SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number 0-18558
NORTHSTAR INCOME FUND-I, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-1105225
(State of organization) (I.R.S. Employer Identification Number)
7175 W. JEFFERSON AVENUE, LAKEWOOD, COLORADO 80235
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 980-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Class A
Limited Partner
Interest
(Title of Class)
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. Yes X No
----- -----.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K [ ].
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
Exhibit Index Appears on Page 32
Page 1 of 33 Pages
<PAGE>
Item 1. Business
--------
Northstar Income Fund-I, L.P., a Delaware limited partnership (the
"Partnership"), is engaged in the business of owning and leasing equipment. CAI
Equipment Leasing I Corp. (the "CAI General Partner"), a Colorado corporation
and a wholly owned subsidiary of Capital Associates, Inc. ("CAI"), and Northstar
Equipment Leasing Income Inc. (the "Northstar General Partner"), a Delaware
corporation and an affiliate of Lehman Brothers Inc. (formerly Shearson Lehman
Brothers Inc.), are the general partners of the Partnership (the "General
Partners" or "general partners").
Capital Associates International, Inc. ("CAII"), an affiliate of the CAI General
Partner, is the sole Class B limited partner of the Partnership. In exchange for
its Class B limited partner interest, CAII contributed equipment to the
Partnership having an aggregate acquisition value of approximately $4,899,866
(which represented 10% of the net offering proceeds received from the sale of
Class A limited partner units and the equipment contributed by CAII). CAII is
the largest single investor in the Partnership.
During 1997, the Partnership liquidated substantially all of its assets and
distributed the related proceeds to the partners in accordance with the
Partnership Agreement. It is the intent of the general partners to liquidate the
remaining assets and settle all liabilities during 1998. Excess cash, if any,
will be distributed to the Partners in accordance with the Partnership
Agreement.
The Partnership acquired equipment of various types under lease to third parties
on short-term leases (generally five years or less). All of the equipment was
purchased by CAII directly from manufacturers or other independent third parties
and sold to the Partnership. The equipment generally consisted of, but was not
limited to, office technology and manufacturing equipment. The Partnership is in
its liquidation period, as defined in the Partnership Agreement. Accordingly,
the Partnership did not purchase any equipment during 1997 and the Partnership
will not acquire any equipment in future periods.
The Partnership leases equipment to investment grade and noninvestment grade
lessees. Since the Partnership's formation, approximately 75% of the
Partnership's total equipment under lease was leased to investment grade
lessees. Pursuant to the Partnership Agreement, an investment grade lessee is a
company (1) with a credit rating of not less than Baa as determined by Moody's
Investor Services, Inc., (2) that has a comparable credit rating as determined
by other recognized credit rating services or, (3) if the lessee is not rated,
then a lessee whom the general partners believe would have received a rating of
Baa, or better, if the lessee would have been rated.
Upon expiration of an initial lease, the Partnership typically attempted to
re-lease or sell the equipment to the existing lessee. If a re-lease or sale to
the lessee was not negotiated, the Partnership attempted to lease or sell the
equipment to a third party. Since the Partnership is in its liquidation period,
all equipment held as of December 31, 1997 is intended to be sold in 1998.
The ultimate rate of return on leases depends, in part, on interest rates at the
time the leases are originated, as well as future equipment values and on-going
lessee creditworthiness. 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 changes in the
capital markets).
-2-
<PAGE>
Item 1. Business, continued
--------
The Partnership has no employees. The General Partners jointly manage and
control the affairs of the Partnership. The officers, directors and employees of
the General Partners and their affiliates perform services on behalf of the
Partnership. The General Partners are entitled to receive certain fees and
expense reimbursements in connection with the performance of these services. See
Item 10 of this Report, "Directors and Executive Officers of the Partnership"
and Item 13 of this Report, "Certain Relationships and Related Transactions".
The Partnership competed in the leasing marketplace as a lessor with a
significant number of other companies, including equipment manufacturers,
leasing companies and financial institutions. The Partnership is in its
liquidation period, as defined in the Partnership Agreement; therefore, the
Partnership currently competes mainly on the basis of the expertise of its
General Partners in remarketing equipment. Although the Partnership does not
account for a significant percentage of the leasing market, the General Partners
believe the Partnership's remarketing strategies enable it to compete
effectively in the remarketing markets.
The Partnership leased equipment to a significant number of lessees. In 1997,
three lessees accounted for 22%, 15% and 10%, respectively, of total partnership
revenue.
Item 2. Properties
----------
The Partnership does not own or lease any physical properties other than the
equipment discussed in Item 1 of this Report, "Business".
Item 3. Legal Proceedings
-----------------
Neither the Partnership nor any of the Partnership's equipment are the subject
of any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of the limited partners of the Partnership,
through the solicitation of proxies or otherwise, during the fourth quarter of
1997.
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters
-------
(a) The Partnership's Class A limited partner units, Class B limited
partnership interest and general partnership interests are not
publicly traded. There is no established public trading market for
such units and interests, and none is expected to develop.
(b) As of December 31, 1997, there were 3,127 Class A limited partners.
-3-
<PAGE>
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters, continued
-------
(c) Distributions
-------------
During 1997, the Partnership made five (5) distributions (a
substantial portion of which constituted a return of capital) to Class
A limited partners, as follows:
<TABLE>
<CAPTION>
Distributions
Distributions Per of Cash from Distributions of
$500 Class A Limited Operations Cash from Sales
For the Payment Total Partner Unit (computed (computed on (computed on
Quarter Ended Made During Distributions on weighted average) weighted average) weighted average)
------------- ----------- ------------- ---------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
December 31, 1996 January 1997 $ 1,181,479 $ 11.27 $ 3.58 $ 7.69
March 31, 1997 April 1997 156,394 1.49 .63 .86
June 30, 1998 July 1997 231,069 2.20 1.62 .58
September 30, 1997 October 1997 191,081 1.82 1.28 .54
December 31, 1997 December 1997 1,859,826 17.75 - 17.75
----------- ------- ------ -------
$ 3,619,849 $ 34.53 $ 7.11 $ 27.42
=========== ======= ====== =======
</TABLE>
Distributions may be characterized for tax, accounting and economic
purposes as a return of capital, a return on capital or both. The
portion of each cash distribution by a partnership which exceeds its
net income for the fiscal period may be deemed a return of capital for
accounting purposes. 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 partners have represented
for the last several years, a substantial portion of all distributions
to the partners is expected to be a return of capital. Total
distributions to Class A limited partners were $56,455,232 from the
inception of the Partnership through December 31, 1997 ($538.68 per
weighted average Class A limited partner unit outstanding).
The distribution for the quarter ended December 31, 1997, totaling
$1,859,826 (cash from liquidation) was paid to the Class A limited
partners in December 1997. Distributions to the General Partners and
Class B limited partner during 1997 are discussed in Item 13 of this
Report, "Certain Relationships and Related Transactions".
During 1996, the Partnership made four (4) quarterly distributions (a
substantial portion of which constituted a return of capital) to Class
A limited partners, as follows:
<TABLE>
<CAPTION>
Distributions
Distributions Per of Cash from Distributions of
$500 Class A Limited Operations Cash from Sales
For the Payment Total Partner Unit (computed (computed on (computed on
Quarter Ended Made During Distributions on weighted average) weighted average) weighted average)
------------- ----------- ------------- ---------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
December 31, 1995 January 1996 $ 823,614 $ 7.86 $ 7.82 $ 0.04
March 31, 1996 April 1996 1,014,098 9.68 6.34 3.34
June 30, 1996 July 1996 681,900 6.51 3.93 2.58
September 30, 1996 October 1996 1,235,365 11.78 5.53 6.25
----------- ------- ------- -------
$ 3,754,977 $ 35.83 $ 23.62 $ 12.21
=========== ======= ======= =======
</TABLE>
-4-
<PAGE>
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters, continued
-------
(c) Distributions, continued
-------------
The Class B limited partner distributions of cash from operations are
subordinated to the Class A limited partners receiving cumulative
distributions of cash from operations, as scheduled in the Partnership
Agreement (i.e., 15%). Therefore, because the Class A limited partners
have not received their total cumulative distributions, CAII, the
Class B limited partner is not receiving distributions of cash from
operations, and as a result of this subordination, the general
partners anticipate that CAII will not receive any future
distributions of cash from operations. As a result, the general
partners anticipate that CAII will only recover approximately $3.6
million or 73% of its original $4.9 million Class B investment.
Item 6. Selected Financial Data
-----------------------
The following selected financial data relates to the years ended December 31,
1993 through 1997. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto appearing elsewhere
herein.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $ 1,672,634 $ 2,767,465 $ 3,911,086 $ 5,266,986 $ 8,223,119
Net income 681,121 1,185,997 1,373,906 1,544,149 1,888,272
Net income per weighted average
Class A limited partner unit outstanding 5.19 9.14 10.74 11.20 14.25
Total assets 551,542 4,244,705 6,695,392 11,177,527 18,218,316
Distributions declared to partners 2,764,865 4,501,676 4,721,260 8,118,393 8,160,752
Distributions declared per weighted average
Class A limited partner unit outstanding 23.27 39.24 42.98 70.99 70.00
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
Presented below are schedules (prepared solely to facilitate 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:
-5-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
Results of Operations, continued
- ---------------------
<TABLE>
<CAPTION>
Condensed Condense
Statements of Income The effect on Statements of The effect of
for the years net income Income for the years net income
ended December 31, of changes ended December 31, of changes
----------------------- between ------------------------ between
1997 1996 years 1996 1995 years
---------- ----------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 345,028 $ 567,279 $ (222,251) $ 567,279 $ 1,050,155 $ (482,876)
Equipment sales margin 749,526 940,938 (191,412) 940,938 166,969 773,969
Interest income 55,346 83,396 (28,050) 83,396 131,832 (48,436)
Other income - 33,310 (33,310) 33,310 355,889 (322,579)
Management fees paid to
general partners (50,936) (99,174) 48,238 (99,174) (132,506) 33,332
Direct services from general partners (116,397) (65,750) (50,647) (65,750) (60,768) (4,982)
General and administrative expenses (301,446) (274,002) (27,444) (274,002) (137,665) (136,337)
---------- ----------- ---------- ----------- ------------ ----------
Net income $ 681,121 $ 1,185,997 $ (504,876) $ 1,185,997 $ 1,373,906 $ (187,909)
========== =========== ========== =========== =========== ==========
</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 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:
Years ended December 31,
-----------------------------------------------
1997 1996 1995
---- ---- ----
Operating lease rentals $ 832,440 $ 1,577,529 $ 3,122,669
Direct finance lease income 35,322 132,292 133,727
Depreciation (522,734) (1,142,542) (2,206,241)
---------- ------------ ------------
Leasing margin $ 345,028 $ 567,279 $ 1,050,155
========== ============ ============
Leasing margin ratio 40% 33% 32%
== == ==
All components of leasing margin decreased for the years ended December 31, 1997
and 1996, and are expected to decrease further, primarily as a result of
portfolio run-off.
Leasing margin ratio fluctuates based upon (i) the mix of direct finance leases
and operating leases, (ii) remarketing activities, and (iii) the relative age
and types of leases in the portfolio. (Operating leases have a relatively lower
leasing margin early in the lease term and an increasing leasing margin as the
lease term passes. The majority of the Partnership's leases were operating
leases).
-6-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
Results of Operations, continued
- ---------------------
Leasing margin ratio increased primarily because of the age and run-off of the
operating leases held by the Partnership.
The ultimate rate of return on leases depends, in part, on interest rates at the
time the leases are originated, as well as future equipment values and on-going
lessee creditworthiness. 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 changes in the
capital markets).
EQUIPMENT SALES MARGIN
Equipment sales margin consists of the following:
Years ended December 31,
------------------------------------------
1997 1996 1995
---- ---- ----
Equipment sales revenue $ 1,658,916 $ 2,396,640 $ 538,504
Cost of equipment sales (909,390) (1,455,702) (371,535)
----------- ------------ ----------
Equipment sales margin $ 749,526 $ 940,938 $ 166,969
=========== ============ ==========
The Partnership is in its liquidation period. During the liquidation period, as
initial leases terminate, the equipment is being sold. Equipment sales revenue,
cost of equipment sales and the resulting equipment sales margin all decreased
in 1997 compared to 1996 due to portfolio run-off. The increase in equipment
sales margin in 1996 compared to 1995 is primarily due to the success of the
general partners in selling the Partnership's equipment for amounts in excess of
their net book values.
INTEREST INCOME
The decline in interest income is due to decreases in excess cash available for
investment.
OTHER INCOME
Other income for the year ended December 31, 1995 represented the collection of
previously charged-off accounts receivable from one lessee.
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 as 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.
-7-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
Results of Operations, continued
- ---------------------
PROVISION FOR LOSSES, continued
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 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 in 1997, 1996 or 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 general partners decreased due to portfolio run-off.
Direct services from general partners and general and administrative expenses
increased in 1997 due to expenses associated with liquidating the Partnership.
General and administrative expenses increased in 1996 as compared to 1995 due to
(i) $67,194 reimbursed to the CAI General Partner during the second quarter 1996
for insurance costs related to prior years and (ii) shipping and warehouse costs
related to certain equipment returned to the Partnership.
Liquidity and Capital Resources
- -------------------------------
The Partnership funded its activities principally with cash from rents, interest
income and sale of off-lease equipment. Available cash and cash reserves of the
Partnership were invested in interest bearing accounts and short-term U.S.
government securities pending distributions to the partners.
During 1997, 1996 and 1995, the Partnership declared distributions to the
partners of $2,764,865, $4,501,676 and $4,721,260, respectively (a substantial
portion 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 partners have represented for the last several years, a
substantial portion of all distributions to the partners is expected to be a
return of capital.
-8-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
Liquidity and Capital Resources, continued
- -------------------------------
The general partners anticipate that the Partnership will generate cash flow
from rentals and equipment sales during 1998 which, when added to cash and cash
equivalents on hand, should provide sufficient cash to enable the Partnership to
meet its current operating requirements. Any remaining cash will be distributed
to the partners in accordance with the Partnership Agreement. The Partnership's
intent is to dissolve and distribute all of its assets no later than December
31, 1998.
The Class B limited partner distributions of cash from operations are
subordinated to the Class A limited partners receiving cumulative distributions
of cash from operations, as scheduled in the Partnership Agreement (i.e., 15%).
Therefore, because the Class A limited partners have not received their total
cumulative distributions, CAII, the Class B limited partner is not receiving
distributions of cash from operations, and as a result of this subordination,
the general partners anticipate that CAII will not receive any future
distributions of cash from operations. As a result, the general partners
anticipate that CAII will only recover approximately $3.6 million or 73% of its
original $4.9 million Class B investment.
During 1997, the general partners made a curative allocation in accordance with
the Partnership Agreement whereby the balance in the Class B limited partner's
capital account was reallocated first to the general partners' capital account,
to the extent of their respective deficit balances, and next to the Class A
limited partners' capital accounts.
-9-
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Index to Financial Statements and
Financial Statement Schedule
Page
Financial Statements Number
-------------------- ------
Independent Auditors' Report 11
Balance Sheets as of December 31, 1997 and 1996 12
Statements of Income for the years ended
December 31, 1997, 1996 and 1995 13
Statements of Partners' Capital for the years
ended December 31, 1997, 1996 and 1995 14
Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 15
Notes to Financial Statements 16-24
Financial Statement Schedule
----------------------------
Independent Auditors' Report 25
Schedule II - Valuation and Qualifying Accounts 26
-10-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE PARTNERS
NORTHSTAR INCOME FUND-I, L.P.:
We have audited the accompanying balance sheets of Northstar Income Fund-I L.P.
as of December 31, 1997 and 1996, and the related statements of income,
partners' capital, and cash flows for each of the years in the three-year period
ended December 31, 1997. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, the Partnership is in the liquidation stage, whereby all
assets are expected to be liquidated during 1998 and all cash distributed to the
partners, after satisfaction of liabilities.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Northstar Income Fund-I, L.P.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
February 6, 1998
-11-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
---- ----
Cash and cash equivalents $ 100,816 $ 2,456,349
Accounts receivable, net of allowance for doubtful
accounts of $68,665 in 1997 372,935 278,149
Equipment held for sale or re-lease 25,000 324,180
Net investment in direct finance leases 2,791 131,963
Leased equipment, net 50,000 1,054,064
--------- -----------
Total assets $ 551,542 $ 4,244,705
========= ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 350,882 $ 672,315
Payable to affiliates 63,653 22,881
Rents received in advance 6,598 18,188
Distributions payable to partners - 1,317,168
--------- -----------
Total liabilities 421,133 2,030,552
--------- -----------
Partners' Capital (Deficit):
General partners - (578,739)
Limited partners:
Class A 300,000 units authorized;
104,802 units issued and outstanding 130,409 790,910
Class B - 2,001,982
--------- -----------
Total partners' capital 130,409 2,214,153
--------- -----------
Total liabilities and partners' capital $ 551,542 $ 4,244,705
========= ===========
See accompanying notes to financial statements.
-12-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
STATEMENTS OF INCOME
Years ended December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
REVENUE:
Operating lease rentals $ 832,440 $ 1,577,529 $ 3,122,669
Direct finance lease income 35,322 132,292 133,727
Equipment sales margin 749,526 940,938 166,969
Interest income 55,346 83,396 131,832
Other income - 33,310 355,889
----------- ----------- -----------
Total revenue 1,672,634 2,767,465 3,911,086
----------- ----------- -----------
EXPENSES:
Depreciation 522,734 1,142,542 2,206,241
Management fees paid to general
partners 50,936 99,174 132,506
Direct services from general partners 116,397 65,750 60,768
General and administrative 301,446 274,002 137,665
----------- ----------- -----------
Total expenses 991,513 1,581,468 2,537,180
----------- ----------- -----------
NET INCOME $ 681,121 $ 1,185,997 $ 1,373,906
=========== =========== ===========
NET INCOME ALLOCATED:
To the general partners $ 96,771 $ 157,559 $ 165,244
To the Class A limited partners 544,384 958,099 1,125,998
To the Class B limited partner 39,966 70,339 82,664
----------- ----------- -----------
$ 681,121 $ 1,185,997 $ 1,373,906
=========== =========== ===========
Net income per weighted average
Class A limited partner unit
outstanding $ 5.19 $ 9.14 $ 10.74
=========== =========== ===========
Weighted average Class A limited
partner units outstanding 104,802 104,802 104,802
=========== =========== ===========
See accompanying notes to financial statements.
-13-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Class A
Limited Class A Class B
General Partner Limited Limited
Partners Units Partners Partner Total
---------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Partners' capital,
January 1, 1995 $ (578,739) 104,802 $ 7,323,704 $ 2,132,221 $ 8,877,186
Net income 165,244 - 1,125,998 82,664 1,373,906
Distributions declared to partners (165,244) - (4,504,050) (51,966) (4,721,260)
---------- ------- ------------ ------------ ------------
Partners' capital,
December 31, 1995 (578,739) 104,802 3,945,652 2,162,919 5,529,832
Net income 157,559 - 958,099 70,339 1,185,997
Distributions declared to partners (157,559) - (4,112,841) (231,276) (4,501,676)
---------- ------- ------------ ----------- ------------
Partners' capital,
December 31, 1996 (578,739) 104,802 790,910 2,001,982 2,214,153
Adjustments 578,739 - 1,233,485 (1,812,224) -
Net income 96,771 - 544,384 39,966 681,121
Distributions declared to partners (96,771) - (2,438,370) (229,724) (2,764,865)
---------- ------- ------------ ------------ ------------
Partners' capital
December 31, 1997 $ - 104,802 $ 130,409 $ - $ 130,409
========== ======= ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
-14-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 681,121 $ 1,185,997 $ 1,373,906
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 522,734 1,142,542 2,206,241
Cost of equipment sales 909,390 1,455,702 371,535
Recovery of investment in direct finance leases 83,482 528,643 657,974
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (177,977) 50,844 52,544
Increase (decrease) in accounts payable and
accrued liabilities (321,433) 438,081 (78,849)
Increase (decrease) in payable to affiliates 40,772 12,411 (1,869)
Decrease in rents received in advance (11,589) (48,688) (6,623)
----------- ----------- -----------
Net cash provided by operating activities 1,726,500 4,765,532 4,574,859
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (4,082,033) (4,038,488) (5,768,700)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,355,533) 727,044 (1,193,841)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,456,349 1,729,305 2,923,146
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 100,816 $ 2,456,349 $ 1,729,305
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
-15-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
Organization
Northstar Income Fund-I, L.P. (the "Partnership"), was organized on
August 26, 1988 as a limited partnership under the laws of the State of
Delaware pursuant to an Agreement of Limited Partnership (the
"Partnership Agreement"). The Partnership was formed for the purpose of
owning and leasing equipment. During 1997, the Partnership liquidated
substantially all of its assets and distributed the related proceeds to
the partners in accordance with the Partnership Agreement. It is the
intent of the general partners to liquidate the remaining assets and
settle all liabilities during 1998. Any remaining cash will be
distributed to the partners.
The general partners of the Partnership are CAI Equipment Leasing I Corp.
(the "CAI General Partner"), a wholly owned subsidiary of Capital
Associates, Inc. ("CAI"), and Northstar Equipment Leasing Income Inc.
(the "Northstar General Partner"), an affiliate of Lehman Brothers Inc.
(the "General Partners" or "general partners"). The General Partners
manage the Partnership, including investment of funds, purchase and sale
of equipment, lease negotiation and other administrative duties.
Capital Associates International, Inc. ("CAII"), an affiliate of the CAI
General Partner, is the Class B limited partner. The Class B limited
partner contributed equipment totaling $4,899,866 (which represented 10%
of the net offering proceeds generated from sales of Class A limited
partner units).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. For leasing entities, this includes the
estimate of residual values, as discussed below. Actual results could
differ from those estimates.
Partnership Cash Distributions and Allocations of Profit and Loss
Cash Distributions
------------------
During the Reinvestment Period, as defined in the Partnership Agreement,
cash distributions were made as follows:
The General Partners and the Class A limited partners receive 3.5% and
96.5%, respectively, of cash from operations until the Class A limited
partners received annual, cumulative distributions equal to 14% of their
contributed capital. Thereafter, the General Partners and the Class B
limited partner received 3.5% and 96.5%, respectively, of cash from
operations until the Class B limited partner received annual
non-cumulative distributions equal to 11% of its contributed capital. The
remaining cash from operations was reinvested or distributed to the
partners as specified in the Partnership Agreement.
-16-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Partnership Cash Distributions and Allocations of Profit and Loss,
continued
Cash from equipment sales was distributed to the partners to the extent
necessary to pay any taxes arising from such sales. The remaining amount
was generally reinvested.
After the reinvestment period, cash is to be distributed to the partners
in accordance with the terms of the Partnership Agreement, generally,
3.5% to the General Partners with the remaining 96.5% allocated 90% to
the Class A limited partners and 10% to the Class B limited partner.
The Class B limited partner distributions of cash from operations are
subordinated to the Class A limited partners receiving cumulative
distributions of cash from operations, as scheduled in the Partnership
Agreement (i.e., 15%). Therefore, because the Class A limited partners
have not received their total cumulative distributions, CAII, the Class B
limited partner, is not receiving distributions of cash from operations,
and as a result of this subordination, the general partners anticipate
that CAII will not receive any future distributions of cash from
operations.
During 1997, the general partners made a curative allocation in
accordance with the Partnership Agreement whereby the balance in the
Class B limited partner's capital account was reallocated first to the
general partners' capital account, to the extent of their respective
deficit balances, and next to the Class A limited partners' capital
accounts.
Federal Income Tax Basis Profits and Losses
-------------------------------------------
Profits are first allocated in proportion to, and to the extent of any,
losses incurred during prior periods. Thereafter, the General Partners,
as a class, are generally allocated 3.5% and the Limited Partners, as a
class, are allocated 96.5%. The Class A limited partners and the Class B
limited partner are allocated 90% and 10%, respectively, of the 96.5%,
until the Class A limited partners have been allocated an amount equal in
the aggregate to a 10% annual cumulative return compounded quarterly on
the Class A limited partners' Adjusted Capital Contributions, as defined
in the Partnership Agreement. The Class A limited partners and the Class
B limited partner receive 10% and 90%, respectively, of the balance of
the 96.5% in profits until the Class B limited partner receives an
allocation equal to a 10% annual cumulative return compounded quarterly
on the Class B limited partners' Adjusted Capital Contribution, as
defined in the Partnership Agreement. The remaining balance of the 96.5%
in profits is shared 40% and 60%, respectively, between the Class B
limited partner and the Class A limited partners.
-17-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Federal Income Tax Basis Profits and Losses, continued
-------------------------------------------
Losses are first allocated in proportion to, and to the extent of any,
prior profits. Thereafter, losses are generally allocated 91.45% to the
Class A limited partners and 8.55% to the Class B limited partner.
Upon dissolution of the Partnership, the General Partners are required to
contribute additional capital to the Partnership in an amount equal to
the lesser of (1) the aggregate deficit in their capital accounts at such
time, or (2) 1.01% of the limited partners' capital contributions (which
amount is equal to $578,739).
Reclassifications
Certain reclassifications have been made to prior years' financial
statements to conform to the current year's presentation.
Recently Issued Financial Accounting Standards
During 1997, the Partnership adopted SFAS No. 125, Accounting for
Transfer and Servicing of Financial Assets and Extinguishments of
Liabilities ("SFAS No. 125"). SFAS No. 125 provides consistent standards
for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. The adoption of SFAS No. 125 did
not have a material impact on the Partnership's financial position or
results of operations.
Long-lived Assets
The Partnership accounts for long-lived assets under the provisions of
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets,
including operating leases, and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In performing the review for recoverability, the
entity should estimate the future cash flows expected to result from the
use of the asset and its eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets, including
operating leases, and identifiable intangibles held by the Partnership is
based on the fair value of the asset calculated by discounting the
expected future cash flows at an appropriate interest rate.
-18-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Lease Accounting
Statement of Financial Accounting Standards No. 13, Accounting for
Leases, requires that a lessor account for each lease by the direct
finance, sales-type or operating lease method. The Partnership currently
utilizes the direct financing and operating methods for all of the
Partnership's equipment under lease. Direct finance leases are defined as
those leases which transfer substantially all of the benefits and risks
of ownership of the equipment to the lessee. For all types of leases, the
determination of profit considers the estimated value of the equipment at
lease termination, referred to as the residual value.
The Partnership's accounting methods and their financial reporting effects
are described below.
Net Investment in Direct Finance Leases ("DFLs")
The cost of the equipment, including acquisition fees paid to the general
partners, is recorded as net investment in DFLs on the accompanying
balance sheet. Leasing revenue, which is recognized over the term of the
lease, consists of the excess of lease payments plus the estimated
residual value over the equipment's cost. Earned income is recognized
monthly to provide a constant yield and is recorded as direct finance
lease income on the accompanying income statements. Residual values were
established at lease inception equal to the estimated value to be
received from the equipment following termination of the initial lease
(which in certain circumstances includes anticipated re-lease proceeds),
as determined by the general partners. In estimating such values, the
general partners considered all relevant information regarding the
equipment and the lessee.
Equipment on Operating Leases ("OLs")
The cost of equipment, including acquisition fees paid to the general
partners, is recorded as leased equipment in the accompanying balance
sheets and is depreciated on a straight-line basis over the lease term to
an amount equal to the estimated residual value at the lease termination
date. Leasing revenue consists principally of monthly rents and is
recognized as operating lease rentals in the accompanying income
statements. Residual values were established at lease inception equal to
the estimated value to be received from the equipment following
termination of the initial lease (which in certain circumstances includes
anticipated release proceeds), as determined by the general partners. In
estimating such values, the general partners considered all relevant
information and circumstances regarding the equipment and the lessee.
-19-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Allowance for Losses
An allowance for losses is maintained at levels determined by the general
partners to adequately provide for any other-than-temporary declines in
asset values. In determining losses, economic conditions, the activity in
the used equipment markets, the effect of actions by equipment
manufacturers, the financial condition of lessees, the expected courses
of action by lessees with regard to leased equipment at termination of
the initial lease term, and other factors which the general partner
believes are relevant, are considered. Asset chargeoffs are recorded upon
the termination or remarketing of the underlying assets. The lease
portfolio is reviewed quarterly to determine the adequacy of the
allowance for losses.
Transactions Subsequent to Initial Lease Termination
After the initial lease term of equipment on lease expires, the equipment
is either sold or re-leased to the existing lessee or another third
party. The remaining net book value of equipment sold is removed and gain
or loss recorded when equipment is sold. The accounting for re-leased
equipment is consistent with the accounting described under "Net
Investment in Direct Finance Leases" and "Equipment on Operating Leases"
above.
Income Taxes
No provision for income taxes has been made in the financial statements
since taxable income or loss is recorded in the tax returns of the
individual partners.
Cash Equivalents
The Partnership considers short-term, highly liquid investments that are
readily convertible to known amounts of cash to be cash equivalents.
Cash equivalents of $99,816 and $2,448,000 at December 31, 1997 and 1996,
respectively, are comprised of investments in a money market fund which
invests solely in U.S. Government securities having maturities of 90 days
or less.
Equipment Held for Sale or Re-lease
Equipment held for sale or re-lease, recorded at the lower of cost or
market value expected to be realized, consists of equipment previously
leased to end users which has been returned to the Partnership following
lease expiration.
-20-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Net Income Per Class A Limited Partner Unit
Net income per Class A limited partner unit is computed by dividing net
income allocated to the Class A limited partners by the weighted average
number of Class A limited partner units outstanding during the period.
2. Net Investment in Direct Finance Leases
---------------------------------------
The components of the net investment in direct finance leases at December
31, 1997 and 1996 were:
1997 1996
---- ----
Minimum lease payments receivable $ 20,590 $ 130,149
Estimated unguaranteed residual value - 32,566
Unearned lease income (17,799) (30,752)
--------- ---------
$ 2,791 $ 131,963
========= =========
Minimum lease payments receivable at December 31, 1997 are due in
installments as follows:
Year Ending December 31,
------------------------
1998 $ 8,520
1999 8,520
2000 3,550
--------
Total $ 20,590
========
3. Equipment on Operating Leases
-----------------------------
The Partnership's investments in equipment on operating leases by major
class as of December 31, 1997 and 1996 were:
1997 1996
---- ----
Transportation and industrial equipment $ 429,278 $ 3,549,277
Other - 618,437
--------- ------------
429,278 4,167,714
Less:
Accumulated depreciation (319,458) (2,640,962)
Allowance for losses (59,820) (472,688)
--------- ------------
$ 50,000 $ 1,054,064
========= ============
-21-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
3. Equipment on Operating Leases, continued
-----------------------------
Depreciation expense for 1997, 1996 and 1995 was $522,734, $1,142,542 and
$2,206,241, respectively.
There are no future minimum lease rentals receivable under noncancelable
operating leases at December 31, 1997.
4. Transactions With the General Partners and Affiliates
-----------------------------------------------------
Management Fees
---------------
As permitted under terms of the Partnership Agreement, the general partners
receive management fees equal to 2.675% of monthly gross rentals received
by the Partnership (payable 2% to the CAI General Partner and 0.675% to the
Northstar General Partner), payable monthly in arrears as compensation for
services rendered in connection with the management of the Partnership's
equipment. Management fees totaled $27,064, $78,685 and $107,761 in 1997,
1996 and 1995, respectively.
Incentive Management Fee
------------------------
The General Partners earn an incentive management fee equal to 5% of
monthly gross rentals from re-leases received by the Partnership (payable
4% to the CAI General Partner and 1% to the Northstar General Partner),
payable monthly in arrears as compensation for negotiating and consummating
extensions, renewals and re-leases of equipment and monitoring the
subsequent performance of lessees as permitted under the Partnership
Agreement. Incentive management fees totaled $23,872, $20,489 and $24,745
in 1997, 1996 and 1995, respectively.
Direct Services from General Partners
-------------------------------------
The General Partners and their affiliates provide accounting, investor
relations, billing, collecting, asset management and other administrative
services to the Partnership. The Partnership reimburses the General
Partners for these services performed on its behalf as permitted under the
terms of the Partnership Agreement. Such reimbursements totaled $116,397,
$65,750 and $60,768 in 1997, 1996 and 1995, respectively.
Payables to Affiliates
----------------------
Payables to affiliates consists primarily of management fees and direct
services payable to the General Partners.
-22-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
4. Transactions With the General Partners and Affiliates, continued
-----------------------------------------------------
Disposition Fee
---------------
The CAI General Partner earns a subordinated fee with respect to each sale
of equipment in an amount not to exceed the lesser of (a) 50% of the fee
that would be charged by an unaffiliated party or (b) 3% of the gross
contract price relating to each sale of equipment. The disposition fee has
not and will not be paid to the CAI General Partner until the Class A
limited partners have received cash distributions in an amount equal to
their capital contributions plus an 8% annual, cumulative return compounded
quarterly on their adjusted capital contributions, calculated from the date
that each Class A limited partner is admitted to the Partnership. The
Partnership has not accrued any disposition fees since inception since it
is anticipated that the limited partners will not receive the minimum
distributions described above.
5. Tax Information (Unaudited)
---------------------------
The following reconciles net income for financial reporting purposes to
income for federal income tax purposes for the years ended December 31,:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income per financial statements $ 681,121 $ 1,185,995 $ 1,373,906
Differences due to:
Direct finance leases 83,483 481,984 960,182
Depreciation 200,377 115,760 334,595
Loss on sale of equipment 549,962 (3,579) (200,851)
Other (293,514) (26,679) 91,387
----------- ----------- -----------
Partnership income for federal
income tax purposes $ 1,221,429 $ 1,753,481 $ 2,559,219
=========== =========== ===========
</TABLE>
The following reconciles partners' capital for financial reporting purposes
to partners' capital for federal income tax purposes for the years ended
December 31,:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Partners' capital per financial statements $ 130,409 $ 2,214,153 $ 5,529,832
Differences due to:
Commissions and offering costs 6,792,543 6,792,543 6,792,543
Direct finance leases 8,456,022 8,372,539 7,890,555
Depreciation (10,414,415) (10,614,792) (10,730,552)
Provision for losses 3,263,929 3,652,511 3,652,511
Reduction for excess of fair value over
basis on contributed property (617,411) (617,411) (617,411)
Loss on sale of equipment (438,837) (988,799) (985,220)
Other 139,034 43,965 70,644
------------- ------------- -------------
Partners' capital for federal income
tax purposes $ 7,311,274 $ 8,854,709 $ 11,602,902
============= ============= =============
</TABLE>
-23-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
6. Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
Statement of Financial Standards No. 107, Disclosures about Fair Value of
Financial Instruments specifically excludes certain items from its
disclosure requirements such as the Company's investment in leased assets.
The carrying amounts at December 31, 1997 for cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, payable to
affiliates, rents and sale proceeds received in advance and distributions
payable to partners approximate their fair values due to the short maturity
of these instruments.
-24-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE PARTNERS
NORTHSTAR INCOME FUND-I, L.P.:
Under date of February 6, 1998, we reported on the balance sheets of Northstar
Income Fund-I, L.P. as of December 31, 1997 and 1996, and the related statements
of income, partners' capital, and cash flows for each of the years in the
three-year period ended December 31, 1997, as contained in the Partnership's
annual report on Form 10-K for the year 1997. In connection with our audits of
the aforementioned financial statements, we also audited the related financial
statement Schedule II, as listed in the accompanying index. This financial
statement schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/KPMG Peat Marwick LLP
------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
February 6, 1998
-25-
<PAGE>
NORTHSTAR INCOME FUND-I, L.P.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------------- -------- --------
Additions
Balance at (deductions) Balance
beginning charged to at end
Classification of period other accounts Deductions of period
- -------------- --------- -------------- ---------- ---------
(1) (2)
1997
- ---------------------
<S> <C> <C> <C> <C>
Allowance for losses:
Accounts receivable $ - $ 68,665 $ - $ 68,665
Equipment on leases 472,688 (328,762) (84,106) 59,820
--------- ---------- --------- ---------
$ 472,688 $ 260,097 $ (84,106) $ 128,485
========= ========== ========= =========
1996
- ---------------------
Allowance for losses:
Equipment on leases $ 449,963 $ 41,725 $ (19,000) $ 472,688
========= ========== ========= =========
1995
- ---------------------
Allowance for losses:
Equipment on leases $ 494,215 $ (42,821) $ (1,431) $ 449,963
========= ========== ========= =========
</TABLE>
(1) Represents reclassifications to and from other reserve accounts and asset
and liability accounts.
(2) Represents allowance charge-offs and write-downs for equipment impairment.
See accompanying independent auditors' report
-26-
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosures
-----------------------------------------------------
None
Item 10. Directors and Executive Officers of the Partnership
---------------------------------------------------
The Partnership has no officers and directors. The General Partners jointly
manage and control the affairs of the Partnership and have general
responsibility and authority in all matters affecting its business. Information
concerning the directors and executive officers of the General Partners is as
follows:
CAI Equipment Leasing I Corp.
Name Positions Held
---- --------------
John F. Olmstead President and Director
Dennis J. Lacey Senior Vice President and Director
Anthony M. DiPaolo Senior Vice President, Principle Financial and Chief
Administrative Officer and Director
Richard H. Abernethy Vice President and Director
John A. Reed Vice President, Assistant Secretary and Director
Joseph F. Bukofski Vice President, Assistant Secretary and Director
Robert A. Golden Director
Mick Myers Director
Ann Danielson Assistant Vice President
David J. Anderson Chief Accounting Officer and Secretary
JOHN F. OLMSTEAD, age 53 joined CAII as Vice President in December, 1988, is a
Senior Vice President of CAI and CAII and is head of CAII's Public Equity
division. He has served as Chairman of the Board for Neo-kam Industries, Inc.,
Matchless Metal Polish Company, Inc. and ACL, Inc. for more than 5 years. He has
over 20 years of experience holding various positions of responsibility in the
leasing industry. Mr. Olmstead holds a Bachelor of Science degree from Indiana
University and a Juris Doctorate degree from Indiana Law School.
DENNIS J. LACEY, age 44, joined CAI as Vice President, Operations, in October
1989. Mr. Lacey was appointed Treasurer on January 1, 1991, Chief Financial
Officer on April 11, 1991, a director on July 19, 1991, and President and Chief
Executive Officer on September 6, 1991. Prior to joining CAI, Mr. Lacey was an
audit partner for the public accounting firm of Coopers & Lybrand. Mr. Lacey is
also a director and senior officer of CAII, CAI Equipment Leasing I Corp., CAI
Equipment Leasing II Corp., CAI Equipment Leasing III Corp., CAI Equipment
Leasing IV Corp., CAI Equipment Leasing V Corp., CAI Leasing Canada, Ltd., CAI
Partners Management Company, CAI Securities Corporation, CAI Lease
Securitization I Corp. and Capital Equipment Corporation (collectively referred
to herein as the "CAI Affiliates"), all of which are first- or second-tier
wholly-owned subsidiaries of CAI.
-27-
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
ANTHONY M. DIPAOLO, age 39, joined CAII in July 1990 as Assistant Treasurer and
is currently Senior Vice President-Chief Financial Officer. He also held the
positions of Senior Vice President-Controller and Assistant Vice
President-Credit Administration for the Company. Mr. DiPaolo has held similar
senior financial management positions with two public companies between 1986 and
June 1990, and prior to then was an audit manager for the public accounting firm
of Coopers & Lybrand. Mr. DiPaolo holds a Bachelor of Science degree in
Accounting from the University of Denver.
RICHARD H. ABERNETHY, age 43, joined CAII in April 1992 as Equipment Valuation
Manager and currently serves as Vice President of Asset Management. Mr.
Abernethy has thirteen years experience in the leasing industry, including prior
positions with Barclays Leasing Inc., from November 1986 to February 1992, and
Budd Leasing Corporation, from January 1981 to November 1986. Mr. Abernethy
holds a Bachelor of Arts in Business Administration from the University of North
Carolina at Charlotte.
JOHN A. REED, age 42, joined CAII in January 1990 as the Tax Director and
Assistant Secretary. Mr. Reed is currently the Vice President-Manager, Capital
Markets Group and is responsible for obtaining off balance sheet financing,
syndications and private programs. Prior to joining the Capital Markets Group,
Mr. Reed was Vice President of both Marketing Administration and Credit and Debt
Administration. He spent seven and one half years with Coopers & Lybrand in the
Tax Department and served on CAII's tax consulting engagement during that time.
Mr. Reed holds a Bachelor of Arts degree in Social Sciences and Masters of
Science in Accounting, from Colorado State University.
JOSEPH F. BUKOFSKI, age 43, joined CAII in June 1990 as a Financial Analyst. Mr.
Bukofski is currently the Vice President of Marketing and is responsible for all
lease documentation and management of transaction structuring and processing.
Prior to joining the Marketing Department, Mr. Bukofski was Assistant Vice
President and Controller. Prior to joining the Company, he was a geologist with
Barringer Geoservices, Inc. for eleven years. Mr. Bukofski holds a Bachelor of
Science degree in Secondary Education - Earth Science from Bloomsburg University
and a Masters of Science in Accounting from the University of Colorado.
ROBERT A. GOLDEN, age 52, is Vice President and the National Sales Manager of
the Company. Mr. Golden joined the Company in 1993 as a Branch Manager. He was
promoted to his current position in September 1994. Prior to joining the
Company, he was an Executive Vice President with the U.S. Funds Group, President
of BoCon Capital Group and Vice President with Ellco/GE Capital for fifteen
years. Mr. Golden is an officer, but not a director, of CAII.
MICK MYERS, age 40, joined CAI in February 1992 as a Senior Portfolio Manager.
Currently he is Assistant Vice President of Asset Management. Mr. Myers has nine
years experience in the leasing industry. Previously, he has held the position
of Senior End of Lease Negotiator with ELLCO/GE Capital. Mr. Myers holds a
Bachelor of Science degree from the University of Wyoming.
-28-
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
ANN DANIELSON, age 34, joined CAII in February 1990 and is currently Assistant
Vice President, Assistant Treasurer and is responsible for the Company's cash
management and collections functions. Prior to joining the Company, she was with
U.S. West financial Services and Coopers & Lybrand. Ms. Danielson holds a
Bachelor of Arts Degree from the University of Northern Iowa.
DAVID J. ANDERSON, age 45, joined CAII in August 1990 as Manager of Billing &
Collections and currently serves as Assistant Vice-President/Chief Accounting
Officer. Prior to joining CAII, Mr. Anderson was Vice- President/Controller for
Systems Marketing, Inc., from 1985 to 1990, and previous to that worked in
several senior staff positions at the Los Alamos National Laboratory and with
Ernst & Whinney. Mr. Anderson holds a Bachelor of Business Administration degree
in Accounting from the University of Wisconsin.
Northstar Equipment Leasing Income Inc.
---------------------------------------
Name Positions Held
---- --------------
Rocco F. Andriola Director
Jeffrey C. Carter Director, President and CFO
Robert Sternlieb Vice President
ROCCO F. ANDRIOLA, 39, is a Managing Director of Lehman Brothers in its
Diversified Asset Group and has held such position since October 1996. Since
joining Lehman in 1986, Mr. Andriola has been involved in a wide range of
restructuring and asset management activities involving real estate and other
direct investment transactions. From June 1991 through September 1996, Mr.
Andriola held the position of Senior Vice President in Lehman's Diversified
Asset Group. From June 1989 through May 1991, Mr. Andriola held the position of
First Vice President in Lehman's Capital Preservation and Restructuring Group.
From 1986 to 1989, Mr. Andriola served as a Vice President in the Corporate
Transactions Group of Shearson Lehman Brothers' office of the general counsel.
Prior to joining Lehman, Mr. Andriola practiced corporate and securities law at
Donovan Leisure Newton & Irvine in New York. Mr. Andriola received a B.A. from
Fordham University, a J.D. from New York University School of Law, and an LLM in
Corporate law from New York University's Graduate School of Law.
JEFFREY C. CARTER, 52, is a Senior Vice President of Lehman Brothers in the
Diversified Asset Group. Mr. Carter joined Lehman Brothers in September 1988.
From 1972 to 1988, Mr. Carter held various positions with Helmsley-Spear
Hospitality Services, Inc. and Stephen W. Brener Associates, Inc. including
Director of Consulting Services at both firms. From 1982 through 1987, Mr.
Carter was President of Keystone Hospitality Services, an independent hotel
consulting and brokerage company. Mr. Carter received his B.S. degree in Hotel
Administration from Cornell University and an M.B.A. degree from Columbia
University.
-29-
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
ROBERT STERNLIEB, 33, is an Assistant Vice President of Lehman Brothers and is
responsible for asset management within the Diversified Asset Group. Mr.
Sternlieb joined Lehman Brothers in April 1989 as an asset manager. From May
1986 to April 1989, he was a systems analyst at Drexel Burnham Lambert. Mr.
Sternlieb received a B.S. degree in Finance from Lehigh University in 1986.
Item 11. Executive Compensation
----------------------
No compensation was paid by the Partnership to the officers and directors of the
General Partners. See Item 13 of this Report, "Certain Relationships and Related
Transactions", for a description of the compensation and fees paid to the
General Partners and their affiliates by the Partnership during 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
(a) As of the date hereof, no person is known by the Partnership to be the
beneficial owner of more than 5% of the Class A limited partner units
of the Partnership. The Partnership has no directors or officers, and
neither the General Partners nor the Class B limited partner of the
Partnership owns any Class A limited partner units.
CAII, an affiliate of the CAI General Partner, owns 100% of the
Partnership's Class B limited partner interest.
CAI Equipment Leasing I Corp. and Northstar Equipment Leasing Income
Inc. own 100% of the Partnership's general partner interest.
The names and addresses of the General Partners and the Class B
limited partner are as follows:
CAI General Partner
-------------------
CAI Equipment Leasing I Corp.
7175 West Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
Northstar General Partner
-------------------------
Northstar Equipment Leasing Income Inc.
c/o Lehman Brothers
3 World Financial Center - 29th Floor
New York, New York 10285
-30-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management,
----------------------------------------------------------------------
continued
Class B Limited Partner
-----------------------
Capital Associates International, Inc.
7175 West Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
(b) No directors or officers of the CAI General Partner, the Northstar
General Partner or the Class B limited partner owned any Class A
limited partner units as of February 1, 1998.
(c) The Partnership knows of no arrangements, the operation of which may
at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The General Partners and their affiliates receive certain types of compensation,
fees or other distributions in connection with the operations of the Partnership
as discussed below:
Management Fee
- --------------
The General Partners earn a monthly fee in an amount equal to 2.675% of gross
rentals received by the Partnership (payable 2.0% to the CAI General Partner and
.675% to the Northstar General Partner) as compensation for services rendered in
connection with the management of the Partnership's equipment. Management fees
earned by the General Partners totaled $27,064 during 1997.
Incentive Management Fee
- ------------------------
The General Partners earn a monthly fee equal to 5% of monthly gross rentals
from re-leases received by the Partnership (payable 4% to the CAI General
Partner and 1% to the Northstar General Partner) as compensation for negotiating
and consummating extensions, renewals and re-leases of equipment and monitoring
the subsequent performance of lessees. Incentive management fees totaled $23,872
during 1997.
Disposition Fee
- ---------------
The CAI General Partner earns a subordinated fee with respect to each sale of
equipment in an amount not to exceed the lesser of (a) 50% of the fee that would
be charged by an unaffiliated party or (b) 3% of the gross contract price
relating to each sale of equipment. The disposition fee has not and will not be
paid to the CAI General Partner until the Class A limited partners have received
cash distributions in an amount equal to their capital contributions plus an 8%
annual, cumulative return compounded quarterly on their adjusted capital
contributions, calculated from the date that each Class A limited partner is
admitted to the Partnership. The Partnership has not accrued any disposition
fees since inception since it is anticipated that the limited partners will not
receive distributions in the aforementioned amounts.
-31-
<PAGE>
Item 13. Certain Relationships and Related Transactions, continued
----------------------------------------------
Accountable General and Administrative Expenses
- -----------------------------------------------
The General Partners are entitled to reimbursement of certain expenses paid on
behalf of the Partnership which are incurred in connection with the
Partnership's operations. Such reimbursable expenses amounted to $116,397 during
1997.
Additionally, the General Partners receive 3.5% of Partnership cash
distributions and are allocated certain Partnership net income and gross
revenues (shared 2% to the CAI General Partner and 1.5% to the Northstar General
Partner) relating to their general partner interests in the Partnership.
Distributions paid and net income allocated to the General Partners totaled
$96,771 and $96,771 respectively, for 1997. Distributions paid and net income
allocated to the Class B limited partner were $229,724 and $56,788,
respectively, for 1997.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a)
and
(d) The following documents are filed as part of this Report:
1. Financial Statements: (Incorporated by reference to Item 8 of this
Report, "Financial Statements and Supplementary Data").
2. Financial Statement Schedule: (Incorporated by reference to Item 8
of this Report, "Financial Statements and Supplementary Data").
(b) The Partnership did notfile any reports on Form 8-K during the quarter
ended December 31, 1997.
(c) Exhibits required to be filed.
Exhibit Exhibit
Number Name
------- -------
4.1* Amended and Restated Agreement of Limited Partnership
(incorporated by reference to Exhibit 2(a) contained in the
Partnership's Form 8-A Registration Statement, dated May 4,
1990, Commission File No. 0-18558)
4.2* Amendment No. 1 to Amended and Restated Agreement of
Limited Partnership (incorporated by reference to Exhibit
4(d) contained in Post-Effective Amendment No. 1 to the
Partnership's Form S-1 Registration Statement dated May 8,
1989, Commission File No. 33-24022)
* Not filed herewith. In accordance with Rule 12b-32 of the
General Rules and Regulations under the Securities Exchange
Act of 1934, reference is made to the document previously
filed with the Commission.
-32-
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 31, 1998 Northstar Income Fund-I, L.P.
By: CAI Equipment Leasing I Corp.
By: /s/John F. Olmstead
-----------------------------
John F. Olmstead
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the general partner
of the Partnership and in the capacities indicated on March 31, 1998.
Signature Title
- --------- -----
/s/John F. Olmstead
- -----------------------
John F. Olmstead President and Director
/s/Dennis J. Lacey
- -----------------------
Dennis J. Lacey Senior Vice President and Director
/s/Anthony M. DiPaolo
- ----------------------- Senior Vice President, Principle Financial and Chief
Anthony M. DiPaolo Administrative Officer and Director
/s/Richard H. Abernethy
- -----------------------
Richard H. Abernethy Vice President and Director
/s/John A. Reed
- -----------------------
John A. Reed Vice President, Assistant Secretary and Director
/s/Joseph F. Bukofski
- -----------------------
Joseph F. Bukofski Vice President, Assistant Secretary and Director
/s/Robert A. Golden
- -----------------------
Robert A. Golden Director
/s/Mick Myers
- -----------------------
Mick Myers Director
/s/Ann Danielson
- -----------------------
Ann Danielson Assistant Vice President
/s/David J. Anderson
- -----------------------
David J. Anderson Chief Accounting Officer and Secretary
-32-
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 100,816
<SECURITIES> 0
<RECEIVABLES> 372,935
<ALLOWANCES> 0
<INVENTORY> 25,000
<CURRENT-ASSETS> 0
<PP&E> 50,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 551,542
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 130,409
<TOTAL-LIABILITY-AND-EQUITY> 551,542
<SALES> 749,526
<TOTAL-REVENUES> 1,672,634
<CGS> 0
<TOTAL-COSTS> 991,513
<OTHER-EXPENSES> 167,333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 681,121
<INCOME-TAX> 0
<INCOME-CONTINUING> 681,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 681,121
<EPS-PRIMARY> 5.19
<EPS-DILUTED> 5.19
</TABLE>
