SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ------------------------
Commission file number 0-18555
Leastec Income Fund V, A California Limited Partnership
(Exact name of registrant as specified in its charter)
California 68-0136036
----------------------- ------------------------------------
(State of organization) (I.R.S. Employer Identification No.)
7175 West Jefferson Avenue, Suite 3000
Lakewood, Colorado 80235
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 980-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 .
Exhibit Index Appears on Page 11
Page 1 of 12 Pages
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
Quarterly Report on Form 10-Q
for the Quarter Ended
June 30, 1995
Table of Contents
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (Unaudited)
Balance Sheets-June 30, 1995 and December 31, 1994 3
Statements of Operations-Three and Six months ended
June 30, 1995 and 1994 4
Statements of Cash Flows-Six months ended
June 30, 1995 and 1994 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 2. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
2
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
---------- ------------
ASSETS
Cash and cash equivalents $ 287,355 $ 702,210
Accounts receivable, net 37,008 95,807
Equipment held for sale or lease 61,282 74,337
Net investment in direct finance leases 2,137,107 2,467,517
Equipment on operating leases, net 4,100,411 5,349,797
---------- ----------
Total assets $6,623,163 $8,689,668
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 232,426 $ 271,525
Payable to affiliates 41,585 26,298
Rents received in advance 50,411 98,037
Distributions payable to partners 216,497 441,682
Discounted lease rentals 3,017,757 4,231,393
---------- ----------
Total liabilities 3,558,676 5,068,935
---------- ----------
Partners' Capital:
General partner - -
Limited partners:
Class A 1,941,929 2,519,669
Class B 1,122,558 1,101,064
---------- ----------
Total partners' capital 3,064,487 3,620,733
---------- ----------
Total liabilities and partners' capital $6,623,163 $8,689,668
========== ==========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1995 1994 1995 1994
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue:
Operating lease rentals $ 907,246 $ 1,325,562 $ 1,892,393 $ 3,094,959
Direct finance lease income 62,443 100,521 132,431 192,640
Equipment sales margin 90,513 52,121 135,801 375,715
Interest income 2,679 7,353 7,793 16,740
----------- ----------- ----------- -----------
Total revenue 1,062,881 1,485,557 2,168,418 3,680,054
----------- ----------- ----------- -----------
Expenses:
Depreciation and amortization 513,650 1,136,347 1,120,066 2,486,490
Provision for losses - 8,615 - 108,615
Management fees paid to general partner 53,646 83,327 114,454 182,947
Interest on discounted lease rentals 74,434 147,439 162,389 285,983
Direct services from general partner 20,352 23,901 42,804 48,820
General and administrative 67,845 53,229 111,050 113,267
----------- ----------- ----------- -----------
Total expenses 729,927 1,452,858 1,550,763 3,226,122
----------- ----------- ----------- -----------
Net income $ 332,954 $ 32,699 $ 617,655 $ 453,932
=========== =========== =========== ===========
Net income allocated:
To the general partner $ 19,533 $ 101,550 $ 58,213 $ 202,048
To the Class A limited partners 301,379 (66,208) 537,947 242,202
To the Class B limited partner 12,042 (2,643) 21,495 9,682
----------- ----------- ----------- -----------
$ 332,954 $ 32,699 $ 617,655 $ 453,932
=========== =========== =========== ===========
Net income (loss) per weighted
average Class A limited
partner unit outstanding $ 1.52 $ (0.33) $ 2.71 $ 1.22
=========== =========== =========== ===========
Weighted average Class A limited
partner units outstanding 198,488 199,115 198,600 199,150
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30, June 30,
1995 1994
----------- -----------
Net cash provided by operating activities $ 2,197,867 $ 4,178,723
----------- -----------
Cash flows from investing activities:
Net cash used in investing activities - -
----------- -----------
Cash flows from financing activities:
Proceeds from the discounting of lease rentals - 616,512
Principal payments on discounted lease rentals (1,213,636) (1,715,970)
Redemptions of Class A limited partner units (9,909) (1,541)
Distributions to partners (1,389,177) (4,064,379)
----------- -----------
Net cash used in financing activities (2,612,722) (5,165,378)
----------- -----------
Net decrease in cash and cash equivalents (414,855) (986,655)
Cash and cash equivalents at beginning of period 702,210 2,360,404
----------- -----------
Cash and cash equivalents at end of period $ 287,355 $ 1,373,749
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 162,389 $ 285,983
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
disclosures required by generally accepted accounting principles for annual
financial statements. In the opinion of the general partner, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. The balance sheet at
December 31, 1994 has been derived from the audited financial statements
included in the Partnership's 1994 Form 10-K. For further information,
refer to the financial statements of Leastec Income Fund V, A California
Limited Partnership (the "Partnership"), and the related notes, included in
the Partnership's Annual Report on Form 10-K for the year ended December
31, 1994 (the "1994 Form 10-K"), previously filed with the Securities and
Exchange Commission.
2. Reclassifications
In the Statements of Cash Flows for the six months ended June 30, 1995 and
1994, the principal portion of direct finance lease rentals and proceeds
from sales of equipment have been classified as "Cash flows from operating
activities". Previously, such amounts were reported as "Cash flows from
investing activities".
The effect of the reclassifications on previously issued financial
statements is as follows:
Six months ended
June 30, 1994
-----------------------------
As Previously As
Reported Reclassified
------------- ------------
Net cash provided by operating activities $ 2,448,741 $ 4,178,723
Net cash provided by investing activities 1,729,982 -
Net cash used in financing activities (5,165,378) (5,165,378)
------------ ------------
Net decrease in cash and cash equivalents $ 986,655 $ 986,655
============ ============
3. Equipment Purchases
The Partnership is in its liquidation period, as defined in the
Partnership Agreement and as set forth in the Prospectus, and made no
equipment purchases during the six months ended June 30, 1995. It is not
anticipated that the Partnership will acquire any material amount of
equipment in future periods.
6
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Presented below are schedules (prepared solely to facilitate the discussion of
results of operations that follows) showing condensed statements of operations
categories and analyses of changes in those condensed categories derived from
the Statements of Operations:
<TABLE>
<CAPTION>
Condensed Condensed
Statements of Operations Statements of Operations
for the Three Months The effect on for the Six Months The effect on
ended June 30, net income of ended June 30 net income of
------------------------ changes between ------------------------ changes between
1995 1994 periods 1995 1994 periods
--------- ---------- --------------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 381,605 $ 142,297 $ 239,308 $ 742,369 $ 515,126 $ 227,243
Equipment sales margin 90,513 52,121 38,392 135,801 375,715 (239,914)
Interest income 2,679 7,353 (4,674) 7,793 16,740 (8,947)
Management fees paid
to general partner,
direct services from
general partner and
general and
administrative expenses (141,843) (160,457) 18,614 (268,308) (345,034) 76,726
Provision for losses - (8,615) 8,615 - (108,615) 108,615
--------- --------- --------- --------- --------- -----------
Net income $ 332,954 $ 32,699 $ 300,255 $ 617,655 $ 453,932 $ 163,723
========= ========= ========= ========= ========= ===========
</TABLE>
Leasing Margin
The Partnership is currently in the eighth year of its operations and, as set
forth in the Prospectus, is in its liquidation period. The Partnership is not
purchasing additional equipment, initial leases are expiring and the amount of
equipment being remarketed is increasing. Because a leasing portfolio declines
in size as it matures, these circumstances have resulted in a decline in the
Partnership's leasing portfolio (referred to in this discussion as "portfolio
run-off").
Leasing margin consists of the following:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------- ----------------------------
1995 1994 1995 1994
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating lease rentals $ 907,246 $ 1,325,562 $ 1,892,393 $ 3,094,959
Direct finance lease income 62,443 100,521 132,431 192,640
Depreciation and amortization (513,650) (1,136,347) (1,120,066) (2,486,490)
Interest expense on discounted
lease rentals (74,434) (147,439) (162,389) (285,983)
---------- ----------- ------------ ------------
Leasing margin $ 381,605 $ 142,297 $ 742,369 $ 515,126
========== =========== ============ ============
Leasing margin ratio 39% 20% 37% 19%
========== =========== ============ ============
</TABLE>
7
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, (continued)
Leasing Margin, (continued)
All components of leasing margin have declined for the three and six months
ended June 30, 1995 compared to the corresponding periods in 1994, and are
expected to decline further, due to portfolio run-off.
The leasing margin and leasing margin ratio increased primarily due to (a)
remarketing activities, which include the rental proceeds from renewing,
extending or re-leasing equipment before and after the end of the initial lease
term and (b) a portion of the Partnership's portfolio consists of non-recourse
debt financed operating leases. Leasing margin and leasing margin ratio for
non-recourse debt financed operating leases increases during the term of the
leases since rents and depreciation are typically fixed while interest expense
declines as the related non-recourse debt is paid off.
The ultimate rate of return on leases depends, in part, on the general level of
interest rates at the time the leases are originated. Because leasing is an
alternative to financing equipment purchases with debt, lease rates tend to rise
and fall with interest rates (although lease rate movements generally lag
interest rate movements in the capital market). Interest rates declined from
1990 until the early part of 1994. The lease rates on equipment purchased by the
Partnership during that period reflect that low interest rate environment.
Equipment Sales Margin
Equipment sales margin consists of the following:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------- ---------------------------
1995 1994 1995 1994
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Equipment sale revenue $ 105,128 $ 767,912 $ 272,932 $ 1,441,434
Cost of equipment sales (14,615) (715,791) (137,131) (1,065,719)
---------- ---------- ----------- ------------
Gain on sale of equipment, net $ 90,513 $ 52,121 $ 135,801 $ 375,715
========== ========== =========== ============
</TABLE>
The Partnership is in its liquidation period and, as initial leases terminate,
equipment is remarketed (i.e., released or sold to either the original lessee or
a third party). The timing and amount of equipment sales are difficult to
predict. However, as the Partnership's liquidation continues, equipment sales
are expected to provide an increasingly higher percentage of total revenue.
Interest Income
Interest income declined due to a decrease in cash available for investment.
8
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, (continued)
Provision for losses
The remarketing of equipment for an amount greater than its net book value is
reported as equipment sales margin (if the equipment is sold) or as leasing
margin (if the equipment is released). The realization of less than the carrying
value of equipment (which is typically not known until after the initial lease
termination) is recorded as provision for loss. The Partnership performs ongoing
quarterly assessments of its assets to identify any other-than-temporary losses
in value. The Partnership did not record provision for losses during the three
and six months ended June 30, 1995 because no new losses were identified. The
provision for losses during the three and six months ended June 30, 1994
primarily related to identified "other-than-temporary" losses in value of
off-lease equipment, principally certain telecommunication equipment and
semiconductor manufacturing equipment.
Expenses
Management fees paid to the general partner and direct services from general
partner decreased due to portfolio run-off. General and administrative expenses
increased for the three months ended June 30, 1995 compared to June 30, 1994 due
to legal expenses related to the North Miami Medical lease litigation.
Liquidity and Capital Resources
The Partnership funded its operating activities principally with cash from
rents, interest income and sale of off-lease equipment. Available cash and cash
reserves of the Partnership are invested in interest bearing cash accounts and
short-term U.S. government securities pending distributions to the partners.
During the six months ended June 30, 1995, the Partnership declared
distributions to the partners of $1,163,992 (of which $216,497 was paid during
the third quarter of 1995). All of such distributions constituted a return of
capital.
Distributions may be characterized for tax, accounting and economic purposes as
a return of capital, a return on capital or both. The total return on capital
over a leasing partnership's life can only be determined at the termination of
the Partnership after all residual cash flows (which include proceeds from the
re-leasing and sale of equipment after initial lease terms expire) have been
realized. However, the general partner currently anticipates all distributions
to the partners are expected to be a return of capital.
The general partner currently anticipates that the Partnership will generate
cash flow from rentals and equipment sales during the remainder of 1995 which,
when added to cash and cash equivalents on hand, should provide sufficient cash
to enable the Partnership to meet its current operating requirements and to fund
distributions to the Class A limited partners. Currently, distributions to the
Class A limited partners are at an annualized rate of 3% on their capital
contributions (all of which will constitute a return of capital). However, while
rentals are fairly predictable, the timing and amounts of proceeds from
9
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, (continued)
Liquidity and Capital Resources, continued
equipment sales are not. If fewer equipment sales occur or the proceeds from
equipment sales are less than anticipated, the Partnership may not have
sufficient cash available to continue to make cash distributions to the Class A
limited partners at an annualized rate of 3% on their capital contributions.
Therefore, because the Partnership is in liquidation, cash distributions to the
Class A limited partners will be based upon cash availability and allowed to
vary, as early as fourth quarter.
Cash distributions to the Class B limited partner are subordinated to the Class
A limited partners receiving the distributions as scheduled in the Partnership
Agreement. Therefore, because of the initial decrease in cash distributions to
the Class A limited partners which occurred as of July 1, 1994, CAII, the sole
Class B limited partner ceased receiving any distributions as a result of this
subordination.
10
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
North Miami Medical Center litigation ("North Miami"), see the
Partnership's 1994 Form 10-K for a complete discussion.
USX served the writ of replevin on North Miami and, with the general
partner's assistance, the Partnership repossessed the Equipment since
the parties were unable to work out a settlement. The general partner
is remarketing the equipment on behalf of USX. Because the value of
the Equipment is less than the amount of the outstanding debt owed to
USX, the Partnership may suffer a loss equal to its book value for the
equipment, net of any additional rent payments received from North
Miami. A provision for loss has been previously recorded for this
contingent loss.
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) The Partnership did not file any reports on Form 8-K during
the quarter ended June 30, 1995.
11
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEASTEC INCOME FUND V
A California Limited Partnership
By: CAI Partners Management Company
Dated: August 11, 1995 By: /s/John F. Olmstead
-------------------
John F. Olmstead
President and Director
By: /s/John E. Christensen
----------------------
John E. Christensen
Senior Vice President,
Chief Administrative Officer and Director
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the balance
sheets and statements of operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> Jun-30-1995
<CASH> 287,355
<SECURITIES> 0
<RECEIVABLES> 37,008
<ALLOWANCES> 0
<INVENTORY> 61,282
<CURRENT-ASSETS> 0
<PP&E> 4,100,411
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,623,163
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 3,064,487
<TOTAL-LIABILITY-AND-EQUITY> 6,623,163
<SALES> 135,801
<TOTAL-REVENUES> 2,168,418
<CGS> 0
<TOTAL-COSTS> 1,550,763
<OTHER-EXPENSES> 268,308
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162,389
<INCOME-PRETAX> 617,655
<INCOME-TAX> 0
<INCOME-CONTINUING> 617,655
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 617,655
<EPS-PRIMARY> 2.71
<EPS-DILUTED> 2.71
</TABLE>
