<PAGE>
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 the quarterly period ended September 30, 1996
--------------------------------------------
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 September 30, 1996 Commission File No. 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 North Washington Street, Boston, MA 02114
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
-------------------------
- -------------------------------------------------------------------------------
(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-D LIMITED PARTNERSHIP
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Statement of Financial Position at September 30, 1996 and
December 31, 1995 3
Statement of Operations for the Three and Nine Months Ended
September 30, 1996 and 1995 4
Statement of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 5
Notes to the Financial Statements 6-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-14
PART II. OTHER INFORMATION
ITEMS 1-6 15
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
1996 1995
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 458,619 $ 450,165
Rents receivable, net of allowance for doubtful accounts
of $17,000 at December 31, 1995 - 18,442
Due from Buyer 470,647 -
Accounts receivable--affiliate 848,913 37,479
Equipment at cost, net of accumulated depreciation
of $5,332,783 at December 31, 1995 - 1,439,393
---------- ----------
Total assets $1,778,179 $1,945,479
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Notes payable $ - $ 51,649
Accrued interest - 153
Accrued liabilities 46,272 20,000
Accrued liabilities--affiliate 9,400 24,668
Deferred rental income - 6,944
Cash distributions payable to partners 1,547,961 98,470
---------- ----------
Total liabilities 1,603,633 201,884
PARTNERS' CAPITAL (DEFICIT):
General Partners (112,048) (96,358)
Limited Partnership Interests (519,926 Units;
initial purchase price of $25 each) 286,594 1,839,953
---------- ----------
Total partners' capital 174,546 1,743,595
---------- ----------
Total liabilities and partners' capital $1,778,179 $1,945,479
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INCOME:
Lease revenue $182,584 $164,480 $417,549 $474,639
Interest income 8,926 6,141 19,906 19,673
Gain on sale of equipment 184,843 345 286,329 181,640
-------- -------- -------- --------
Total income 376,353 170,966 723,784 675,952
-------- -------- -------- --------
EXPENSES:
Depreciation 30,941 64,202 125,807 195,781
Write-down of equipment - - 300,000 -
Interest expense - 1,929 577 7,749
Equipment management fees--affiliate 9,129 8,224 20,877 23,732
Operating expenses--affiliate 69,074 13,621 100,671 56,996
-------- -------- -------- --------
Total expenses 109,144 87,976 547,932 284,258
-------- -------- -------- --------
NET INCOME $267,209 $ 82,990 $175,852 $391,694
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 0.51 $ 0.16 $ 0.34 $ 0.75
-------- -------- -------- --------
-------- -------- -------- --------
CASH DISTRIBUTIONS DECLARED PER LIMITED PARTNERSHIP UNIT $ 2.95 $ 0.31 $ 3.32 $ 0.94
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 175,852 $ 391,694
Adjustments to reconcile net income to cash from
operating activities-
Depreciation 125,807 195,781
Write-down of equipment 300,000 -
Gain on sale of equipment (286,329) (181,640)
Decrease in allowance for doubtful accounts (17,000) -
Changes in assets and liabilities-
Decrease (increase) in-
Rents receivable 35,442 57,469
Accounts receivable--affiliate (99,671) 7,011
Increase (decrease) in-
Accrued interest (153) (3,997)
Accrued liabilities 26,272 (1,750)
Accrued liabilities--affiliate (15,268) (783)
Deferred rental income (6,944) (360)
--------- ---------
Cash from operating activities 238,008 463,425
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from equipment sales 117,505 181,640
--------- ---------
Cash from investing activities 117,505 181,640
--------- ---------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Principal payments--notes payable (51,649) (169,706)
Distributions paid (295,410) (492,354)
--------- ---------
Cash used in financing activities (347,059) (662,060)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,454 (16,995)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 450,165 477,199
--------- ---------
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 458,619 $ 460,204
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 730 $ 11,746
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
As discussed in Note 1, the Partnership entered into a sale transaction to
dispose of its equipment portfolio. This transaction was closed on
September 30, 1996. The Partnership received net sales proceeds of
$470,647 that were deposited into an escrow account and transferred to the
Partnership on October 3, 1996. This amount has been reflected as Due from
Buyer on the Statement of Financial Position at September 30, 1996.
As discussed in Notes 1 and 4, the Partnership entered into an additional
sale transaction to dispose of its interest in an aircraft leased to
Northwest Airlines, Inc. This transaction was settled on September 30,
1996. The net sales proceeds of $711,763 were deposited into an escrow
account and transferred to the Partnership on October 3, 1996. This amount
has been included in Accounts Receivable-Affiliate on the Statement of
Financial Position at September 30, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
(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 1995 Annual Report. Except as disclosed herein, there has been no
material change to the information presented in the footnotes to the
1995 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the
financial position at September 30, 1996 and December 31, 1995 and
results of operations for the three and nine month periods ended
September 30, 1996 and 1995 have been made and are reflected.
On September 30, 1996, the Partnership sold all of its equipment assets,
excluding its interest in an aircraft, for $470,647 (see Notes 4 and 5).
In October 1996, the Partnership filed Form 8-K, which provided a
description of the remarketing process and the terms of sale. The
entire remarketing effort was undertaken jointly by 15 individual
equipment leasing programs, consisting of the Partnership and 14
affiliated partnerships, each of which individually executed separate
purchase and sale agreements with RSL Finance Limited Partnership II
(the Buyer) and certain of which entered into a collective purchase and
sale agreement with Northwest Airlines Inc. (NWA) to sell all or a
portion of their equipment assets (the Sale Assets). Certain of these
partnerships, including the Partnership, sold their collective interest
in a McDonnell Douglas MD-82 aircraft (NWA Aircraft) to NWA. The net
consideration for this aircraft was allocated first to remaining lease
rental obligations and second to sale proceeds. The Partnership's
proportionate share of this consideration was $813,087, including
$711,763 representing net sale proceeds (see Notes 3 and 4).
The Managing General Partner anticipates that the Partnership will be
dissolved on or before December 31, 1996 in accordance with the
Partnership's Amended and Restated Agreement and Certificate of Limited
Partnership. Prior to December 31, 1996, the Managing General Partner
will wind-up the operations of the Partnership and make a liquidating
distribution of $1,547,961 to the Partners. The distribution
approximates all of the Partnership's available cash, net of estimated
wind-up costs and a contingency reserve. In November 1996, the
contingency reserve of $175,000 was deposited into a separate account to
cover any unforeseen liabilities that may arise in future periods. At
such time as the Managing General Partner considers appropriate, any
balance in the reserve account will be distributed to the Partners
according to their respective ownership interests in the Partnership at
the date of its dissolution (see Note 6).
6
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(1) BASIS OF PRESENTATION (Continued)
The financial statements presented have been prepared on a going-concern
basis through September 30, 1996. Due to the imminent dissolution of
the Partnership requiring liquidation and distribution of its net
assets, a statement of net assets in liquidation as of September 30,
1996 is presented below. This statement is prepared based on
anticipated liquidating values of assets and liabilities. Management
has determined the liquidating values of amounts receivable based on
collectibility of balances prior to any final distribution and
termination of the Partnership. Accrued liabilities have been estimated
based on the existing obligations and anticipated fees and costs
associated with the sales transactions and the wind-up effort. Cash
distributions to partners, including contingency reserves, may vary
depending upon the realization of the amounts estimated by management.
Values estimated by management may be different from actual amounts.
Assets:
Cash and cash equivalents $ 458,619
Due from Buyer 470,647
Accounts receivable--affiliate 848,913
----------
Total assets $1,778,179
----------
----------
Liabilities:
Accrued liabilities $ 46,272
Accrued liabilities--affiliate 9,400
Cash distributions payable to partners,
including contingency reserve 1,722,507
----------
Total liabilities $1,778,179
----------
----------
Net assets $ -
----------
----------
(2) CASH
The Partnership invests excess cash with large institutional banks in
reverse repurchase agreements with overnight maturities. The reverse
repurchase agreements are secured by U.S. Treasury Bills or interests in
U.S. Government securities. At September 30, 1996, the Partnership had
$455,000 invested in reverse repurchase agreements.
7
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(3) REVENUE RECOGNITION
Rents were payable to the Partnership monthly or quarterly and no
significant amounts were calculated on factors other than the passage of
time. The leases were accounted for as operating leases and were
noncancelable. Rents received prior to their due dates were deferred.
Lease rentals, representing early termination rents, were recognized as
revenue in the period in which they were received.
As discussed in Note 1, the Partnership realized $101,324 of early
termination rents in connection with the sale of the NWA Aircraft.
(4) EQUIPMENT
The following is a summary of equipment owned by the Partnership
immediately prior to the sales transactions described in Note 1.
LEASE TERM EQUIPMENT
EQUIPMENT TYPE (MONTHS) AT COST
Aircraft 36-60 $ 3,212,715
Manufacturing 60 414,060
Materials handling 4-60 336,197
Tractors and heavy duty trucks 24-60 115,786
Construction and mining 48-60 31,866
Photocopying 6-36 19,732
-----------
Total equipment cost 4,130,356
Accumulated depreciation (3,116,770)
-----------
Equipment, net of accumulated depreciation $ 1,013,586
-----------
-----------
As discussed in Note 1, on September 30, 1996, the Partnership sold all of
the foregoing equipment for $1,182,410, including $711,763 of net sales
proceeds related to the NWA Aircraft.
7
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(5) RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Partnership are paid by American
Finance Group (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 nine month periods ended September 30, 1996 and 1995,
which were paid or accrued by the Partnership to AFG or its Affiliates, are
as follows:
1996 1995
Equipment management fees $ 20,877 $23,732
Administrative charges 17,904 13,428
Reimbursable operating expenses due to third parties 82,767 43,568
-------- -------
Total $121,548 $80,728
-------- -------
-------- -------
Administrative charges and reimbursable operating expenses due to
third parties in 1996 include all costs anticipated in connection with
the Partnership's wind-up and dissolution.
All rents and proceeds from the sale of equipment, including the sales
transactions described in Note 1, 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 September 30, 1996, the Partnership was owed $848,913
by AFG for such funds and the interest thereon. These funds were
remitted to the Partnership in October 1996. The sales proceeds due
from the Buyer were deposited into the escrow account subsequent to
September 30, 1996.
The remarketing effort described in Note 1 was undertaken jointly by
15 individual equipment leasing programs, consisting of the
Partnership and 14 affiliated partnerships (Other Affected
Partnerships). Collectively, the Partnership and the Other Affected
Partnerships offered for sale all or a portion of their equipment
assets. Thirteen of the programs, including the Partnership, sold all
of their equipment assets and are expected to wind up business
operations by December 31, 1996; the remaining two programs, which
will continue their business operations beyond December 31, 1996, sold
only their interest in assets owned jointly with one or more of the 13
programs anticipating wind-up by December 31, 1996. Substantially all
of the Partnership's equipment assets of material value represented
partial ownership interests whereby the Partnership owned less than a
100% interest in the equipment it sold. The remaining interests in
such assets were owned by one or more of the Other Affected
Partnerships. Ultimately, the Sale Assets were sold for an aggregate
adjusted sale price of approximately $32,997,000, of which the
Partnership's proportionate share, net of associated costs, was
determined to be $470,647. In a separate transaction, the Partnership
and certain of the Other Affected Partnerships sold their entire
interest in the NWA Aircraft to the lessee and agreed to terminate the
lease agreement for total proceeds of $13,200,000, of which the
Partnership's proportionate share, net of associated costs, was
determined to be $813,087, including early
9
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Continued)
(5) RELATED PARTY TRANSACTIONS (Continued)
termination rents of $101,324. The Partnership's proportionate share
in both transactions is net of certain third-party advisory fees
incurred in connection with the equipment sales.
The Buyer is a limited partnership established to acquire the Sale
Assets, excluding the NWA Aircraft, and has no direct affiliation with
the Partnership, the Other Affected Partnerships, the General Partners
or AFG. The sole general partner of the Buyer is RSL Holdings, Inc.
(RSL). An affiliate of RSL purchased a significant limited
partnership interest in a direct-participation equipment leasing
program co-sponsored by AFG in 1992. AFG acquired this interest in
1993 for cash and assumption of indebtedness. There have been no
other business dealings between the Buyer and AFG and their
affiliates.
(6) SUBSEQUENT EVENTS
On October 10, 1996, the General Partner entered into a Cross
Partnership Agreement with the general partners of certain other
affiliated partnerships. Under this agreement, each of the general
partners has agreed to set aside a contingency reserve amount for
future liabilities and deposit that amount into an account that may be
accessed by any of the general partners to fund any and all
obligations contemplated under the Cross Partnership Agreement. Any
obligation of the Partnership that is not associated with the sales
transactions (see Note 1) will directly reduce the Partnership's
reserve amount. All costs arising as a result of the sales
transactions will be allocated against the reserve amount of the
Partnership and other affiliated partnerships. If the reserve amount
contributed by the Partnership is reduced below zero, the reserve
amounts contributed by the general partners of the other affiliated
partnerships shall be debited on a pro rata basis to cover the
deficit. Likewise, if the reserve amount contributed by one of the
affiliated partnerships is reduced below zero, the reserve amounts of
the Partnership and the other affiliated partnerships shall be debited
on a pro rata basis to cover the deficit. Upon termination of the
contingency reserve account, any monies remaining will be distributed
to those partnerships with positive balances. The Partnership's
reserve amount under this agreement was determined to be $175,000 and
was deposited in the reserve account in November 1996.
In connection with the wind-up effort, AFG Leasing Incorporated, the
Managing General Partner of the Partnership, was merged with and into
AFG Leasing IV Incorporated effective October 17, 1996. Accordingly,
AFG Leasing IV Incorporated became the Managing General Partner of the
Partnership commencing October 17, 1996. AFG Leasing IV Incorporated
was established in 1987 and is also the general partner or managing
general partner of certain other affiliated partnerships sponsored by
AFG.
10
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Three and Nine Months Ended September 30, 1996 Compared To the Three and
Nine Months Ended September 30, 1995:
OVERVIEW
The Partnership was organized in 1988 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment
subject to lease agreements with third parties. The Partnership's stated
investment objectives and policies contemplated that the Partnership would
wind up its operations within approximately seven years of its inception.
On September 30, 1996, the Partnership sold all of its equipment assets. The
remarketing effort described in Note 1 was undertaken jointly by 15
individual equipment leasing programs, consisting of the Partnership and 14
affiliated partnerships (Other Affected Partnerships). Collectively, the
Partnership and the Other Affected Partnerships offered for sale all or a
portion of their equipment assets (Sale Assets). Thirteen of the programs,
including the Partnership, sold all of their equipment assets and are
expected to wind up business operations by December 31, 1996; the remaining
two programs, which will continue their business operations beyond December
31, 1996, sold only their interest in assets owned jointly with one or more
of the 13 programs anticipating wind up by December 31, 1996. Substantially
all of the Partnership's equipment assets of material value represented
partial ownership interests whereby the Partnership owned less than a 100%
interest in the equipment it sold. The remaining interests in such assets
were owned by one or more of the Other Affected Partnerships. Ultimately,
the Sale Assets, excluding the NWA Aircraft, were sold for an aggregate
adjusted sale price of approximately $32,997,000, of which the Partnership's
proportionate share, net of associated costs, was determined to be $470,647.
In a separate transaction, the Partnership and certain of the Other Affected
Partnerships sold their entire interest in the NWA Aircraft to the lessee and
agreed to terminate the lease agreement for total proceeds of $13,200,000, of
which the Partnership's proportionate share, net of associated costs, was
determined to be $813,087, including early termination rents of $101,324.
The Partnership's proportionate share in both transactions is net of certain
third-party advisory fees incurred in connection with the equipment sales.
The Managing General Partner anticipates that the Partnership will be
dissolved on or before December 31, 1996 in accordance with the Partnership's
Amended and Restated Agreement and Certificate of Limited Partnership
(Partnership Agreement). Prior to December 31, 1996, the Managing General
Partner will wind up the operations of the Partnership and make a liquidating
cash distribution of $1,547,961 to the Partners. The distribution
approximates all of the Partnership's available cash, net of estimated
wind-up costs and a
11
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
(Continued)
OVERVIEW (Continued)
contingency reserve. In November 1996, the contingency reserve of $175,000
was deposited in a separate account to cover any unforeseen liabilities that
may arise in future periods. At such time as the Managing General Partner
considers appropriate, any balance in the reserve account will be distributed
to the Partners according to their respective ownership interests in the
Partnership at the date of its dissolution (See Note 6 to the financial
statements).
The financial statements presented have been prepared on a going-concern
basis through September 30, 1996. Due to the imminent dissolution of the
Partnership requiring liquidation and distribution of its net assets,
management has determined the liquidating values of amounts receivable based
on collectibility of balances prior to any final distribution and termination
of the Partnership. Accrued liabilities have been estimated based on the
existing obligations and anticipated fees and costs associated with the sales
transactions and the wind-up effort. Cash distributions to Partners,
including contingency reserves, may vary depending upon the realization of
the amounts estimated by management. Values estimated by management may be
different from actual amounts.
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1996, the Partnership
recognized lease revenue of $182,584 and $417,549, respectively, compared to
$164,480 and $474,639 for the same periods in 1995. The increase in lease
revenue for the three months ended September 30, 1996 resulted from the
recognition of $101,324 in lease revenue related to early termination rents
associated with the sale of the NWA Aircraft. This was partially offset by
renewal lease term expirations and the sale of equipment. The Partnership
also earned interest income from temporary investments of rental receipts and
equipment sales proceeds in short-term instruments.
Prior to the sale of the Partnership's assets, the Partnership's equipment
portfolio included certain assets in which the Partnership held a
proportionate ownership interest. In such cases, the remaining interests
were owned by AFG or an affiliated equipment leasing program sponsored by
AFG. Proportionate equipment ownership enabled the Partnership to further
diversify its equipment portfolio by participating in the ownership of
selected assets, thereby reducing the general levels of risk that could
result from a concentration in any single equipment type, industry or lessee.
The Partnership and each affiliate individually reported, in proportion to
their respective ownership interests, their respective shares of assets,
liabilities, revenues and expenses associated with the equipment.
During the three and nine months ended September 30, 1996, the Partnership
sold equipment which had been fully depreciated in the normal course of
business to existing lessees and third parties. The sales resulted in net
gains, for financial statement purposes, of $16,019 and $117,505,
respectively, compared to net gains of $345 and $181,640 on equipment which
had been fully depreciated for the same periods in 1995. In
12
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
(Continued)
RESULTS OF OPERATIONS (Continued)
connection with the September 30, 1996 sales transactions discussed above,
the Partnership realized a net gain of $168,824.
Depreciation expense for the three and nine months ended September 30, 1996
was $30,941 and $125,807, respectively, compared to $64,202 and $195,781 for
the same periods in 1995. For financial reporting purposes, to the extent
that an asset was held on primary lease term, the Partnership depreciated 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. To the extent
that equipment was held beyond its primary lease term, the Partnership
continued to depreciate the remaining net book value of the asset on a
straight-line basis over the asset's remaining economic life.
During the nine months ended September 30, 1996, the Partnership recorded a
write-down, representing an impairment in value, pertaining to its interest
in a Lockheed L-1011 aircraft. This adjustment was precipitated by
continuing deterioration in the secondary market for wide-body aircraft of
this type. Several air carriers have reduced their commitment to the L-1011,
and a major domestic air carrier is expected to retire eleven L-1011 aircraft
from its fleet. Further, it appeared that future demand for this type of
aircraft would be weak, consisting principally of air cargo or operators of
passenger charters. In consideration of such circumstances and in accordance
with Financial Accounting Standards Board Statement No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF, the Partnership reduced the carrying value of its L-1011 aircraft
interest to its estimated current fair market value. This resulted in a
write-down of $300,000, representing $0.57 per limited partnership unit.
There was no interest expense for the three month periods ended September 30,
1996. Interest expenses was $1,929 or 1.2% of lease revenue for the same
period in 1995. Interest expense was $577 and $7,749 or less than 1% and
1.6% for the nine month periods ended September 30, 1996 and 1995,
respectively.
Management fees were 5% of lease revenue in each of the periods ended
September 30, 1996 and 1995.
Operating expenses consisted 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 were incurred in connection with
equipment being remarketed. Collectively, operating expenses represented
37.8% and 24.1% of lease revenue for the three and nine month periods ended
September 30, 1996, respectively, compared to 8.3% and 12% of lease revenue
for the same periods in 1995. Operating expenses for the three and nine month
periods ended September 30, 1996 included all costs anticipated in connection
with the Partnership's wind-up and dissolution.
13
<PAGE>
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
(Continued)
LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS
The Partnership, by its nature, is a limited-life entity that was established
for specific purposes described in the preceding "Overview." As an equipment
leasing program, the Partnership's principal operating activities have been
derived from asset rental transactions. Accordingly, the Partnership's
principal source of cash from operations was provided from the collection of
periodic rents. These cash inflows were 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 $238,008
and $463,425 in 1996 and 1995, respectively.
Cash realized from asset disposal transactions, excluding the sales
transactions on September 30, 1996, is reported under investing activities on
the accompanying Statement of Cash Flows. During the nine months ended
September 30, 1996 and 1995, the Partnership realized $117,505 and $181,640,
respectively, in equipment sale proceeds during the normal course of business.
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. All of the
Partnership's outstanding debt obligations were retired in 1996.
On September 30, 1996, the Partnership recorded a receivable in the amount of
$813,087 in connection with the disposal of the NWA Aircraft. The
Partnership also recorded a receivable of $470,647 in connection with the
sale of all of its remaining equipment assets. These proceeds were deposited
into an escrow account and transferred to the Partnership on October 3, 1996.
In conjunction with this transaction, the Managing General Partner has
commenced the dissolution and liquidation of the Partnership. The aggregate
funds from the sales transactions and liquidation will be used to fund
existing obligations, including estimated costs of the wind-up effort and
sales transactions and to establish a contingency reserve to cover any
unforeseen liabilities. The remaining funds, including any unutilized
contingency reserves, will be distributed to the Partners in accordance with
the terms of the Partnership Agreement and related agreements.
14
<PAGE>
AMERICAN INCOME PARTNERS III-D 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.
15
<PAGE>
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-D LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporated, a Massachusetts
corporation and the Managing General Partner of the Registrant.
By: /S/ Michael J. Butterfield
--------------------------
Michael J. Butterfield
Treasurer of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Accounting Officer)
Date: November 19, 1996
-----------------
By: /S/ Gary M. Romano
------------------
Gary M. Romano
Clerk of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: November 19, 1996
-----------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-10-1996
<PERIOD-END> SEP-30-1996
<CASH> 458,619
<SECURITIES> 0
<RECEIVABLES> 1,319,560
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,778,179
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,778,179
<CURRENT-LIABILITIES> 1,603,633
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 174,546
<TOTAL-LIABILITY-AND-EQUITY> 1,778,179
<SALES> 417,549
<TOTAL-REVENUES> 723,784
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 247,355
<LOSS-PROVISION> 300,000
<INTEREST-EXPENSE> 577
<INCOME-PRETAX> 175,852
<INCOME-TAX> 0
<INCOME-CONTINUING> 175,852
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175,852
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
