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 June 30, 1996
or
For the Transition period from ______ to ______
Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
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 of I.R.S. Employer Identification No.
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 ____
Consolidated Balance Sheets At June 30, At December 31,
1996 1995
Assets
Equipment, at cost:
Construction cranes $ 12,822,913 $ 16,307,334
Vehicles and equipment 128,761 128,761
12,951,674 16,436,095
Less: accumulated depreciation (8,107,808) (9,781,264)
4,843,866 6,654,831
Cash and cash equivalents 4,173,076 1,118,831
Accounts receivable, net of
allowance for doubtful accounts
of $10,000 in 1996 and 1995 308,712 272,837
Organization and loan closing
costs, net of accumulated
amortization of $275,423 in 1996
and $242,372 in 1995 288,837 321,888
Other assets 449,133 53,124
Total Assets $ 10,063,624 $ 8,421,511
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 482,594 $ 434,799
Deferred management fee 1,983,597 1,889,818
Loans payable 2,023,115 4,452,545
Accrued interest 12,148 --
Due to affiliates 363,995 175,331
Deferred income taxes 967,737 619,320
Total liabilities 5,833,186 7,571,813
Minority interest 1,284,312 1,265,001
Partners' Capital (Deficit):
General Partners 29,461 (415,303)
Limited Partners 2,798,820 --
Special Limited Partner 117,845 --
Total Partners' Capital (Deficit) 2,946,126 (415,303)
Total Liabilities and Partners'
Capital (Deficit) $ 10,063,624 $ 8,421,511
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1996
Special
General Limited Limited
Partners Partners Partner Total
Balance at December 31, 1995 $ (415,303) $ -- $ -- $ (415,303)
Net Income 444,764 2,798,820 117,845 3,361,429
Balance at June 30, 1996 $ 29,461 $ 2,798,820 $ 117,845 $ 2,946,126
Consolidated Statements of Operations
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
Income
Rental revenues $ 1,169,391 $ 1,065,897 $ 2,456,764 $ 2,251,006
Interest income 14,798 15,341 29,772 29,878
Other income 5,100 6,383 10,120 14,134
Total income 1,189,289 1,087,621 2,496,656 2,295,018
Expenses
Rental expense 274,181 295,879 615,010 590,351
General, selling, and
administrative 434,235 530,474 843,772 963,113
Depreciation and
amortization 269,799 310,632 564,574 627,103
Interest expense 73,799 125,852 160,552 267,638
Management fee 226,114 55,237 291,274 115,715
Total expenses 1,278,128 1,318,074 2,475,182 2,563,920
Income (loss) from
operations (88,839) (230,453) 21,474 (268,902)
Other Income
Gain on sales of
cranes 3,347,251 334,345 3,707,683 761,044
Net Income before
Minority Interest and
Provision for
Income Taxes 3,258,412 103,892 3,729,157 492,142
Minority Interest (102,241) 11,928 (19,311) 51,132
Income before Provision
for Income Taxes 3,156,171 115,820 3,709,846 543,274
Provision for Income
Taxes, Deferred 138,021 64,100 348,417 91,100
Net Income $ 3,018,150 $ 51,720 $ 3,361,429 $ 452,174
Net Income Allocated:
To the General Partners $ 101,485 $ (208,989) $ 444,764 $ 216,660
To the Limited Partners 2,798,820 257,993 2,798,820 233,060
To the Special
Limited Partner 117,845 2,716 117,845 2,454
$ 3,018,150 $ 51,720 $ 3,361,429 $ 452,174
Per limited partnership
unit (32,722 outstanding) $ 85.53 $ 7.88 $ 85.53 $ 7.12
Consolidated Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities
Net income $ 3,361,429 $ 452,174
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain on sales of cranes (3,707,683) (761,044)
Minority interest 19,311 (51,132)
Depreciation and amortization 564,574 627,103
Increase (decrease) in cash arising
from changes in Operating assets
and liabilities:
Accounts receivable, net (35,875) (10,351)
Other assets (396,009) 45,812
Accounts payable and
accrued expenses 47,795 6,907
Deferred management fee 93,779 85,715
Accrued interest 12,148 (50,012)
Due to affiliates 188,664 (9,000)
Deferred income taxes 348,417 91,100
Net cash provided by operating activities 496,550 427,272
Cash Flows From Investing Activities
Proceeds from sales of cranes 4,987,125 1,312,677
Net cash provided by investing activities 4,987,125 1,312,677
Cash Flows From Financing Activities
Proceeds from long-term debt 249,247 100,000
Principal payments on long-term debt (2,678,677) (1,955,475)
Net cash used for financing activities (2,429,430) (1,855,475)
Net increase (decrease) in cash and
cash equivalents 3,054,245 (115,526)
Cash and cash equivalents,
beginning of period 1,118,831 1,215,735
Cash and cash equivalents,
end of period $ 4,173,076 $ 1,100,209
Supplemental Disclosure of Cash
Flow Information
Cash paid during the period for interest $ 148,404 $ 317,650
Notes to the Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's 1995 annual audited 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 June 30, 1996 and the results of operations for the
three and six months ended June 30, 1996 and 1995, the statement of changes in
partners' capital (deficit) for the six months ended June 30, 1996 and the
statements of cash flows for the six months ended June 30, 1996 and 1995.
Results of operations for the period are not necessarily indicative of the
results to be expected for the full year.
Certain amounts in the prior year's consolidated financial statements have been
reclassified 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, March, April and June 1996, the Partnership sold nine DSC Venture
cranes and one DSC Venture Ringer, the proceeds of which were used to reduce
the Partnership's debt.
Date Net1 Net Gain
of Selling Book on
Crane Sale Price Value Sale
Manitowoc 3900 January, 1996 $ 277,875 $ 101,912 $ 175,963
Manitowoc 3900 March, 1996 292,500 108,031 184,469
Manitowoc 4100W-S2 April, 1996 658,125 208,540 449,585
Manitowoc 4000W April, 1996 385,125 77,571 307,554
Manitowoc 4100W June, 1996 585,000 138,967 446,033
Manitowoc 4100W-S2 June, 1996 633,750 97,101 536,649
Manitowoc 4100W-S2 June, 1996 633,750 119,112 514,638
Manitowoc 4100W-S2 June, 1996 633,750 145,331 488,419
Manitowoc 4100W-S2 June, 1996 633,750 177,176 456,574
Manitowoc Ringer June, 1996 253,500 105,701 147,799
$ 4,987,125 $ 1,279,442 $ 3,707,683
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 June 30, 1996, the Partnership and its consolidated venture and subsidiary's
cash and cash equivalents balance totaled $4,173,076 compared to $1,118,831 at
December 31, 1995. The increase is primarily due to the receipt of proceeds
from the sale of nine cranes and one Ringer during 1996 and cash provided by
operating activities exceeding principal payments on long-term debt. The
General Partners believe that the Partnership has adequate cash reserves at the
DSC, the Partnership's 99% subsidiary, and Partnership levels to support
operations.
At June 30, 1996, construction cranes at cost totaled $12,822,913 as compared
to $16,307,334 at December 31, 1995. The decrease is due to the sales of nine
DSC cranes and one Ringer during the first half of 1996. The net selling price
of the equipment sold during the first half of 1996 was $4,987,125 resulting in
a gain of $3,707,683 during the first half of 1996. A portion of the proceeds
from the 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 $2,023,115 at June
30, 1996. Subsequent to the end of the second quarter, the Partnership utilized
the remaining proceeds from the 1996 second quarter equipment sales to make
principal payments to virtually retire the Partnership's debt.
Accounts receivable increased from $272,837 at December 31, 1995 to $308,712 at
June 30, 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 $449,133 at June
30, 1996 due to an increase in prepaid insurance during the first quarter of
1996 and the establishment of a $253,500 receivable resulting from the sale of
the Ringer during the second quarter of 1996.
Accrued interest increased from $0 at December 31, 1995 to $12,148 at June 30,
1996 primarily due to the timing of loan interest payments. Due to affiliates
increased from $175,331 at December 31, 1995 to $363,995 at June 30, 1996
mainly due to an accrual made for SFN's consulting fee and salary expenses and
fees due to the General Partners in connection with the equipment sale.
Deferred income taxes increased from $619,320 at December 31, 1995 to $967,737
at June 30, 1996 resulting from deferred taxes provided on higher SFN income in
1996 than in 1995.
Results of Operations
For the three and six months ended June 30, 1996, the Partnership generated net
income of $3,018,150 and $3,361,429, respectively, compared to net income of
$51,720 and $452,174 for the same periods during 1995. The increases in net
income are primarily due to a higher gain on the sale of equipment and an
increase in rental revenues, as well as decreases in general, selling and
administrative expense and interest expense. The Partnership sold nine cranes
and one Ringer during the first half of 1996 compared to two cranes during the
same period in 1995, resulting in the Partnership recognizing higher gains on
sales of cranes during the 1996 periods.
Rental revenues for the three and six months ended June 30, 1996 totaled
$1,169,391 and $2,456,764, respectively, compared to $1,065,897 and $2,251,006
for the corresponding periods in 1995. The increases are the result of an
increase in crane utilization and average rental rates. 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.
For the three and six months ended June 30, 1996, general, selling and
administrative expenses totaled $434,235 and $843,772, respectively, compared
to $530,474 and $963,113 for the same periods in 1995. The decreases are
mainly due to lower salary expenses, business insurance and office expenses,
and lower consulting and salary expenses incurred at SFN during the second
quarter of 1996 compared to the same period in 1995.
Interest expenses for three and six months ended June 30, 1996 totaled $73,799
and $160,552, respectively, compared to $125,852 and $267,638 for the same
periods in 1995. The decreases are 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 half of 1996.
Management fee for the three and six months ended June 30, 1996 totaled
$226,114 and $291,274, respectively, compared to $55,237 and $115,715 for the
corresponding periods in 1995. The increases are the result of an increase in
DSC Venture's gross revenues and an accrual for fees to the General Partners
resulting from the sale of DSC's equipment.
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 June 30, 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: August 14, 1996 BY: /s/ Moshe Braver
President, Director and Chief Financial Officer
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<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 4,173,076
<SECURITIES> 0
<RECEIVABLES> 318,712
<ALLOWANCES> (10,000)
<INVENTORY> 0
<CURRENT-ASSETS> 5,219,758
<PP&E> 12,951,674
<DEPRECIATION> (8,107,808)
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0
0
<OTHER-SE> 2,946,126
<TOTAL-LIABILITY-AND-EQUITY> 10,063,624
<SALES> 0
<TOTAL-REVENUES> 6,204,339
<CGS> 0
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<OTHER-EXPENSES> 2,314,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160,552
<INCOME-PRETAX> 3,709,846
<INCOME-TAX> 348,417
<INCOME-CONTINUING> 3,361,429
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<EPS-PRIMARY> 85.53
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