<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13
or 15 (d) of the Securities
Exchange Act of 1934
For the Quarter Ended
September 30, 1998 Commission File Number 0-17744
- --------------------- ------------------------------
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
-------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 36-3581924
-------------- ------------
State or other IRS Employer Identification
jurisdiction of Number
incorporation or
organization
1300 E. Woodfield Road, Suite 312 Schaumburg, Illinois 60173
- --------------------------------- --------------------------
Address of principal City, State, Zip Code
executive offices
Registrant's telephone number: (847) 240-6200
--------------------------
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 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.
(1) Yes x No___
(2) Yes x No___
<PAGE> 2
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
PART I - FINANCIAL INFORMATION
Item 1.
- -------
Index to Financial Statements
Balance Sheets
September 30, 1998 (unaudited) 3
December 31, 1997 4
Statements of Revenue and Expenses (unaudited)
For the three months ended September 30, 1998 5
For the three months ended September 30, 1997 6
For the nine months ended September 30, 1998 7
For the nine months ended September 30, 1997 8
Statements of Changes in Partners' Equity
For the nine months ended September 30, 1998 9
(unaudited)
Statements of Cash Flows (unaudited)
For the nine months ended September 30, 1998 10
For the nine months ended September 30, 1997 11
Notes to Financial Statements (unaudited) 12 - 13
Item 2.
- -------
Management's Discussion and Analysis of
Financial Condition and Results of Operations 14 - 15
PART II - OTHER INFORMATION
Items 1-6. 16
- ----------
2
<PAGE> 3
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
BALANCE SHEETS
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $1,570,044 $3,786,462 $5,356,506
Net investment in direct
financing leases -- 79,288 79,288
Diverted and other assets, net 102,718 223,165 325,883
Datronic assets, net -- -- --
---------- ---------- -------
$1,672,762 $4,088,915 $5,761,677
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and
accrued expenses $ 248 $ 14,085 $ 14,333
Lessee rental deposits 13,229 31,823 45,052
---------- ---------- ----------
Total liabilities 13,477 45,908 59,385
Total partners' equity 1,659,285 4,043,007 5,702,292
---------- ---------- ----------
$1,672,762 $4,088,915 $5,761,677
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
BALANCE SHEETS
December 31, 1997
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $1,843,376 $3,936,608 $5,779,984
Net investment in direct
financing leases -- 461,900 461,900
Diverted and other assets, net 102,718 223,165 325,883
Datronic assets, net -- -- --
---------- ---------- ----------
$1,946,094 $4,621,673 $6,567,767
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and
accrued expenses $ 1,711 $ 20,086 $ 21,797
Lessee rental deposits 25,672 61,010 86,682
---------- ---------- ----------
Total liabilities 27,383 81,096 108,479
Total partners' equity 1,918,711 4,540,577 6,459,288
---------- ---------- ----------
$1,946,094 $4,621,673 $6,567,767
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -------
<S> <C> <C> <C>
Revenue:
Lease income $ 1,595 $ 11,578 $ 13,173
Interest income 20,486 47,040 67,526
--------- --------- --------
22,081 58,618 80,699
--------- --------- --------
Expenses:
General Partner's
expense reimbursement 53,347 128,501 181,848
Professional fees 8,431 20,216 28,647
Other operating expenses 2,231 4,875 7,106
Credit for lease losses (8,192) (17,799) (25,991)
--------- --------- ---------
55,817 135,793 191,610
--------- --------- ---------
Net loss $ (33,736) $ (77,175) $(110,911)
========= ========= =========
Net loss - General Partner $ (337) $ (772) $ (1,109)
========= ========= =========
Net loss - Limited Partners $ (33,399) $ (76,403) $(109,802)
========= ========= =========
Net loss per limited
partnership unit $ (.53) $ (.56)
====== =======
Weighted average number
of limited partnership
units outstanding 63,030 136,969
====== =======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -------
<S> <C> <C> <C>
Revenue:
Lease income $ 5,336 $ 42,722 $ 48,058
Interest income 22,931 53,349 76,280
--------- --------- --------
28,267 96,071 124,338
--------- --------- --------
Expenses:
General Partner's
expense reimbursement 85,187 199,925 285,112
Professional fees 43,893 98,738 142,631
Other operating expenses 6,749 14,677 21,426
Credit for lease losses (14,116) (30,668) (44,784)
--------- --------- ---------
121,713 282,672 404,385
--------- --------- ---------
Net loss $ (93,446) $(186,601) $(280,047)
========= ========= =========
Net loss - General Partner $ (934) $ (1,866) $ (2,800)
========= ========= =========
Net loss - Limited Partners $ (92,512) $(184,735) $(277,247)
========= ========= =========
Net loss per limited
partnership unit $(1.47) $ (1.35)
====== =======
Weighted average number
of limited partnership units
outstanding 63,030 136,969
====== =======
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the nine months ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -------
<S> <C> <C> <C>
Revenue:
Lease income $ 6,339 $ 56,303 $ 62,642
Interest income 63,095 144,903 207,998
--------- --------- --------
69,434 201,206 270,640
--------- --------- --------
Expenses:
General Partner's
expense reimbursement 150,475 360,207 510,682
Professional fees 202,156 445,022 647,178
Other operating expenses 12,364 27,054 39,418
Credit for lease losses (36,135) (133,507) (169,642)
--------- --------- ---------
328,860 698,776 1,027,636
--------- --------- ---------
Net loss $(259,426) $(497,570) $(756,996)
========= ========= =========
Net loss - General Partner $ (2,594) $ (4,976) $ (7,570)
========= ========= =========
Net loss - Limited Partners $(256,832) $(492,594) $(749,426)
========= ========= =========
Net loss per limited
partnership unit $(4.07) $ (3.60)
====== =======
Weighted average number
of limited partnership
units outstanding 63,030 136,969
====== =======
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the nine months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -------
<S> <C> <C> <C>
Revenue:
Lease income $ 17,710 $ 157,064 $ 174,774
Interest income 62,538 161,299 223,837
--------- --------- ----------
80,248 318,363 398,611
--------- --------- ----------
Expenses:
General Partner's
expense reimbursement 253,548 589,991 843,539
Professional fees 95,326 221,487 316,813
Other operating expenses 14,455 31,534 45,989
Credit for lease losses (96,279) (209,174) (305,453)
--------- --------- ----------
267,050 633,838 900,888
--------- --------- ----------
Net loss $(186,802) $(315,475) $ (502,277)
========= ========= ==========
Net loss - General Partner $ (1,868) $ (3,155) $ (5,023)
========= ========= ==========
Net loss - Limited Partners $(184,934) $(312,320) $ (497,254)
========= ========= ==========
Net loss per limited
partnership unit $(2.93) $ (2.28)
====== =======
Weighted average number
of limited partnership units
outstanding 63,030 136,969
====== =======
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
General Limited Limited Total
Partner's Partners' Partners' Partners'
Equity Equity Equity Equity
---------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1997* $ -- $1,918,711 $4,540,577 $6,459,288
Net loss (7,570) (256,832) (492,594) (756,996)
Allocation of General
Partner's Equity 7,570 (2,594) (4,976) --
--------- ------------ ---------- ----------
Balance, September 30, 1998 $ -- $1,659,285 $4,043,007 $5,702,292
========= ========== ========== ==========
</TABLE>
[FN]
* Balances are net of $100,599 and $299,320, of General Partner's equity
previously allocated to Liquidating and Continuing Limited Partners'
Equity.
</FN>
See accompanying notes to financial statements.
9
<PAGE> 10
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (259,426) $ (497,570) $ (756,996)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Credit for lease losses (36,135) (133,507) (169,642)
Changes in assets and liabilities:
Accounts payable and accrued
expenses (1,463) (6,001) (7,464)
Lessee rental deposits (12,443) (29,187) (41,630)
---------- ---------- ----------
(309,467) (666,265) (975,732)
---------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 36,135 516,119 552,254
---------- ---------- ----------
Net decrease in cash
and cash equivalents (273,332) (150,146) (423,478)
Cash and cash equivalents:
Beginning of year 1,843,376 3,936,608 5,779,984
---------- ---------- ----------
End of third quarter $1,570,044 $3,786,462 $5,356,506
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows used for operating activities:
Net loss $ (186,802) $ (315,475) $ (502,277)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Credit for lease losses (96,279) (209,174) (305,453)
Changes in assets and
liabilities:
Accounts payable and
accrued expenses (64,162) (149,126) (213,288)
Lessee rental deposits (37,778) (95,249) (133,027)
Due from management company 12,676 31,334 44,010
---------- ---------- ----------
(372,345) (737,690) (1,110,035)
---------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 107,103 1,103,211 1,210,314
---------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents (265,242) 365,521 100,279
Cash and cash equivalents:
Beginning of year 2,203,075 3,532,245 5,735,320
---------- ---------- ----------
End of third quarter $1,937,833 $3,897,766 $5,835,599
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE 1 -- ORGANIZATION:
- -----------------------
Datronic Equipment Income Fund XVII, L.P., a Delaware Limited Partnership (the
"Partnership"), was formed on May 12, 1988 for the purpose of acquiring and
leasing both high- and low- technology equipment. See Notes 4, 7, and 9 to the
Partnership's financial statements included in the 1997 Form 10-K for a
discussion of the alleged diversion of Partnership assets in 1991 and 1992 and
the subsequent litigation and settlement, change in general partner, new classes
of limited partners established and amendments to the Partnership Agreement
which occurred.
NOTE 2 -- BASIS OF FINANCIAL STATEMENTS:
- ----------------------------------------
The accompanying financial statements should be read in conjunction with the
Partnership's financial statements included in the 1997 Form 10-K. The financial
information furnished herein is unaudited but in the opinion of Management
includes all adjustments necessary (all of which are normal recurring
adjustments) for a fair presentation of financial condition and results of
operations. See Note 2 to the Partnership's financial statements included in the
1997 Form 10-K.
NOTE 3 -- LIMITED PARTNERSHIP DISTRIBUTIONS:
- --------------------------------------------
Distributions to Liquidating Limited Partners were suspended after payment of
the April 1, 1995 distribution. Distributions to Continuing Limited Partners
were suspended after payment of the January 1, 1996 distribution.
NOTE 4 -- SETTLEMENT OF LITIGATION:
- -----------------------------------
On May 5, 1998, Lease Resolution Corporation (LRC), on behalf of Datronic
Equipment Income Funds XVI, XVII, XVIII, XIX, XX and Datronic Finance Income
Fund I, reached an agreement to settle all claims of the aforementioned
partnerships against Weiss & Co. The settlement was contingent upon the
subsequent approval by the United States District Court for the Northern
District of Illinois, Eastern Division (the "District Court") dismissing Weiss &
Co. as a party defendant. On August 19, 1998, the District Court entered an
order dismissing Weiss & Co. as a party defendant, and on September 20, 1998,
$2,437,331 was transferred to LRC in full and final settlement of the Weiss
matter. In connection with this matter, a total of $1,410,950 of expenses
($708,600 for the nine months ended September 30, 1998) consisting primarily of
legal fees, was incurred. After payment of contingent legal fees of $609,333, a
total of $1,827,998 is available for transfer to the Datronic Partnerships. LRC
will determine the appropriate allocation of these amounts among the
Partnerships after
12
<PAGE> 13
resolution of the post-trial motions filed in the Price Waterhouse
matter.
On June 10, 1998 a verdict was rendered finding Price Waterhouse liable for
negligence, but not guilty of breach of contract. On July 20, 1998, LRC and
Price Waterhouse both filed post-trial motions requesting relief from the Court.
The Court is not expected to rule on these motions for several months.
13
<PAGE> 14
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------
The following discussion and analysis of liquidity and capital resources covers
material changes in the Partnership's financial condition from December 31, 1997
through September 30, 1998. The discussion and analysis of results of operations
is for the three and nine month periods ended September 30, 1998 as compared to
the corresponding periods in 1997.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended September 30, 1998, Partnership assets continued to
be converted to cash in order to pay Partnership operating expenses, liquidate
Partnership liabilities and to provide for the ultimate liquidation of the
Partnership.
During the nine months ended September 30, 1998, the Partnership's cash and cash
equivalents decreased by $424,000 to $5,356,000 at September 30, 1998 from
$5,780,000 at December 31, 1997. This decrease is primarily due to cash used in
operations of $976,000, partially offset by cash receipts from collections on
leases of $552,000.
The Partnership's sources of liquidity on both a long-term and short-term basis
are expected to come principally from cash-on-hand and cash receipts from leases
owned by the Partnership. The lease portfolio is scheduled to be substantially
run out by the end of 1998. In addition, the Partnership's sources of liquidity
on a long-term basis include proceeds from the sale of Diverted and other
assets. Management believes that these sources of liquidity in the short and
long-term are sufficient to meet operating cash requirements, provide for
ongoing pursuit of litigation, and an orderly liquidation of the Partnership.
The continued operation and eventual liquidation of the Partnership involves
complex issues some of which have been resolved. These issues relate to the
timing and the amount to be realized from the liquidation of lease-related
assets, Diverted and other assets, Datronic assets, litigation and the
liquidation of the other Datronic Partnerships. These issues make it difficult
to predict the time and costs necessary to operate and liquidate the Partnership
in an orderly manner. Through the second quarter of 1998, it appeared unlikely
that the Partnership would make any additional distributions until such time as
its remaining assets were liquidated and the pending litigation was resolved.
Now that additional assets have been liquidated the General Partner has
determined that an interim cash distribution will be paid to the Limited
Partners shortly after the end of the first quarter 1999. The General Partner is
in the process of determining the amount that will be available for this
distribution and its allocation among each class of Limited Partner. This
distribution will be made to owners of record as of December 31, 1998 even if
their units are subsequently sold.
14
<PAGE> 15
Results of Operations
- ---------------------
The Partnership had net losses of $111,000 and $757,000 for the three and nine
months ended September 30, 1998, respectively, in the aggregate for all classes
of partners. This compares to aggregate net losses of $280,000 and $502,000 for
the same periods in 1997. Differences in operating results between Liquidating
and Continuing Limited Partners are attributable to lease income, acquisition
costs, and expenses associated with new lease investments made since the March
4, 1993 Settlement. Liquidating Limited Partners do not participate in these
post Settlement activities. Significant factors affecting overall operating
results for the three and nine month periods ended September 30, 1998 as
compared to the same periods in 1997 include the following:
Lease income:
Since May 1994, the Partnership has been in its Liquidation Phase which
prohibits investing in any new leases. Accordingly, the lease portfolio has
continued to decrease as collections are made, resulting in a continued decline
in lease income for the three and nine months ended September 30, 1998 as
compared to the corresponding periods in 1997.
General Partner's expense reimbursement:
The decrease for the three and nine months ended September 30, 1998 is primarily
due to the elimination of premium payments for D&O insurance and relocation
costs as well as reductions in staff and related costs. Through the first
quarter 1997, D&O insurance premiums were paid on an annual basis; however, in
September 1997 a one-time premium was paid that extended coverage through the
ultimate liquidation date of the Partnership. Included in the second quarter
1997 is a one-time charge for relocating staff to reduced office space.
Professional fees:
The increase for the nine month period ended September 30, 1998 primarily
reflects fees paid during the second quarter of 1998 in connection with the
trial against one of the Partnership's former accountants. This increase is
partially offset by the decreasing level of professional services required in
such areas as collections, consulting and auditing. These decreases are the
result of the decrease in the Partnership's lease portfolio and related
activities. The decrease for the three months ended September 30, 1998 primarily
reflects the reduction in fees paid in connection with the ongoing litigation.
There was little activity while awaiting rulings on post-trial motions filed in
July 1998. See Note 4 to the Partnership's financial statements included in Item
1.
Credit for lease losses:
This credit primarily reflects collections on previously reserved balances.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 - Legal Proceedings in the Partnership's December
31, 1997 Form 10-K for a discussion of material legal proceedings involving the
Partnership.
Reference is made to Part I, Item 1, Note 4 for a discussion of legal
proceedings involving claims against Weiss & Co.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
None.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized, on the 16th day of November 1998.
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
Registrant
By: /s/ DONALD D. TORISKY
--------------------------------------------------------------------
Donald D. Torisky
Chairman and Chief Executive Officer,
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XVII, L.P.
By: /s/ ROBERT P. SCHAEN
--------------------------------------------------------------------
Robert P. Schaen
Vice-Chairman and Chief Financial Officer,
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XVII, L.P.
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
27 Financial Data Schedule, which is
submitted electronically to the
Securities and Exchange Commission for
Information only and not filed.
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND THE STATEMENTS OF REVENUE AND EXPENSES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT ON FORM 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,356,506
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,761,677
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,702,292
<TOTAL-LIABILITY-AND-EQUITY> 5,761,677
<SALES> 0
<TOTAL-REVENUES> 270,640
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 39,418
<LOSS-PROVISION> (169,642)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
