SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended Commission file number
02-95458
December 31, 1994
DECEMBER 31, 1994
GEMINI EQUIPMENT PARTNERS INCOME FUND IX
(Exact name of registrant as specified in its charter)
1301 West Newport Center Drive
Deerfield Beach, Florida 33442
(305) 570-7676
Virginia 54-1385487
(State of organization) (I.R.S. Employer Identification
No.)
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
None
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 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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405
of Regulation S-K is not contained herein, and will not be
contained, to the
best of registrant's knowledge, in definitive proxy or
information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to
this Form 10-K.[ X ]
Number of shares outstanding of each of registrant's classes of
securities:
Number of
Units
Title of Each Class at December 31,
1994
Units of Limited Partnership Interest:
$500 per unit 21,222
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Part III are incorporated by reference to Post
Effective Amendment No. 1 to
Form S-1, Registration Statement No. 2-95458
Total number of pages: 24 Exhibit Index:
page 24
PART I
Item 1. Business
General Development of Business -
The registrant is a Limited Partnership ("the Partnership")
composed of Finalco
Group, Inc. ("FGI"), a Delaware corporation, which is the General
Partner, and purchasers
of partnership units as Limited Partners; however, on March 27,
1990, FGI sold its rights
and duties as General Partner to Gemini Equities Limited
Partnership ("GELP"), a
Partnership related to FGI by means of similar ownership. GELP
subsequently assigned its
management functions and duties to Gemini Equities, Inc. (herein
after referred to as
managing general partner or the "General Partner"), a company
wholly-owned by GELP. The
Partnership was formed and commenced operations on March 5, 1987.
The primary objectives of the Partnership are to acquire and
lease equipment
("Equipment") in order to generate quarterly distributions to
Limited Partners from leasing
revenues and proceeds from the sale or disposition of equipment,
to reinvest in equipment
a portion of their Cash From Operations and Cash From Sales or
Refinancings during the
first eight years of operations and as a result, distributions,
if any, for such period
would be limited; and to provide certain tax benefits. The
achievement by the Partnership
of any of its objectives cannot be assured or guaranteed.
All Partnership primary objectives are being met. After
careful analysis the General
Partner has estimated that the next cash distribution will be
payable in June 1995 at an
annualized rate of 5%. The General Partner expects to close this
Partnership during 1996
and expects to return about 112% of the Limited Partners'
original investment. Because the
General Partner will attempt to lease the Partnerships' equipment
until it has little
economic value, the sale of equipment is expected to generate
only minimal proceeds. As
of December 31, 1994 the Partnership has returned approximately
96.87% of investment
through distributions.
Although the General Partner has sole responsibility for the
selection of equipment
and lessees and total reliance is placed upon it by the Limited
Partners, events subsequent
to this selection process may operate to change the intended
results of any equipment or
lessees that have been selected. In this connection; a number of
factors have negatively
impacted the Partnership's results of operations. These factors
include lower interest
rates, lessee bankruptcies, remarketing problems due to changes
in manufacturers'
practices, the acceleration of technological changes, and
increasing competition for
leases.
Selection of the Equipment for purchase and lease is based
principally on the General
Partner's evaluation of the usefulness of the Equipment in
commercial, industrial or
agricultural applications and its estimate of the potential
demand for the Equipment at the
end of the initial lease term and successive lease terms. The
Partnership has invested
primarily in computer related equipment. The General Partner
makes ongoing evaluations of
the Equipment to determine whether each item of Equipment should
remain in its portfolio
or be sold at the end of the initial lease term, depending on a
number of criteria,
including the Partnership's operating results, economic
considerations, tax considerations,
and the nature and condition of the Equipment.
The registrant has no direct employees. The General Partner
has full and exclusive
discretion in management and control of the Partnership.
The equipment leasing industry is highly competitive. In
initiating leasing
transactions, the Partnership competes with leasing companies,
manufacturers that lease
their products directly, equipment brokers and dealers, and
financial institutions,
including commercial banks, insurance companies and other leasing
partnerships sponsored
by the General Partner. Many competitors are larger than the
Partnership and have access
to more favorable financing. Competitive factors in the equipment
leasing business
primarily involve pricing and other financial arrangements.
Marketing capability is also
a factor of competition.
Item 1. Business - Continued
Leases -
At December 31, 1994, 1993, and 1992, Equipment had a net
book value of $76,167,
$451,070, and $1,065,546, respectively. Such equipment was
leased under 39 separate leases
to 23 lessees as of December 31, 1994, all of whom are
unaffiliated with the General
Partner and are located within the United States, with a
geographic concentration in
California and Texas, and the United Kingdom. Major customers
providing 10% or more of the
rental income were as follows:
1994 1993 1992
Psychological Corporation 10% 0 0
GE 0 11% 13%
AT&T 0 0 11%
GTE 0 0 0
Smithkline 0 0 10%
Ben Hogan 0 12%
0
The Partnership's Equipment is leased under operating and direct
financing lease
arrangements. At December 31, 1994 such leases had remaining
terms ranging from 1 to 15
months.
Equipment -
The Partnership acquires a significant portion of its
equipment from the General
Partner in conjunction with the assignment of an existing lease
to the Partnership. The
General Partner acquires the equipment to be sold to the
Partnership on a temporary basis,
generally not to exceed six months, for the purpose of
facilitating the acquisition by the
Partnership of the equipment, obtaining financing for the
Partnership, or other purposes
relating to the business of the Partnership.
The Partnership purchase price is equal to or less than the
lesser of the General
Partner's purchase price (less any rents received) plus an
acquisition fee not to exceed
4% of the purchase price of the equipment or the estimated market
value of the equipment
at purchase date.
Item 2. Properties
The Partnership neither owns nor leases office space or
equipment for the purpose of
managing its day-to-day affairs. The General Partner, FGI, has
exclusive control over all
aspects of the business of the Partnership, including provision
of any necessary office
space. As such, FGI is compensated for management services and
general and administrative
costs relating to managing the Partnership's business. Excluded
from the allowable
reimbursement to the General Partner, however, are the following:
(1) expenditures for
rent or utilities, (2) purchases of capital equipment, and the
related depreciation, and
(3) certain other administrative items which are borne by the
General Partner.
Item 3. Legal Proceedings
On March 3, 1994, Xerox Corporation without admitting guilt
entered into a settlement agreement with the General Partner who
had filed a complaint against Xerox for the benefit of this
Partnership and fourteen other Gemini Limited Partnerships. The
complaint was for, among other matters, violation of the federal
anti-trust laws.
Based upon this settlement the pro-rata share of the amount
to this Partnership was $620,000 before legal fees and expenses
which had been incurred in current and prior years
relating to the settlement.
GELP became involved in litigation, along with other
affiliated entities, with the Resolution Trust Corporation in
March 1994 concerning loan guarantees provided by Finalco Group,
Inc. prior to current management's involvement. This litigation
was settled during 1994 without impact on the Partnership.
Item 4. Submission of Matters to a Vote of Security
Holders
No matters were submitted to a vote of security holders,
through the solicitation of
proxies or otherwise during the three months ended December 31,
1994.
PART II
Item 5. Market for the Registrant's Securities and
Related Stockholder Matters
The Partnership's limited partnership interests are not
publicly traded. There is
no market for the Partnership's limited partnership interests and
it is unlikely that any
will develop.
Approximate Number of Equity Security Holders:
Number of Record Holders
Title of Class As of December
31, 1994
Units of Limited Partnership Interest 965
Item 6. Selected Financial Data
Year Ended
December 31,
1994 1993 1992
1991 1990
Total Revenues $1,406,531 $1,824,146 $1,697,916
$2,345,967 $4,051,436
Net Income (Loss) $ 789,024 $ 122,968 $
279,933 $ (247,893) $ 717,365
Net Income (Loss Per
Limited Partnership
Unit $ 36.81 $ 5.74
$ 13.06 $ (11.56) $ 33.46
Distributions to
Limited Partners Per
Partnership Unit $ 66.25 $ 60.00 $
60.00 $ 60.00 $ 60.63
Year Ended
December 31,
1994 1993 1992
1991 1990
Total Assets $ 646,872 $2,224,388 $5,598,892
$2,965,462 $5,250,296
Notes Payable $ 0 $ 0 $ 0
$ 0 $ 311,860
The above selected financial data should be read in
conjunction with the financial
statements and related notes appearing elsewhere in this report.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
SUMMARY
During 1990, Management discovered an unexpected decline in
the residual values of
Xerox equipment. Management believes that this decline was the
result of actions by Xerox
Corporation which were not connected with the changing
marketplace or economic conditions.
In order to protect the Partnership's interest in Xerox
equipment, the Partnership has
brought legal action to prosecute their claims against Xerox
Corporation and has settled
with Xerox and received $620,485 of proceeds from the litigation
(See Item 3-Legal
Proceedings).
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of
Operations, Continued
A number of factors have negatively affected the
Partnership's results of operations.
These factors include lower interest rates, lessee bankruptcies,
remarketing problems due
to changes in manufacturers' practices, the acceleration of
technological changes, and
increasing competition for leases. Declines have been
marketplace driven, and have been
beyond Management's control.
Re-marketing activity continues to be strong in the
portfolio purchased from
Intelogic Trace-Texcom. For the Gemini Fund IX portion of the
portfolio the return to date
is 107% of cost.
Net income for the years ended December 31, 1994, 1993, and
1992 was $789,024,
$122,968, $279,933, respectively.
REVENUES
Total revenues for 1994 were $1,406,531, a 23% decrease over
1993 total revenues of
$1,824,146. Total revenue decreased because leasing income
decreased $755,171 to $682,284
in 1994 compared to $1,437,455 in 1993 and the gain on the sale
of equipment decreased
$356,005 to $16,127 in 1994 compared to $372,132. The decrease
in rental income is due to
leases maturing. The above decreases are offset by an increase
in other income of $693,561
due primarily from the proceeds of the Xerox settlement as well
as the collection of bad
debts of $19,000 from one lessee.
Total revenues for 1993 were $1,824,146, a 7% increase over
1992 total revenues of
$1,697,916. The total revenues increased because leasing income
increased $105,854 to
$1,437,455 in 1993 over $1,331,601 in 1992 and the gain on sale
of equipment increased
$133,401 to $372,132 in 1993 over $238,731 in 1992. The
increased leasing income was the
result of the acquisition of an equipment lease portfolio in
August of 1992. The increase
in gains was a result of the sale of equipment as a greater
number of leases mature. Other
income principally interest declined $113,025 from 1992 to 1993.
COSTS AND EXPENSES
Direct costs for 1994 of $89,496 was a decrease of 36% over
direct costs for 1993 of
$139,362. This decrease is a result of maturing leases and the
settlement of litigation
against Xerox Corporation.
Direct costs for 1993 of $139,362 was an increase of 54%
over direct costs for 1992
of $90,504. The increase in 1993 includes an increase in legal
fees of $20,000 in
connection with the Xerox lawsuit and $26,000 of commissions to
an affiliated entity for
lease renewals and remarketing.
Management fees and general and administrative fees
decreased 27% and 55%
respectively for 1994 compared to 1993.
Management fees and general and administrative fees
increased 57% and 66%
respectively for 1993 over 1992. These fees are calculated on
gross rents and therefore
do not track leasing income. Further, when leases go into
default, management fees are no
longer charged, but general and administrative charges continue.
The provision for bad debts during 1994 has decreased 99%
due to no bankruptcies
during the current year. As the amount of receivables and the
number of leases has
significantly declined due to the winding down of the
partnership, the amounts provided as
allowance for doubtful accounts is expected to remain at the same
level for 1995 as 1994.
Lessees are generally required under lease contract to
notify the lessor in advance
(usually 90 days) if they intend to renew, buy or return the
equipment at the end of the
lease term. If no notice is received the lessee is billed at the
same rate until notice
is met. If a dispute arises with a lessee over the notice an
allowance is provided as the
collection is doubtful. In 1994 management was successful in
recovering $22,610 from one
lessee related to the lack of appropriate notice which had
previously been recorded as
doubtful.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of
Operations, Continued
For 1993, provision for bad debts was provided for one
lessee in bankruptcy for
$198,756 and for a second lessee that had been unable to make
lease payments in the amount
of $64,186.
Leasing costs consists of amortization of initial direct
costs and interest expense.
The 1993 increase over 1992 is due to the August 1992 portfolio
acquisition. The 1994
decrease is due to leases maturing.
Depreciation is declining because the Partnership equipment
is becoming fully
depreciated. The acquired portfolios are primarily direct
financing leases and are
therefore not depreciated.
ASSETS, LIABILITIES AND EQUITY
Investment in leases and rents receivable have declined as
the portfolio is being
liquidated and no new lease originations are replacing the
maturing leases. It is
anticipated that by December of 1995 the remaining direct
financing leases and rents
receivable will be collected or sold for their approximate book
value.
Rental Equipment declined $374,903 in 1994 related to the
continuing depreciation of
assets and the sale of equipment. It is anticipated that all of
the remaining equipment
will be disposed of during 1995.
Other receivables declined $116,093 in 1994 primarily
related to the collection of
equipment sale proceeds, and an overall reduction in the proceeds
from sales of equipment
as the portfolio matures and the remaining equipment values
continue to decline with age.
This decline will continue in 1995 as all equipment sales are
anticipated to be fully
collected in 1995.
In 1994 lease obligations declined from $1,241,332 to
$259,284. This decline
corresponds to the reduction in net investment in direct finance
leases and is anticipated
to continue in 1995 as the lease transactions are completed
and the associated
non-recourse debt is paid down.
As no new leases are replacing the maturing leases, no new debt
is being obtained. This
decline is expected to continue in 1995.
Security deposits liability to customers is expected to
decline substantially in 1995
as many leases will mature in 1995 and security deposits will be
refunded to customers.
Any amount of security deposits remaining at the termination of
the partnership will be
paid to the general partner who will accept liability for
repayment.
Total partners equity declined during 1994 primarily related
to distributions to
partners of $1,409,173, which was greater than earnings during
the same period of $789,024.
It is anticipated that partners equity will continue to decline
in 1995.
STATEMENT OF CASH FLOWS
Net cash provided from operating activities increased 43%
from 1993 of $660,669 to
$943,456 in 1994. Excluding the Xerox legal settlement from the
1994 amount the net cash
provided from operating activities would have declined 51% from
1993 to 1994. This decline
is related to the overall reduction of the portfolio and the
winding down of the
partnership. Cash provided from operations and investing
activities is being distributed
to the partners and not reinvested in new leases. It is
anticipated that the decline will
continue in 1995 since the number of leases has significantly
declined.
Net cash provided from investing activities declined 50%
from 1993 to 1994. This is
related to the continual sale of equipment at the end of the
lease term and the sale of
off-lease equipment. Net cash provided from investing activities
is anticipated continue
to decline 1995 as the remaining assets continue to mature and
the revenue from the sale
or disposal of equipment continues to decline.
Item 7. Management's Discussion
and Analysis of Financial
Condition and Results of
Operations, Continued
Cash expenditures from financing activities have remained
fairly constant for the
last three years. Distributions to partners in 1994 were
$122,991 higher than 1993 due to
the higher distribution of cash resulting from the proceeds
received from the Xerox
litigation. It is anticipated that in 1995 all cash flow from
operations and investing
activities will be distributed to the partners. However, the
amount distributed will
decline as significantly less cash flow will be generated from
operations and financing
activities as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Over 67% of the leasing transactions have been completed in
the portfolio. The
return on investment for computer and related equipment purchased
totaling about $7.8
million (about 32%) of the portfolio has been or is expected to
be less than 100% of the
investment on a present value basis. Significant residual value
declines have been
experienced primarily in equipment manufactured by Prime and
Datagraphics. Returns greater
than 100% have been experienced on equipment manufactured by Data
Switch, Paradyne, Sun
Information Systems, AT&T, Prime, Timplex, Develcon, Digital
Equipment, Tandem, McDonnell
Douglas, Hewlett Packard, Avanti, Kodak, Cannon, some I.B.M. and
also Office Furniture.
The best performance to date has come from I.B.M. personal
computers that were leased to
C&P Telephone Company. The worst performance to date has come
from CAD/CAM equipment
leased to General Electric and from Xerox laser Printers that
were leased to General
Electric and Comnet.
It is Management's intention to lease the equipment until it
has little economic
value, therefore the sale of the equipment is expected to
generate only minimal proceeds.
However, if a fair sales price is offered the equipment will be
sold.
Distributions to the Limited Partners were $1,405,958,
$1,273,320, and $1,273,320 for
the years ended December 31, 1994, 1993, and 1992, respectively.
Distributions to the
General Partner were $3,215, $12,862, and $12,860 for the same
three years, respectively.
As the industry responds to the ever changing marketplace, the
General Partner has made
adjustments that were considered necessary to remain responsive
and competitive.
The Partnership has no material commitments for capital
expenditures as of December
31, 1994. Cash provided from operations, together with the
General Partner's actions as
discussed above are considered adequate to fund the Partnership
requirements for its
present business.
INTEREST RATES
Interest rates as reflected in the prime rate and other
money costs affect the
Partnership's non-recourse borrowings from banks. To the extent
that bank borrowings are
at interest rates tied to the prime rate, there has been a
moderate impact of interest rate
changes on operations.
Item 8. Financial Statements
Index to Financial Statements
Page
Number
Report of Independent Accountants 9
Balance Sheets as of December 31, 1994 and 1993
10
Statements of Operations, Years Ended December 31, 1994,
1993 and 1992 11
Statements of Partners' Equity (Deficit), Years Ended
December 31, 1994, 1993 and 1992 12
Statements of Cash Flows, Years Ended December 31, 1994,
1993 and 1992 13
Notes to Financial Statements 14 -
19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Gemini Equipment Partners Income Fund IX
Deerfield Beach, Florida
We have audited the accompanying balance sheets of Gemini
Equipment Partners Income Fund
IX, a limited partnership, as of December 31, 1994 and 1993, and
the related statements
of operations, partners' equity (deficit), and cash flows for
each of the three years
ended December 31, 1994. These financial statements are the
responsibility of the
Partnership's management. Our responsibility is to express an
opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those
standards require that we plan and perform the audit to obtain
reasonable assurance
about whether the financial statements are free of material
misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles
used and significant estimates made by management, as well as
evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all
material respects, the financial position of Gemini Equipment
Partners Income Fund IX, a
limited partnership, as of December 31, 1994 and 1993, and the
results of its
operations, and its cash flows for each of the three years ended
December 31, 1994 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Miami, Florida
March 10, 1995
BALANCE SHEETS
December 31,
1994
1993
Assets
Cash & Cash Equivalents $71,828
$ 242,700
Net Investment in Direct
Financing Leases - Less Allowance
for Doubtful Accounts of $270,750 and
$277,949, respectively 327,334
1,297,918
Operating Lease Rent Receivable
[RECEIVABLES]3,198 23,437
Less: Allowance for Doubtful Accounts
[ALLOWANCES](2,123) (21,167)
Net Operating Lease Receivable 1,075
2,270
Rental Equipment, at Cost
[PP&E]2,173,393
5,698,405
Less: Accumulated Depreciation
[DEPRECIATION](2,097,226) (5,247,335)
Net Rental Equipment 76,167
451,070
Due from General Partner 92,018
35,887
Other Receivables 78,450
194,543
Total Assets $
[TOTAL-ASSETS]646,872 $2,224,388
Liabilities and Partners' Equity
Accounts Payable-Affiliates 0
414
Accounts Payable 41,161
31,191
Security Deposits 221,229
249,659
Deferred Revenue 0 8,416
Lease Obligations 259,284
1,241,332
Total Liabilities 521,674
1,531,012
Partners' Equity (Deficit):
General Partner (28,203)
(84,387)
Limited Partners 153,401
777,763
Total Partners' Equity
[OTHER-SE]125,198 693,376
Total Liabilities and Partners' Equity $
[TOTAL-LIABILITY-AND-EQUITY]646,872 $2,224,388
STATEMENTS OF OPERATIONS
Year Ended December 31,
1994 1993
1992
Revenues
Leasing income $ 682,284 $1,437,455
$1,331,601
Other income 708,120 14,559
127,584
Net Gain on sale of equipment 16,127 372,132
238,731
Total Revenues
[TOTAL-REVENUES]1,406,531 1,824,146 1,697,916
Expenses
Direct costs 89,496 139,362
90,504
Management fees 146,670 201,453
127,986
General and administrative 31,722 70,855
42,662
Provision for bad debts 2,541 278,403
0
Leasing Costs & interest 99,787 386,133
254,852
Depreciation 247,291 624,972
901,979
Total Operating Expenses [TOTAL-COSTS]617,507
1,701,178 1,417,983
Net Income $ [NET-INCOME]789,024
$ 122,968
$ 279,933
Net Income Allocation
General Partner $ 7,890 $ 1,230
$ 2,799
Limited Partners 781,134 121,738
277,134
$ 789,024 $ 122,968
$ 279,933
Net Income per Limited
Partnership Unit $ [EPS-PRIMARY]36.81 $
5.74 $
13.06
Weighted Average Number
of Limited Partnership
Units Outstanding 21,222 21,222
21,222
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Limited Partners General Partner
Total
Partners' Equity (Deficit),
December 31, 1991 $ 2,936,064 $ (62,588) $
2,873,476
Translation loss (9,012) (91)
(9,103)
Distributions (1,273,320) (12,860)
(1,286,180)
Net income 277,134 2,799
279,933
Partners' Equity (Deficit),
December 31, 1992 1,930,866 (72,740)
1,858,126
Translation loss (1,521) (15)
(1,536)
Distributions (1,273,320) (12,862)
(1,286,182)
Net income 121,738 1,230
122,968
Partners' Equity (Deficit),
December 31, 1993 777,763 (84,387)
693,376
Translation gain 462 5
467
Distributions (1,405,958) (3,215)
(1,409,173)
Contributions 0 51,504
51,504
Net income 781,134 7,890
789,024
Partners' Equity (Deficit),
December 31, 1994 $ 153,401 $ (28,203) $
125,198
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1994
1993 1992
Cash flows from operating activities:
Net income (loss) $ 789,024
$ 122,968 $ 279,933
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Depreciation 247,291
624,972 901,979
Provision for bad debts, net
of recoveries (20,069)
275,572 (49,155)
Net gain on sales of equipment (16,127)
(372,132) (238,731)
Change in assets and liabilities:
(Increase) decrease in rent
receivable, net 20,239
24,832 49,008
(Increase) decrease in investment in direct
financing leases* 872,474
2,085,011 827,163
(Increase) decrease in other receivables 116,093
97,068 (45,764)
(Increase) decrease in due from General Partner
(56,131) 0 0
Increase (decrease) in accounts
payable Affiliates (414)
46,364 (34,773)
Increase (decrease) in lease
obligations (982,048)
(1,514,604) (851,386)
Increase (decrease) in accounts payable 9,970
(52,855) 84,581
Increase (decrease) in due to
General Partner 0
(636,298) (418,787)
Increase (decrease) in security
deposits (28,430)
(5,907) 0
Increase (decrease) in deferred
revenue (8,416)
(34,322) 26,891
Net cash provided by operating
activities 943,456
660,669 530,959
Cash flows from investing activities:
Equipment lease portfolio acquisition 0
0 (478,692)
Financed lease off-lease 0
0 (32,071)
Purchase of rental equipment 0
0 (11,010)
Proceeds from sale of equipment 243,502
487,432 399,976
Net cash provided by (used in)
investing activities 243,502
487,432 (121,797)
Cash flows from financing activities:
Principal payments on notes payable 0
0 (143,054)
Additional Capital Contributions 51,504
0 0
Distribution to partners (1,409,173)
(1,286,182) (1,286,180)
Net cash used in financing activities (1,357,669)
(1,286,182) (1,429,234)
Effect of exchange rate on cash (161)
(773) (5,715)
Increase (decrease) in cash &
cash equivalents (170,872)
(138,854) (1,025,787)
Cash & Cash equivalents at
beginning of year 242,700
381,554 1,407,341
Cash & cash equivalents at end of year $ 71,828
$ 242,700 $ 381,554
Supplemental disclosures of cash
flow information:
Cash paid during the year for interest $ 0
$ 268,102 $ 166,581
* Net of $99,135 of non-cash effect of direct finance lease
equipment and residual
values transferred to Rental Equipment.
Notes to Financial Statements
Note 1 - Organization
Gemini Equipment Partners Income Fund IX (the "Partnership"), is
a limited partnership
that was organized under the provisions of the Uniform Limited
Partnership Act of
Virginia for the purpose of acquiring and leasing equipment.
Operations commenced on
March 5, 1987. The Partnership is required to terminate on
December 31, 2010, or
before, in accordance with the terms of the Limited Partnership
Agreement; however,
management has decided to wind-down the Partnership gradually and
orderly. Termination
of the Partnership is anticipated in 1996.
Finalco Group Inc. ("FGI"), the General Partner, managed and
controlled the business and
affairs of the Partnership; however, on March 27, 1990, FGI sold
its rights and duties
as General Partner to Gemini Equities Limited Partnership
("GELP"), a Partnership
related to FGI by means of similar ownership. GELP subsequently
assigned its management
functions and duties to Gemini Equities, Inc., a company
wholly-owned by GELP.
Note 2 - Summary of Significant Accounting Policies
Basis of Accounting
The Partnership utilizes the accrual basis of accounting for
financial reporting
purposes whereby revenues are recognized as earned and expenses
are recognized when
incurred. The financial statements include only those assets,
liabilities, and results
of operations which relate to the Partnership.
Lease Accounting Policies
Statement of Financial Accounting Standards No. 13 requires that
a lessor account for
each lease by either the direct financing or operating method.
Leased Assets:
Direct financing leased assets consist of the present value of
the future minimum lease
payments plus the present value of the residual (collectively
referred to as the net
investment). The residual is the estimated fair market value at
lease termination.
Operating leased assets consists of the equipment cost, plus
acquisition fees, less the
amount depreciated to date.
Revenue, Costs and Expenses:
Operating leases-Revenue consists of the contractual lease
payments and is recognized on
a straight-line basis over the lease term. Costs and expenses
are principally
depreciation of the equipment. Depreciation is recognized on a
straight-line basis over
the lease term to the Partnerships estimate of the equipment's
fair market value at
lease termination, commonly referred to a "residual value". The
residual value of the
Partnership's rental equipment is periodically assessed, and
adjusted to the lower of
cost or estimated market value. Any adjustments resulting from
the periodic assessment
are charged to depreciation expense currently for equipment held
for sale and
prospectively for equipment held for lease.
Notes to
Financial Statements, Continued
Note 2 - Summary of Significant Accounting Policies, Continued
Direct financing leases-Revenue consists of interest earned on
the present value of the
lease payment and residual. Revenue is recognized periodically
over the lease term as a
constant percentage return on the net investment. There are no
costs and expenses
related to direct financing leases since leasing revenue is
recorded on a net basis.
Initial direct costs related to operating and direct financing
leases, including
acquisition fees are capitalized and amortized over the lease
term.
Deferred Revenue
Deferred revenue consists of equipment rent received in advance.
Income Taxes
Federal and state income tax regulations provide that the taxes
on income or loss of the
Partnership are reportable by the partners on their individual
income tax returns.
Accordingly, no provision for income taxes has been made.
The Partnership uses the accrual basis of reporting for Federal
income tax purposes and
uses accelerated depreciation methods allowed by the Internal
Revenue Code.
Income Per Limited Partnership Unit
Income per limited partnership unit represents the income
allocated to the Limited
Partners [99% of net income] divided by the weighted average
number of limited
partnership units outstanding during the year.
Purchase of Equipment from Affiliates
The majority of rental equipment is purchased from the General
Partner in conjunction
with the assignment of the existing lease to the Partnership.
The Partnership's
purchase price is equal to or less than the lesser of the General
Partner's purchase
price (less any rents received) plus an acquisition fee not to
exceed 4% of cost or the
estimated market value of the equipment at purchase date.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Partnership
considers all highly
liquid debt instruments purchased with a maturity of three months
or less to be cash
equivalents.
The Partnership maintains its cash in bank deposit accounts
which, at times, may exceed
federally insured limits. The Partnership maintains its accounts
with highly creditable
institutions and has not experienced any losses from these
accounts.
Notes to Financial Statements, Continued
Note 3 - Related Party Transactions
In accordance with the terms of the offering prospectus and the
Partnership Agreement,
the following costs were charged to the Partnership by the
General Partner:
Year Ended December 31
Basis 1994 1993
1992
Acquisition expenses $ 0 $ 0
$ 74,241
Equipment acquisition Not to exceed 0
0 180,578
fees 4% of cost
Management fees 6% of gross 146,670 201,453
127,986
rents
General and admin- 2% of gross 31,722 70,855
42,662
istrative services rents
Management fees related to the Xerox settlement, which is
included in other income, were
$51,504 and were contributed to capital by the General Partner
(See Note 10).
Accounts Payable-Affiliates include amounts due to FGI and other
Gemini Limited
Partnerships for lease rentals owed on their behalf.
During 1993 the Partnership paid commissions of $26,356 to an
affiliated entity for
lease renewals and remarketing.
Note 4 - Leases
At December 31, 1994, the remaining terms of leases purchased by
the Partnership range
from 1 to 15 months with negotiable renewal options. Future
minimum rentals expected to
be received on these leases are as follows:
Year Ending Operating Direct
Financing
December 31, Leases Leases
1995 $ 31,397 $ 291,800
1996 0 46,332
$ 31,397 $ 338,132
Notes to Financial Statements, Continued
Note 5 - Allowance for Doubtful Accounts
December 31,
1994 1993
1992
Allowance for doubtful accounts $ 299,116 $ 23,998
$ 73,153
at beginning of year
Provision for bad debts 2,541 278,403
0
Writeoffs (6,174) (454)
0
Recoveries of bad debts
previously provided for (22,610)
(2,831) (49,155)
Allowance for doubtful accounts
at end of year $ 272,873 $ 299,116
$ 23,998
Note 6 - Rental Equipment
Rental Equipment consists of the following:
December 31,
1994 1993
1992
Rental equipment at beginning $5,698,405 $
9,325,076 $12,678,333
of year
Equipment purchases 0 0
674,816
Financed leases off lease and 99,135
125,796 32,071
residual value of leased equipment
Translation gain 931 0 0
Less: Equipment sales (3,625,078)
(3,752,467) (4,060,144)
Rental equipment at end of year 2,173,393
5,698,405 9,325,076
Accumulated depreciation at
beginning of year $5,247,335 $
8,259,530 $11,283,286
Depreciation expense 247,291 624,972
901,979
Translation loss (301) 0 0
Less: Equipment sales (3,397,099)
(3,637,167) (3,925,735)
Accumulated depreciation at
end of year 2,097,226
5,247,335 8,259,530
Net rental equipment $ 76,167 $
451,070 $ 1,065,546
Notes to Financial Statements, Continued
Note 7 - Discounted Lease Rentals
Financing-discounted lease rentals -
The partnership has utilized its lease rentals receivable and
underlying equipment in
leasing transactions as collateral to borrow from financial
institutions at fixed rates
ranging from 7.5% to 10.10% on a nonrecourse basis. However, the
Partnership primarily
borrowed from one lending institution at a fixed rate of 10% on a
nonrecourse basis for
95 percent of the financing. In return for this collateralized
financing, the
Partnership received a discounted cash payment for the lease
stream less certain amounts
held back by the lender. Amounts withheld from the funding are 1)
a 5% loss pool hold
back of $54,978; 2) a hold back representing lessee security
deposits of $123,075. In
the event of default by the lessee, the financial institution has
a first lien on the
underlying leased equipment, with no further recourse against the
Partnership except for
the 5% hold back. Semi-annually the discounting is reviewed by
the financial
institution and the corresponding portion of the hold back is
paid to the Partnership;
as lessees make payments to the financial institutions, lease
revenue (i.e. interest
income on direct financing and rental revenue on operating
leases) and interest expense
is recorded. Discounted lease rentals are reduced by the
interest method. Future
minimum lease payments less the amount representing security
deposits and interest
expense on leases that have been discounted as of December 31,
1994, are as follows:
Year Ending
December 31,
1995 $ 277,489
1996 46,332
323,821
Less amount representing
security deposits (44,961)
Less amount representing
interest (19,576)
$ 259,284
Interest expense on discounted lease rentals was $74,990 for the
year ended December 31,
1994.
Note 8 - Distributions
In accordance with the Partnership Agreement, the Limited
Partners will receive 99% and
the General Partner will receive 1% of all distributions of cash
from operations until
Payout. Thereafter, the Limited Partners will receive 95% and
the General Partner 5%
until Payout (as defined in the Limited Partnership Agreement).
Following Payout, the
Limited Partners will receive 85% and the General Partner will
receive 15% of all
distributions including Cash From Sales or Refinancings.
Distributions of Cash From
Operations, if any, will be made in such amounts and at such
times as the General
Partner may determine, which determination shall take place not
less frequently than
once each fiscal quarter, taking into consideration the amount of
such cash and the
Partnership's reasonably anticipated needs as determined by the
General Partner. The
Limited Partners will receive distributions of Cash From Sales or
Refinancings until
Payout at the discretion of the General Partner. Distributions
of Cash From Sales or
Refinancings generated by the sale or other disposition of all or
substantially all of a
Partnership's Equipment resulting in the dissolution of the
Partnership will first be
distributed to the partners in amounts equal to the positive
balances in their tax
capital accounts, and any excess will be allocated as described
above. Any negative tax
capital account balances shall be contributed by the partners at
liquidation of the
partnership.
Notes to Financial Statements,
Continued
Note 9 - Net Investment in Direct Financing Leases:
The components of the net investment in direct financing leases:
December 31,
1994 1993
Minimum lease payments receivable, $ 338,132
$1,337,549
noncurrent
Minimum lease payments receivable, 268,106
212,222
current
Estimated residual values 3,876
103,285
Initial direct costs, net 4,012
28,811
Less: Allowance for bad debt (270,749)
(277,949)
Less unearned income (16,043)
(106,000)
$ 327,334 $1,297,918
Note 10 - Major Customers
Major customers providing 10% or more of the total rental income
were as follows:
1994 1993 1992
Psychological Corporation 10% 0 0
GE 0 11% 13%
AT&T 0 0 11%
GTE 0 0 0
Smithkline 0 0 10%
Ben Hogan 0 12% 0
Based upon the settlement with Xerox (see Item 3) the Partnership
received $620,485 in net settlement proceeds before legal fees.
This amount has been recorded as other income for the year ended
December 31, 1994.
Note 11 - Concentration of Business Activities
The General Partner typically has purchased for the Partnership
lease portfolios
containing equipment leases entered into with entities located
throughout the United
States. Substantially all of the Partnership's existing lease
portfolios are comprised
of leases of computer equipment which is subject to rapid
technological obsolescence.
In 1991, a portion of an equipment lease portfolio located in the
United Kingdom (U.K.)
was purchased by the Partnership, which contains computer
equipment being leased by U.K.
lessees. The majority of the lessees of the lease portfolio
acquired in August 1992,
are geographically located in California and Texas.
Note 12 - Legal Proceedings
GELP became involved in litigation, along with other
affiliated entities, with the Resolution Trust Corporation in
March 1994 concerning loan guarantees provided by Finalco Group,
Inc. prior to current management's involvement. This litigation
was settled during 1994 without impact on the Partnership.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial
Disclosures
There were no disagreements with accountants on
accounting and financial
disclosures.
PART III
Item 10. Directors and Executive Officers of the
Registrant
The Partnership has no directors or officers. All
management functions are performed
by Gemini Equities, Inc., in connection with GELP's acquisition
of the General Partner's
rights and duties from FGI. A more detailed description of the
activities and business
experience of the General Partner appears under the heading
"Management" which begins on
page 35 of Post Effective Amendment No. 1 to Form S-1,
Registration Statement no. 2-95458,
filed with the Commission on May 6, 1986 and is incorporated
herein by reference.
EXECUTIVE OFFICERS OF THE GENERAL PARTNER
OF THE REGISTRANT
All of the executive officers of the General Partner (for
purposes of this information
referred to below as "Company") as of March 31, 1995, are shown
below. Executive
officers of the Company as determined for the purposes of
Regulation S-K, include
executive officers of Finalco, Incorporated ("FI") a wholly-owned
subsidiary of FGI.
Officers on the Board serve at the discretion of the Board of
Directors.
Number
Number
of Years of
Years
in Present With
Name Position Age Position
Company
Harold L. Van Arnem Chairman of the Board, 54 7
7
Chief Executive Officer,
and Director
N. Philip McKnight President 44 7
10
Julia M. Decker Vice President of 38 4
4
Accounting, Controller and
Assistant Treasurer
Betty Allen Secretary 64 2
7
Mr. Van Arnem joined the Company in April 1988. Prior to that
time he was Chief Executive
Officer and sole owner of Van Arnem Financial Services, Inc., a
Michigan corporation, and
predecessor businesses for more than five years.
Mr. McKnight joined the Company on July 1, 1985. Prior to that
time he was Senior Vice
President-Technical Services of Dialcom, Inc. and Director of
Global Messaging at ITT
International Telecommunications.
Ms. Decker joined the Company in April 1991. Prior to that time
she was a Senior Manager
with Deloitte & Touche.
Ms. Allen joined the Company in April 1988. Prior to that she was
the Personal Executive
Assistant to Harold Van Arnem and Office Manager for Van Arnem
Financial Services.
Item 11. Executive Compensation
The Partnership has no directors or officers. Compensation
and reimbursement for
equipment purchases, costs and expenses to the General Partner
for the year ended December
31, 1994 were:
(a) Equipment acquisition fees are paid to the General
Partner for
locating Equipment and potential lessees and providing
other
services in connection with the acquisition and leasing
of
Equipment. Different amounts of acquisition fees were
paid on
various Equipment acquired by the Partnership. In
accordance with
the Partnership Agreement, the acquisition fee
cannot exceed 4%
of the purchase price of Equipment for any piece of
Equipment. $ 0
(b) Acquisition expenses are paid to the General Partner in
connection
with the selection and acquisition of any equipment
whether or not
acquired.
$ 0
(c) Management fees are paid to the General Partner for
services
performed in connection with daily management of the
Partnership's
Equipment, including ongoing marketing and re-leasing
of the
Equipment. This fee is limited to 6% of the gross
rental payments
of the leases, payable quarterly.
$ 146,670
(d) General and Administrative costs are reimbursed to the
General
Partner for actual costs which the General Partner has
determined
to be no less than 2% of the gross rentals, payable
quarterly. The
approximate breakdown of costs reimbursed is salaries
(55%),
benefits and other costs (45%).
$ 31,722
(e) Cash From Operations: The Limited Partners will
receive 99% and
the General Partner 2% of all distributions of Cash
From Operations
until the Limited Partners have received 100% of their
capital
contributions. Thereafter, the Limited Partners will
receive 95%
and the General Partner will receive 5% of all
distributions of
Cash From Operations until Payout. Following Payout,
the Limited
Partners will receive 85% and the General Partner will
receive 15%
of all distributions from Cash From Operations.
$ 0
(f) Cash From Sales or Refinancings: The Limited Partners
will receive
distributions of Cash From Sales or Refinancings until
Payout at
the discretion of the General Partner. Following
Payout, the
Limited Partners will receive 85% and the General
Partner will
receive 15% of all distributions of Cash From Sales or
Refinancings. However, distributions of Cash From
Sales or
Refinancings generated by the sale or other disposition
of all or
substantially all of a Partnership's Equipment
resulting in the
dissolution of the Partnership will first be
distributed to the
Partners in amounts equal to the positive balances in
their capital
accounts, and any excess will be allocated as described
above. $ 0
Item 11. Executive Compensation, Continued
(g) Purchase Price of Equipment: Most of the Equipment is
purchased
from the General Partner in conjunction with the
assignment of an
existing lease to the Partnership. The Partnership's
purchase
price is equal to or less than the lesser of the
General Partner's
purchase price (less any rents received) an acquisition
fee not to
exceed 4% of the purchase price of the Equipment or the
estimated
market value of the Equipment at purchase date.
$ 0
Item 12. Security Ownership of Certain Beneficial
Owners and Management
(a) No person of record owns, or is known by the
Partnership to own beneficially,
more than 5% of any class of voting securities of the
Partnership.
(b) The General Partner of the Partnership owns the equity
securities of the
Partnership set forth in the following table:
Percent
Title of Class Amount Beneficially Owned
of Class
General Partner Represents initially a 1% and
100%
potentially a 15% interest in
the Partnership's income,
gain and loss deductions,
with exceptions.*
* There was a $1,000 capital contribution made by the General
Partner. Additionally,
in the year ended December 31, 1994, the General Partner
contributed $51,504. The
General Partner shall be entitled to share 1% of all items
of income, gain and loss
deductions except Cash From Sales or Refinancings. After
all Limited Partners have
received 100% of their capital contribution, the General
Partner's percentage will
increase to 5%. After achieving Payout, the General
Partner's percentage will
increase to 15%. FGI owns no limited partnership units of
Gemini Equipment Partners
Income Fund IX. The Directors and Officers of FGI own no
limited partnership units
of the Partnership as of December 31, 1994. The registrant
is a limited partnership
and therefore does not have any voting shares of stock.
Item 13. Certain Relationships and Related Transactions
See Item 11.
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
(a) 1. Financial Statements - See accompanying index to
financial statements,
Item 8.
2. Financial Statement Schedules - Schedules
required by Article 12 of
Regulation SX have been omitted as not required,
not applicable, or the
information required to be shown therein is
included in the financial
statements and related notes.
3. Exhibits - See index to Exhibits on page 24.
(b) Reports filed on Form 8-K - None filed for the three
months ended December
31, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GEMINI EQUIPMENT PARTNERS
INCOME FUND IX
By: Finalco Group, Inc.
Its Sole General Partner
By: /S/ Harold Van Arnem
Harold Van Arnem
Chairman of the Board,
Chief Executive Officer,
and Director
Date: March 31, 1995
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
FINALCO GROUP, INC., the sole
General Partner of the Registrant
/S/ Harold Van Arnem
Harold Van Arnem Chairman of the Board,
Chief Executive Officer,
and Director
/S/ N. Philip McKnight
N. Philip McKnight President
/S/ Julia M. Decker
Julia M. Decker Vice President of
Accounting Controller,
and Assistant Treasurer
/S/ Betty Allen
Betty Allen Secretary
INDEX TO EXHIBITS
Table
Number Page
3.1 Limited Partnership Agreement
*
3.2 Certificate of Limited Partnership
**
3.3 Amendment to Certificate of Limited Partnership
**
10.1 General and Administrative Service Contract dated
***
June 14, 1985 between Finalco Equity Services,
Inc. and Finalco, Inc.
* Incorporated herein by reference to Exhibit A of Post
Effective Amendment No. 1 to
Form S-1, Registration Statement No. 02-95458 filed with the
Securities and Exchange
Commission on June 11, 1985.
** Incorporated herein by reference to Exhibit 3.2 and 3.3 on
Gemini Partners Income
Fund IX, 1987 10K, filed with the Securities and Exchange
Commission on March 30, 1988.
*** Incorporated herein by reference to Exhibit 10.1 of 1985
Form 10-K of Gemini
Equipment Partners Income Fund I, 1985 10K, filed with the
Securities and Exchange
Commission on April 15, 1986.
