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 March 31, 1995
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ________________________
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
March 31, 1995
Table of Contents
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Balance Sheets-March 31, 1995 and December 31, 1994 3
Statements of Operations-Three months ended
March 31, 1995 and 1994 4
Statements of Cash Flows-Three months ended
March 31, 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)
March 31, December 31,
1995 1994
------------ ------------
ASSETS
Cash and cash equivalents $ 392,332 $ 702,210
Accounts receivable, net 87,472 95,807
Equipment held for sale or lease 73,562 74,337
Net investment in direct finance leases 2,289,649 2,467,517
Equipment on operating leases, net 4,611,081 5,349,797
----------- -----------
Total assets $ 7,454,096 $ 8,689,668
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 215,104 $ 271,525
Payable to affiliates 24,419 26,298
Rents received in advance 56,211 98,037
Distributions payable to partners 436,127 441,682
Discounted lease rentals 3,591,988 4,231,393
----------- -----------
Total liabilities 4,323,849 5,068,935
----------- -----------
Partners' Capital:
General partner - -
Limited partners:
Class A 2,019,730 2,519,669
Class B 1,110,517 1,101,064
----------- -----------
Total partners' capital 3,130,247 3,620,733
----------- -----------
Total liabilities and partners' capital $ 7,454,096 $ 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)
Three Months Ended
March 31,
1995 1994
---------- ----------
Revenue:
Operating lease rentals $ 985,147 $1,769,397
Direct finance lease income 69,987 92,119
Equipment sales revenue 167,804 673,522
Interest income 5,115 9,387
---------- ----------
Total revenue 1,228,053 2,544,425
---------- ----------
Expenses:
Depreciation and amortization 606,416 1,350,143
Cost of equipment sales 122,516 349,928
Provision for losses - 100,000
Management fees paid to general partner 60,808 99,620
Interest on discounted lease rentals 87,955 138,544
Direct services from general partner 22,452 24,919
General and administrative 43,205 60,038
---------- ----------
Total expenses 943,352 2,123,192
---------- ----------
Net income $ 284,701 $ 421,233
========== ==========
Net income allocated:
To the general partner $ 38,680 $ 100,498
To the Class A limited partners 236,568 308,410
To the Class B limited partner 9,453 12,325
---------- ----------
$ 284,701 $ 421,233
========== ==========
Net income per weighted average
Class A limited partner unit
outstanding $ 1.19 $ 1.55
========== ==========
Weighted average Class A limited
partner units outstanding 198,713 199,187
========== ==========
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)
Three months Ended
March 31, March 31,
1995 1994
----------- -----------
Net cash provided by operating activities $ 1,110,269 $ 2,129,842
----------- -----------
Cash flows from investing activities:
Net cash used in investing activities - -
----------- -----------
Cash flows from financing activities:
Principal payments on discounted lease rentals (639,405) (911,723)
Redemptions of Class A limited partner units (1,848) (1,542)
Distributions to partners (778,894) (2,026,167)
----------- -----------
Net cash used in financing activities (1,420,147) (2,939,432)
----------- -----------
Net decrease in cash and cash equivalents (309,878) (809,590)
Cash and cash equivalents at beginning of period 702,210 2,360,404
----------- -----------
Cash and cash equivalents at end of period $ 392,332 $ 1,550,814
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 87,955 $ 138,544
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 three months ended March 31, 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:
Three months ended
March 31, 1994
As Previously As
Reported Reclassified
------------- ------------
Net cash provided by operating activities $ 1,327,748 $ 2,129,842
Net cash provided by investing activities 802,094 -
Net cash used in financing activities (2,939,432) (2,939,432)
----------- -----------
Net decrease in cash and cash equivalents $ (809,590) $ (809,590)
=========== ===========
3. Equipment Purchases
The Partnership is in its liquidation period, as defined in the
Partnership Agreement and as set forth in the Prospectus and accordingly,
made no equipment purchases during the three months ended March 31, 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:
Condensed Statements The effect
of Operations for on net income
the Three Months of changes
ended March 31, between
1995 1994 periods
---------- ---------- -------------
Leasing margin $ 360,763 $ 372,829 $ (12,066)
Equipment sales margin 45,288 323,594 (278,306)
Interest income 5,115 9,387 (4,272)
Management fees paid to general
partner, direct services from
general partner and general and
administrative expenses (126,465) (184,577) 58,112
Provision for losses - (100,000) 100,000
---------- ---------- -----------
Net income $ 284,701 $ 421,233 $ (136,532)
========== ========== ===========
Leasing Margin
The Partnership is currently in the eighth year of its operations and 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:
Three months ended
March 31,
1995 1994
----------- -----------
Operating lease rentals $ 985,147 $ 1,769,397
Direct finance lease income 69,987 92,119
Depreciation and amortization (606,416) (1,350,143)
Interest expense on related discounted
lease rentals (87,955) (138,544)
----------- -----------
Leasing margin $ 360,763 $ 372,829
=========== ===========
Leasing margin ratio 34% 20%
=========== ===========
7
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations (continued)
Leasing Margin, (continued)
All components of leasing margin have declined for the three months ended March
31, 1995 compared to the corresponding periods in 1994, and are expected to
decline further, due to portfolio run-off.
Leasing margin ratio increased primarily due to a larger portion of the
portfolio consisting of remarketed leases with higher leasing margins.
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 this low interest rate environment.
Equipment Sales Margin
Equipment sales margin consists of the following:
Three months ended
March 31,
1995 1994
--------- ---------
Equipment sale revenue $ 167,804 $ 673,522
Cost of equipment sales (122,516) (349,928)
--------- ---------
Gain on sale of equipment, net $ 45,288 $ 323,594
========= =========
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 or as leasing margin. 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. However, the Partnership did not record
provision for losses during the three months ended March 31, 1995 because no new
losses were identified. The provision for losses during the three months ended
March 31, 1994 primarily related to an estimated credit loss on one lessee
experiencing financial difficulties.
Expenses
Management fees paid to the general partner, direct services from general
partner and general and administrative expenses, decreased due to portfolio
run-off.
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 three months ended March 31, 1995, the Partnership declared
distributions to the partners of $773,339 (of which $436,128 was paid during the
second 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, as the general partner has represented for the last several
years, 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 operations and equipment sales during the remainder of 1995
which, when added to cash and cash equivalents currently on hand, should provide
sufficient cash to enable the Partnership to meet its current operating
requirements. However, these cash flows will be insufficient to provide cash
distributions to the Class A limited partners at an annualized rate of 6% on
contributed capital. Therefore, after April 1, 1995, the cash distributions to
the Class A limited partners will be decreased to an annualized rate of 3% on
contributed capital (all of which will constitute a return of capital). The
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
Class B distributions are subordinated to the Class A limited partners receiving
the distributions as scheduled in the Partnership Agreement. Therefore, because
of the decrease in distributions to the Class A limited partners, effective as
of July 1, 1994, CAII, the sole Class B limited partner ceased receiving any
distributions as a result of this subordination. The general partner currently
anticipates that the Partnership will fund 1995 distributions to the limited
partners with Partnership cash and cash equivalents on hand at March 31, 1995
and cash from rentals and equipment sales. While rentals are fairly predictable,
the timing and amount of proceeds from equipment sales are not. Accordingly, if
fewer equipment sales occur during 1995 than are currently anticipated or if the
proceeds from equipment sales during 1995 are less than anticipated, the
Partnership may not have sufficient cash available during 1995 to make cash
distributions to the Class A limited partners at annualized rates of 3% on their
capital contributions.
10
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
North Miami Medical Center, the lessee of certain equipment owned by
the Partnership (the "Equipment"), and its parent (together, "North
Miami"), filed a declaratory judgment action (the "Litigation") to
determine whether (i) North Miami purchased the Equipment directly
from the vendor (and consequently owed the vendor the portion of the
purchase price that remains unpaid) or (ii) Delta Financial Services
("Delta") purchased the Equipment (financed with a nonrecourse loan
from USX Credit ("USX")) and leased it to North Miami (in which case
North Miami is obligated to pay rent to USX, as assignee of the
rents). In December 1992, CAI purchased the Equipment and related
lease from Delta, subject to the existing debt to USX, and transferred
the Equipment and lease to the Partnership. The net book value of the
Equipment is $220,000.
In June 1994, USX filed counterclaims and cross claims in the
litigation, naming CAI and the Partnership as third party defendants
in connection with USX' claim to foreclose its security interest in
the Equipment for North Miami's failure to pay rent. CAI and the
Partnership filed counter claims and cross claims against (i) Delta,
its president and an affiliate, for breaches of representations and
warranties made in the purchase documents and (ii) North Miami, for
holdover rent. The court granted USX a writ of replevin, authorizing
it to repossess the Equipment. All other claims in the Litigation are
still pending.
USX served the writ of replevin on North Miami. The Company has made
arrangements to repossess the Equipment as it appears that the parties
are unable to work out a settlement. Because the value of the
Equipment is less than the amount of the outstanding debt owed to USX,
once USX repossesses the Equipment, the Partnership will 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 March 31, 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: May 12, 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
Principal Financial Officer and Director
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 392,332
<SECURITIES> 0
<RECEIVABLES> 87,472
<ALLOWANCES> 0
<INVENTORY> 73,562
<CURRENT-ASSETS> 0
<PP&E> 4,611,081
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,454,096
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 3,130,247
<TOTAL-LIABILITY-AND-EQUITY> 7,454,096
<SALES> 167,804
<TOTAL-REVENUES> 1,228,053
<CGS> 122,516
<TOTAL-COSTS> 943,352
<OTHER-EXPENSES> 126,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,955
<INCOME-PRETAX> 284,701
<INCOME-TAX> 0
<INCOME-CONTINUING> 284,701
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 284,701
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
</TABLE>
