UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-17532
American Income Partners III-D Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-6579994
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 N. Washington St., Fifth Floor, Boston, MA 02114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
Securities registered pursuant to Section 12(b) of the Act NONE
Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
519,926 Units Representing Limited Partnership Interest
(Title of class)
(Title of class)
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 XX No
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant. Not applicable. Securities are nonvoting for
this purpose. Refer to Item 12 for further information.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to security holders for
the year ended December 31, 1995 (Part I and II)
<PAGE>
<TABLE>
<CAPTION>
-18-
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
FORM 10-K
TABLE OF CONTENTS
<S> <C>
Page
PART I
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for the Partnership's Securities and Related Security Holder Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 7
Item 8. Financial Statements and Supplementary Data 8
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 8
PART III
Item 10. Directors and Executive Officers of the Partnership 9
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners and Management 11
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14-17
</TABLE>
<PAGE>
PART I
Item 1. Business.
(a) General Development of Business
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP (the "Partnership")
was organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on December 30, 1987 for the purpose of
acquiring and leasing to third parties a diversified portfolio of capital
equipment. Partners' capital initially consisted of contributions of $1,000 from
the Managing General Partner (AFG Leasing Incorporated) and $100 from the
Initial Limited Partner (AFG Assignor Corporation). On April 15, 1988, the
Partnership issued 519,926 units representing assignments of limited partnership
interests (the "Units") to 1,129 investors. Unitholders and Limited Partners
(other than the Initial Limited Partner) are collectively referred to as
Recognized Owners. The 519,926 Units include 76 bonus Units. Subsequent to the
Partnership's Closing, the Partnership had five General Partners: AFG Leasing
Incorporated, a Massachusetts corporation, Kestutis J. Makaitis, Daniel J.
Roggemann, Martin F. Laughlin, and Geoffrey A. MacDonald (collectively the
"General Partners"). Messrs. Makaitis, Roggemann and Laughlin subsequently
elected to withdraw as Individual General Partners. The General Partners, each
of whom is affiliated with American Finance Group ("AFG"), a Massachusetts
partnership, are not required to make any other capital contributions except as
may be required under the Uniform Act and Section 6.1(b) of the Amended and
Restated Agreement and Certificate of Limited Partnership (the "Restated
Agreement").
(b) Financial Information About Industry Segments
The Partnership is engaged in only one industry segment: the business of
acquiring capital equipment and leasing the equipment to creditworthy lessees on
a full payout or operating lease basis. Full payout leases are those in which
aggregate noncancellable rents equal or exceed the Purchase Price of the leased
equipment. Operating leases are those in which the aggregate noncancellable
rental payments are less than the Purchase Price of the leased equipment.
Industry segment data is not applicable.
(c) Narrative Description of Business
The Partnership was organized to acquire a diversified portfolio of
capital equipment subject to various full payout and operating leases and to
lease the equipment to third parties as income-producing investments. More
specifically, the Partnership's primary investment objectives are to acquire and
lease equipment which will:
1. Generate quarterly cash distributions;
2. Preserve and protect invested capital; and
3. Maintain substantial residual value for ultimate sale.
The Partnership has the additional objective of providing certain
federal income tax benefits.
The Closing Date of the Offering of Units of the Partnership was April
15, 1988. The initial purchase of equipment and the associated lease commitments
occurred on April 19, 1988. The acquisition of the equipment and its associated
leases is described in detail in Note 3 to the financial statements included in
Item 14, herein. The Partnership is expected to terminate no later than December
31, 1999.
The Partnership has no employees; however, it entered into a Management
Agreement with AFG (the "Manager"). The Manager's role, among other things, is
to (i) evaluate, select, negotiate, and consummate the acquisition of equipment,
(ii) manage the leasing, re-leasing, financing, and refinancing of equipment,
and (iii) arrange the resale of equipment. The Manager is compensated for such
services as described in the Restated Agreement, as amended, Item 13 herein and
in Note 4 to the financial statements included in Item 14, herein.
The Partnership's investment in equipment is, and will continue to be,
subject to various risks, including physical deterioration, technological
obsolescence and defaults by lessees. A principal business risk of owning and
leasing equipment is the possibility that aggregate lease revenues and equipment
sale proceeds will be insufficient to provide an acceptable rate of return on
invested capital after payment of all debt service costs and operating expenses.
Consequently, the success of the Partnership is largely dependent upon the
ability of the Managing General Partner and its Affiliates to forecast
technological advances, the ability of the lessees to fulfill their lease
obligations and the quality and marketability of the equipment at the time of
sale.
In addition, the leasing industry is very competitive. Although all
funds available for acquisitions have been invested in equipment, subject to
noncancellable lease agreements, the Partnership will encounter considerable
competition when equipment is re-leased or sold at the expiration of primary
lease terms. The Partnership will compete with lease programs offered directly
by manufacturers and other equipment leasing companies, including limited
partnerships and trusts organized and managed similarly to the Partnership and
including other AFG sponsored partnerships and trusts, which may seek to
re-lease or sell equipment within their own portfolios to the same customers as
the Partnership. Many competitors have greater financial resources and more
experience than the Partnership, the Managing General Partner and the Manager.
Generally, the Partnership is prohibited from reinvesting the proceeds
generated by refinancing or selling equipment. Accordingly, it is anticipated
that the Partnership will begin to liquidate its portfolio of equipment at the
expiration of the initial and renewal lease terms and to distribute the net
liquidation proceeds. As an alternative to sale, the Partnership may enter
re-lease agreements when considered advantageous by the Managing General Partner
and the Manager. In accordance with the Partnership's stated investment
objectives and policies, the Managing General Partner is also considering
winding-up the Partnership's operations, including the liquidation of its entire
portfolio.
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1995, 1994 and 1993 is
incorporated herein by reference to Note 2 to the financial statements in the
1995 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the
Securities and Exchange Commission.
Default by a lessee under a lease may cause equipment to be returned to
the Partnership at a time when the Managing General Partner or the Manager is
unable to arrange for the re-lease or sale of such equipment. This could result
in the loss of a material portion of anticipated revenues and significantly
weaken the Partnership's ability to repay related debt.
AFG is a successor to the business of American Finance Group, Inc., a
Massachusetts corporation engaged since its inception in 1980 in various aspects
of the equipment leasing business. In 1990, certain members of AFG's management,
principally Geoffrey A. MacDonald, Chief Executive Officer and co-founder of
AFG, established AFG Holdings (Massachusetts) Limited Partnership ("Holdings
Massachusetts") to acquire ownership and control of AFG. Holdings Massachusetts
effected this event by acquiring all of the equity interests of AFG's two
partners, AFG Holdings Illinois Limited Partnership ("Holdings Illinois") and
AFG Corporation. Holdings Massachusetts incurred significant indebtedness to
finance this acquisition, a significant portion of which was scheduled to mature
in 1995.
On December 16, 1994, the senior lender to Holdings Massachusetts (the
"Senior Lender") assumed control of its security interests in Holdings Illinois
and AFG Corporation and sold all such interests to GDE Acquisitions Limited
Partnership, a Massachusetts limited partnership owned and controlled entirely
by Gary D. Engle, President and member of the Executive Committee of AFG. As a
result of this transaction, GDE Acquisitions Limited Partnership acquired all of
the assets, rights and obligations of AFG from the Senior Lender and assumed
control of AFG. Geoffrey A. MacDonald remains as Chief Executive Officer of AFG
and member of its Executive Committee.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales
Not applicable.
Item 2. Properties.
Incorporated herein by reference to Note 3 to the financial statements
in the 1995 Annual Report.
Item 3. Legal Proceedings.
Incorporated herein by reference to Note 7 to the financial statements
in the 1995 Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
PART II
Item 5. Market for the Partnership's Securities and Related Security Holder
Matters.
(a) Market Information
There is no public market for the resale of the Units and it is not
anticipated that a public market for resale of the Units will develop.
(b) Approximate Number of Security Holders
At December 31, 1995, there were 1,015 recordholders of Units in the
Partnership.
(c) Dividend History and Restrictions
Pursuant to Article VI of the Restated Agreement, as amended, the
Partnership's Distributable Cash From Operations and Distributable Cash From
Sales or Refinancings are determined and distributed to the Partners quarterly.
Each quarter's distribution may vary in amount. Distributions may be made to the
Managing General Partner prior to the end of the fiscal quarter; however, the
amount of such distribution reflects only amounts to which the Managing General
Partner is entitled at the time such distribution is made. Currently, there are
no restrictions that materially limit the Partnership's ability to distribute
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings or that the Partnership believes are likely to materially limit the
future distribution of Distributable Cash From Operations and Distributable Cash
From Sales or Refinancings. The Partnership expects to continue to distribute
all Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings on a quarterly basis.
<TABLE>
<CAPTION>
Distributions in 1995 and 1994 were as follows:
<S> <C> <C> <C>
General Recognized
Total Partners Owners
Total 1995 distributions $ 590,825 $ 5,908 $ 584,917
Total 1994 distributions 656,472 6,565 649,907
Total $ 1,247,297 $ 12,473 $ 1,234,824
</TABLE>
Distributions payable were $98,470 and $164,118 at December 31, 1995 and
1994, respectively.
"Distributable Cash From Operations" means the net cash provided by the
Partnership's normal operations after general expenses and current liabilities
of the Partnership are paid, reduced by any reserves for working capital and
contingent liabilities to be funded from such cash, to the extent deemed
reasonable by the Managing General Partner, and increased by any portion of such
reserves deemed by the Managing General Partner not to be required for
Partnership operations and reduced by all accrued and unpaid Equipment
Management Fees and, after Payout, further reduced by all accrued and unpaid
Subordinated Remarketing Fees. Distributable Cash From Operations does not
include any Distributable Cash From Sales or Refinancings.
"Distributable Cash From Sales or Refinancings" means Cash From Sales or
Refinancings as reduced by (i)(a) amounts realized from any loss or destruction
of equipment which the Managing General Partner determines shall be reinvested
in similar equipment for the remainder of the original lease term of the lost or
destroyed equipment, or in isolated instances, in other equipment, if the
Managing General Partner determines that investment of such proceeds will
significantly improve the diversity of the Partnership's equipment portfolio,
and subject in either case to satisfaction of all existing indebtedness secured
by such equipment to the extent deemed necessary or appropriate by the Managing
General Partner, and (b) the proceeds from the sale of an interest in equipment
pursuant to any agreement governing a joint venture which the Managing General
Partner determines will be invested in additional equipment or interests in
equipment and which ultimately are so reinvested and (ii) any accrued and unpaid
Equipment Management Fees and, after Payout, any accrued and unpaid Subordinated
Remarketing Fees.
"Cash From Sales or Refinancings" means cash received by the Partnership
from sale or refinancing transactions, as reduced by (i)(a) all debts and
liabilities of the Partnership required to be paid as a result of sale or
refinancing transactions, whether or not then due and payable (including any
liabilities on an item of equipment sold which are not assumed by the buyer and
any remarketing fees required to be paid to persons not affiliated with the
General Partners, but not including any Subordinated Remarketing Fees whether or
not then due and payable) and (b) any reserves for working capital and
contingent liabilities funded from such cash to the extent deemed reasonable by
the Managing General Partner and (ii) increased by any portion of such reserves
deemed by the Managing General Partner not to be required for Partnership
operations. In the event the Partnership accepts a note in connection with any
sale or refinancing transaction, all payments subsequently received in cash by
the Partnership with respect to such note shall be included in Cash From Sales
or Refinancings, regardless of the treatment of such payments by the Partnership
for tax or accounting purposes. If the Partnership receives purchase money
obligations in payment for equipment sold, which are secured by liens on such
equipment, the amount of such obligations shall not be included in Cash From
Sales or Refinancings until the obligations are fully satisfied.
Each distribution of Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings of the Partnership shall be made
99% to the Recognized Owners and 1% to the General Partners until Payout and 85%
to the Recognized Owners and 15% to the General Partners after Payout.
"Payout" is defined as the first time when the aggregate amount of all
distributions to the Recognized Owners of Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings equals the aggregate amount of the
Recognized Owners' original capital contributions plus a cumulative annual
return of 10% (compounded quarterly and calculated beginning with the last day
of the month of the Partnership's Closing Date) on their aggregate unreturned
capital contributions. For purposes of this definition, capital contributions
shall be deemed to have been returned only to the extent that distributions of
cash to the Recognized Owners exceed the amount required to satisfy the
cumulative annual return of 10% (compounded quarterly) on the Recognized Owners'
aggregate unreturned capital contributions, such calculation to be based on the
aggregate unreturned capital contributions outstanding on the first day of each
fiscal quarter.
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings ("Distributions") are distributed within 60 days after the
completion of each quarter, beginning with the first full fiscal quarter
following the Partnership's Closing Date. Each Distribution is described in a
statement sent to the Recognized Owners.
Item 6. Selected Financial Data.
Incorporated herein by reference to the section entitled "Selected
Financial Data" in the 1995 Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Incorporated herein by reference to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
1995 Annual Report.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Incorporated herein by reference to the financial statements and
supplementary data included in the 1995 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
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, AFG Leasing Incorporated is the Managing General Partner of the
Partnership. Under the Restated Agreement, as amended, the Managing General
Partner is responsible for the operation of the Partnership's properties and the
Recognized Owners have no right to participate in the control of such
operations. The names, titles and ages of the Directors and Executive Officers
of the Managing General Partner as of March 15, 1996 are as follows:
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS OF THE
MANAGING GENERAL PARTNER (See Item 13)
<S> <C> <C> <C>
Name Title Age Term
Geoffrey A. MacDonald Chief Executive Officer, Until a
Chairman and a member of the successor
Executive Committee of AFG and is duly
President and a Director of the elected
Managing General Partner 47 and
qualified
Gary D. Engle President, Chief Operating
Officer, and a member of the
Executive Committee of AFG 47
Gary M. Romano Vice President and Controller
of AFG and Clerk of the Managing
General Partner 36
James F. Livesey Vice President, Aircraft and Vessels 46
of AFG
Sandra L. Simonsen Vice President, Information Systems 45
of AFG
(c) Identification of Certain Significant Persons
None.
(d) Family Relationship
No family relationship exists among any of the foregoing Partners,
Directors or Executive Officers.
(e) Business Experience
Mr. MacDonald, age 47 is a co-founder, Chief Executive Officer, Chairman and a member of the Executive Committee
of AFG and President and a Director of the Managing General Partner. Mr. MacDonald served as a co-founder, Director and
Senior Vice President of AFG's predecessor corporation from 1980 to 1988. Mr. MacDonald is Vice President of American
Finance Group Securities Corp. and a limited partner in Atlantic Acquisition Limited Partnership ("AALP"). Prior to
co-founding AFG's predecessor, Mr. MacDonald held various executive and management positions in the leasing and
pharmaceutical industries. Mr. MacDonald holds an M.B.A. from Boston College and a B.A. degree from the University of
Massachusetts (Amherst).
Mr. Engle, age 47 is President and Chief Operating Officer and a member of the Executive Committee of AFG and
President of AFG Realty Corporation. Mr. Engle is Vice President, and a Director of certain of AFG's affiliates. On
December 16, 1994, Mr. Engle acquired control of AFG, the Managing General Partner and each of AFG's subsidiaries. Mr.
Engle controls the general partner of AALP and is also a limited partner in AALP. From 1987 to 1990, Mr. Engle was a
principal and co-founder of Cobb Partners Development, Inc., a real estate and mortgage banking company. From 1980 to
1987, Mr. Engle was Senior Vice President and Chief Financial Officer of Arvida Disney Company, a large scale community
development company owned by Walt Disney Company. Prior to 1980, Mr. Engle served in various management consulting and
institutional brokerage capacities. Mr. Engle has an M.B.A. from Harvard University and a B.S. degree from the
University of Massachusetts (Amherst).
Mr. Romano, age 36, is Vice President and Controller of AFG and certain of its affiliates and Clerk of the
Managing General Partner. Mr. Romano joined AFG in November 1989 and was appointed Vice President and Controller in
April 1993. Prior to joining AFG, Mr. Romano was Assistant Controller for a privately-held real estate company which he
joined in 1987. Mr. Romano held audit staff and manager positions at Ernst & Whinney from 1982 to 1986. Mr. Romano is a
C.P.A. and holds a B.S. degree from Boston College.
Mr. Livesey, age 46, is Vice President, Aircraft and Vessels, of AFG. Mr. Livesey joined AFG in October, 1989,
and was promoted to Vice President in January, 1992. Prior to joining AFG, Mr. Livesey held sales and marketing
positions with two privately-held equipment leasing firms. Mr. Livesey holds an M.B.A. from Boston College and B.A.
degree from Stonehill College.
Ms. Simonsen, age 45, joined AFG in February 1990 and was promoted to Vice President, Information Systems in April
1992. Prior to joining AFG, Ms. Simonsen was Vice President, Information Systems with Investors Mortgage Insurance
Company which she joined in 1973. Ms. Simonsen provided systems consulting for a subsidiary of American International
Group and authored a software program published by IBM. Ms. Simonsen holds a B.A. degree from Wilson College.
</TABLE>
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
Item 11. Executive Compensation.
(a) Cash Compensation
Currently, the Partnership has no employees. However, under the terms of
the Restated Agreement, as amended, the Partnership is obligated to pay all
costs of personnel employed full or part-time by the Partnership, including
officers or employees of the Managing General Partner or its Affiliates. There
is no plan at the present time to make any officers or employees of the Managing
General Partner or its Affiliates employees of the Partnership. The Partnership
has not paid and does not propose to pay any options, warrants or rights to the
officers or employees of the Managing General Partner or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Partnership has no employees, as discussed in Item 11(a),
pursuant to section 10.4 of the Restated Agreement, as amended, the Partnership
incurs a monthly charge for personnel costs of the Manager for persons engaged
in providing administrative services to the Partnership. A description of the
remuneration paid by the Partnership to the Manager for such services is
included in Item 13, herein and in Note 4 to the financial statements included
in Item 14, herein.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the General
Partners or the Managing General Partner or its Affiliates which results or may
result from their resignation, retirement or any other termination.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
By virtue of its organization as a limited partnership, the Partnership
has outstanding no securities possessing traditional voting rights. However, as
provided in Section 11.2(a) of the Restated Agreement, as amended (subject to
Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners have
voting rights with respect to:
1. Amendment of the Restated Agreement;
2. Termination of the Partnership;
3. Removal of the General Partners; and
4. Approval or disapproval of the sale of all, or substantially all,
of the assets of the Partnership (except in the orderly
liquidation of the Partnership upon its termination and
dissolution).
<TABLE>
<CAPTION>
As of March 1, 1996, the following person or group owns beneficially more than 5% of the Partnership's 519,926
outstanding Units:
<S> <C> <C> <C>
Name and Amount Percent
Title Address of of Beneficial of
of Class Beneficial Owner Ownership Class
Units Representing Atlantic Acquisition Limited Partnership
Limited Partnership 98 North Washington Street 37,604 Units 7.23%
Interests Boston, MA 02114
Messrs. Engle and MacDonald have ownership interests in AALP. See Item 10 of this report.
</TABLE>
The ownership and organization of AFG is described in Item 1 of this
report.
Item 13. Certain Relationships and Related Transactions.
The Managing General Partner of the Partnership is AFG Leasing
Incorporated, an affiliate of AFG.
(a) Transactions with Management and Others
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 the years ended December 31,
1995, 1994 and 1993, which were paid or accrued by the Partnership to AFG or its
Affiliates, are as follows:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Equipment management fees $ 32,101 $ 52,235 $ 70,387
Interest expense - affiliate -- 8,315 --
Administrative charges 17,904 12,000 14,955
Reimbursable operating expenses
due to third parties 74,232 96,386 65,768
Total $ 124,237 $ 168,936 $ 151,110
</TABLE>
As provided under the terms of the Management Agreement, AFG is
compensated for its services to the Partnership. Such services include all
aspects of acquisition, management and sale of equipment. For acquisition
services, AFG is compensated by an amount equal to 4.75% of Equipment Base Price
paid by the Partnership. For management services, AFG is compensated by an
amount equal to the lesser of (i) 5% of gross lease rental revenue or (ii) fees
which the Managing General Partner reasonably believes to be competitive for
similar services for similar equipment. Both of these fees are subject to
certain limitations defined in the Management Agreement. Compensation to AFG for
services connected to the sale of equipment is calculated as the lesser of (i)
3% of gross sale proceeds or (ii) one-half of reasonable brokerage fees
otherwise payable under arm's length circumstances. Payment of the remarketing
fee is subordinated to Payout and is subject to certain limitations defined in
the Management Agreement.
Interest expense - affiliate represents interest incurred on legal costs
in connection with a state sales tax dispute involving certain equipment owned
by the Partnership and other affiliated investment programs sponsored by AFG.
Legal costs incurred by AFG to resolve this matter and the interest thereon was
allocated to the Partnership and other affected investment programs.
Administrative charges represent amounts owed to AFG, pursuant to Section 10.4
of the Restated Agreement, as amended, for persons employed by AFG who are
engaged in providing administrative services to the Partnership. Reimbursable
operating expenses due to third parties represent costs paid by AFG on behalf of
the Partnership which are reimbursed to AFG.
All equipment was purchased from AFG, one of its affiliates, including
other equipment leasing programs sponsored by AFG, or from third-party sellers.
The Partnership's Purchase Price was determined by the method described in Note
2 to the financial statements, included in Item 14, herein.
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 account prior to remittance to the Partnership. At
December 31, 1995, the Partnership was owed $37,479 for such funds and the
interest thereon. These funds were remitted to the Partnership in January 1996.
On August 18, 1995, Atlantic Acquisition Limited Partnership ("AALP"), a
newly formed Massachusetts limited partnership owned and controlled by certain
principals of AFG, commenced a voluntary cash Tender Offer (the "Offer") for up
to approximately 45% of the outstanding units of limited partner interest in
this Partnership and 20 affiliated partnerships sponsored and managed by AFG.
The Offer was subsequently amended and supplemented in order to provide
additional disclosure to unitholders; increase the offer price; reduce the
number of units sought to approximately 35% of the outstanding units; and extend
the expiration date of the Offer to October 20, 1995. Following commencement of
the Offer, certain legal actions were initiated by interested persons against
AALP, each of the general partners (4 in total) of the 21 affected programs, and
various other affiliates and related parties. One action, a class action brought
in the United States District Court for the District of Massachusetts (the
"Court") on behalf of the unitholders (limited partners), sought to enjoin the
Offer and obtain unspecified monetary damages. A settlement of this litigation
was approved by the Court on November 15, 1995. A second class action, brought
in the Superior Court of the Commonwealth of Massachusetts (the "Superior
Court") seeking to enjoin the Offer, obtain unspecified monetary damages, and
intervene in the first class action, was dismissed by the Superior Court. The
Plaintiffs have filed an appeal in this matter. The limited partners of the
Partnership tendered approximately 37,604 units or 7.23% of the total
outstanding units of the Partnership to AALP. The operations of the Partnership
are not expected to be adversely affected by these proceedings or settlements.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Partnership
None.
(d) Transactions with Promoters
See Item 13(a) above.
<PAGE>
<TABLE>
<S> <C>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements:
Report of Independent Auditors...................................................................*
Statement of Financial Position
at December 31, 1995 and 1994....................................................................*
Statement of Operations
for the years ended December 31, 1995, 1994 and 1993.............................................*
Statement of Changes in Partners' Capital
for the years ended December 31, 1995, 1994 and 1993.............................................*
Statement of Cash Flows
for the years ended December 31, 1995, 1994 and 1993.............................................*
Notes to the Financial Statements................................................................*
(2) Financial Statement Schedules:
None required.
(3) Exhibits:
Except as set forth below, all Exhibits to Form 10-K,
as set forth in Item 601 of Regulation S-K, are not
applicable.
Exhibit
Number
4 Amended and Restated Agreement and Certificate of Limited Partnership included as Exhibit A to
the Prospectus which is included in Registration Statement on Form S-1 (No. 33-11160).
13 The 1995 Annual Report to security holders, a copy of
which is furnished for the information of the
Securities and Exchange Commission. Such Report, except
for those portions thereof which are incorporated
herein by reference, is not deemed "filed" with the
Commission.
23 Consent of Independent Auditors.
99 (a) Lease agreement with Marsh Supermarkets, Inc. was filed in the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991 as Exhibit 28 (c) and is incorporated herein by
reference.
* Incorporated herein by reference to the appropriate portion of the 1995 Annual Report to security holders for the
year ended December 31, 1995. (See Part II)
</TABLE>
<PAGE>
Exhibit
Number
99 (b) Lease agreement with Northwest Airlines, Inc. was
filed in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991 as Exhibit
28 (d) and is incorporated herein by reference.
99 (c) Lease agreement with Equicor, Incorporated was
filed in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 as Exhibit 28 (e)
and is incorporated herein by reference.
99 (d) Lease agreement with ING Aviation Lease is filed in
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995 and is included herein.
(b) Reports on Form 8-K
None.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of American Income Partners III-D Limited Partnership of our report dated
March 12, 1996, included in the 1995 Annual Report to the Partners of American
Income Partners III-D Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts
March 12, 1996
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No annual report has been sent to the Recognized Owners. A report will
be furnished to the Recognized Owners subsequent to the date hereof.
No proxy statement has been or will be sent to the Recognized Owners.
<PAGE>
<TABLE>
-17-
SIGNATURES
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.
<S> <C>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
By: AFG Leasing Incorporated,
a Massachusetts corporation and the
Managing General Partner of the Registrant.
By: /s/ Geoffrey A. MacDonald By: /s/ Gary D. Engle
Geoffrey A. MacDonald Gary D. Engle
Chief Executive Officer, President and Chief Operating
Chairman, and a member of the Officer and a member of the
Executive Committee of AFG and Executive Committee of AFG
President and a Director of the (Principal Financial Officer)
Managing General Partner
(Principal Executive Officer)
Date: March 29, 1996 Date: March 29, 1996
By: /s/ Gary M. Romano
Gary M. Romano
Vice President and Controller
of AFG and Clerk of the Managing General
Partner
(Principal Accounting Officer)
Date: March 29, 1996
</TABLE>
<TABLE>
<CAPTION>
-1-
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
INDEX TO ANNUAL REPORT TO THE PARTNERS
<S> <C>
Page
SELECTED FINANCIAL DATA 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 3-6
FINANCIAL STATEMENTS:
Report of Independent Auditors 7
Statement of Financial Position
at December 31, 1995 and 1994 8
Statement of Operations
for the years ended December 31, 1995, 1994 and 1993 9
Statement of Changes in Partners' Capital
for the years ended December 31, 1995, 1994 and 1993 10
Statement of Cash Flows
for the years ended December 31, 1995, 1994 and 1993 11
Notes to the Financial Statements 12-20
ADDITIONAL FINANCIAL INFORMATION:
Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed 21
Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings 22
Schedule of Costs Reimbursed to the Managing General Partner and its Affiliates
as Required by Section 10.4 of the Amended and Restated Agreement and
Certificate of
Limited Partnership 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
The following data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
financial statements.
For each of the five years in the period ended December 31, 1995:
<S> <C> <C> <C> <C> <C>
Summary of
Operations 1995 1994 1993 1992 1991
Lease revenue $ 642,023 $ 1,044,707 $ 1,407,741 $ 2,042,586 $ 2,725,865
Net income $ 191,193 $ 311,740 $ 113,721 $ 318,165 $ 102,883
Per Unit:
Net income $ 0.36 $ 0.59 $ 0.22 $ 0.61 $ 0.20
Cash distributions $ 1.13 $ 1.25 $ 2.50 $ 3.75 $ 3.75
Financial
Position
Total assets $ 1,945,479 $ 2,604,830 $ 3,519,154 $ 4,998,526 $ 7,350,227
Total long-term
obligations $ $ 271,796 $ 619,355 $ 745,527 $ 1,448,624
51,649
Partners' capital $ 1,743,595 $ 2,143,227 $ 2,487,959 $ 3,687,182 $ 5,338,433
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year ended December 31, 1995 compared to the year
ended December 31, 1994 and the year ended December 31, 1994
compared to the year ended December 31, 1993
Overview
As an equipment leasing partnership, American Income Partners III-D
Limited 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
progresses through various stages. Initially, all equipment generates rental
revenues under primary term lease agreements. During the life of the
Partnership, these agreements expire on an intermittent basis and equipment held
pursuant to the related leases are renewed, re-leased or sold, depending on
prevailing market conditions and the assessment of such conditions by American
Finance Group ("AFG") to obtain the most advantageous economic benefit. Over
time, a greater portion of the Partnership's original equipment portfolio
becomes available for remarketing and cash generated from operations and from
sales or refinancings begins to fluctuate. Ultimately, all equipment will be
sold and the Partnership will be dissolved. In accordance with the Partnership's
stated investment objectives and policies, the Managing General Partner is
considering the winding-up of the Partnership's operations, including the
liquidation of its entire portfolio. The Partnership's operations commenced in
1988.
Results of Operations
For the year ended December 31, 1995, the Partnership recognized lease
revenue of $642,023 compared to $1,044,707 and $1,407,741 for the years ended
December 31, 1994 and 1993, respectively. The decrease in lease revenue from
1993 to 1995 was expected and resulted principally from primary lease term
expirations and the sale of equipment. The Partnership also earns interest
income from temporary investments of rental receipts and equipment sales
proceeds in short-term instruments.
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.
In 1995, the Partnership sold equipment having a net book value of $127
to existing lessees and third parties. These sales resulted in a net gain, for
financial statement purposes, of $209,004 compared to net gains in 1994 and 1993
of $39,316 and $316,943 on equipment having a net book value of $51,502 and
$81,078, respectively.
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 and amortization expense was $249,541, $593,080 and
$1,422,010 for the years ended December 31, 1995, 1994 and 1993, respectively.
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. (See Note 2 to
the financial statements herein.)
The Partnership recorded a write-down of the carrying value of its
interest in an L1011-50 aircraft, representing an impairment, during the year
ended December 31, 1995. The resulting charge, $302,300 ($0.58 per limited
partnership unit) in 1995 was based on a comparison of the estimated net
realizable value and corresponding carrying value for the Partnership's interest
in the aircraft.
Net realizable value was estimated based on (I) third-party appraisals
of the Partnership's aircraft and (ii) AFG's assessment of prevailing market
conditions for similar aircraft. In recent years, market values for used
commercial jet aircraft have deteriorated. Consistent price competition and
other pressures within the airline industry have inhibited sustained
profitability for many carriers. Most major airlines have had to re-evaluate
their aircraft fleets and operating strategies. Such issues complicate the
determination of net realizable value for specific aircraft, and particularly
used aircraft, because cost-benefit and market considerations may differ
significantly between major airlines. Aircraft condition age, passenger
capacity, distance capability, fuel efficiency, and other factors also influence
market demand and market values for passenger jet aircraft.
Interest expense was $9,008 or 1.4% of lease revenue in 1995, $37,092 or
3.6% of lease revenue in 1994, and $51,215 or 3.6% of lease revenue in 1993. In
1994, interest expense, as a percentage of lease revenue, remained consistent
with 1993 as a result of interest incurred on legal costs in connection with a
state sales tax dispute. In the future, interest expense will be minimal due to
the scheduled maturity of the Partnership's debt obligations in 1996.
Management fees were 5% of lease revenue in the years ended December
31, 1995, 1994 and 1993 and will not change as a percentage of lease revenue in
future years.
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 14.4%, 10.4% and 5.7%
of lease revenue in 1995, 1994 and 1993, respectively. Operating expenses in
1994 include repair and maintenance costs incurred in connection with the
re-lease of an L1011-50 aircraft to a third party and legal costs in connection
with a sales tax dispute. 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 $640,455, $826,134 and $1,288,572 in
1995, 1994 and 1993, respectively. 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 also decline as the Partnership experiences a higher frequency
of remarketing events.
During 1995, the Partnership and other affiliated partnerships, executed
a renegotiated and extended lease agreement in connection with two DC-10-40
aircraft leased by Northwest Airlines, Inc. ("Northwest"). Pursuant to the
agreement, Northwest will continue to lease these aircraft until September 3,
2000. The Partnership, which owns a less than 1% interest in these aircraft,
will receive $24,020 each year through December 31, 1999 and $18,016 during the
year ending December 31, 2000.
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 expended for equipment acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Statement of Cash Flows. During 1994, the Partnership capitalized
$7,160 in connection with the upgrade of an L1011-50 aircraft. In 1995, the
Partnership realized $209,131 in equipment sale proceeds compared to $90,818 and
$398,021 in 1994 and 1993, respectively. 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 origination of such indebtedness and the subsequent
repayments of principal are reported as components of financing activities. Cash
inflows of $519,929 in 1993 resulted from leveraging a portion of the
Partnership's equipment portfolio with third-party lenders.
No leveragings of equipment occurred in 1994 or 1995.
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. The Partnership's notes payable
will be fully amortized in 1996.
Cash distributions to the General Partners and Recognized Owners 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 year ended December 31, 1995, the Partnership
declared total cash distributions of Distributable Cash From Operations and
Distributable Cash From Sales and Refinancings of $590,825. In accordance with
the Amended and Restated Agreement and Certificate of Limited Partnership (the
"Restated Agreement, as amended"), the Recognized Owners were allocated 99% of
these distributions, or $584,917, and the General Partners were allocated 1%, or
$5,908. The fourth quarter 1995 cash distribution was paid on January 22, 1996.
Cash distributions paid to the Recognized Owners 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. In addition, the Partnership may be required to incur
asset refurbishment or upgrade costs in connection with future remarketing
activities. Accordingly, fluctuations in the level of quarterly cash
distributions will occur during the life of the Partnership.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of American Income Partners III-D Limited Partnership:
We have audited the accompanying statements of financial position of
American Income Partners III-D Limited Partnership as of December 31, 1995 and
1994, and the related statements of operations, changes in partners' capital,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Income
Partners III-D Limited Partnership at December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Additional Financial
Information identified in the Index to Annual Report to the Partners is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ERNST & YOUNG LLP
Boston, Massachusetts
March 12, 1996
<PAGE>
The accompanying notes are an integral part of
these financial statements.
<TABLE>
<CAPTION>
-11-
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
December 31, 1995 and 1994
<S> <C> <C>
ASSETS 1995 1994
Cash and cash equivalents $ $ 477,199
450,165
Rents receivable, net of allowance for
doubtful accounts of $17,000 18,442 100,470
Accounts receivable - affiliate 37,479 35,800
Equipment at cost, net of accumulated
depreciation of $5,332,783 and $5,670,941
at December 31, 1995 and 1994, respectively
1,439,393 1,991,361
Total assets $ 1,945,479 $ 2,604,830
LIABILITIES AND PARTNERS' CAPITAL
Notes payable $ 51,649 $ 271,796
Accrued interest 153 4,867
Accrued liabilities 20,000 15,500
Accrued liabilities - affiliate 24,668 3,557
Deferred rental income 6,944 1,765
Cash distributions payable to partners 98,470 164,118
Total liabilities 201,884 461,603
Partners' capital (deficit):
General Partners (96,358) (92,362)
Limited Partnership Interests (519,926
Units; initial purchase price of $25 each) 1,839,953 2,235,589
Total partners' capital 1,743,595 2,143,227
Total liabilities and partners' capital $ 1,945,479 $ 2,604,830
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
for the years ended December 31, 1995, 1994 and 1993
<C> <C> <C> <C>
1995 1994 1993
Income:
Lease revenue $ 642,023 $ 1,044,707 $ 1,407,741
Interest income 25,252 18,510 13,372
Gain on sale of equipment 209,004 39,316 316,943
Total income 876,279 1,102,533 1,738,056
Expenses:
Depreciation and amortization 249,541 593,080 1,422,010
Write-down of equipment 302,300 -- --
Interest expense 9,008 28,777 51,215
Interest expense - affiliate -- 8,315 --
Equipment management fees - affiliate 32,101 52,235 70,387
Operating expenses - affiliate 92,136 108,386 80,723
Total expenses 685,086 790,793 1,624,335
Net income $ 191,193 $ 311,740 $ 113,721
Net income
per limited partnership unit $ 0.36 $ 0.59 $ 0.22
Cash distributions declared
per limited partnership unit $ 1.13 $ 1.25 $ 2.50
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
for the years ended December 31, 1995, 1994 and 1993
<C> <C> <C> <C> <C>
General
Partners Recognized Owners
Amount Units Amount Total
Balance at December 31, 1992 $ (76,922) 519,926 $ 3,764,104 $ 3,687,182
5,489
Net income - 1993 1,137 -- 112,584 113,721
Cash distributions declared (13,129) -- (1,299,815) (1,312,944)
Balance at December 31, 1993 (88,914) 519,926 2,576,873 2,487,959
Net income - 1994 3,117 -- 308,623 311,740
Cash distributions declared (6,565) -- (649,907) (656,472)
Balance at December 31, 1994 (92,362) 519,926 2,235,589 2,143,227
Net income - 1995 1,912 -- 189,281 191,193
Cash distributions declared (5,908) -- (584,917) (590,825)
Balance at December 31, 1995 $ (96,358) 519,926 $ 1,839,953 $ 1,743,595
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
Cash flows from (used in) operating activities:
Net income $ 191,193 $ 311,740 $ 113,721
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 249,541 593,080 1,422,010
Write-down of equipment 302,300 -- --
Gain on sale of equipment (209,004) (39,316) (316,943)
Changes in assets and liabilities:
Decrease (increase) in:
rents receivable 82,028 54,346 (6,015)
accounts receivable - affiliate (1,679) (35,800) 74,087
Increase (decrease) in:
accrued interest (4,714) (7,403) (8,221)
accrued liabilities 4,500 (17,500) (8,500)
accrued liabilities - affiliate 21,111 (17,071) 12,199
deferred rental income 5,179 (15,942) 6,234
Net cash from operating activities 640,455 826,134 1,288,572
Cash flows from (used in) investing activities:
Purchase of equipment -- (7,160) --
Proceeds from equipment sales 209,131 398,021
90,818
Net cash from investing activities 209,131 83,658 398,021
Cash flows from (used in) financing activities:
Proceeds from notes payable -- -- 519,929
Principal payments - notes payable (220,147) (347,559) (646,101)
Distributions paid (656,473) (820,589) (1,477,062)
Net cash used in financing activities (876,620) (1,168,148) (1,603,234)
Net increase (decrease) in cash and
cash equivalents (27,034) (258,356) 83,359
Cash and cash equivalents at beginning of year 477,199 735,555 652,196
Cash and cash equivalents at end of year $ 450,165 $ 477,199 $ 735,555
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 13,722 $ 44,495 $ 59,436
</TABLE>
<PAGE>
-16-
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
Notes to the Financial Statements
December 31, 1995
NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS
The Partnership was organized as a limited partnership under the
Massachusetts Uniform Limited Partnership Act (the "Uniform Act") on December
30, 1987, for the purpose of acquiring and leasing to third parties a
diversified portfolio of capital equipment. Partners' capital initially
consisted of contributions of $1,000 from the Managing General Partner (AFG
Leasing Incorporated) and $100 from the Initial Limited Partner (AFG Assignor
Corporation). On April 15, 1988, the Partnership issued 519,926 units,
representing assignments of limited partnership interests (the "Units") to 1,129
investors. Unitholders and Limited Partners (other than the Initial Limited
Partner) are collectively referred to as Recognized Owners. The 519,926 Units
include 76 bonus units. Subsequent to the Partnership's Closing, the Partnership
had five General Partners: AFG Leasing Incorporated, a Massachusetts
corporation, Kestutis J. Makaitis, Daniel J. Roggemann, Martin F. Laughlin and
Geoffrey A. MacDonald (collectively the "General Partners"). Messrs. Makaitis,
Roggemann and Laughlin subsequently elected to withdraw as Individual General
Partners. The General Partners, each of whom is affiliated with American Finance
Group ("AFG"), a Massachusetts partnership, are not required to make any other
capital contributions to the Partnership, except as may be required under the
Uniform Act and Section 6.1(b) of the Amended and Restated Agreement and
Certificate of Limited Partnership (the "Restated Agreement as amended").
AFG is a successor to the business of American Finance Group, Inc., a
Massachusetts corporation engaged since its inception in 1980 in various aspects
of the equipment leasing business. In 1991, certain members of AFG's management,
principally Geoffrey A. MacDonald, Chief Executive Officer and co-founder of
AFG, established AFG Holdings (Massachusetts) Limited Partnership ("Holdings
Massachusetts") to acquire ownership and control of AFG. Holdings Massachusetts
effected this event by acquiring all of the equity interests of AFG's two
partners, AFG Holdings Illinois Limited Partnership ("Holdings Illinois") and
AFG Corporation. Holdings Massachusetts incurred significant indebtedness to
finance this acquisition, a significant portion of which was scheduled to mature
in 1995.
On December 16, 1994, the senior lender to Holdings Massachusetts (the
"Senior Lender") assumed control of its security interests in Holdings Illinois
and AFG Corporation and sold all such interests to GDE Acquisitions Limited
Partnership, a Massachusetts limited partnership owned and controlled entirely
by Gary D. Engle, President and member of the Executive Committee of AFG. As a
result of this transaction, GDE Acquisitions Limited Partnership acquired all of
the assets, rights and obligations of AFG from the Senior Lender and assumed
control of AFG. Geoffrey A. MacDonald remains as Chief Executive Officer of AFG
and member of its Executive Committee.
Significant operations commenced April 19, 1988 when the Partnership made
its initial equipment purchase. Pursuant to the Restated Agreement, as amended,
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings will be allocated 99% to the Recognized Owners and 1% to the
General Partners until Payout and 85% to the Recognized Owners and 15% to the
General Partners after Payout. Payout will occur when the Recognized Owners have
received distributions equal to their original investment plus a cumulative
annual return of 10% (compounded quarterly) on undistributed invested capital.
Under the terms of a Management Agreement between the Partnership and
AFG, management services are provided by AFG to the Partnership at fees which
the Managing General Partner believes to be competitive for similar services.
(Also see Note 4.)
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Cash Flows
The Partnership considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. From time to time, the
Partnership invests excess cash with large institutional banks in reverse
repurchase agreements with overnight maturities. Under the terms of the
agreements, title to the underlying securities passes to the Partnership. The
securities underlying the agreements are book entry securities. At December 31,
1995, the Partnership had $445,000 invested in reverse repurchase agreements
secured by U.S. Treasury Bills or interests in U.S. Government securities.
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
$721,924 are due as follows:
For the year ending December 31, 1996 $ 362,200
1997 236,656
1998 81,032
1999 24,020
2000 18,016
Total $ 721,924
<TABLE>
<CAPTION>
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1995, 1994 and 1993 is as
follows:
<S> <C> <C> <C>
1995 1994 1993
Marsh Supermarkets, Inc. $ 157,254 $ 207,512 $ 329,593
Northwest Airlines, Inc. $ 157,136 $ 192,677 $ 228,353
ING Aviation Lease $ 77,133 -- --
Equicor, Incorporated -- $ 133,423 --
</TABLE>
During 1995, the Partnership and other affiliated partnerships, executed
a renegotiated and extended lease agreement in connection with two DC-10-40
aircraft leased by Northwest Airlines, Inc. ("Northwest"). Pursuant to the
agreement, Northwest will continue to lease these aircraft until September 3,
2000. The Partnership, which owns a less than 1% interest in these aircraft,
will receive $24,020 each year through December 31, 1999 and $18,016 during the
year ending December 31, 2000.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes.
Actual results could differ from those estimates.
Equipment on Lease
All equipment was acquired from AFG, one of its affiliates, including
other equipment leasing programs sponsored by AFG, or from third-party sellers.
Equipment cost represents asset base price plus acquisition fees and was
determined in accordance with the Restated Agreement, as amended, and certain
regulatory guidelines. Asset base price is affected by the relationship of the
seller to the Partnership as summarized herein. Where the seller of the
equipment was AFG or an affiliate, asset base price was the lower of (i) the
actual price paid for the equipment by AFG or the affiliate plus all actual
costs accrued by AFG or the affiliate while carrying the equipment less the
amount of all rents earned by AFG or the affiliate prior to selling the
equipment or (ii) fair market value as determined by the Managing General
Partner in its best judgment, including all liens and encumbrances on the
equipment and other actual expenses. Where the seller of the equipment was a
third party who did not manufacture the equipment, asset base price was the
lower of (i) the price invoiced by the third party or (ii) fair market value as
determined by the Managing General Partner. Where the seller of the equipment
was a third party who also manufactured the equipment, asset base price was the
manufacturer's invoice price, which price was considered to be representative of
fair market value.
Depreciation and Amortization
The Partnership's depreciation policy is intended to allocate the cost of
equipment over the period during which it produces economic benefit. The
principal period of economic benefit is considered to correspond to each asset's
primary lease term, which term generally represents the period of greatest
revenue potential for each asset. Accordingly, 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.
Periodically, the Managing General Partner evaluates the net carrying value of
equipment to determine whether it exceeds estimated net realizable value.
Adjustments to reduce the net carrying value of equipment are recorded in those
instances where estimated net realizable value is considered to be less than net
carrying value. Such adjustments are reflected separately on the accompanying
Statement of Operations as Write-Down of Equipment.
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.
Organization costs are amortized using the straight-line method over a
period of five years.
Allocation of Profits and Losses
For financial statement purposes, net income or loss is allocated to each
Partner according to their respective ownership percentages (99% to the
Recognized Owners and 1% to the General Partners). See Note 6 concerning
allocation of income or loss for income tax purposes.
Net Income and Cash Distributions Per Unit
Net income and cash distributions per Unit are based on 519,926 Units
outstanding during each of the three years in the period ended December 31, 1995
and computed after allocation of the General Partners' 1% share of net income
and cash distributions.
Accrued Liabilities - Affiliate
Unpaid operating expenses paid by AFG on behalf of the Partnership are
reported as Accrued Liabilities - Affiliate. (See Note 4.)
Provision for Income Taxes
No provision or benefit from income taxes is included in the accompanying
financial statements. The Partners are responsible for reporting their
proportionate shares of the Partnership's taxable income or loss and other tax
attributes on their tax returns.
Impact of Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Partnership will adopt Statement 121 in the first quarter of 1996 and, based on
current circumstances, does not believe the impact of adoption to be material to
the financial statements of the Partnership.
<TABLE>
<CAPTION>
NOTE 3 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at
December 31, 1995. In the opinion of AFG, the acquisition cost of the equipment
did not exceed its fair market value.
<S> <C> <C> <C>
Lease
Term Equipment
Equipment Type (Months) at Cost
Location
Aircraft 36-108 $ 3,212,715 MN/Foreign
Retail store fixtures 1-36 2,309,320 AL/DE/GA/IN/KY/MD/NC/SC/TN
VA/WV
Manufacturing 60 414,060 CA
Materials handling 4-60 395,697 AZ/CA/CT/FL/MA/MI/MO/MS/NJ/PA
Computers and peripherals 1-53 272,441 KS/MI
Tractors and heavy-duty trucks 24-60 115,786 NC
Construction and mining 48-60 32,331 MA
Photocopying 6-36 19,826 NJ
Total equipment cost 6,772,176
Accumulated depreciation (5,332,783)
Equipment, net of accumulated depreciation $ 1,439,393
</TABLE>
In certain cases, the cost of the Partnership's equipment represents a
proportionate ownership interest. The remaining interests are owned by AFG or an
affiliated equipment leasing program sponsored by AFG. 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. 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. At December 31, 1995, the Partnership's equipment
portfolio included equipment having a proportionate original cost of $4,065,790,
representing approximately 60% of total equipment cost.
Certain of the equipment and related lease payment streams were used to
secure term loans with third-party lenders. The preceding summary of equipment
includes leveraged equipment having an original cost of approximately $1,871,000
which had been fully depreciated at December 31, 1995. (See Note 5.)
Generally, the costs associated with maintaining, insuring and operating
the Partnership's equipment are incurred by the respective lessees pursuant to
terms specified in their individual lease agreements with the Partnership.
As equipment is sold to third parties, or otherwise disposed of, the
Partnership recognizes a gain or loss equal to the difference between the net
book value of the equipment at the time of sale or disposition and the proceeds
realized upon sale or disposition. The ultimate realization of estimated
residual value in the equipment is dependent upon, among other things, AFG's
ability to maximize proceeds from selling or re-leasing the equipment upon
expiration of the primary lease terms. At December 31, 1995, the Partnership
held equipment for sale or re-lease with a cost of approximately $63,000 which
had been fully depreciated. The Managing General Partner is actively seeking the
sale or re-lease of all equipment not on lease.
The Partnership recorded a write-down of the carrying value of its
interest in an L1011-50 aircraft, representing an impairment, during the year
ended December 31, 1995. The resulting charge, $302,300 ($0.58 per limited
partnership unit) in 1995 was based on a comparison of the estimated net
realizable value and corresponding carrying value for the Partnership's interest
in the aircraft. NOTE 4 - 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 years in
the period ended December 31, 1995, which were paid or accrued by the
Partnership to AFG or its Affiliates, are as follows:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Equipment management fees $ 32,101 $ 52,235 $ 70,387
Interest expense - affiliate -- 8,315 --
Administrative services 17,904 12,000 14,955
Reimbursable operating expenses due to
third parties 74,232 96,386 65,768
Total $ 124,237 $ 168,936 $ 151,110
</TABLE>
As provided under the terms of the Management Agreement, AFG is
compensated for its services to the Partnership. Such services include all
aspects of acquisition, management and sale of equipment. For acquisition
services, AFG is compensated by an amount equal to 4.75% of Equipment Base Price
paid by the Partnership. For management services, AFG is compensated by an
amount equal to the lesser of (i) 5% of gross lease rental revenue or (ii) fees
which the Managing General Partner reasonably believes to be competitive for
similar services for similar equipment. Both of these fees are subject to
certain limitations defined in the Management Agreement. Compensation to AFG for
services connected to the sale of equipment is calculated as the lesser of (i)
3% of gross sale proceeds or (ii) one-half of reasonable brokerage fees
otherwise payable under arm's length circumstances. Payment of the remarketing
fee is subordinated to Payout and is subject to certain limitations defined in
the Management Agreement.
Interest expense - affiliate represents interest incurred on legal costs
in connection with a state sales tax dispute involving certain equipment owned
by the Partnership and other affiliated investment programs sponsored by AFG.
Legal costs incurred by AFG to resolve this matter and the interest thereon was
allocated to the Partnership and other affected investment programs.
Administrative charges represent amounts owed to AFG, pursuant to Section 10.4
of the Restated Agreement, as amended, for persons employed by AFG who are
engaged in providing administrative services to the Partnership. Reimbursable
operating expenses due to third parties represent costs paid by AFG on behalf of
the Partnership which are reimbursed to AFG.
All equipment was acquired from AFG, one of its affiliates, including
other equipment leasing programs sponsored by AFG, or from third-party sellers.
The Partnership's Purchase Price was determined by the method described in Note
2.
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 December 31, 1995, the Partnership was owed $37,479 by AFG for such funds and
the interest thereon. These funds were remitted to the Partnership in January
1996.
On August 18, 1995, Atlantic Acquisition Limited Partnership ("AALP"), a
newly formed Massachusetts limited partnership owned and controlled by certain
principals of AFG, commenced a voluntary cash Tender Offer (the "Offer") for up
to approximately 45% of the outstanding units of limited partner interest in
this Partnership and 20 affiliated partnerships sponsored and managed by AFG.
The Offer was subsequently amended and supplemented in order to provide
additional disclosure to unitholders; increase the offer price; reduce the
number of units sought to approximately 35% of the outstanding units; and extend
the expiration date of the Offer to October 20, 1995. Following commencement of
the Offer, certain legal actions were initiated by interested persons against
AALP,each of the general partners (4 in total) of the 21 affected programs, and
various other affiliates and related parties. One action, a class action brought
in the United States District Court for the District of Massachusetts (the
"Court") on behalf of the unitholders (limited partners), sought to enjoin the
Offer and obtain unspecified monetary damages. A settlement of this litigation
was approved by the Court on November 15, 1995. A second class action, brought
in the Superior Court of the Commonwealth of Massachusetts (the "Superior
Court") seeking to enjoin the Offer, obtain unspecified monetary damages, and
intervene in the first class action, was dismissed by the Superior Court. The
Plaintiffs have filed an appeal in this matter. The limited partners of the
Partnership tendered approximately 37,604 units or 7.23% of the total
outstanding units of the Partnership to AALP. The operations of the Partnership
are not expected to be adversely affected by these proceedings or settlements.
NOTE 5 - NOTES PAYABLE
Notes payable at December 31, 1995 consisted of installment notes of
$51,649 payable to a bank. The installment notes are non-recourse, with interest
rates of 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 during the year ending December 31, 1996.
NOTE 6 - INCOME TAXES
The Partnership is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts of
the Partnership.
For financial statement purposes, the Partnership allocates net income
or loss to each class of partner according to their respective ownership
percentages (99% to the Recognized Owners and 1% to the General Partners). This
convention differs from the income or loss allocation requirements for income
tax and Dissolution Event purposes as delineated in the Restated Agreement, as
amended. For income tax purposes, the Partnership allocates net income or loss
in accordance with the provisions of such agreement. The Restated Agreement, as
amended, requires that upon dissolution of the Partnership, the General Partners
will be required to contribute to the Partnership an amount equal to any
negative balance which may exist in the General Partners' tax capital account.
At December 31, 1995, the General Partners had a positive tax capital account
balance.
The following is a reconciliation between net income reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1995, 1994 and 1993:
<PAGE>
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Net income $ 191,193 $ 311,740 $ 113,721
Financial statement depreciation
in excess of (less than) tax
depreciation (37,022) 219,281 673,802
Write-down of equipment 302,300
Prepaid rental income 5,179 (15,942) 6,234
Other 127 31,502 (2,667)
Net income for federal income tax
reporting purposes $ 461,777 $ 546,581 $ 791,090
</TABLE>
The principal component of "Other" consists of the difference between
the tax gain on equipment disposals and the financial statement gain on
equipment disposals.
<TABLE>
<CAPTION>
The following is a reconciliation between partners' capital reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1995 and 1994:
<S> <C> <C>
1995 1994
Partners' capital $ 1,743,595 $ 2,143,227
Add back selling commissions and
organization and offering costs 1,517,719 1,517,719
Financial statement distributions in excess
of tax distributions 985 1,641
Cumulative difference between federal income
tax and financial statement income (820,407) (1,090,991)
Partners' capital for federal income tax
reporting purposes $ 2,441,892 $ 2,571,595
</TABLE>
Financial statement distributions in excess of tax distributions and
cumulative difference between federal income tax and financial statement income
represent timing differences.
NOTE 7 - LEGAL PROCEEDINGS
On September 7, 1993, Rose's Stores, Inc. (the "Debtor"), a lessee of
the Partnership, filed for protection under Chapter 11 of the Bankruptcy Code.
AFG, on behalf of the Partnership and various other AFG-sponsored investment
programs, filed a proof of claim in this case, which claim was amended and
restated. In August 1994, the Bankruptcy Court approved a Motion to Reject
Certain Executory Equipment Leases filed by the Debtor relating to approximately
$212,000 of equipment owned by this Partnership. The Partnership sold all such
equipment during 1994 and recognized a net gain of $233 for financial statement
purposes. During 1995, the Partnership sold an additional $2,313 of equipment
previously leased to the Debtor and recognized a net gain of $145 for financial
statement purposes. At December 31, 1995, the Partnership owned other equipment,
having an original cost of $439,027, which was leased to the Debtor. This
equipment represents approximately 6% of the Partnership's aggregate equipment
portfolio and is fully depreciated for financial statement purposes. All of this
equipment is currently being leased pursuant to renewal rental schedules
executed by the Debtor; however, a sale with respect to such equipment is
currently pending.
The Debtor's First Amended Joint Plan of Reorganization (the "Plan of
Reorganization") was adopted on December 14, 1994. On June 8, 1995 and August
18, 1995, AFG, on behalf of the Partnership and various other AFG-sponsored
investment programs, was issued 24,319 shares of the Debtor's common stock
pursuant to the Plan of Reorganization. The common stock, which had a market
value of $2.38 per share (for 17,023 of the shares) and $2.56 per share (for
7,296 of the shares) at the respective settlement dates, was issued in full
satisfaction of the outstanding unsecured claims of the affected investment
programs. The Partnership's proportionate interest in this settlement is 5.46%
or approximately 1,329 shares. This bankruptcy did not have a material adverse
effect on the financial position of the Partnership.
NOTE 8 - SUBSEQUENT EVENT
On January 1, 1995, AFG entered into a series of agreements with PLM
International, Inc., a Delaware corporation headquartered in San Francisco,
California ("PLM"), whereby PLM would: (i) purchase, in a multi-step
transaction, certain of AFG's assets and (ii) provide accounting, asset
management and investor services to AFG and certain of AFG's affiliates,
including the Partnership and all other equipment leasing programs managed by
AFG (the "Investment Programs").
On January 3, 1996, AFG and PLM executed an amendment to the 1995
agreements whereby PLM purchased: (i) AFG's lease origination business and
associated contracts, (ii) the rights to the name "American Finance Group" and
associated logo, and (iii) certain furniture, fixtures and computer software.
PLM hired AFG's marketing force and certain other support personnel effective
January 1, 1996 in connection with the transaction and relinquished its
responsibilities under the 1995 agreements to provide accounting, asset
management and investor services to AFG, its affiliates and the Investment
Programs after December 31, 1995. Accordingly, AFG and its affiliates retain
ownership and control and all authority and rights with respect to each of the
general partners or managing trustees of the Investment Programs; and AFG, as
Manager, will continue to provide accounting, asset management and investor
services to the Partnership.
Pursuant to the 1996 amendment to the 1995 agreements, AFG and certain
of its affiliates agreed not to compete with the lease origination business sold
to PLM for a period of five years. AFG reserved the right to satisfy all
equipment needs of the Partnership and all other Investment Programs and
reserved certain other rights not material to the Partnership. AFG also agreed
to change its name, except where it is used in connection with the Investment
Programs. AFG's management considers the amendment to the 1995 agreements to be
in the best interest of AFG and the Partnership.
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST
OF EQUIPMENT DISPOSED
for the years ended December 31, 1995, 1994 and 1993
The Partnership classifies all rents from leasing equipment as lease
revenue. Upon expiration of the primary lease terms, equipment may be sold,
rented on a month-to-month basis or re-leased for a defined period under a new
or extended lease agreement. The proceeds generated from selling or re-leasing
the equipment, in addition to any month-to-month revenues, represent the total
residual value realized for each item of equipment. Therefore, the financial
statement gain or loss, which reflects the difference between the net book value
of the equipment at the time of sale or disposition and the proceeds realized
upon sale or disposition may not reflect the aggregate residual proceeds
realized by the Partnership for such equipment.
<TABLE>
<CAPTION>
The following is a summary of cash excess associated with equipment
dispositions occurring in the years ended December 31, 1995, 1994 and 1993.
<S> <C> <C> <C>
1995 1994 1993
Rents earned prior to disposal of equipment,
net of interest charges $ 885,284 $ 929,133 $ 1,835,296
Sale proceeds realized upon disposition of
equipment 209,131 90,818 398,021
Total cash generated from rents and
equipment sale proceeds 1,094,415 1,019,951 2,233,317
Original acquisition cost of equipment
disposed 890,126 792,558 1,817,146
Excess of total cash generated to cost of
equipment disposed $ 204,289 $ 227,393 $ 416,171
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS,
SALES AND REFINANCINGS
for the year ended December 31, 1995
<S> <C> <C> <C>
Sales and
Operations Refinancings Total
Net income (loss) $ (17,811) $ 209,004 $ 191,193
Add back:
Depreciation 249,541 -- 249,541
Write-down of equipment 302,300 -- 302,300
Management fees 32,101 -- 32,101
Book value of disposed equipment -- 127 127
Less:
Principal reduction of notes payable (220,147) -- (220,147)
Cash from operations, sales and
refinancings 345,984 209,131 555,115
Less:
Management fees (32,101) -- (32,101)
Distributable cash from operations,
sales and refinancings 313,883 209,131 523,014
Other sources and uses of cash:
Cash at beginning of year 477,199 -- 477,199
Net change in receivables
and accruals 106,425 -- 106,425
Less:
Cash distributions paid (447,342) (209,131) (656,473)
Cash at end of year $ 450,165 -- $ 450,165
</TABLE>
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
SCHEDULE OF COSTS REIMBURSED TO THE
MANAGING GENERAL PARTNER AND ITS AFFILIATES AS REQUIRED
BY SECTION 10.4 OF THE AMENDED AND RESTATED
AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
December 31, 1995
For the year ended December 31, 1995, the Partnership reimbursed the
Managing General Partner and its Affiliates for the following costs:
Operating expenses $ 65,636
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 450,165
<SECURITIES> 0
<RECEIVABLES> 72,921
<ALLOWANCES> 17,000
<INVENTORY> 0
<CURRENT-ASSETS> 506,086
<PP&E> 6,772,176
<DEPRECIATION> 5,332,783
<TOTAL-ASSETS> 1,945,479
<CURRENT-LIABILITIES> 150,235
<BONDS> 51,649
<COMMON> 0
0
0
<OTHER-SE> 1,743,595
<TOTAL-LIABILITY-AND-EQUITY> 1,945,479
<SALES> 0
<TOTAL-REVENUES> 876,279
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 676,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,008
<INCOME-PRETAX> 191,193
<INCOME-TAX> 0
<INCOME-CONTINUING> 191,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 191,193
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
