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, 1997
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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
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(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 4000
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, 1997
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (Unaudited)
Balance Sheets-March 31, 1997 and December 31, 1996 3
Statements of Income-Three months ended
March 31, 1997 and 1996 4
Statements of Cash Flows-Three months ended
March 31, 1997 and 1996 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 1. 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)
ASSETS
March 31, December 31,
1997 1996
----------- ------------
Cash and cash equivalents $ 373,022 $ 465,217
Accounts receivable, net 1,945 122,357
Equipment held for sale or re-lease 128,696 128,696
Net investment in direct finance leases 945,944 1,105,111
Leased equipment, net 857,795 1,011,332
---------- ----------
Total assets $2,307,402 $2,832,713
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 160,215 $ 283,321
Payable to affiliates 17,302 31,361
Rents received in advance 4,000 34,242
Distributions payable to partners 263,350 225,019
Discounted lease rentals 587,739 721,550
---------- ----------
Total liabilities 1,032,606 1,295,493
---------- ----------
Partners' capital:
General partner - -
Limited partners:
Class A 90,869 360,500
Class B 1,183,927 1,176,720
---------- ----------
Total partners' capital 1,274,796 1,537,220
---------- ----------
Total liabilities and partners' capital $2,307,402 $2,832,713
========== ==========
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,
--------------------
1997 1996
-------- --------
Revenue:
Operating lease rentals $315,158 $643,132
Direct finance lease income 27,659 51,066
Equipment sales margin 65,175 1,290
Interest income 4,175 5,633
-------- --------
Total revenue 412,167 701,121
-------- --------
Expenses:
Depreciation and amortization 104,801 386,184
Provision for losses - -
Management fees paid to general partner 23,582 43,181
Interest on discounted lease rentals 15,815 42,981
Direct services from general partner 14,274 17,361
General and administrative 42,435 42,585
-------- --------
Total expenses 200,907 532,292
-------- --------
Net income $211,260 $168,829
======== ========
Net income allocated:
To the general partner $ 23,684 $ 39,471
To the Class A limited partners 180,369 124,388
To the Class B limited partner 7,207 4,970
-------- --------
$211,260 $168,829
======== ========
Net income per weighted average Class A
limited partner unit outstanding $ 0.91 $ 0.63
======== ========
Weighted average Class A limited partner
units outstanding 198,025 198,465
======== ========
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,
---------------------------
1997 1996
----------- -----------
Net cash provided by operating activities $ 476,970 $ 1,031,899
----------- -----------
Cash flows from financing activities:
Principal payments on discounted lease rentals (133,811) (437,034)
Redemptions of Class A limited partner units - (2,165)
Distributions to partners (435,354) (571,133)
----------- -----------
Net cash used in financing activities (569,165) (1,010,332)
----------- -----------
Net increase (decrease) in cash and cash equivalents (92,195) 21,567
Cash and cash equivalents at beginning of period 465,217 446,663
----------- -----------
Cash and cash equivalents at end of period $ 373,022 $ 468,230
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 15,815 $ 42,981
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, 1996 has been derived from
the audited financial statements included in the Partnership's 1996
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, 1996 (the
"1996 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:
Condensed
Statements of Income
for the three months The effect on
ended March 31, net income of
---------------------- changes between
1997 1996 periods
--------- --------- ---------------
Leasing margin $ 222,201 $ 265,033 $ (42,832)
Equipment sales margin 65,175 1,290 63,885
Interest income 4,175 5,633 (1,458)
Management fees paid to
general partner (23,582) (43,181) 19,599
Direct services from
general partner (14,274) (17,361) 3,087
General and administrative
expenses (42,435) (42,585) 150
Provision for losses - - -
--------- --------- ---------
Net income $ 211,260 $ 168,829 $ 42,431
========= ========= =========
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, both the size of the
Partnership's leasing portfolio and the amount of leasing revenue are declining
(referred to in this discussion as "portfolio run-off").
LEASING MARGIN
Leasing margin consists of the following:
Three months ended
March 31,
-----------------------
1997 1996
--------- ---------
Operating lease rentals $ 315,158 $ 643,132
Direct finance lease income 27,659 51,066
Depreciation and amortization (104,801) (386,184)
Interest expense on related discounted lease rentals (15,815) (42,981)
--------- ---------
Leasing margin $ 222,201 $ 265,033
========= =========
Leasing margin ratio 65% 38%
== ==
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 for the three months ended March 31, 1997,
compared to the comparable period of 1996, have declined and are expected to
decline further, due to portfolio run-off.
Leasing margin ratio for the three months ended March 31, 1997 increased
compared to the comparable period of 1996 primarily because of remarketing
activities.
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. Annual average 5-year U.S. Treasury yields for the past seven years
were as follows:
Annual average 5-year U.S. Treasury Yield
Year Yield
---- -----
1990 8.37
1991 7.37
1992 6.19
1993 5.14
1994 6.69
1995 6.53
1996 6.18
EQUIPMENT SALES MARGIN
Equipment sales margin consists of the following:
Three months ended
March 31,
-----------------------
1997 1996
--------- ---------
Equipment sale revenue $ 101,175 $ 288,290
Cost of equipment sales (36,000) (287,000)
--------- ---------
Equipment sales margin $ 65,175 $ 1,290
========= =========
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 cannot be projected accurately.
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 during the three months ended March 31,
1997 or the corresponding periods in 1996 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 primarily as a result of
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, 1997, the Partnership declared
distributions to the partners of $473,684 ($263,350 of which was paid in April
1997), 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.
The general partner currently anticipates that the Partnership will generate
cash flow from rentals and equipment sales during the remainder of 1997 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. 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 for
the remainder of 1997 (all of which is 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 Partnership is required to dissolve and distribute all of its assets no
later than December 31, 1998. However, the general partner anticipates that all
equipment will be sold prior to that date and that the Partnership will be
liquidated earlier.
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, as a result of this subordination, the
general partner currently anticipates that CAII will not receive any future
Class B distributions related to the $1.2 million of Class B limited partner's
capital shown on the accompanying Balance Sheets.
10
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is involved in routine legal proceedings incidental to
the conduct of its business. The general partner believes none of
these legal proceedings will have a material adverse effect on the
financial condition or operations of the Partnership.
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, 1997.
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 5, 1997 By: /s/Anthony M. DiPaolo
---------------------
Anthony M. DiPaolo
Senior Vice President
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 373,022
<SECURITIES> 0
<RECEIVABLES> 1,945
<ALLOWANCES> 0
<INVENTORY> 128,696
<CURRENT-ASSETS> 0
<PP&E> 857,795
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,307,402
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,274,796
<TOTAL-LIABILITY-AND-EQUITY> 2,307,402
<SALES> 65,175
<TOTAL-REVENUES> 412,167
<CGS> 0
<TOTAL-COSTS> 200,907
<OTHER-EXPENSES> 37,856
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,815
<INCOME-PRETAX> 211,260
<INCOME-TAX> 0
<INCOME-CONTINUING> 211,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211,260
<EPS-PRIMARY> 0.91
<EPS-DILUTED> 0.91
</TABLE>
