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 September 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
September 30, 1995
Table of Contents
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Balance Sheets-September 30, 1995 and December 31, 1994 3
Statements of Income-Three and Nine months ended
September 30, 1995 and 1994 4
Statements of Cash Flows-Nine months ended
September 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 6. Exhibits and Reports on Form 8-K 11
Signature 12
2
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
BALANCE SHEETS
(Unaudited)
September 30, December 31,
1995 1994
------------- ------------
ASSETS
Cash and cash equivalents $ 235,525 $ 702,210
Accounts receivable, net 46,028 95,807
Equipment held for sale or lease 60,441 74,337
Net investment in direct finance leases 1,957,836 2,467,517
Equipment on operating leases, net 3,630,129 5,349,797
---------- ----------
Total assets $5,929,959 $8,689,668
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 265,367 $ 271,525
Payable to affiliates 50,197 26,298
Rents received in advance 21,719 98,037
Distributions payable to partners 217,935 441,682
Discounted lease rentals 2,507,862 4,231,393
---------- ----------
Total liabilities 3,063,080 5,068,935
---------- ----------
Partners' Capital:
General partner - -
Limited partners:
Class A 1,737,497 2,519,669
Class B 1,129,382 1,101,064
---------- ----------
Total partners' capital 2,866,879 3,620,733
---------- ----------
Total liabilities and partners' capital $5,929,959 $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 INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
---------- ------------ ---------- -----------
Revenue:
Operating lease rentals $ 729,031 $ 1,170,142 $ 2,621,424 $ 4,265,101
Direct finance lease income 56,591 91,340 189,022 283,980
Equipment sales margin 20,364 29,259 156,165 404,974
Interest income 1,853 5,139 9,646 21,879
--------- ----------- ----------- -----------
Total revenue 807,839 1,295,880 2,976,257 4,975,934
--------- ----------- ----------- -----------
Expenses:
Depreciation and amortization 441,363 789,156 1,561,429 3,275,646
Provision for losses - - - 108,615
Management fees paid to general partner 45,384 74,629 159,838 257,576
Interest on discounted lease rentals 63,245 132,717 225,634 418,700
Direct services from general partner 16,474 22,778 59,278 71,598
General and administrative 44,035 70,765 155,085 184,032
--------- ----------- ----------- -----------
Total expenses 610,501 1,090,045 2,161,264 4,316,167
--------- ----------- ----------- -----------
Net income $ 197,338 $ 205,835 $ 814,993 $ 659,767
========= =========== =========== ===========
Net income allocated:
To the general partner $ 19,747 $ 39,622 $ 77,960 $ 241,670
To the Class A limited partners 170,767 159,827 708,714 402,029
To the Class B limited partner 6,824 6,386 28,319 16,068
--------- ----------- ----------- -----------
$ 197,338 $ 205,835 $ 814,993 $ 659,767
========= =========== =========== ===========
Net income per weighted
average Class A limited
partner unit outstanding $ 0.86 $ 0.80 $ 3.58 $ 2.02
========= =========== =========== ===========
Weighted average Class A limited
partner units outstanding 198,475 198,928 197,831 199,075
========= =========== =========== ===========
</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)
Nine months ended
-----------------------------
September 30, September 30,
1995 1994
------------- -------------
Net cash provided by operating activities $ 3,049,440 $ 5,466,639
----------- -----------
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 (1,723,531) (2,293,125)
Redemptions of Class A limited partner units (9,909) (19,889)
Distributions to partners (1,782,685) (5,575,416)
----------- -----------
Net cash used in financing activities (3,516,125) (7,271,918)
----------- -----------
Net decrease in cash and cash equivalents (466,685) (1,805,279)
Cash and cash equivalents at beginning of period 702,210 2,360,404
----------- -----------
Cash and cash equivalents at end of period $ 235,525 $ 555,125
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 225,634 $ 418,700
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. 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 nine months ended September 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 income
categories and analyses of changes in those condensed categories derived from
the Statements of Income:
<TABLE>
<CAPTION>
Condensed Condensed
Statements of Income Statements of Income
for the Three Months The effect on for the Nine months The effect of
ended September 30, net income of ended September 30, net income of
---------------------- changes between ------------------------ changes between
1995 1994 periods 1995 1994 periods
-------- -------- ---------------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 281,014 $ 339,609 $ (58,595) $ 1,023,383 $ 854,735 $ 168,648
Equipment sales margin 20,364 29,259 (8,895) 156,165 404,974 (248,809)
Interest income 1,853 5,139 (3,286) 9,646 21,879 (12,233)
Management fees paid
to general partner,
direct services from
general partner and
general and
administrative expenses (105,893) (168,172) 62,279 (374,201) (513,206) 139,005
Provision for losses - - - - (108,615) 108,615
---------- ---------- ---------- ----------- ---------- ----------
Net income $ 197,338 $ 205,835 $ (8,497) $ 814,993 $ 659,767 $ 155,226
========== ========== ========== =========== ========== ==========
</TABLE>
Leasing Margin
- --------------
The Partnership is in its liquidation period, as set forth in the Prospectus,
and as expected, the Partnership is not purchasing additional equipment, initial
leases are expiring and the equipment is being remarketed (i.e., re-leased,
renewed or sold). As a result, the size of the Partnership's leasing portfolio
and the amount of leasing revenue is declining (referred to in this discussion
as "portfolio run-off").
Leasing margin consists of the following:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- ---------------------------
1995 1994 1995 1994
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating lease rentals $ 729,031 $ 1,170,142 $ 2,621,424 $ 4,265,101
Direct finance lease income 56,591 91,340 189,022 283,980
Depreciation and amortization (441,363) (789,156) (1,561,429) (3,275,646)
Interest expense on discounted
lease rentals (63,245) (132,717) (225,634) (418,700)
---------- ----------- ------------ ------------
Leasing margin $ 281,014 $ 339,609 $ 1,023,383 $ 854,735
========== =========== ============ ============
Leasing margin ratio 36% 27% 36% 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 and are expected to decline
further, due to portfolio run-off. However, leasing margin increased for the
nine months ended September 30, 1995 compared to the corresponding period in
1994 primarily due to remarketing activities, which include the rental proceeds
from renewing, extending or re-leasing equipment before and after the end of the
initial lease term.
Leasing margin ratio increased primarily because of (a) remarketing activities,
and (b) a portion of the Partnership's portfolio consists of operating leases
financed with non-recourse debt. Leasing margin and leasing margin ratio for an
operating lease financed with non-recourse debt increases during the term of the
lease since rents and depreciation are typically fixed while interest expense
declines as the related non-recourse debt is repaid.
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. This
will result in corresponding reductions in the ultimate overall yields to
partners.
Equipment Sales Margin
- ----------------------
Equipment sales margin consists of the following:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------ ---------------------------
1995 1994 1995 1994
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Equipment sale revenue $ 44,102 $ 57,216 $ 317,034 $ 1,498,650
Cost of equipment sales (23,738) (27,957) (160,869) (1,093,676)
--------- --------- ---------- ------------
Gain on sale of equipment, net $ 20,364 $ 29,259 $ 156,165 $ 404,974
========= ========= ========== ============
</TABLE>
The Partnership is in its liquidation period. During the liquidation period, as
initial leases terminate, equipment is remarketed (i.e., re-leased or sold to
either the original lessee or a third party) and, accordingly, the timing and
amount of equipment sales are difficult to predict.
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 provision for losses during the nine months ended September 30, 1994
primarily related to identified "other-than-temporary" losses in value of
off-lease equipment, principally telecommunication equipment and semiconductor
manufacturing equipment.
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 nine months ended September 30, 1995, the Partnership declared
distributions to the partners of $1,558,938 (of which $217,935 was paid in
October 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,
because the Partnership is in liquidation, cash distributions to the Class A
limited partners will be based upon cash availability and will vary beginning in
October 1995.
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
- ------------------------------------------
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 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 September 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: November 13, 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 income and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 235,525
<SECURITIES> 0
<RECEIVABLES> 46,028
<ALLOWANCES> 0
<INVENTORY> 61,282
<CURRENT-ASSETS> 0
<PP&E> 3,630,129
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,929,959
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,866,879
<TOTAL-LIABILITY-AND-EQUITY> 5,929,959
<SALES> 156,165
<TOTAL-REVENUES> 2,976,257
<CGS> 0
<TOTAL-COSTS> 2,161,264
<OTHER-EXPENSES> 374,201
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225,634
<INCOME-PRETAX> 814,993
<INCOME-TAX> 0
<INCOME-CONTINUING> 814,993
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 814,993
<EPS-PRIMARY> 3.58
<EPS-DILUTED> 3.58
</TABLE>
