<TABLE>
<S><C>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended March 31, 1995 Commission File No. 0-16513
American Income Partners III-C Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-2979663
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Boston, MA 02114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
Exchange Place, 14th Floor, Boston, MA 02109
(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
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 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_____ No______
<PAGE>
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position
at March 31, 1995 and December 31, 1994 3
Statement of Operations
for the three months ended March 31, 1995 and 1994 4
Statement of Cash Flows
for the three months ended March 31, 1995 and 1994 5
Notes to the Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
PART II. OTHER INFORMATION:
Items 1 - 6 13
</TABLE>
[CAPTION]
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
March 31, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<S> <C> <C>
March 31, December 31,
1995 1994
ASSETS
Cash and cash equivalents $ 900,082 $ 837,988
Rents receivable, net of allowance
for doubtful accounts of $20,000
and $50,000 at March 31, 1995 and
December 31, 1994, respectively 3,404 258,991
Accounts receivable - affiliate 77,964 134,703
Equipment at cost, net of accumulated
depreciation of $5,705,435 and $6,662,559
at March 31, 1995 and December 31, 1994,
respectively 3,363,682 3,475,123
Total assets $ 4,345,132 $ 4,706,805
LIABILITIES AND PARTNERS' CAPITAL
Notes payable $ 57,451 $ 372,398
Accrued interest 513 11,861
Accrued liabilities 11,914 17,414
Accrued liabilities - affiliate 10,579 1,949
Deferred rental income 41,247 20,682
Cash distributions payable to partners 244,359 390,975
Total liabilities 366,063 815,279
Partners' capital (deficit):
General Partners (130,127) (131,002)
Limited Partnership Interests
(774,130 Units; initial purchase
price of $25 each) 4,109,196 4,022,528
Total partners' capital 3,979,069 3,891,526
Total liabilities and partners' capital $ 4,345,132 $ 4,706,805
</TABLE>
[CAPTION]
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
for the three months ended March 31, 1995 and 1994
(Unaudited)
<TABLE>
<S> <C> <C>
1995 1994
Income:
Lease revenue $ 240,995 $ 466,542
Interest income 10,879 7,636
Gain on sale of equipment 233,188 11,170
Total income 485,062 485,348
Expenses:
Depreciation 111,441 319,712
Interest expense 1,546 11,027
Equipment management fees - affiliate 12,050 23,327
Operating expenses - affiliate 28,123 21,684
Total expenses 153,160 375,750
Net income $ 331,902 $ 109,598
Net income
per limited partnership unit $ 0.42 $ 0.14
Cash distribution declared
per limited partnership unit $ 0.31 $ 0.50
</TABLE>
[CAPTION]
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1995 and 1994
(Unaudited)
<TABLE>
<S> <C> <C>
1995 1994
Cash flows from (used in) operating activities:
Net income $ 331,902 $ 109,598
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 111,441 319,712
Gain on sale of equipment (233,188) (11,170)
Decrease in allowance for doubtful accounts (30,000) --
Changes in assets and liabilities
Decrease (increase) in:
rents receivable 285,587 128,416
accounts receivable - affiliate 56,739 (22,409)
Increase (decrease) in:
accrued interest (11,348) (20,359)
accrued liabilities (5,500) 1,750
accrued liabilities - affiliate 8,630 5,081
deferred rental income 20,565 22,001
Net cash from operating activities 534,828 532,620
Cash flows from investing activities:
Proceeds from equipment sales 233,188 11,170
Net cash from investing activities 233,188 11,170
Cash flows used in financing activities:
Principal payments - notes payable (314,947) (230,221)
Distributions paid (390,975) (390,975)
Net cash used in financing activities (705,922) (621,196)
Net increase (decrease) in cash and cash equivalents 62,094 (77,406)
Cash and cash equivalents at beginning of period 837,988 1,188,487
Cash and cash equivalents at end of period $ 900,082 $ 1,111,081
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 12,894 $ 31,386
</TABLE>
<TABLE>
<S><C>
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
Notes to the Financial Statements
March 31, 1995
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing Form
10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not
include all information and footnote disclosures required under generally
accepted accounting principles for complete financial statements and,
accordingly, the accompanying financial statements should be read in conjunction
with the footnotes presented in the 1994 Annual Report. Except as disclosed
herein, there has been no material change to the information presented in the
footnotes to the 1994 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at March 31, 1995 and December 31, 1994 and results of operations for
the three month periods ended March 31, 1995 and 1994 have been made and are
reflected.
NOTE 2 - CASH
At March 31, 1995, the Partnership had $895,000 invested in reverse
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities.
NOTE 3 - REVENUE RECOGNITION
Rents are payable to the Partnership monthly, quarterly or semi-annually
and no significant amounts are calculated on factors other than the passage of
time. The leases are accounted for as operating leases and are noncancellable.
Rents received prior to their due dates are deferred. Future minimum rents of
$1,257,818 are due as follows:
For the year ending March 31, 1996 $ 583,108
1997 424,802
1998 228,584
1999 21,324
Total $ 1,257,818
<PAGE>
NOTE 4 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at
March 31, 1995. In the opinion of American Finance Group ("AFG"), the carrying
value of the equipment does not exceed its fair market value.
Lease Term Equipment
Equipment Type (Months) at Cost
Aircraft 36-60 $ 5,665,903
Retail store fixtures 1-84 988,911
Materials handling 1-84 712,158
Communications 36-84 621,500
Research and test 17-84 282,484
Locomotives 57-60 273,767
Manufacturing 60 195,271
Medical 56-60 162,007
Computers and peripherals 1-60 159,832
Furniture and fixtures 17-84 7,284
Total equipment cost 9,069,117
Accumulated depreciation (5,705,435)
Equipment, net of accumulated depreciation $ 3,363,682
At March 31, 1995, the Partnership's equipment portfolio included equipment
having a proportionate original cost of $6,599,823, representing approximately
73% of total equipment cost.
The summary above includes equipment held for sale or re-lease which had
been fully depreciated of approximately $145,000 at March 31, 1995.
NOTE 5 - RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Partnership are paid by AFG on
behalf of the Partnership and AFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during each of the three month
periods ended March 31, 1995 and 1994, which were paid or accrued by the
Partnership to AFG or its Affiliates, are as follows:
1995 1994
Equipment management fees $ 12,050 $ 23,327
Administrative charges 3,000 3,000
Reimbursable operating expenses
due to third parties 25,123 18,684
Total $ 40,173 $ 45,011
<PAGE>
All rents and proceeds from the sale of equipment are paid directly to
either AFG or to a lender. AFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Partnership.
At March 31, 1995, the Partnership was owed $77,964 by AFG for such funds and
the interest thereon. These funds were remitted to the Partnership in
April 1995.
NOTE 6 - NOTES PAYABLE
Notes payable at March 31, 1995 consisted of installment notes of $57,451
payable to banks and institutional lenders. All of the installment notes are
non-recourse, with interest rates ranging between 6.25% and 7.13% and are
collateralized by the equipment and assignment of the related lease payments.
The installment notes will be fully amortized by noncancellable rents.
The annual maturities of the installment notes payable are as follows:
For the year ending March 31, 1996 $ 35,793
1997 21,658
Total $ 57,451
<PAGE>
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Three months ended March 31, 1995 compared to the three months ended
March 31, 1994:
Overview
As an equipment leasing partnership, the Partnership was organized to
acquire a diversified portfolio of capital equipment subject to lease agreements
with third parties. The Partnership was designed to progress through three
principal phases: acquisitions, operations, and liquidation. During the
operations phase, a period of approximately six years, all equipment in the
Partnership's portfolio will progress through various stages. Initially, all
equipment will generate rental revenues under primary term lease agreements.
During the life of the Partnership, these agreements will expire on an
intermittent basis and equipment held pursuant to the related leases will be
renewed, re-leased or sold, depending on prevailing market conditions and the
assessment of such conditions by AFG to obtain the most advantageous economic
benefit. Over time, a greater portion of the Partnership's original equipment
portfolio will become available for remarketing and cash generated from
operations and from sales or refinancings will begin to fluctuate. Ultimately,
all equipment will be sold and the Partnership will be dissolved. The
Partnership's operations commenced in 1987.
Results of Operations
For the three months ended March 31, 1995, the Partnership recognized lease
revenue of $240,995 compared to $466,542 for the same period in 1994. The
decrease in lease revenue between 1994 and 1995 was expected and resulted
principally from primary lease term expirations and the sale of equipment.
The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are owned by AFG or an affiliated equipment leasing program
sponsored by AFG. Proportionate equipment ownership enables the Partnership to
further diversify its equipment portfolio by participating in the ownership of
selected assets, thereby reducing the general levels of risk which could result
from a concentration in any single equipment type, industry or lessee. The
Partnership and each affiliate individually report, in proportion to their
respective ownership interests, their respective shares of assets, liabilities,
revenues, and expenses associated with the equipment.
At March 31, 1995, the Managing General Partner lowered the amount reserved
against potentially uncollectable rents to $20,000 resulting in an increase in
lease revenue of $30,000 during the three months ended March 31, 1995. It
cannot be determined whether the Partnership will recover any past due rents in
the future; however, the Managing General Partner will pursue the collection of
all such items.
<PAGE>
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
Interest income for the three months ended March 31, 1995 was $10,879
compared to $7,636 for the same period in 1994. Interest income is generated
from temporary investment of rental receipts and equipment sale proceeds in
short-term instruments. The increase in interest income from 1994 to 1995 is
principally attributable to an increase in interest rates. The amount of future
interest income is expected to fluctuate in relation to prevailing interest
rates, the level of lease revenue and the proceeds from equipment sales.
For the three months ended March 31, 1995, the Partnership sold equipment
which had been fully depreciated to existing lessees and third parties. These
sales resulted in a net gain, for financial statement purposes, of $233,188
compared to a net gain in 1994 of $11,170 on equipment which had also been fully
depreciated.
It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Partnership, as such transactions will be
dependent upon the condition and type of equipment being sold and its
marketability at the time of sale. In addition, the amount of gain or loss
reported for financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including AFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. AFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Partnership and which will
maximize total cash returns for each asset.
The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenues generated from that asset, together
with its residual value. The latter consists of cash proceeds realized upon the
asset's sale in addition to all other cash receipts obtained from renting the
asset on a re-lease, renewal or month-to-month basis. The Partnership
classifies such residual rental payments as lease revenue. Consequently, the
amount of gain or loss reported in the financial statements is not necessarily
indicative of the total residual value the Partnership achieved from leasing the
equipment.
Depreciation expense for the three months ended March 31, 1995 was $111,441
compared to $319,712 for the same period in 1994. For financial reporting
purposes, to the extent that an asset is held on primary lease term, the
Partnership depreciates the difference between (i) the cost of the asset and
(ii) the estimated residual value of the asset on a straight-line basis over
such term. For purposes of this policy, estimated residual values represent
estimates of equipment values at the date of primary lease expiration. To the
extent that an asset is held beyond its primary lease term, the Partnership
continues to depreciate the remaining net book value of the asset on a
straight-line basis over the asset's remaining economic life.
<PAGE>
Interest expense was $1,546 or less than 1% of lease revenue for the three
months ended March 31, 1995 compared to $11,027 or 2.4% of lease revenue for the
same period in 1994. Interest expense in future periods will continue to
decline in amount and as a percentage of lease revenue as the principal balance
of notes payable is reduced through the application of rent receipts to
outstanding debt.
Management fees were 5% of lease revenue during each of the three month
periods ended March 31, 1995 and 1994 and will not change as a percentage of
lease revenue in future periods.
Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as printing,
distribution and remarketing expenses. In certain cases, equipment storage or
repairs and maintenance costs may be incurred in connection with equipment being
remarketed. Collectively, operating expenses represented 11.7% and 4.6% of
lease revenue for the three months ended March 31, 1995 and 1994, respectively.
The increase in operating expenses from 1994 to 1995 was due primarily to higher
premiums in connection with supplemental insurance policies carried by the
Partnership on certain aircraft and a rise in professional service costs. The
amount of future operating expenses cannot be predicted with certainty; however,
such expenses are usually higher during the acquisition and liquidation phases
of a partnership. Other fluctuations typically occur in relation to the volume
and timing of remarketing activities.
Liquidity and Capital Resources and Discussion of Cash Flows
The Partnership by its nature is a limited life entity which was
established for specific purposes described in the preceding "Overview". As an
equipment leasing program, the Partnership's principal operating activities
derive from asset rental transactions. Accordingly, the Partnership's principal
source of cash from operations is provided by the collection of periodic rents.
These cash inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs. Operating
activities generated net cash inflows of $534,828 during the three months ended
March 31, 1995 compared to $532,620 for the same period in 1994. Future
renewal, re-lease and equipment sale activities will cause a gradual decline in
the Partnership's lease revenues and corresponding sources of operating cash.
Overall, expenses associated with rental activities, such as management fees,
and net cash flow from operating activities will decline as the Partnership
experiences a higher frequency of remarketing events.
Ultimately, the Partnership will dispose of all assets under lease. This
will occur principally through sale transactions whereby each asset will be sold
to the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of an
asset. Such circumstances are infrequent and usually result in the collection
of stipulated cash settlements pursuant to terms and conditions contained in the
underlying lease agreements.
Cash realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During the three months
<PAGE>
ended March 31, 1995, the Partnership realized $233,188 in equipment sale
proceeds compared to $11,170 for the same period in 1994. Future inflows of
cash from asset disposals will vary in timing and amount and will be influenced
by many factors including, but not limited to, the frequency and timing of lease
expirations, the type of equipment being sold, its condition and age, and future
market conditions.
The Partnership obtained long-term financing in connection with certain
equipment leases. The repayments of principal related to such indebtedness are
reported as a component of financing activities.
Each note payable is recourse only to the specific equipment financed and
to the minimum rental payments contracted to be received during the debt
amortization period (which period generally coincides with the lease rental
term). As rental payments are collected, a portion or all of the rental payment
is used to repay the associated indebtedness. In future periods, the amount of
cash used to repay debt obligations will decline as the principal balance of
notes payable is reduced through the collection and application of rents.
Cash distributions to the Recognized Owners and General Partners are
declared and generally paid within fifteen days following the end of each
calendar quarter. The payment of such distributions is presented as a component
of financing activities. For the three months ended March 31, 1995, the
Partnership declared total cash distributions of Distributable Cash From
Operations and Distributable Cash From Sales and Refinancings of $244,359. In
accordance with the Amended and Restated Agreement and Certificate of Limited
Partnership, the Recognized Owners were allocated 99% of these distributions, or
$241,915, and the General Partners were allocated 1%, or $2,444. The first
quarter 1995 cash distribution was paid on April 14, 1995.
Cash distributions paid to the Partners consist of both a return of and a
return on capital. To the extent that cash distributions consist of Cash From
Sales or Refinancings, substantially all of such cash distributions should be
viewed as a return of capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each asset at
its disposal date. Future market conditions, technological changes, the ability
of AFG to manage and remarket the assets, and many other events and
circumstances, could enhance or detract from individual asset yields and the
collective performance of the Partnership's equipment portfolio.
The future liquidity of the Partnership will be influenced by the foregoing
and will be greatly dependent upon the collection of contractual rents and the
outcome of residual activities. The Managing General Partner anticipates that
cash proceeds resulting from these sources will satisfy the Partnership's future
expense obligations. However, the amount of cash available for distribution in
future periods will fluctuate. Equipment lease expirations and asset disposals
will cause the Partnership's net cash from operating activities to diminish over
time; and equipment sale proceeds will vary in amount and period of realization.
Accordingly, fluctuations in the level of quarterly cash distributions will
occur during the life of the Partnership.
<PAGE>
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of
Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6(a). Exhibits
Response: None
Item 6(b). Reports on Form 8-K
Response: None
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP
By: AFG Leasing Incorporated, a Massachusetts
corporation and the Managing General Partner
of the Registrant.
By: /s/ Gary M. Romano
Gary M. Romano
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
Date: May 18, 1995
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 900,082
<SECURITIES> 0
<RECEIVABLES> 131,368
<ALLOWANCES> 50,000
<INVENTORY> 0
<CURRENT-ASSETS> 981,450
<PP&E> 9,069,117
<DEPRECIATION> 5,705,435
<TOTAL-ASSETS> 4,345,132
<CURRENT-LIABILITIES> 308,612
<BONDS> 57,451
<COMMON> 0
0
0
<OTHER-SE> 3,979,069
<TOTAL-LIABILITY-AND-EQUITY> 4,345,132
<SALES> 0
<TOTAL-REVENUES> 485,062
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 151,614
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,546
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 331,902
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 331,902
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>