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, 1996
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 0-18555
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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 12
Page 1 of 13 Pages
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
Quarterly Report on Form 10-Q
for the Quarter Ended
March 31, 1996
Table of Contents
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Balance Sheets-March 31, 1996 and December 31, 1995 3
Statements of Income-Three months ended
March 31, 1996 and 1995 4
Statements of Cash Flows-Three months ended
March 31, 1996 and 1995 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 13
2
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
---------- ------------
ASSETS
Cash and cash equivalents $ 468,230 $ 446,663
Accounts receivable, net 61,861 120,375
Equipment held for sale or lease 206,525 59,534
Net investment in direct finance leases 1,653,364 1,803,274
Leased equipment, net 2,149,611 2,989,764
---------- ----------
Total assets $4,539,591 $5,419,610
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 195,766 $ 235,847
Payable to affiliates 20,130 27,918
Rents received in advance 50,248 40,894
Distributions payable to partners 404,383 186,101
Discounted lease rentals 1,624,300 2,061,334
---------- ----------
Total liabilities 2,294,827 2,552,094
---------- ----------
Partners' Capital:
General partner - -
Limited partners:
Class A 1,101,550 1,729,272
Class B 1,143,214 1,138,244
---------- ----------
Total partners' capital 2,244,764 2,867,516
---------- ----------
Total liabilities and partners' capital $4,539,591 $5,419,610
========== ==========
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)
Three Months Ended
March 31,
----------------------
1996 1995
-------- ----------
Revenue:
Operating lease rentals $643,132 $ 985,147
Direct finance lease income 51,066 69,987
Equipment sales margin 1,290 45,288
Interest income 5,633 5,115
-------- ----------
Total revenue 701,121 1,105,537
-------- ----------
Expenses:
Depreciation and amortization 386,184 606,416
Provision for losses - -
Management fees paid to general partner 43,181 60,808
Interest on discounted lease rentals 42,981 87,955
Direct services from general partner 17,361 22,452
General and administrative 42,585 43,205
-------- ----------
Total expenses 532,292 820,836
-------- ----------
Net income $168,829 $ 284,701
======== ==========
Net income allocated:
To the general partner $ 39,471 $ 38,680
To the Class A limited partners 124,388 236,568
To the Class B limited partner 4,970 9,453
-------- ----------
$168,829 $ 284,701
======== ==========
Net income per weighted average Class A
limited partner unit outstanding $ 0.63 $ 1.19
======== ==========
Weighted average Class A limited partner
units outstanding 198,465 198,713
======== ==========
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,
-------------------------
1996 1995
----------- -----------
Net cash provided by operating activities $ 1,031,899 $ 1,110,269
----------- -----------
Cash flows from financing activities:
Principal payments on discounted lease rentals (437,034) (639,405)
Redemptions of Class A limited partner units (2,165) (1,848)
Distributions to partners (571,133) (778,894)
----------- -----------
Net cash used in financing activities (1,010,332) (1,420,147)
----------- -----------
Net increase (decrease) in cash and cash equivalents 21,567 (309,878)
Cash and cash equivalents at beginning of period 446,663 702,210
----------- -----------
Cash and cash equivalents at end of period $ 468,230 $ 392,332
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 42,981 $ 87,955
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 only of normal recurring adjustments) considered
necessary for a fair presentation have been included. The balance sheet at
December 31, 1995 has been derived from the audited financial statements
included in the Partnership's 1995 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, 1995 (the "1995 Form 10-K"), previously filed with the Securities and
Exchange Commission.
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
Statements of Income
for the three months The effect on
ended March 31, net income of
------------------------- changes between
1996 1995 periods
---------- ----------- ---------------
<S> <C> <C> <C>
Leasing margin $ 265,033 $ 360,763 $ (95,730)
Equipment sales margin 1,290 45,288 (43,998)
Interest income 5,633 5,115 518
Management fees paid to general partner (43,181) (60,808) 17,627
Direct services from general partner (17,361) (22,452) 5,091
General and administrative expenses (42,585) (43,205) 620
Provision for losses - - -
---------- ----------- -----------
Net income $ 168,829 $ 284,701 $ (115,872)
========== =========== ===========
</TABLE>
The Partnership is in its liquidation period, as defined in the Partnership
Agreement, 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
Leasing margin consists of the following:
Three months ended
March 31,
----------------------
1995 1994
---------- ----------
Operating lease rentals $ 643,132 $ 985,147
Direct finance lease income 51,066 69,987
Depreciation and amortization (386,184) (606,416)
Interest expense on related discounted lease rentals (42,981) (87,955)
--------- ---------
Leasing margin $ 265,033 $ 360,763
========= =========
Leasing margin ratio 38% 34%
== ==
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 months ended March
31, 1996 compared to the corresponding period in 1995 and are expected to
decline further, due to portfolio run-off.
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:
Three months ended
March 31,
------------------------
1995 1994
--------- ---------
Equipment sale revenue $ 288,290 $ 167,804
Cost of equipment sales (287,000) (122,516)
--------- ---------
Equipment sales margin $ 1,290 $ 45,288
========= =========
The Partnership is in its liquidation period. During the liquidation period, as
initial leases terminate, equipment is being 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 project.
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 book value is
reported as equipment sales margin (if the equipment is sold) or leasing margin
(if the equipment is re-leased). The realization of less than the carrying value
of equipment (which is typically not known until remarketing subsequent to the
initial lease termination has occurred) is recorded as provision for losses.
Residual values are established equal to the estimated value to be received from
the equipment following termination of the lease. In estimating such values, the
Partnership considers all relevant facts regarding the equipment and the lessee,
including, for example, the likelihood that the lessee will re-lease the
equipment. The nature of the Partnership's leasing activities is that it has
credit exposure and residual value exposure and, accordingly, in the ordinary
course of business, it will incur losses from those exposures. The Partnership
performs ongoing quarterly assessments of its assets to identify any
other-than-temporary losses in value.
No provision for losses were recorded for the three months ended March 31, 1996
or for the corresponding period in 1995 because no other-than-temporary losses
in the value of equipment were identified in the quarterly assessments of the
Partnership's assets.
EXPENSES
Management fees paid to the general partner decreased due to portfolio run-off.
Liquidity and Capital Resources
- -------------------------------
The Partnership funds its 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, 1996, the Partnership declared
distributions to the partners of $789,415 (of which $404,383 was paid in April
1996), all of which 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.
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
- -------------------------------
The general partner currently anticipates that the Partnership will generate
cash flow from rentals and equipment sales during the remainder of 1996 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. The general partner currently
anticipates that the remaining 1996 distributions to the Class A limited
partners are expected to be in the range of an annualized rate of 1% to 3% of
their capital contributions (all of which is expected to be a return of
capital). Because the Partnership is in liquidation, as defined in the
Partnership Agreement, cash distributions to the Class A limited partners will
be based upon cash availability and will vary.
The Class B distributions of cash from operations are subordinated to the Class
A limited partners receiving distributions of cash from operations, as scheduled
in the Partnership Agreement (i.e., 15%). Therefore, because of the decrease in
the distributions to the Class A limited partners effective as of June 1994,
CAII, the sole Class B limited partner, ceased receiving distributions of cash
from operations as of March 1994 and the general partner currently anticipates
that CAII will not receive any future Class B 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 March 31, 1996.
11
<PAGE>
Item No. Exhibit Index
- -------- -------------
27 Financial Data Schedule
12
<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 7, 1996 By: /s/John E. Christensen
----------------------
John E. Christensen
Senior Vice President,
Chief Administrative Officer and Director
13
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 468,230
<SECURITIES> 0
<RECEIVABLES> 61,861
<ALLOWANCES> 0
<INVENTORY> 206,525
<CURRENT-ASSETS> 0
<PP&E> 2,149,611
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,539,591
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,244,764
<TOTAL-LIABILITY-AND-EQUITY> 4,539,591
<SALES> 1,290
<TOTAL-REVENUES> 701,121
<CGS> 0
<TOTAL-COSTS> 532,292
<OTHER-EXPENSES> 60,542
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,981
<INCOME-PRETAX> 168,829
<INCOME-TAX> 0
<INCOME-CONTINUING> 168,829
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,829
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
