cash equivalents, beginning
of period 1,118,831 1,215,735
Cash and cash equivalents, end
of period $ 1,263,528 $ 1,069,051
Supplemental Disclosure of Cash Flow
Information
Cash paid during the period for interest $ 60,798 $ 191,798
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's 1995 annual audited consolidated financial
statements within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of March 31, 1996 and the results of operations and cash
flows for the three months ended March 31, 1996 and 1995 and the statement of
changes in partners' deficit for the three months ended March 31, 1996. Results
of operations for the period are not necessarily indicative of the results to
be expected for the full year.
Certain reclassifications have been made in the prior year's financial
statements to conform with the current year's presentation.
The following significant events have occurred subsequent to fiscal year 1995
which would require disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
Sale of Cranes
In January and March 1996, the Partnership sold two DSC Venture cranes, the
proceeds of which were used to reduce the Partnership's debt.
Date Net(1) Net Gain
of Selling Book on
Crane Sale Price Value Sale
Manitowoc 3900 January 16, 1996 $ 277,875 $ 101,912 $ 175,963
Manitowoc 3900 March 15, 1996 292,500 108,031 184,469
$ 570,375 $ 209,943 $ 360,432
(1) The proceeds are net of 2.5% sales commission paid to Dayton- Scott
Equipment Company
Part 1, Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At March 31, 1996, the Partnership and its consolidated venture and
subsidiary's cash and cash equivalents balance totaled $1,263,528 compared to
$1,118,831 at December 31, 1995. The increase is primarily due to cash flow
from operations. The General Partners believe that the Partnership has
adequate cash reserves at DSC, the Partnership's 99% subsidiary, and
Partnership levels to support operations and the amortization of debt for the
near term. However, there can be no assurance that existing operating levels
can be maintained and that these cash reserves will be adequate in either the
near or long term. The adequacy of the current cash position will be affected
by matters over which the Partnership and its managers have little control.
This includes market conditions which affect the utilization and rental rates
at which the Partnership's assets are leased.
At March 31, 1996, construction cranes at cost totaled $15,851,978 as compared
to $16,307,334 at December 31, 1995. The decrease is due to the sales of two
DSC cranes during the first quarter of 1996. The net selling prices of the DSC
cranes were $277,875 and $292,500, respectively, resulting in respective gains
of $175,963 and $184,469 during the first quarter of 1996. The proceeds from
these sales were used to reduce the Partnership's debt. As a result, and in
addition to the Partnership's required monthly debt service payments, loans
payable decreased from $4,452,545 at December 31, 1995 to $3,885,120 at March
31, 1996.
Accounts receivable increased from $272,837 at December 31, 1995 to $392,543 at
March 31, 1996 primarily due to timing differences in the receipt of payments
for outstanding invoices.
Other assets increased from $53,124 at December 31, 1995 to $228,795 at March
31, 1996 due to an increase in prepaid insurance during the first quarter of
1996.
Accounts payable and accrued expenses decreased from $434,799 at December 31,
1995 to $381,800 at March 31, 1996 primarily due to the timing of payments of
operating expenses and 1995 audit fees.
Accrued interest increased from $0 at December 31, 1995 to $25,955 at March 31,
1996 primarily due to the timing of loan interest payments. Due to affiliates
increased from $175,331 at December 31, 1995 to $184,250 at March 31, 1996
mainly due to a quarterly accrual made for the SFN consulting fee and salary
expenses.
Deferred income taxes increased from $619,320 at December 31, 1995 to $829,716
at March 31, 1996 resulting from deferred taxes provided on higher SFN income
in 1996 than in 1995.
Results of Operations
For the period ended March 31, 1996, the Partnership generated net income of
$343,279 compared to net income of $400,454 for the same period during 1995.
The decrease in net income is primarily due to a lower gain on the sale of
cranes partially offset by an increase in rental revenues and decreases in
general, selling and administrative expense and interest expense.
Rental revenues for the three months ended March 31, 1996 totaled $1,287,373
compared to $1,185,109 for the corresponding period in 1995. The increase was
primarily the result of an increase in crane utilization. Dayton-Scott
Equipment Company, the fleet's operational manager, expects rental revenues to
remain relatively steady through the remainder of 1996 as a result of stable
utilization and rental rates. There can be no assurance, however, that either
utilization rates or rental rates will remain steady.
Rental expenses for the three months ended March 31, 1996 totaled $340,829
compared to $294,472 for the same period during 1995. The increase is primarily
due to increases in crane maintenance and repair expenses related to increased
crane utilization.
For the three months ended March 31, 1996, general, selling and administrative
expenses totaled $409,537 compared to $432,639 during the same period in 1995.
The decrease is mainly due to lower salary expenses, business insurance and
office expenses.
Interest expense for three months ended March 31, 1996 totaled $86,753 compared
to $141,786 for the same period in 1995. The decrease is due to interest being
calculated on a lower outstanding principal balance on the Partnership's debt
resulting from principal repayments made during 1995 and the first quarter of
1996.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the quarter ended March 31, 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.
EQUIPMENT ASSET RECOVERY FUND, L.P.
BY: EQUIPMENT MANAGEMENT INC.
General Partner
Date: May 14, 1996 BY: /s/ Moshe Braver
President, Director and
Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Mar-31-1996
<CASH> 1,263,528
<SECURITIES> 0
<RECEIVABLES> 402,543
<ALLOWANCES> (10,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,980,739
<DEPRECIATION> (9,814,101)
<TOTAL-ASSETS> 8,356,867
<CURRENT-LIABILITIES> 7,246,820
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,356,867
<SALES> 0
<TOTAL-REVENUES> 1,307,367
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,110,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86,753
<INCOME-PRETAX> 553,675
<INCOME-TAX> 210,396
<INCOME-CONTINUING> 343,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 343,279
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
