UNITED STATES 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 fiscal year ended December 31, 1997
Commission File No. 2-97907
Columbia Lease Income Fund II-B L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3263135
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
One Financial Center, 21st Floor, Boston, MA 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 482-8000
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Securities registered pursuant to Section 12(b) of the Act None
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Securities registered pursuant
to Section 12(g) of the Act Units of Limited Partnership Interests
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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
--- ---
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1998: Not applicable, since securities are
non-voting.
Documents incorporated by reference: None.
Exhibit Index on Page: 35
Page 1 of 38
<PAGE>
Corporate organization as discussed in Part I, Item 1 Business is as follows:
TLP Holding LLC ("Holding") controls TLP Leasing Programs, Inc. ("TLP"), TLP
Management Services, Inc. ("TLPMS"), and TLP Securities, Inc. TLP controls TLP
Columbia Management Corp. ("TCMC") which serves as General Partner to the
Columbia Lease Income Funds. Torchmark Corporation ("Torchmark") controls
TMK/United, Inc. which controls Waddell and Reed Financial Services, Inc.
("Waddell and Reed").
Through various dealer-manager arrangements, TLP, TLPMS, and Waddell and Reed
serve as corporate general partners to the Wellesley Leasing Partnership
("Wellesley General Partner") and the Hanover Leasing Partnership. The Wellesley
General Partner is the general partner for the Wellesley Lease Income Limited
Partnerships. Hanover Leasing Partnership serves as the General Partner for
Hanover Lease Income Limited Partnership with BOT Financial Corporation serving
as agent.
<PAGE>
PART I
Item 1. BUSINESS
General Development of Business. Columbia Lease Income Fund II-B L.P. (the
"Partnership") is a limited partnership organized under the provisions of the
Delaware Revised Uniform Limited Partnership Act on April 11, 1985. At December
31, 1997, TLP Columbia Management Corporation ("TCMC"), a wholly-owned
subsidiary of its parent company, TLP Leasing Programs, Inc. ("TLP"), is the
sole General Partner of the Partnership. TLP is a wholly-owned subsidiary of TLP
Holding LLC.
By the Agreement Relating to the Admission of TCMC as an Additional General
Partner of Certain Limited Partnerships dated June 30, 1993 (the "Agreement"),
as referenced in Form 8-K filing dated June 30, 1993, the then current and now
former General Partner of the Registrant, Meridian-Columbia Management
Corporation ("Meridian-CMC"), agreed to admit TCMC as a co-General Partner (see
Management Agreement below).
Pursuant to the above Agreement and as referenced in Form 8-K filing dated
November 30, 1993, Meridian-CMC, co-General Partner withdrew, effective November
30, 1993, as co-General Partner pursuant to Article II Section 2.4(b) of the
Limited Partnership Agreement (see Withdrawal of Meridian-CMC below).
Meridian-CMC, a wholly-owned subsidiary of Meridian Leasing Corporation
("Meridian") was admitted as an additional General Partner of the Partnership on
November 2, 1989. TM-Columbia Management Corporation ("TMC"), a wholly-owned
subsidiary of Thomson McKinnon Inc. ("TMI") was a General Partner from April 11,
1985 until October 14, 1990 when TMC voluntarily withdrew from the Partnership.
The Partnership is engaged in the business of: (i) acquiring certain types and
kinds of primarily new, but also used, equipment consisting principally of IBM
peripheral devices for large and small data processing systems, fully configured
small processing systems, computer terminals and other information processing
devices ("Equipment"); and (ii) leasing Equipment primarily pursuant to a series
of short-term net operating leases, with an initial lease in effect or committed
to at the time of acquisition with a lessee which is a publicly or
privately-held company considered creditworthy by the General Partner, generally
a "Fortune 1000" company or subsidiary, bank, insurance company or utility
(lower credit criteria may be used for remarketed Equipment users).
The Partnership has acquired Equipment using funds from non-recourse borrowings.
Such borrowings may equal up to 65% of the aggregate purchase price of all
Equipment acquired, but generally will not exceed 50%. The Partnership is
intended to provide Limited Partners of the Partnership (the "Limited Partners")
with quarterly cash distributions from revenue derived from Equipment and leases
thereof.
The Partnership also intends to reinvest a portion of its cash from operations,
and a substantial portion of any available cash from sales or refinancings, in
additional Equipment during its first nine years of operations, provided that
distributions are made to Limited Partners in amounts sufficient to pay their
federal income tax liability (assuming each Limited Partner is in a 30% federal
income tax bracket) created by such operations, sales or refinancings.
Until such time as the General Partner determines that it would be advisable to
sell all or some of the Equipment, the Partnership will endeavor to keep the
Equipment on lease pursuant to a series of short-term net operating leases.
General Partner. The General Partner, among other things, (i) determines and
revises, as and when it deems necessary, a list of Equipment and equipment lease
characteristics, which make an item of Equipment suitable for acquisition by the
Partnership; (ii) makes all final decisions regarding, among other things, the
Partnership's acquisition, financing, refinancing, leasing, re-leasing or sale
of Equipment; (iii) independently verifies certain types of information
concerning selected Equipment and the leases therefore; and (iv) maintains books
and records concerning Equipment in addition to those maintained by Suppliers
(as defined below in Supplier Agreements). The General Partner advises and
supervises Suppliers generally with respect to: (a) locating, evaluating and
negotiating the acquisition of Equipment; (b) negotiating the terms of leases
for Equipment; (c) negotiating the terms of Partnership debt obligations; (d)
negotiating re-leases or sales of Equipment upon the expiration or earlier
termination of the leases thereof; (e) supervising the payment of, or collecting
of, rentals from Partnership lessees; (f) supervising, monitoring and auditing
the payment of all personal property, use and sales taxes applicable to
Equipment; (g) inspecting Equipment; (h) maintaining liaison with lessees, and
generally supervising lessees to assure that Equipment is being properly
operated and maintained; (i) supervising maintenance of Equipment; (j)
supervising and coordinating the acquisition of casualty, liability and other
types of insurance relating to Equipment; and (k) monitoring performance by
Partnership lessees of their obligations under their leases of Equipment.
The General Partner is entitled to receive acquisition fees for locating,
evaluating, selecting, negotiating and closing acquisitions of Equipment. The
acquisition fee generally equals 2.5% of the purchase price paid by the
Partnership for each item of Equipment acquired; provided, however, that the
total amount of all acquisition fees paid to the General Partner(s) over the
life of the Partnership shall not exceed 15% of the total capital contributions
received by such Partnership. In addition, the General Partner is entitled to
receive an equipment management fee for its active management of Equipment and a
subordinated resale fee for arranging the sale of Equipment. The equipment
management fee equals up to 6% of gross rental payments payable with respect to
Equipment for the quarter for which such payment is made, except for Equipment
subject to certain leases referred to in the Partnership agreement as "Full
Payout Leases", for which the equipment management fee shall not exceed 2% of
the gross rental payment. The resale fee equals the lesser of (i) 3% of the
sales proceeds or (ii) one-half of the competitive equipment sales commission.
In addition, the General Partner is entitled to receive reimbursement for the
administrative services necessary for the prudent operation of the Partnership.
Supplier Agreements. Certain of the General Partner's responsibilities are
performed by equipment leasing companies ("Suppliers") with experience in the
business of owning, leasing and managing equipment. Suppliers perform these
services pursuant to agreements with the General Partner ("Supplier
Agreements"), subject to the General Partner's supervision. Pursuant to the
admission of TCMC as a co-General Partner and the withdrawal of Meridian-CMC as
discussed above, TCMC has agreed to the existing supplier agreements as executed
by Meridian. Meridian has entered into Supplier Agreements with Meridian and
Meridian Sales and Leasing, Inc., ("MSL") (formerly Thomson McKinnon Sales and
Leasing Inc.). MSL was a wholly-owned subsidiary of TMI until June 22, 1988, at
which time it was acquired by Meridian. The General Partner may also enter into
agreements for the purchase of specific items of Equipment with other leasing
companies.
Pursuant to the Supplier Agreements, each Supplier is responsible, subject to
the supervision of the General Partner, for the performance of certain general
and day-to-day management services of the Partnership, including acquisition,
management and reporting services, which services generally are performed at the
Supplier's sole cost and expense, in a commercially reasonable manner and with
no less care than would be given to other equipment owned, leased or managed by
the Supplier or any of its affiliates.
Under the Supplier Agreements, compensation for locating, managing and reselling
equipment is paid to each Supplier in amounts deducted from the corresponding
compensation payable by the Partnership to the General Partner. Generally, a
Supplier's compensation for such services equals 80% of the acquisition fee, 50%
of the management fee and 50% of the resale fee. MSL's resale fees will be
subordinated to the same extent as resale fees earned by the General Partner.
A Supplier may also be entitled to receive incentive fees in the following
circumstances: (i) if it locates a possible transaction which meets the General
Partner's criteria for acceptable Partnership investments and the Equipment
subject to the possible transaction is purchased by the Partnership; and (ii) if
it benefits the Partnership by obtaining a lease for Equipment with a better
than market rental rate, a loan to acquire Equipment at a lower than market
interest rate, Equipment at a lower than market purchase price, favorable
payment terms from the vendor, or a combination of the foregoing.
Withdrawal of Meridian-CMC. During 1993, Meridian-CMC notified TCMC of its
desire to voluntarily withdraw as a co-General Partner of the Partnership. To
withdraw as a general partner, the Partnership agreement requires: (i) there is
remaining at least one other general partner who is willing to continue the
operations of the Partnership; (ii) the Partnership shall have received an
opinion of Counsel to the Partnership to the effect that such withdrawal will
not constitute a termination of the Partnership or otherwise materially
adversely affect the status of the Partnership for federal income tax purposes;
and (iii) the Limited Partners shall have received at least sixty days notice of
the general partner's intention to withdraw. As previously discussed, TCMC was
admitted as co-General Partner in June 30, 1993 and has been exercising
management control over the Partnership since that date and intends to continue
operating in that capacity. Meridian-CMC withdrew from the Partnership effective
on November 30, 1993. TMC, the former co-General Partner with Meridian-CMC,
voluntarily withdrew from the Partnership on October 14, 1990.
Management Agreement. Prior to the Agreement Relating to the Admission of TCMC
as an Additional General Partner of Certain Limited Partnerships dated June 30,
1993 (the "Agreement"), TCMC (the "New General Partner") agreed on April 1, 1993
to assume overall responsibility, subject to final approval and ultimate
authority of Meridian-CMC (the "Former General Partner"), for administration,
management and operation of the Partnership and the Other Columbia Lease Income
Funds ("CLIF") Partnerships (see Related Parties and Conflicts of Interest
below) except that TCMC has no responsibility for communicating with the Limited
Partners or making distributions to the Limited Partners or Meridian-CMC prior
to November 30, 1993.
As compensation for these services under the above Agreement, all fees and cash
distributions derived from the Partnership's operations to which the General
Partner is entitled and which accrues on and after April 1, 1993, including but
not limited to, Distributable Cash From Operations and Distributable Cash From
Sales or Refinancings (as those terms are defined in the Partnership Agreements)
shall be allocated to the New General Partner. All management fees for rents
received on or after April 1, 1993 that relate to the period on or before March
31, 1993 shall be allocated to the Former General Partner. The New General
Partner is to remit such fees to the Former General Partner as they are paid
after April 1, 1993. Prior to the New General Partner's admission, the Former
General Partner was entitled to receive 100% of the acquisition fees, management
fees and resale fees (net of amounts payable to Suppliers) until the agreed upon
threshold was reached; thereafter, all acquisition fees and 60% of management
fees and resale fees (net of amounts payable to Suppliers) were allocated based
upon a sharing agreement with TMC.
TCMC was formed on April 1, 1993 for the specific purpose of being admitted as
the new general partner, managing the Partnership and the Other CLIF
Partnerships (see Related Parties and Conflicts of Interest below) and
discharging the administrative duties of the Former General Partner. TLP Leasing
Programs, Inc., has extensive experience administering numerous publicly-held
Limited Partnerships owning leased equipment.
Related Parties and Conflicts of Interest. The General Partner serves or has
served as a general partner of Columbia Lease Income Fund I-A L.P. ("CLIF I-A"),
Columbia Lease Income Fund II-C L.P. ("CLIF II-C"), Columbia Lease Income Fund
II-D L.P. ("CLIF II-D"), and Columbia Lease Income Fund II-E L.P. ("CLIF II-E")
(the "Other CLIF Partnerships"), which have investment objectives similar to
that of the Partnership.
Certain affiliates of the General Partner, including TLP, are engaged in
business activities that are directly in competition with the Partnership, and
they are expected to continue to engage in additional business activities which
will be competitive with the Partnership. The General Partner, in good faith,
devotes time to the affairs of the Partnership as it deems necessary, in its
sole discretion, to fulfill its fiduciary obligation and other obligations under
the Partnership agreement.
Competition for opportunities to acquire, lease, re-lease and sell equipment
exists between and among the Partnership and the General Partner, one or more
Suppliers and their affiliates, the Other CLIF Partnerships and other
partnerships and entities formed by the General Partner, or its affiliates.
If the Partnership and any other partnership with which the General Partner is
affiliated are seeking to acquire the same equipment, conflicts of interest may
arise as to which entity should acquire that equipment. In such situations, the
General Partner will analyze the portfolio of equipment already purchased by,
and investment objectives of, each such entity, and will make its decision as to
which entity will purchase the equipment based upon such factors, among others,
as: (a) the amount and origin (that is, net proceeds, Cash From Operations or
Cash From Sales or Refinancings) of cash available in each such entity and the
length of time such funds have been available; (b) the liabilities of each such
entity; (c) the effect of such acquisition on the diversification of each such
entity's equipment portfolio by the type of equipment; (d) the estimated income
tax consequences to each such entity from such acquisition and each such
entity's needs for current and future income; (e) the cash distribution and
reinvestment objectives of each such entity; (f) the lessee and credit
diversification (geographically or by industry) of each such entity's equipment
portfolio; and (g) the policy of each entity relating to leverage.
In allocating equipment, the General Partner may conclude that it is in the best
interest of the Partnership to own equipment jointly with one or more of the
Other CLIF Partnerships. Such joint venture agreements have been negotiated in
the past and additional joint venture agreements may be negotiated in the
future.
Risks of Ownership and Operation of Equipment. The Partnership's ability to
attain its investment objectives is subject to various risks associated with
ownership and operation of the Equipment. In certain respects, the success of
the Partnership will depend upon the residual value of, the demand for, the
viability of the manufacturers of, and the ability of the Partnership to
remarket Equipment. Equipment leasing is subject to, among other things, the
risk of credit losses, technological and economic obsolescence, physical
deterioration and malfunction, and the risk of defaults by lessees and
purchasers of Equipment. Technological developments can adversely affect the
ability of the Partnership to obtain renewal or new leases for, or to sell,
Equipment. No combination of management ability, experience, knowledge, care or
scientific approach can avoid the inherent possibilities of loss.
Other risk factors include: (i) changes in technology, whereby the introduction
of an entirely new technology could lead to a radical reduction in, or the
complete elimination of, the value of certain Equipment and make Equipment
difficult, or impossible, to re-lease or to sell; (ii) the residual (i.e.,
continuing) values of Equipment which, in turn, will affect the return on the
Partnership's equity investments, and will depend on factors neither controlled
nor controllable by the Partnership, such as: the quality, condition, technology
and timing of the acquisition of Equipment; the cost of comparable new
equipment; the General Partner's ability to forecast technological changes which
may adversely affect the value of Equipment; and market factors; (iii) the
potential inability of the Partnership to keep all of the Equipment fully leased
at rentals which, together with any anticipated sale proceeds or salvage value,
will provide an acceptable rate of return on its equity investment in Equipment
resulting from: general economic conditions, including inflation and the
availability of financing; fluctuations in supply and demand for various types
of equipment resulting from, among other things, technological obsolescence;
faster than expected introduction of replacement technology; unanticipated
manufacturers' price reductions; changes in tax laws which may increase the
desirability of owning rather than leasing equipment; and increases in operating
expenses borne by the Partnership, if any, which cannot be transferred to
lessees or matched by commensurate increases in lease revenues; (iv) competition
from other lessors; competition from full payout leases, which generally are
written for a longer term and at a lower rental rate than the operating leases
to be offered by the Partnership; competition from equipment manufacturers and
their financing subsidiaries which have the capacity to offer users alternatives
to the purchase of nearly every type of equipment; and competition from numerous
other potential investors, including limited partnerships organized and managed
similarly to the Partnership, seeking to purchase equipment subject either to
operating leases or full payout leases, many of which have greater financial
resources and more experience than the Partnership and the General Partner and
some of which may be willing to purchase or lease Equipment at rates less
favorable to the lessor thereof due to different residual value assumptions,
required rates of return or other factors; (v) changes in marketing policies,
such that benefits derived from lease credit (i.e., applying lease payments as a
credit toward purchase of equipment) and volume discounts which permit the
Partnership to purchase Equipment at a cost lower than its fair market value
could be eliminated, thus making it more difficult for the Partnership to
successfully compete as a lessor of Equipment; and (vi) defaults by lessees
which may cause Equipment to be returned to the Partnership at a time when the
Partnership may be unable to arrange promptly for its re-lease or sale on terms
satisfactory to the General Partner or on any terms, thus resulting in the loss
of anticipated revenues and the inability of the Partnership to recover all or a
portion of its equity investment in the Equipment and to repay the non-recourse
debt, if any, secured by such Equipment and the rentals therefrom.
Two lessees, Coulter Leasing Corporation and ON Technology Corporation, lease
equipment in which the related rental payments exceed 10% of total rental
income. The related rental payments comprise 25.47% and 31.16%, respectively, of
the total rental income for the year ended December 31, 1997. Coulter Leasing
Corporation and ON Technology Corporation lease equipment comprising 29.51% and
35.21%, respectively, of the total equipment portfolio at December 31, 1997.
Foreign Operations and Segment Data. The Partnership has not engaged, and does
not intend to engage, in material operations in foreign countries, nor is a
material portion of the Partnership's revenue intended to be derived from
customers in foreign countries. Since the Partnership will engage only in
equipment leasing, no industry segment information is provided herein.
<PAGE>
Item 2. PROPERTIES
At December 31, 1997, the Partnership owned computer equipment with a
depreciated cost basis of $36,042, subject to existing leases. All purchases of
computer equipment are subject to a 2.5% acquisition fee paid to the General
Partner.
<PAGE>
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership is a
party or of which any of its equipment or leases is the subject.
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market Information. There is no established public market for the Limited
Partnership Units ("Units"), and it is not anticipated that any such market will
develop. Although under no obligation to do so, Prudential Securities, Inc. has
offered to attempt to match and sell Units with unsolicited requests to buy
Units, but may discontinue this service at any time. Limited Partners also have
a limited right to request the Partnership to repurchase Units for cash at a
discount from net asset value. To date, no such requests have been accepted by
the Partnership.
Holders. Except for the General Partner's interest, the only class of equity
held in the Partnership is Units of Limited Partnership interest. As of December
31, 1997, 1,063 Limited Partners owned the 20,217 issued and outstanding Units.
Dividends. Cash distributions are made to Limited Partners and to the General
Partner on a quarterly basis from available funds in accordance with the
Partnership agreement. Cash distributions to the General Partner are further
subject to the Management Agreement between TCMC and TLP. Cash distributions are
derived from (1) Distributable Cash From Operations and (2) Distributable Cash
From Sales or Refinancings. "Distributable Cash From Operations" means cash from
operations, as reduced by (i) amounts which the General Partner determines
(through the ninth anniversary of the Partnership's final closing date) shall be
reinvested in additional Equipment and which ultimately are so reinvested, (ii)
payments of all accrued but unpaid equipment management fees (to the extent that
payment thereof is required by the Partnership agreement to be deferred), and
(iii) after Payout, payments of all accrued but unpaid subordinated resale fees.
"Distributable Cash From Sales or Refinancings" means cash from sales or
refinancings, as reduced by (i) amounts which the General Partner determines
(through the ninth anniversary of the Partnership's final closing date) shall be
reinvested in additional Equipment and which ultimately are so reinvested, (ii)
payments of all accrued but unpaid equipment management fees, and (iii) after
Payout, payments of all accrued but unpaid subordinated resale fees.
Each distribution of Distributable Cash From Operations of the Partnership shall
be allocated 95% to the Limited Partners and 5% to the General Partner. Any
Distributable Cash From Sales or Refinancings from gains and losses shall be
allocated 99% to the Limited Partners and 1% to the General Partner until
"Payout" has occurred. "Payout" means the time when the aggregate amount of all
distributions to the Limited Partners of Distributable Cash From Operations and
of Distributable Cash From Sales or Refinancings equals the aggregate amount of
the Limited Partners' original invested capital plus a cumulative 8% annual
return (compounded daily) on their aggregate unreturned invested capital
(calculated from the beginning of the first full fiscal quarter following the
Partnership's closing date). Thereafter, 85% will be distributed to the Limited
Partners and 15% to the General Partner, subject to certain adjustments.
Including the distribution for the fourth quarter of 1997 made February 13,
1998, the cumulative distributions to date are $482.57 per Limited Partnership
Unit. This cumulative distribution per Limited Partnership Unit represents
35.04% of Payout. It is not anticipated that Payout will occur as of the
liquidation of this Partnership.
Distributable Cash From Operations, if any, and Distributable Cash From Sales or
Refinancings, if any, are distributed within 60 days after the completion of
each of the first three fiscal quarters of the Partnership's December 31 fiscal
year, and within 120 days after the completion of each fiscal year beginning
after the first full fiscal quarter following the Partnership's final closing
date.
<PAGE>
During the fiscal year ended December 31, 1997, the Partnership distributed
Distributable Cash From Operations aggregating $101,084 to the Limited Partners
as follows:
<TABLE>
<CAPTION>
Distribution Record Total Distribution
Date Date Distribution per $500 Unit
- --------------- --------- ------------ -------------
<S> <C> <C> <C>
May 15, 1997 March 31, 1997 $ 25,271 $ 1.25
August 15, 1997 June 30, 1997 25,271 1.25
November 14, 1997 September 30, 1997 25,271 1.25
February 13, 1998 December 31, 1997 25,271 1.25
-------------- ----------
Total $ 101,084 $ 5.00
============== ==========
</TABLE>
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding the
Partnership's operations and financial position at the dates and for the periods
shown. This information should be used in conjunction with the financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are included in Items 7.
and 8.
below.
<TABLE>
<CAPTION>
For the Years Ended December 31,
1997 1996 1995 1994 1993
-------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Operating Data
Rental income on
operating leases $ 292,493 $ 487,290 $ 491,203 $ 617,920 $ 909,565
Net income 154,134 63,372 24,869 146,158 253,920
Net income per Limited
Partnership Unit 7.24 2.98 1.17 6.87 11.93
Balance Sheet Data
Total assets $ 122,275 $ 369,422 $ 732,820 $ 798,717 $ 1,618,278
Long-term debt - 289,416 497,499 103,127 -
Net asset value 44,041 (3,689) 65,946 413,496 1,224,986
Net asset value per Limited
Partnership Unit 2.18 (0.18) 3.26 20.45 60.59
Distributions to partners 106,404 133,007 372,419 957,648 1,056,054
Distributions per Limited
Partnership Unit 5.00 6.25 17.50 45.00 50.00
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations.
The following discussion relates to Partnership's operations for the year ended
December 31, 1997, in comparison to the years ended December 31, 1996 and 1995.
The Partnership realized net income of $154,134, $63,372 and $24,869 for the
years ended December 31, 1997, 1996, and 1995, respectively. Rental income
decreased $194,797 and $3,913 in 1997 and 1996, respectively. The decrease in
rental income each year is primarily due to lower rental rates obtained on
equipment lease extensions and remarketings resulting after the initial lease
term expires. Other income is the result of a reduction of an overstated
liability recorded in a prior period. No earned income on direct financing
leases has been recognized during the current year due to the complete
allocation of the lease payments to the fair market value of the equipment over
the lease terms in 1995. Interest income decreased each year as a result of
lower short-term investment balances. The increase in net gain on sale of
equipment in the current year can be attributed to a larger number of equipment
sales carrying low net book values.
Total costs and expenses decreased $225,285 or 50% and $44,801 or 9% in 1997 and
1996, respectively, compared to prior periods. The decrease in costs and
expenses is primarily due to the decrease in depreciation expense. Depreciation
expense decreased each year due to a large portion of the equipment portfolio
becoming fully depreciated and an overall reduction in the equipment portfolio.
Interest expense decreased $15,117 from 1997 to 1996 due to the continued
paydown on long term debt. Management fees have decreased $3,787 and $3,294 for
the years ended December 31, 1997 and 1996, respectively, as a result of the
decline in rental income. General and administrative expenses increased 18% and
8% in 1997 and 1996, respectively. A major factor contributing to this increase
is that the reimbursable salaries and expenses of the partnership accounting and
reporting personnel of the General Partner are being allocated over a
diminishing number of partnerships under management. The reversal of provision
for doubtful accounts in the current year is due to successful collection
efforts on delinquent accounts, versus the prior year in which the provision for
doubtful accounts of $24,309 is due to an increase in potential uncollectible
rents receivable.
The Partnership recorded net income per Limited Partnership Unit of $7.24, $2.98
and $1.17 for the years ended December 31, 1997, 1996 and 1995, respectively.
Net income for financial reporting purposes is allocated 95% to the Limited
Partners and 5% to the General Partner.
<PAGE>
Liquidity and Capital Resources.
For the year ended December 31, 1997, rental revenue generated from operating
leases and sales proceeds generated from equipment sales were the primary
sources of funds for the Partnership. As equipment leases terminate, the General
Partner determines if the equipment will be extended to the same lessee,
remarketed to another lessee, or sold. This decision is made upon analyzing
which option generates the most favorable result.
Rental income on operating leases will continue to decrease due to two factors.
The first factor is the rate obtained when the original leases expire and are
remarketed at a lower rate. Typically, the remarketed rates are lower due to the
decrease in useful life of the equipment. Secondly, the increasing change of
technology in the computer industry usually decreases the demand for older
equipment, thus increasing the possibility of obsolescence. Both of these
factors together will cause remarketed rates to be lower than original rates.
This decrease however, should not affect the Partnership's ability to meet its
future cash requirements, including long-term debt obligations. To the extent
that future cash flows should be insufficient to meet the Partnership's
operating expenses and liabilities, additional funds could be obtained through
the sale of equipment, or a reduction in the rate of cash distributions. Future
rental revenues on operating leases amount to $121,021 and are to be received
over the next four years (see note 5 to the financial statements).
For the year ended December 31, 1997, the Partnership's investing activities for
the year resulted in equipment sales with a net depreciated cost basis of
$156,354, generating $237,142 in sales proceeds. Included in net depreciated
cost basis is a $12,896 loss which was charged against the reserve, initially
set up in a prior period to account for estimated losses on the ultimate
disposition of equipment.
The Partnership's financing activities resulted in proceeds from borrowings on
long-term debt of $35,119. The Partnership activities also included a paydown on
long-term debt during 1997 of $324,535.
During the fourth quarter of 1997, the General Partner announced its intentions
of winding down the operations of the Partnership. It is anticipated that
substantially all of the assets will be liquidated and the proceeds will be used
to settle all outstanding liabilities and make a final distribution to the
Partners in early 1998.
Cash distributions paid in the first quarter of 1998 are currently at an annual
level of 1% per Limited Partnership Unit, or $5.00 per Limited Partnership Unit.
For the year ended December 31, 1997, the Partnership distributed or declared a
total of $5.00 per Limited Partnership Unit of which $5.00 per Unit represents
income and $0 per Unit represents a return of capital. For the quarter ended
December 31, 1997, the Partnership declared a cash distribution of $26,601, of
which $1,330 was allocated to the General Partner and $25,271 was allocated to
the Limited Partners. The distribution is payable on February 13, 1998. The
Partnership expects to continue paying distributions at or near this level. The
effects of inflation have not been significant to the Partnership and are not
expected to have a material impact in future periods.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
To the Partners of Columbia Lease Income Fund II-B L.P.:
We have audited the accompanying balance sheets of Columbia Lease Income Fund
II-B L.P. (a Delaware Limited Partnership) as of December 31, 1997 and 1996, and
the related statements of operations, partners' equity (deficit) and cash flows
for each of the years in the three-year period ended December 31, 1997. In
connection with our audits of the financial statements, we have also audited the
accompanying financial statement schedule II for each of the years in the
three-year period ended December 31, 1997. These financial statements and this
financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and this financial statement schedule 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 Columbia Lease Income Fund II-B
L.P. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in note 1, in 1997 the General Partner announced its intentions of
winding down the operations of the Partnership. It is anticipated that
substantially all of the assets will be liquidated and the proceeds will be used
to settle all outstanding liabilities and make a final distribution to the
Partners in early 1998.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 20, 1998
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Balance Sheets
December 31, 1997 and 1996
Assets
1997 1996
--------------- ---------------
<S> <C> <C>
Investment property, at cost (notes 3 and 5):
Computer equipment $ 698,031 $ 1,338,357
Less accumulated depreciation 661,989 1,023,626
--------------- ---------------
Investment property, net 36,042 314,731
Cash and cash equivalents 29,533 23,330
Rents receivable, net (notes 2 and 5) 29,951 28,066
Sales receivable, net (note 2) - 139
Accounts receivable - affiliates (note 4) 4,131 3,156
Other assets 22,618 -
--------------- ---------------
Total assets $ 122,275 $ 369,422
=============== ===============
Liabilities and Partners' Equity (Deficit)
Liabilities:
Current portion of long-term debt $ - $ 177,540
Accounts payable and accrued expenses - affiliates (note 4) 24,819 39,014
Accounts payable and accrued expenses 26,814 16,750
Distributions payable (note 6) 26,601 27,931
Long-term debt, less current portion - 111,876
--------------- ---------------
Total liabilities 78,234 373,111
--------------- ---------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 68,845 61,138
Cumulative cash distributions (412,892) (407,572)
Reallocation of capital accounts (note 8) 343,047 345,434
--------------- ---------------
- -
--------------- ---------------
Limited Partners (20,217 units):
Capital contribution, net of
offering costs 8,844,937 8,844,937
Cumulative net income 1,308,061 1,161,634
Cumulative cash distributions (9,765,910) (9,664,826)
Reallocation of capital accounts (note 8) (343,047) (345,434)
--------------- ---------------
44,041 (3,689)
--------------- ---------------
Total partners' equity (deficit) 44,041 (3,689)
--------------- ---------------
Total liabilities and partners' equity (deficit) $ 122,275 $ 369,422
=============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Statements of Operations
Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenue:
Rental income on operating leases $ 292,493 $ 487,290 $ 491,203
Other income 1,258 13,611 -
Earned income on sales-type and direct
financing leases - - 463
Interest income 2,338 4,505 6,063
Net gain on sale of equipment 80,518 5,724 19,699
--------------- --------------- ---------------
Total revenue 376,607 511,130 517,428
--------------- --------------- ---------------
Costs and expenses:
Depreciation 122,065 291,644 375,103
Interest 17,031 32,148 18,464
Related party expenses (note 4):
Management fees 22,897 26,684 29,978
General and administrative 85,821 72,973 67,395
(Reversal of) provision for doubtful accounts (25,341) 24,309 1,619
--------------- --------------- ---------------
Total costs and expenses 222,473 447,758 492,559
--------------- --------------- ---------------
Net income $ 154,134 $ 63,372 $ 24,869
=============== =============== ===============
Net income per Limited
Partnership Unit $ 7.24 $ 2.98 $ 1.17
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Statements of Partners' Equity (Deficit)
Years Ended December 31, 1997, 1996 and 1995
General Partner Limited Partners Total
Amount Units Amount Amount
------------- --------- ---------------- ----------------
<S> <C> <C> <C> <C>
Equity at
December 31, 1994 $ - 20,217 $ 413,496 $ 413,496
Distributions (note 6) (18,621) - (353,798) (372,419)
Net income (note 7) 1,243 - 23,626 24,869
Reallocation of capital accounts (note 8) 17,378 - (17,378) -
------------- --------- ---------------- ----------------
Equity at
December 31, 1995 - 20,217 65,946 65,946
Distributions (note 6) (6,651) - (126,356) (133,007)
Net income (note 7) 3,169 - 60,203 63,372
Reallocation of capital accounts (note 8) 3,482 - (3,482) -
------------- --------- ---------------- ----------------
(Deficit) equity at
December 31, 1996 - 20,217 (3,689) (3,689)
Distributions (note 6) (5,320) - (101,084) (106,404)
Net income (note 7) 7,707 - 146,427 154,134
Reallocation of capital accounts (note 8) (2,387) - 2,387 -
------------- --------- ---------------- ----------------
Equity at December 31, 1997 $ - 20,217 $ 44,041 $ 44,041
============= ========= ================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 154,134 $ 63,372 $ 24,869
------------- ------------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 122,065 291,644 375,103
(Reversal of) provision for doubtful accounts (25,341) 24,309 1,619
Net gain on sale of equipment (80,518) (5,724) (19,699)
Net decrease (increase) in current assets 2 (40,373) 16,790
Net decrease in current liabilities (4,131) (33,806) (19,615)
------------- ------------- -------------
Total adjustments 12,077 236,050 354,198
------------- ------------- -------------
Net cash provided by operating activities 166,211 299,422 379,067
------------- ------------- -------------
Cash flows from investing activities:
Purchase of investment property - (410) (489,645)
Proceeds from sales of investment property 237,142 7,002 47,200
------------- ------------- -------------
Net cash provided by (used in) investing activities 237,142 6,592 (442,445)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from borrowings on notes payable - affiliates - - 364,677
Principal payments on notes payable - affiliates - - (364,677)
Proceeds from borrowings on long-term debt 35,119 - 461,719
Principal payments on long-term debt (324,535) (208,083) (67,347)
Cash distributions to partners (107,734) (184,881) (465,523)
------------- ------------- -------------
Net cash used in financing activities (397,150) (392,964) (71,151)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 6,203 (86,950) (134,529)
Cash and cash equivalents at beginning of year 23,330 110,280 244,809
------------- ------------- -------------
Cash and cash equivalents at end of year $ 29,533 $ 23,330 $ 110,280
============= ============= =============
Supplemental cash flow information:
Interest paid during the year $ 17,031 $ 32,148 $ 15,848
============= ============= =============
Non-cash investing activities:
Reclassification of expired direct financing
lease to operating lease $ - $ - $ 4,318
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Notes to Financial Statements
December 31, 1997, 1996 and 1995
(1) Organization
Columbia Lease Income Fund II-B L.P. (the "Partnership") was formed under the
Delaware Revised Uniform Limited Partnership Act on April 11, 1985. The purpose
of the Partnership is to acquire certain types and kinds of new and used
equipment which are leased to third parties. The Partnership has the right to
borrow up to 65% of the aggregate purchase price of all equipment acquired by
it, but anticipates borrowing no more than 50%. The Partnership agreement
provides for the Partnership to continue until December 31, 2011, although the
General Partner may cause the Partnership to dispose of all of the equipment and
to liquidate at any time after the Partnership's tenth year of operations.
At December 31, 1997, TLP-Columbia Management Corporation ("TCMC"), a
wholly-owned subsidiary of TLP Leasing Programs, Inc. ("TLP"), is the sole
General Partner of the Partnership. TCMC was admitted as a co-General Partner of
the Partnership on June 30, 1993 and has exercised control over the Partnership
since that date. Pursuant to TCMC's admission, Meridian-Columbia Management
Corporation ("Meridian-CMC") voluntarily withdrew as co-General Partner of the
Partnership, effective November 30, 1993. TM-Columbia Management Corporation
("TMC"), a wholly-owned subsidiary of Thomson McKinnon Inc. ("TMI"), was a
General Partner from April 11, 1985 until October 14, 1990 when TMC voluntarily
withdrew from the Partnership. Meridian-CMC was admitted as a General Partner of
the Partnership on November 2, 1989.
The General Partner has contributed $1,000 to the Partnership. The subscription
period for the Partnership commenced on April 11, 1986 and terminated on August
10, 1986. Admissions of Limited Partners occurred as follows:
<TABLE>
<CAPTION>
Units of Limited
Partnership Interest Total Capital
Date of Admission ("Units") Contribution
<S> <C> <C>
July 8, 1986 12,754 $ 6,377,000
August 15, 1986 7,463 3,731,500
---------- ---------------
Total 20,217 $ 10,108,500
========== ===============
</TABLE>
During the fourth quarter of 1997, the General Partner announced its intentions
of winding down the operations of the Partnership. It is anticipated that
substantially all of the assets will be liquidated and the proceeds will be used
to settle all outstanding liabilities and make a final distribution to the
Partners in early 1998.
<PAGE>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Notes to Financial Statements
(2) Significant Accounting Policies
General
The Partnership's records are maintained on the accrual basis of accounting so
that revenues are recognized as earned and expenses are recognized as incurred.
Assets and liabilities are those of the Partnership and do not include any
assets and liabilities of the individual partners. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Partnership considers cash and short-term investments with original
maturities of three months or less to be cash and cash equivalents.
Allowance for Doubtful Accounts
The financial statements include an allowance for estimated losses on receivable
balances. The allowance for doubtful accounts is based on past write off
experience and an evaluation of potential uncollectible accounts within the
current receivable balances. Receivable balances which are determined to be
uncollectible are charged against the allowance and subsequent recoveries, if
any, are credited to the allowance. At December 31, 1997 and 1996, the allowance
for doubtful accounts included in rents receivable was $2,400 and $27,741,
respectively, and $250 in sales receivable, respectively.
Income Taxes
No provision for federal income taxes has been made as the liability for such
taxes is that of the Partners rather than that of the Partnership. Taxable
income, as reported on Schedule K-1, Form 1065 "Partner's Share of Income,
Credits, Deductions, etc.", was $109,607, $76,386 and $18,814 in 1997, 1996 and
1995, respectively (see note 9).
<PAGE>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Notes to Financial Statements
Equipment on Operating Leases
The Partnership has determined that its equipment leases are properly classified
as either operating leases or sales-type leases. Under the operating method of
accounting for leases, the leased equipment is recorded as an asset at cost
including acquisition fees and other expenses related to the purchase of
equipment. Equipment placed in service prior to January 1, 1990 is depreciated
on a straight-line basis over five years to its estimated salvage value.
Equipment placed in service after January 1, 1990 and prior to July 1, 1993 is
depreciated on a straight-line basis over the term of the lease to an estimated
residual value at the end of the lease. Equipment placed in service on or after
July 1, 1993 is depreciated using an accelerated method over an economic life of
five years. The Partnership's policy is to periodically review the estimated
fair market value of its equipment to assess the recoverability of its
undepreciated cost. In accordance with this policy, the Partnership records a
charge to depreciation expense in instances when the net book value of equipment
exceeds its net realizable value. Rental income is determined on the basis of
rental payments due under the terms of the lease.
Net Investment in Sales-Type and Direct Financing Leases
Under the sales-type method of accounting for leases, the present value of
future rentals is recorded as revenue at the inception of the lease. Equipment
cost, including acquisition fees and other expenses related to the purchase of
the equipment, less the present value of the residual is recorded as an expense.
The present value of future rentals and of the residual are recorded as the net
investment in sales-type leases ("net investment"). Earned income is recognized
monthly as a constant percentage return of the net investment.
(3) Investment Property
At December 31, 1997, the Partnership owned computer equipment with a
depreciated cost basis of $36,042, subject to existing leases. All purchases of
computer equipment are subject to a 2.5% acquisition fee paid to the General
Partner.
(4) Conflicts of Interest and Related Party Transactions
Compensation to General Partner
The General Partner has ultimate responsibility for the management of the
Partnership's business. Such management includes the acquisition, lease,
re-lease and sale of Partnership equipment, the responsibility to arrange for
non-recourse debt financing for Partnership equipment, and the performance of
general administration and accounting activities.
<PAGE>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Notes to Financial Statements
The General Partner is entitled to receive (1) acquisition fees of 2.5% of the
purchase price paid by the Partnership for each item of equipment acquired; (2)
equipment management fees of up to 6% of gross rental payments received with
respect to the Partnership's equipment, except for equipment subject to certain
leases referred to in the Partnership agreement as "Full Payout Leases", for
which the equipment management fee shall not exceed 2% of the gross rental
payments; and (3) subordinated resale fees not to exceed 3% of the proceeds
derived from the sale of Partnership equipment. The General Partner and its
affiliates may also receive reimbursement for the administrative services
necessary for the prudent operation of the Partnership subject to certain
limitations.
Fees, commissions and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the years ended
December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Equipment acquisition fees $ - $ - $ 11,943
Management fees 22,897 26,684 29,978
Reimbursable expenses paid 73,774 70,893 65,778
------------ -------------- -------------
$ 96,671 $ 97,577 $ 107,699
============ ============== =============
</TABLE>
The management agreement signed in 1993 between Meridian-CMC and TCMC and the
Agreement Relating to the Admission of TCMC as an Additional General Partner of
Certain Limited Partnerships dated June 30, 1993 resulted in definitive sharing
arrangements between Meridian-CMC and TCMC related to acquisition fees,
equipment management fees, resale fees and general partner distributions. These
sharing agreements remain unaffected by Meridian-CMC's withdrawal as a General
Partner of the Partnership.
Under the terms of the Partnership Agreement, the General Partner is entitled to
an equipment acquisition fee of 2.5% of the purchase price paid by the
Partnership for the equipment. The General Partner is also entitled to a
management fee equal to 6% of the monthly rental billings collected, paid
quarterly. In addition, the Partnership reimburses the General Partner and its
affiliates for certain expenses incurred by them in connection with the
operation of the Partnership.
Compensation to Suppliers
The General Partner has contracted with several independent leasing companies
(collectively, the "Suppliers") which perform most of the marketing and
financing activities. Agreements with Suppliers provide for compensation to each
Supplier in amounts which are deducted from the above corresponding compensation
payable by the Partnership to the General Partner.
<PAGE>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Notes to Financial Statements
Conflicts of Interest
The General Partner, the Suppliers and their affiliates are engaged directly and
indirectly in the business of acquiring, leasing, re-leasing and selling
equipment and have formed or sponsored or are acting as the general partner of,
and in the future may form or sponsor or act as the general partner of, other
investment entities which may have the same or similar investment objectives.
(5) Equipment on Operating Leases
Equipment on operating leases is comprised primarily of computer peripheral
devices, small data processing systems/attachments and computer terminals
purchased from Suppliers.
Future minimum lease payments to be received as of December 31, 1997 under
existing noncancelable operating leases are as follows:
1998 $ 105,819
1999 6,942
2000 5,267
2001 2,993
------------
$ 121,021
============
Two lessees, Coulter Leasing Corporation and ON Technology Corporation, lease
equipment in which the related rental payments exceed 10% of total rental
income. The related rental payments comprise 25.47% and 31.16%, respectively, of
the total rental income for the year ended December 31, 1997. Coulter Leasing
Corporation and ON Technology Corporation lease equipment comprising 29.51% and
35.21%, respectively, of the total equipment portfolio at December 31, 1997.
(6) Distributions to Partners
For the years ended December 31, 1997, 1996 and 1995, declarations of
Distributable Cash were as follows:
<TABLE>
<CAPTION>
Limited Partners
Distribution General
Year Ended Per $500 Unit Total Partner
----------------------- ------------- ----- -------
<S> <C> <C> <C>
December 31, 1997 $ 5.00 $ 101,084 $ 5,320
December 31, 1996 $ 6.25 $ 126,356 $ 6,651
December 31, 1995 $ 17.50 $ 353,798 $ 18,621
</TABLE>
<PAGE>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Notes to Financial Statements
Each distribution of Distributable Cash From Operations of the Partnership shall
be allocated 95% to the Limited Partners and 5% to the General Partner. Any
Distributable Cash From Sales or Refinancings from gains and losses shall be
allocated 99% to the Limited Partners and 1% to the General Partner until
"Payout" has occurred. "Payout" means the time when the aggregate amount of all
distributions to the Limited Partners of Distributable Cash From Operations and
of Distributable Cash From Sales or Refinancings equals the aggregate amount of
the Limited Partners' original invested capital plus a cumulative 8% annual
return (compounded daily) on their aggregate unreturned invested capital
(calculated from the beginning of the first full fiscal quarter following the
Partnership's closing date). Thereafter, 85% will be distributed to the Limited
Partners and 15% to the General Partner, subject to certain adjustments.
Including the distribution for the fourth quarter of 1997 made February 13,
1998, the cumulative distributions to date are $482.57 per Limited Partnership
Unit. This cumulative distribution per Limited Partnership Unit represents
35.04% of Payout. It is not anticipated that Payout will occur as of the
liquidation of this Partnership. Distributions to partners in excess of net
income represent a return of capital. See note 8 regarding General Partner
distributions which have been returned to the Partnership during the current and
prior years.
(7) Net Income or Loss per Unit
Net income for financial reporting purposes is allocated to partners in the same
proportions as Distributable Cash From Operations is distributed to partners.
Net loss for financial reporting purposes is allocated to partners in the same
proportions as Distributable Cash From Sales or Refinancings to partners. Net
income or loss per Unit is calculated based on the Limited Partners' share of
net income or loss and the number of Limited Partnership Units outstanding.
(8) Reallocation of Capital Accounts
Under the terms of the Partnership agreement, the amount of deficit capital
account that any general partner can be required to fund upon termination of the
Partnership is limited to a percentage of the capital contributed by the limited
partners (the "Maximum Deficit"). Consequently, the General Partner's equity has
been adjusted to reflect this limitation, with a corresponding adjustment to the
Limited Partners' equity. TMC and Meridian-CMC agreed that once they
collectively received $500,000 of General Partner distributions from the
Partnership and the Other CLIF Partnerships subsequent to October 24, 1989, they
would return their distributions to the Partnership until the Maximum Deficit
had been eliminated. TMC and Meridian-CMC received a total of $500,000 via the
May 15, 1991 distribution.
To the extent that the General Partner's distributions less its allocation of
net income or loss has exceeded or does in the future exceed the Maximum
Deficit, a memo account will be created for this excess. If, in the future, net
income allocated to the General Partner exceeds distributions, this excess will
be credited to the Limited Partners until the memo account has been reduced to
zero.
<PAGE>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Notes to Financial Statements
(9) Reconciliation of Financial Statement Net Income to Taxable Income
to Partners
A reconciliation of financial statement net income to taxable income to partners
is as follows for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income per financial statements $ 154,134 $ 63,372 $ 24,869
Rental income for financial statement purposes
less than (in excess of) rental income for tax purposes 1,349 (5,543) 1,322
Income on sales-type and direct financing leases
for financial statement purposes less than income
for tax purposes - - 8,147
Provision for doubtful accounts expense for financial
statement purposes (less than) in excess of provision
for doubtful accounts expense for tax purposes (25,341) 24,309 1,619
Depreciation expense for financial statement purposes
in excess of depreciation expense for tax purposes 10,508 4,635 2,484
Net gain on sale of equipment for financial statement
purposes in excess of net gain on sale of
equipment for tax purposes (31,043) (12,012) (18,002)
Prepaid expense for financial statement purposes in
excess of (less than) prepaid expense for tax purposes - 1,625 (1,625)
-------------- ------------- -------------
Taxable income to partners $ 109,607 $ 76,386 $ 18,814
============== ============= =============
</TABLE>
Losses for federal tax purposes are allocated 99% to the Limited Partners and 1%
to the General Partner. Profits for tax purposes are allocated in the same
manner as losses if the Partnership has cumulative taxable losses from inception
and are allocated 95% to the Limited Partners and 5% to the General Partner if
the Partnership has cumulative taxable profits.
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA LEASE INCOME FUND II-B L.P.
(A Delaware Limited Partnership)
Schedule II - Valuation and Qualifying Accounts and Reserves
Additions charged
Balance at to (recoveries Balance
beginning credited from) at end
Classification of year costs and expenses Charge-offs of year
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Year ended
December 31, 1995 $ 2,063 $ 1,619 $ - $ 3,682
================ ================ ================ =================
Year ended
December 31, 1996 $ 3,682 $ 24,309 $ - $ 27,991
================ ================ ================ =================
Year ended
December 31, 1997 $ 27,991 $ (25,341) $ - $ 2,650
================ ================ ================ =================
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Statement Disclosures.
None.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1. of this
report, the General Partner of the Partnership is TCMC. Under the Partnership
Agreement, the General Partner is solely responsible for the operation of the
Partnership's properties, and the Limited Partners have no right to participate
in the control of such operations. The names and ages of the Directors and
Executive Officers of the General Partner are as follows:
TLP Columbia Management Corporation
<TABLE>
<CAPTION>
Name Title Age
<S> <C> <C>
Nicholas C. Bogard Director 52
Arthur P. Beecher Director, President, and Clerk 60
Nancy E. Malone Vice President, Lease Financing 39
Irene V. King Vice President, Satellite Operations 50
Joseph P. Colonna Vice President, Marketing 39
</TABLE>
(c) Identification of certain significant persons
See Item 10. (a-b)
(d) Family relationship
No family relationship exists between any of the foregoing Directors or
Officers.
(e) Business experience
Nicholas C. Bogard is Director of TCMC and TLP. Mr. Bogard served as President
and Director of TLP from 1982 - 1992, and served as Director of CS First Boston
from 1992 - 1994. He has been working as an independent consultant since 1994.
Mr. Bogard holds a B.A. from Princeton University and an M.B.A. from Harvard
University.
Arthur P. Beecher is President, Director and Clerk of TCMC and TLP. Prior to
joining TLP, he was an officer of CSA Financial Corp. of Boston, Massachusetts,
most recently as Vice President, Finance and Administration since 1975. Mr.
Beecher holds a B.S. from Boston University and is a Certified Public
Accountant.
Nancy E. Malone is Vice President, Lease Financing of TCMC and TLP. Prior to
joining TLP, she was Manager, Lease Financing for 11 years at CSA Financial
Corp. of Boston, Massachusetts. Ms. Malone holds a B.A. from The College of the
Holy Cross.
<PAGE>
Irene V. King is Vice President, Satellite Operations for TCMC and TLP. Prior to
joining TLP in April 1994, she was Director of Public Income Funds at CSA
Financial Corp. of Boston, Massachusetts and was previously Vice President of
Finance at First Alliance Corp. of Wellesley, Massachusetts. Ms. King holds a
B.A. from Barat College of the Sacred Heart, Lake Forest, Illinois.
Joseph P. Colonna is Vice President, Marketing of TCMC and TLP. Prior to joining
TLP, he was Associate Counsel at CSA Financial Corp. of Boston, Massachusetts in
charge of Domestic and International Leasing Transactions. He received his B.A.
from Rutgers University, J.D. from Suffolk University Law School and M.S.L. from
Vermont Law School.
(f) Involvement in certain legal proceedings
The Partnership is not aware of any legal proceedings against any Director or
Executive Officer of the General Partner which may be important for the
evaluation of any such person's ability and integrity.
<PAGE>
Item 11. Management Remuneration and Transactions.
(a), (b), (c), (d), and (e): The Officers and Directors of the General Partner
receive no current or proposed direct remuneration in such capacities, pursuant
to any standard arrangements or otherwise, from the Partnership. In addition,
the Partnership has not paid and does not propose to pay any options, warrants
or rights to the Officers and Directors of the General Partner. There exists no
remuneration plan or arrangement with any Officer or Director of the General
Partner resulting from the resignation, retirement or any other termination. See
note 4 to the financial statements included in Item 8. of this report for a
description of the remuneration paid by the Partnership to the General Partner
and its affiliates during 1997, 1996 and 1995.
<PAGE>
Item 12. Security Ownership of Certain Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has no
outstanding securities possessing traditional voting rights. However, as
provided for in Section 13.2 of the Amended Agreement of Limited Partnership
(subject to Section 13.3), a majority interest of the Limited Partners have
voting rights with respect to:
1. Amendment of the Limited Partnership Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of substantially all the assets
of the Partnership.
No person or group is known by the General Partner to own beneficially more than
5% of the Partnership's 20,217 outstanding Limited Partnership Units as of
December 31, 1997.
By virtue of its organization as a limited partnership, the Partnership has no
Officers or Directors. See also note 1 to the financial statements included in
Item 8. and Item 10. of this report.
<PAGE>
Item 13. Certain Relationships and Related Transactions.
See Items 1., 8. note (4), 10. and 12. above for information concerning
transactions with TCMC and Meridian-CMC and their affiliates.
<PAGE>
<TABLE>
<CAPTION>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K: None.
Page No.
<S> <C> <C>
(a) 1. Financial Statements
Independent Auditors' Report - KPMG Peat Marwick LLP 16
Balance Sheets at December 31, 1997 and 1996 17
Statements of Operations
Years Ended December 31, 1997, 1996 and 1995 18
Statements of Partners' Equity (Deficit)
Years Ended December 31, 1997, 1996 and 1995 19
Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995 20
Notes to Financial Statements 21 - 27
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves 28
All other financial statement schedules are omitted because they are
not applicable, the data is not significant, or the required
information is shown elsewhere in this report.
3.A. Exhibit Index
N/A
Exhibit Description Page
4.1 Copy of First Restated Agreement of Limited -
Partnership dated July 8, 1986. (1)
4.2 Copy of Amendment No. 1 to First Restated Agreement -
of Limited Partnership dated August 15, 1986. (2)
4.3 Copy of Amended and Restated Certificate -
of Limited Partnership filed with the Delaware Secretary
of State on October 25, 1985. (3)
4.4 Amendment to First Restated Agreement of Limited -
Partnership.(6)
10.1 Copy of Supplier Agreement dated July 19, 1984 -
between TMSI and Meridian Leasing Corporation
amendment thereto dated September 5, 1985, and
assignment thereof from TMSI to the General Partner
dated December 4, 1985. (3)
10.2 Copy of Supplier Agreement dated August 8, 1984 -
between TMSI and Capital Rental Corporation
(guaranteed by Capital Associates International, Inc.),
amendment thereto dated November 1, 1985, and
assignment thereof from TMSI to the General Partner
dated December 9, 1985. (3)(4)
10.3 Copy of Supplier Agreement dated March 26, 1985 -
between the General Partner and Technology
Finance Group, Inc. and amendment thereto dated
September 10, 1985. (3)
10.4 Copy of Supplier Agreement dated September 30, 1985 -
between the General Partner and Comdisco, Inc. (3)
10.5 Copy of Supplier Agreement dated December 1, 1985 -
between the General Partner and Meridian Sales and
Leasing Inc. (formerly Thomson McKinnon Sales and
Leasing Inc.). (3)
10.6 Management Agreement dated June 22, 1988 between the -
General Partner and Meridian-Columbia Management
Corporation. (5)
10.7 Agreement Relating to the Admission of Meridian-Columbia -
Management Corporation as an Additional General Partner
of Certain Limited Partnerships.(6)
</TABLE>
<TABLE>
<CAPTION>
Footnotes:
<S> <C> <C>
1 Exhibit 4.1 is incorporated by reference to Exhibit 4.1 to the registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1986.
2 Exhibit 4.2 is incorporated by reference to Exhibit 4.2 to registrant's Annual Report on Form 10-K for
the year ended December 31, 1986.
3 Exhibits 4.3, 10.1, 10.2, 10.3, 10.4 and 10.5 are incorporated by reference to Exhibits 4.4, 10.5, 10.8,
10.7, 10.6 and 10.9, respectively, to Amendment No. 1 to registrant's Registration Statement on Form S-1
(File No. 2-97907) filed December 11, 1985.
4 This Supplier Agreement has been terminated during 1988.
5 Exhibit 10.6 is incorporated by reference to Exhibit 10.6 to registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1988.
6 Exhibits 4.4 and 10.7 are incorporated by reference to Exhibits 4.1 and 10.1, respectively, to
registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989.
B. Reports on Form 8-K
1 Form 8-K filing and Agreement Relating to the Admission of -
LP-Columbia Management Corporation as an Additional
General Partner of Certain Limited Partnerships dated June 30, 1993.
2 Form 8-K filing dated November 9, 1993 relating to the -
Change in Registrant's Certifying Accountant.
3 Agreement and 8-K filing dated November 30, 1993 relating -
to the withdrawal of Meridian-Columbia Management
Corporation as a co-General Partner.
</TABLE>
<PAGE>
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.
COLUMBIA LEASE INCOME FUND II-B L.P.
(Registrant)
By: TLP COLUMBIA MANAGEMENT CORPORATION,
its General Partner
Date: March 27, 1998
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000769333
<NAME> COLUMBIA II-B 12/31/97
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 29,533
<SECURITIES> 0
<RECEIVABLES> 36,732
<ALLOWANCES> 2,650
<INVENTORY> 0
<CURRENT-ASSETS> 86,233
<PP&E> 698,031
<DEPRECIATION> 661,989
<TOTAL-ASSETS> 122,275
<CURRENT-LIABILITIES> 78,234
<BONDS> 0
8,845,937
0
<COMMON> 0
<OTHER-SE> (8,801,896)
<TOTAL-LIABILITY-AND-EQUITY> 122,275
<SALES> 292,493
<TOTAL-REVENUES> 376,607
<CGS> 0
<TOTAL-COSTS> 22,897
<OTHER-EXPENSES> 207,886
<LOSS-PROVISION> (25,341)
<INTEREST-EXPENSE> 17,031
<INCOME-PRETAX> 154,134
<INCOME-TAX> 0
<INCOME-CONTINUING> 154,134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 154,134
<EPS-PRIMARY> 7.24
<EPS-DILUTED> 0
</TABLE>
