<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996 Commission file number 299435
Leastec Income Fund III
A California Limited Partnership
(Exact name of registrant as specified in its charter)
California 68-0066209
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2855 Mitchell Drive, Suite 215, Walnut Creek, California 94598
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 938-3443
_____________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS: N/A
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15 (d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS: N/A
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<PAGE> 2
Part 1. Financial Information
LEASTEC INCOME FUND III
A California Limited Partnership
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------ -----------
<S> <C> <C>
ASSETS:
Cash $ 303,915 $ 706,443
Accounts receivable 87,417
Net investment in direct financing leases 95,129 541,980
Equipment on operating leases, net of
accumulated depreciation of $6,166
in 1996 and $6,166 in 1995 0 0
--------- ---------
Total assets $ 399,044 $1,335,840
========= =========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Payables to affiliates $ 0 $ 2,767
Accounts payable 57,293 64,323
Deposits 16,663 43,818
Prepaid rental income 9,262 2,944
Distributions payable 21,053 368,421
Notes payable 0 0
-------- ---------
Total liabilities 104,271 482,273
-------- ---------
Partners' capital:
Partners' capital 294,773 853,567
-------- ---------
Total partners' capital 294,773 853,567
-------- ---------
Total liabilities & partners' capital $ 399,044 $1,335,840
========= =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
<PAGE> 3
LEASTEC INCOME FUND III
A California Limited Partnership
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Quarter
Ended Ended
September 30 September 30
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 78 $134,139 0 15,754
Direct financing lease income 21,837 204,854 5,006 13,734
Gain (loss) on sale of equipment 0 112,731 0 0
Interest income 6,284 12,657 1,530 3,817
Other income 6,601 147,508 0 22,545
------- -------- ------- --------
Total revenues 34,800 611,889 6,536 55,850
------- -------- ------- --------
Expenses:
Management fees 27,914 118,166 5,028 26,226
General & administrative 162,620 142,955 75,277 45,788
Data processing 13,586 22,597 1,251 5,651
lnterest expense 0 3,186 0 122
------- ------- ------- -------
Total expenses 204,120 286,904 81,556 77,787
------- ------- ------- -------
Net Income (loss) $(169,320) $324,985 $(75,020) $(21,937)
======== ======= ======= =======
Net income (loss) per limited
partnership unit $ (2.15) $ 4.12 $ (0.95) $ (0.28)
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
<PAGE> 4
LEASTEC INCOME FUND III
A California Limited Partnership
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (169,320) 324,985
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss on disposition of equipment 0 (112,731)
Change in assets and liabilities:
Decrease in accounts receivable 87,417 46,124
Decrease in payable to affiliates (2,767) (15,518)
Decrease in accounts payable (7,030) (51,436)
Decrease in deposits (27,155) (207,883)
Increase (decrease) in prepaid rental income 6,318 (4,609)
Decrease in distributions payable (347,368) (205,263)
-------- --------
Net cash (used) by operating activities (459,905) (226,331)
-------- ---------
Cash flows from investing activities:
Proceeds from disposition of equipment 0 89,050
Proceeds from sale of direct financing leases 0 37,313
Decrease in net investment in direct
financing leases 446,851 1,265,345
-------- ---------
Net cash provided by investing activities 446,851 1,391,708
________ _________
Cash flows from financing activities:
Repayment of notes payable 0 (44,864)
Net distributions to partners (389,474) (1,210,424)
-------- ---------
Net cash used in financing activities (389,474) (1,255,288)
-------- ---------
Net (decrease) in cash (402,528) (89,911)
Cash at beginning of period 706,443 645,072
-------- ---------
Cash at end of period $ 303,915 $ 555,161
======== =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
<PAGE> 5
LEASTEC INCOME FUND III
A California Limited Partnership
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1996, September 30, 1995 and December 31, 1995
(Unaudited)
1. Basis of Condensed Financial Statement Preparation
__________________________________________________
In the opinion of the General Partner, the accompanying unaudited
condensed financial statements contain all adjustments (consisting
principally of normal, recurring accruals) necessary to present fairly the
financial position of Leastec Income Fund III (the Partnership) as of
September 30, 1996, September 30, 1995 and December 31, 1995.
As provided for in the Partnership agreement and offering document, the
Partnership engaged in leasing activities which intended to be completed
in approximately eleven years from its inception at which time all
remaining partnership assets will have been liquidated and cash proceeds
distributed to the registrant's partners. The Partnership has presented
its 1996 financial statements to reflect its leasing activities on a basis
consistent with prior periods.
2. Wind Down Phase
_______________
The Registrant has ceased acquisition of new capital equipment and is in
the process of liquidating its lease portfolio. The Registrant will be
fully liquidated at the end of its eleventh full year of operation,
December 1996.
<PAGE> 6
LEASTEC INCOME FUND III
A California Limited Partnership
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operation
The Registrant has been winding down operations since 1993 by
discontinuing new leasing activities and returning cash available from
operations to the Registrant's Partners. Although the Registrant has until
December 1997 to liquidate operations, the Registrant will to be fully
liquidated by December 1996. This is the Registrant's final year of
operation.
All of the Registrant's operating leases have terminated. As operating
leases terminated the equipment was sold. The remaining lease portfolio is
invested in Direct Finance leases which terminate with the lessee's
contractually required purchase of equipment. The income of the Registrant
is rapidly declining as the lease portfolio size declines. The cash balances
and related interest income fluctuates according to the cash flow from rents
and finance lease terminations during each quarter. Cash is distributed to
the Partners according to their respective tax basis capital accounts.
The Partners will have a loss of capital because of shortfalls in
portfolio performance and a difficult economic environment during the life of
the Partnership. The previous filing anticipated a return of original
investment of approximately 80%. The percentage of capital return will vary
according to the following factors: a) the timing of each partner's original
investment and b) the decision to receive or reinvest distributions during
the operating phase of Partnership. Those Partners that chose to reinvest
acquired a larger percentage basis ownership in the Partnership and thereby,
a larger share of the loss and lower return of original investment. With the
close of the Partnership all of the Partners taxable losses may be applied
against their taxable income.
The Registrant reported a net loss of $169,320 or $2.15 per Limited
Partnership Unit for the nine months ended September 30, 1996 as compared to
net income of $324,985 or $4.12 per Limited Partnership Unit for the nine
months ended September 30, 1995.
Total revenues for the nine months ended September 30, 1996, were $34,800
compared to $611,889 for the same period in the prior year. This decrease
reflects a reduced rental income from both operating and finance leases due to
the rapid liquidation of the Registrant's lease portfolio. Revenue derived
from the Fund's equipment management activities comprised 82% of the total
income for the period, with the remaining 18% being interest income.
Direct financing lease income decreased from September 30, 1995, to
September 30, 1996, ($204,854 to $21,837 respectively). The net investment in
direct financing leases decreased from $1,021,790 at September 30, 1995, to
$95,129 at September 30, 1996.
Interest income decreased because the Registrant held lower cash balances
due to distributions to Partners and lease termination's during the first
nine months of 1996 as compared to the same period in the prior year. All
available cash is being paid out in distributions to the Fund's partners on a
quarterly basis.
<PAGE> 7
Total expenses for the nine months ended September 30, 1996, were $204,120
compared to $286,904 for the same period in the prior year. Management fees,
interest, and general and administrative costs comprised 93% of the total
expenses. Interest expense decreased from September 30, 1995, to
September 30, 1996, ($3,186 to $-0- respectively).
General and administrative costs increased from $142,955 for the first
nine months of 1995 to $162,620 for the same period in 1996. The variable
expenses of the Registrant have been reduced steadily as the liquidation
progressed. There are certain fixed expenses caused by the Partnership
Agreement's requirements for Regulatory and Partner reporting which will
continue at their current level until the Registrant's final close of
operations.
Liquidity and Capital Resources
_______________________________
Cash used by operating activities for the nine months ended September 30,
1996, was $495,905 compared to $226,331 for the same period in the prior
year. The decrease in cash provided by operating activities reflects the
continued winding down of the operating lease portfolio and decreases in
distribution payable to Partners.
Cash provided by investing activities decreased from $1,391,708 in the
first three quarters of 1995 to $446,851 for the first three quarters of 1996,
reflecting the final sales of operating lease equipment in the first half of
1995, lease terminations and decline of rental receipts from the direct
finance lease portfolio. As rental payment on finance leases are received, the
cash is broken up into income and return of principal. As a finance lease
ages the income portion of the rental receipts decreases and the return of
principal portion increases.
Cash provided by investing activities was used to repay notes payable of
$44,864 in the first nine months of 1995 compared to $-0- for the same period
in 1996.
As of September 30, 1996, the Fund's partners were allocated cash
distributions of $21,053 payable on October 15, 1996. The size of cash
available for distribution depends on the timing of lease terminations and
collections of rents. As a result of the decreasing portfolio of leases, the
amount of each distribution can be expected to decrease during the remainder
of 1996.
The cash balance increased from $645,072 at December 31, 1994, to $555,161
at September 30, 1995, and increased to $706,443 at December 31, 1995, then
decreased to $303,915 at September 30, 1996.
The cash position as of September 30, 1996, was $303,915. The General
Partner anticipates that funds from operations will be adequate to cover all
operating expenses of the Partnership during 1996.
<PAGE> 8
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE> 8
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEASTEC INCOME FUND III (Registrant)
LEASTEC CORPORATION,
General Partner
Date: November 4, 1996 By: _____________________________
Ernest V. Lavagetto, President
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 303,915
<SECURITIES> 0
<RECEIVABLES> 95,129
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 399,044
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 399,044
<CURRENT-LIABILITIES> 104,271
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 294,773
<TOTAL-LIABILITY-AND-EQUITY> 399,044
<SALES> 34,800
<TOTAL-REVENUES> 34,800
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 204,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (169,320)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (169,320)
<EPS-PRIMARY> (2.15)
<EPS-DILUTED> (2.15)
</TABLE>
