<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ----------------------
---------------------
For Quarter Ended September 30, 1996 Commission File No. 0-18364
American Income Partners V-A Limited Partnership
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Massachusetts 04-3057303
- -------------------------------------------- --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Boston, MA 02114
- -------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (617) 854-5800
--------------------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court 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 No
----- -----
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position at September 30, 1996
and December 31, 1995 3
Statement of Operations for the three and nine months
ended September 30, 1996 and 1995 4
Statement of Cash Flows for the nine months ended
September 30, 1996 and 1995 5
Notes to the Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
PART II. OTHER INFORMATION:
Items 1 - 6 14
</TABLE>
2
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
September 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- -------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 3,091,283 $ 1,832,111
Rents receivable, net of allowance for
doubtful accounts of $5,000 251,280 179,945
Accounts receivable - affiliate 220,335 134,441
Other receivable 3,104,537 --
Equipment at cost, net of accumulated
depreciation of $10,447,534 and
$22,974,327 at September 30, 1996
and December 31, 1995, respectively 2,041,689 7,833,576
----------- -----------
Total assets $ 8,709,124 $ 9,980,073
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Notes payable $ 261,911 $ 2,231,365
Accrued interest 2,393 31,667
Accrued liabilities 60,142 20,000
Accrued liabilities - affiliate 14,167 9,546
Deferred rental income 9,456 8,363
Cash distributions payable to partners 4,810,514 726,664
----------- -----------
Total liabilities 5,158,583 3,027,605
----------- -----------
Partners' capital (deficit):
General Partner (1,353,443) (1,183,347)
Limited Partnership Interests
(1,380,661 Units; initial
purchase price of $25 each) 4,903,984 8,135,815
----------- -----------
Total partners' capital 3,550,541 6,952,468
----------- -----------
Total liabilities and partners'
capital $ 8,709,124 $ 9,980,073
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
for the three and nine months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Income:
Lease revenue $1,498,156 $ 936,285 $3,339,961 $3,033,805
Interest income 47,715 30,875 95,728 102,022
Gain on sale of equipment 762,202 98,931 953,129 446,587
---------- ---------- ---------- ----------
Total income 2,308,073 1,066,091 4,388,818 3,582,414
---------- ---------- ---------- ----------
Expenses:
Depreciation 307,124 754,372 1,357,866 2,433,827
Interest expense 4,825 63,123 69,165 271,885
Equipment management fees
- affiliate 73,527 43,473 168,920 144,100
Operating expenses - affiliate 14,613 26,205 294,284 97,175
---------- ---------- ---------- ----------
Total expenses 400,089 887,173 1,890,235 2,946,987
---------- ---------- ---------- ----------
Net income $1,907,984 $ 178,918 $2,498,583 $ 635,427
========== ========== ========== ==========
Net income
per limited partnership unit $ 1.31 $ 0.12 $ 1.72 $ 0.44
========== ========== ========== ==========
Cash distributions declared
per limited partnership unit $ 3.31 $ 0.50 $ 4.06 $ 1.50
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the nine months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from (used in) operating
activities:
Net income $ 2,498,583 $ 635,427
Adjustments to reconcile net income
to net cash from operating
activities:
Depreciation 1,357,866 2,433,827
Gain on sale of equipment (953,129) (446,587)
Changes in assets and liabilities
Decrease (increase) in:
rents receivable (71,335) 192,039
accounts receivable - affiliate (85,894) 119,835
Increase (decrease) in:
accrued interest (29,274) (31,371)
accrued liabilities 40,142 3,350
accrued liabilities - affiliate 4,621 (19,641)
deferred rental income 1,093 8,378
----------- -----------
Net cash from operating
activities 2,762,673 2,895,257
----------- -----------
Cash flows from (used in) investing
activities:
Purchase of equipment (245,280) --
Proceeds from equipment sales 2,527,893 716,977
----------- -----------
Net cash from investing
activities 2,282,613 716,977
----------- -----------
Cash flows used in financing activities:
Principal payments - notes payable (1,969,454) (1,828,467)
Distributions paid (1,816,660) (2,179,991)
----------- -----------
Net cash used in financing
activities (3,786,114) (4,008,458)
----------- -----------
Net increase (decrease) in cash and
cash equivalents 1,259,172 (396,224)
Cash and cash equivalents at beginning
of period 1,832,111 2,571,287
----------- -----------
Cash and cash equivalents at end of
period $ 3,091,283 $ 2,175,063
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for
interest $ 98,439 $ 303,256
=========== ===========
</TABLE>
Supplemental disclosure of non-cash investing activity:
The Partnership entered into a sale transaction to dispose of its interests
in a vessel and certain railroad equipment. This transaction closed on
September 30, 1996. The Partnership received net sale proceeds of $3,104,537,
a portion of which was used to repay the outstanding principal balance of
notes payable associated with the vessel of $65,690. The remainder,
$3,038,847, was deposited into an escrow account and transferred to the
Partnership on October 3, 1996. See Note 4 for additional discussion on this
transaction.
The accompanying notes are an integral part
of these financial statements.
5
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
September 30, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing Form
10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not
include all information and footnote disclosures required under generally
accepted accounting principles for complete financial statements and,
accordingly, the accompanying financial statements should be read in conjunction
with the footnotes presented in the 1995 Annual Report. Except as disclosed
herein, there has been no material change to the information presented in the
footnotes to the 1995 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at September 30, 1996 and December 31, 1995 and results of operations
for the three and nine month periods ended September 30, 1996 and 1995 have been
made and are reflected.
NOTE 2 - CASH
- -------------
At September 30, 1996, the Partnership had $2,905,000 invested in reverse
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities.
NOTE 3 - REVENUE RECOGNITION
- ----------------------------
Rents are payable to the Partnership monthly, quarterly or semi-annually and
no significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of
$1,905,021 are due as follows:
<TABLE>
<S> <C>
For the year ending September 30, 1997 $ 895,361
1998 808,688
1999 200,972
----------
Total $1,905,021
==========
</TABLE>
6
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
NOTE 4 - EQUIPMENT
- ------------------
The following is a summary of equipment owned by the Partnership at September
30, 1996. In the opinion of American Finance Group ("AFG"), the acquisition
cost of the equipment did not exceed its fair market value.
<TABLE>
<CAPTION>
Lease Term Equipment
Equipment Type (Months) at Cost
- ----------------------- ----------- -----------
<S> <C>
Aircraft 10-72 $ 4,596,188
Vessels 57 3,666,680
Materials handling 6-60 1,470,945
Tractors and heavy duty trucks 1-84 1,220,030
Computers and peripherals 3-48 579,954
Construction and mining 6-60 334,140
Retail store fixtures 48-60 247,961
Communications 12-60 226,017
Research and test 60 108,304
Photocopying 12-36 28,415
Furniture and fixtures 60 10,589
------------
Total equipment cost 12,489,223
Accumulated depreciation (10,447,534)
------------
Equipment, net of accumulated depreciation $ 2,041,689
============
</TABLE>
On September 30, 1996, the Partnership sold (i) a 23% ownership interest,
representing its entire ownership interest, in a cargo vessel leased by
KGJS/Gearbulk Holding Limited (the "Vessel"), having an original cost to the
Partnership of $1,829,796 and a net book value at September 30, 1996 of $782,887
and (ii) a 50% ownership interest, representing its entire ownership interest,
in 22 locomotives leased by Union Pacific Railroad Company (the "Locomotives"),
having an original cost to the Partnership of $4,692,023 and a net book value at
September 30, 1996 of $2,584,785. The Partnership received net sale proceeds of
$3,104,537, a portion of which was used to repay the outstanding principal
balance of notes payable associated with the Vessel of $65,690. The remainder,
$3,038,847, was deposited into an escrow account and transferred to the
Partnership on October 3, 1996. At September 30, 1996, the net sale proceeds
were reported as Other Receivable on the Statement of Financial Position. The
Partnership sold its interests in the Vessel and Locomotives prior to the
expiration of the related lease terms. These sales were effected in connection
with a joint remarketing effort involving 15 individual equipment leasing
programs sponsored by AFG, consisting of the Partnership and 14 affiliates. In
October 1996, the Partnership filed Form 8-K with the Securities and Exchange
Commission which provided a description of the remarketing process and the terms
of sale.
At September 30, 1996, the Partnership's equipment portfolio included
equipment having a proportionate original cost of $8,747,286, representing
approximately 70% of total equipment cost.
The summary above includes equipment held for sale or re-lease with a cost and
net book value of approximately $3,572,000 and $405,000, respectively, at
September 30, 1996. This equipment includes the Partnership's proportionate
interest in a Boeing 727-251 Advanced aircraft (the "Aircraft"), formerly leased
to Northwest Airlines, Inc., having a cost and net book value of approximately
$2,421,000 and $399,000, respectively, at September 30, 1996. This aircraft was
returned upon expiration of its lease term on
7
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
November 30, 1995 and is currently undergoing heavy maintenance expected to cost
the Partnership approximately $144,000, all of which was incurred or accrued
during the nine months ended September 30, 1996. The Partnership entered into a
new 28-month lease agreement with Transmeridian Airlines to re-lease the
Aircraft at a base rent to the Partnership of $16,016 per month, effective upon
completion of the heavy maintenance.
NOTE 5 - RELATED PARTY TRANSACTIONS
- -----------------------------------
All operating expenses incurred by the Partnership are paid by AFG on behalf
of the Partnership and AFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during each of the nine month
periods ended September 30, 1996 and 1995, which were paid or accrued by the
Partnership to AFG or its Affiliates, are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Equipment management fees $168,920 $144,100
Administrative charges 15,750 15,750
Reimbursable operating expenses
due to third parties 278,534 81,425
-------- --------
Total $463,204 $241,275
======== ========
</TABLE>
All rents and proceeds from the sale of equipment are paid directly to either
AFG or to a lender. AFG temporarily deposits collected funds in a separate
interest-bearing escrow account prior to remittance to the Partnership. At
September 30, 1996, the Partnership was owed $220,335 by AFG for such funds and
the interest thereon. These funds were remitted to the Partnership in October
1996.
NOTE 6 - NOTES PAYABLE
- ----------------------
Notes payable at September 30, 1996 consisted of installment notes of $261,911
payable to banks and institutional lenders. All of the installment notes are
non-recourse,with two notes bearing fluctuating interest rates based on the
London Inter-Bank Offered Rate plus a margin (5.43% at September 30, 1996), and
one note having an interest rate of 10%. The installment notes are
collateralized by the equipment and assignment of the related lease payments and
will be fully amortized by noncancellable rents. The carrying amount of notes
payable approximates fair value at September 30, 1996.
The annual maturities of the installment notes payable are as follows:
<TABLE>
<S> <C>
For the year ending September 30, 1997 $218,794
1998 43,117
--------
Total $261,911
========
</TABLE>
8
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
- --------------
Three and nine months ended September 30, 1996 compared to the three and nine
- -----------------------------------------------------------------------------
months endedm September 30, 1995:
- ---------------------------------
Overview
- --------
As an equipment leasing partnership, the Partnership was organized to acquire
a diversified portfolio of capital equipment subject to lease agreements with
third parties. The Partnership was designed to progress through three principal
phases: acquisitions, operations, and liquidation. During the operations
phase, a period of approximately six years, all equipment in the Partnership's
portfolio will progress through various stages. Initially, all equipment will
generate rental revenues under primary term lease agreements. During the life
of the Partnership, these agreements will expire on an intermittent basis and
equipment held pursuant to the related leases will be renewed, re-leased or
sold, depending on prevailing market conditions and the assessment of such
conditions by AFG to obtain the most advantageous economic benefit. Over time,
a greater portion of the Partnership's original equipment portfolio will become
available for remarketing and cash generated from operations and from sales or
refinancings will begin to fluctuate. Ultimately, all equipment will be sold
and the Partnership will be dissolved. The Partnership's operations commenced
in 1989.
Results of Operations
- ---------------------
For the three and nine months ended September 30, 1996, the Partnership
recognized lease revenue of $1,498,156 and $3,339,961 respectively, compared to
$936,285 and $3,033,805 for the same periods in 1995. Lease revenue increased
during the three and nine months ended September 30, 1996 due to the receipt of
$846,649 of lease termination rents received in connection with the sale of the
Partnership's interest in two Boeing 727-Advanced aircraft in July 1996 (see
discussion below). In future periods, the level of lease revenue will decline
due to the expiration of the Partnership's primary lease term agreements and
equipment sales. The Partnership also earns interest income from temporary
investments of rental receipts and equipment sales proceeds in short-term
instruments.
The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are owned by AFG or an affiliated equipment leasing program
sponsored by AFG. Proportionate equipment ownership enables the Partnership to
further diversify its equipment portfolio by participating in the ownership of
selected assets, thereby reducing the general levels of risk which could result
from a concentration in any single equipment type, industry or lessee. The
Partnership and each affiliate individually report, in proportion to their
respective ownership interests, their respective shares of assets, liabilities,
revenues, and expenses associated with the equipment.
For the three and nine months ended September 30, 1996, the Partnership sold
equipment having a net book value of $1,246,497 and $1,311,629, respectively, to
existing lessees and third parties. These sales resulted in net gains for
financial statement purposes of $762,202 and $953,129, respectively. These
equipment sales included the sale of the Partnership's interest in two Boeing
727-Advanced jet aircraft with an original cost and net book value of
$7,622,493, and $1,188,593, respectively, which the Partnership sold to the
existing lessee in July 1996. In connection with these sales, the Partnership
realized sale proceeds of $1,959,671, which resulted in a net gain, for
financial statement purposes, of $771,078. This equipment was sold prior to the
expiration of the related lease term. The Partnership realized lease
termination rents equal to $846,649, relating to these aircraft. In addition,
equipment sales included the Partnership's interest in a vessel with an original
cost and net book value of $1,829,796 and $782,887, respectively which the
Partnership sold to a third party in September 1996. In
9
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
connection with this sale, the Partnership realized net sale proceeds of
$603,243 which resulted in a net loss, for financial statement purposes, of
179,644. This equipment was sold prior to the expiration of the related lease
term. The Partnership also sold its interest in certain railroad equipment with
an original cost and net book value of $4,692,023 and $2,584,785, respectively,
to a third party. The Partnership realized net sale proceeds of $2,501,294,
which resulted in a net loss, for financial statement purposes, of $83,491. This
equipment was sold prior to the expiration of the related lease term. These
sales were effected in connection with a joint remarketing effort involving 15
individual leasing programs sponsored by AFG, consisting of the Partnership and
14 affiliates. See Note 4 to the financial statements for additional discussion
of the vessel and railroad equipment transactions.
For the three and nine months ended September 30, 1995, the Partnership sold
equipment having a net book value of $88,068 and $270,390, respectively, to
existing lessees and third parties. These sales resulted in net gains, for
financial statement purposes, of $98,931 and $446,587, respectively.
It cannot be determined whether future sales of equipment will result in a net
gain or a net loss to the Partnership, as such transactions will be dependent
upon the condition and type of equipment being sold and its marketability at the
time of sale. In addition, the amount of gain or loss reported for financial
statement purposes is partly a function of the amount of accumulated
depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including AFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. AFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Partnership and which will
maximize total cash returns for each asset.
The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset, together
with its residual value. The latter consists of cash proceeds realized upon the
asset's sale in addition to all other cash receipts obtained from renting the
asset on a re-lease, renewal or month-to-month basis. The Partnership
classifies such residual rental payments as lease revenue. Consequently, the
amount of gain or loss reported in the financial statements is not necessarily
indicative of the total residual value the Partnership achieved from leasing the
equipment.
Depreciation expense for the three and nine months ended September 30, 1996
was $307,124 and $1,357,866 respectively, compared to $754,372 and $2,433,827
for the same periods in 1995. For financial reporting purposes, to the extent
that an asset is held on primary lease term, the Partnership depreciates the
difference between (i) the cost of the asset and (ii) the estimated residual
value of the asset on a straight-line basis over such term. For purposes of
this policy, estimated residual values represent estimates of equipment values
at the date of primary lease expiration. To the extent that an asset is held
beyond its primary lease term, the Partnership continues to depreciate the
remaining net book value of the asset on a straight-line basis over the asset's
remaining economic life.
Interest expense was $4,825 and $69,165, or less than 1% and 2.1% of lease
revenue for the three and nine months ended September 30, 1996, respectively,
compared to $63,123 and $271,885, or 6.7% and 9% of lease revenue for the same
periods in 1995. Interest expense in future periods will continue to decline
in amount and as a percentage of lease revenue as the principal balance of notes
payable is reduced through the application of rent receipts to outstanding debt.
Management fees were 4.9% and 5.1% of lease revenue during the three and nine
months ended September 30, 1996, respectively, compared to 4.6% and 4.8% of
lease revenue during the same periods in 1995.
10
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
Management fees during the nine months ended September 30, 1996 include $6,065,
resulting from an underaccrual in 1995. Management fees are based on 5% of gross
lease revenue generated by operating leases and 2% of gross lease revenue
generated by full payout leases.
Operating expenses consist principally of administrative charges, professional
service costs, such as audit and legal fees, as well as printing, distribution
and remarketing expenses. In certain cases, equipment storage or repairs and
maintenance costs may be incurred in connection with equipment being remarketed.
Collectively, operating expenses represented 1% and 8.8% of lease revenue for
the three and nine months ended September 30, 1996, respectively, compared to
2.8% and 3.2% of lease revenue for the same periods in 1995. The overall
increase in operating expenses from 1995 to 1996 was due primarily to heavy
maintenance and airframe overhaul costs incurred or accrued in connection with
certain of the Partnership's Boeing 727 aircraft. During the three months ended
September 30, 1996, the Partnership received $78,818 from the former lessee of
these aircraft representing a partial reimbursement of such costs. The
Partnership entered into a new 28-month lease agreement with Transmeridian
Airlines to re-lease one of the aircraft at a base rent to the Partnership of
$16,016 per month, effective upon completion of the heavy maintenance. The
amount of future operating expenses cannot be predicted with certainty; however,
such expenses are usually higher during the acquisition and liquidation phases
of a partnership. Other fluctuations typically occur in relation to the volume
and timing of remarketing activities.
Liquidity and Capital Resources and Discussion of Cash Flows
- ------------------------------------------------------------
The Partnership by its nature is a limited life entity which was established
for specific purposes described in the preceding "Overview". As an equipment
leasing program, the Partnership's principal operating activities derive from
asset rental transactions. Accordingly, the Partnership's principal source of
cash from operations is provided by the collection of periodic rents. These
cash inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs. Operating
activities generated net cash inflows of $2,762,673 and $2,895,257 for the nine
months ended September 30, 1996 and 1995, respectively. Future renewal, re-
lease and equipment sale activities will cause a decline in the Partnership's
lease revenue and corresponding sources of operating cash. Overall, expenses
associated with rental activities, such as management fees, and net cash flow
from operating activities will also decline as the Partnership experiences a
higher frequency of remarketing events.
Ultimately, the Partnership will dispose of all assets under lease. This will
occur principally through sale transactions whereby each asset will be sold to
the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of an
asset. Such circumstances are infrequent and usually result in the collection
of stipulated cash settlements pursuant to terms and conditions contained in the
underlying lease agreements.
Cash expended for equipment acquisitions and cash realized from asset disposal
transactions are reported under investing activities on the accompanying
Statement of Cash Flows. During the nine months ended September 30, 1996, the
Partnership expended $245,280 to replace certain aircraft engines to facilitate
the re-lease of an aircraft, in which the Partnership has an ownership interest,
to Transmeridian Airlines (see discussion below). There were no equipment
acquisitions during the same period in 1995. During the nine months ended
September 30, 1996, the Partnership realized $2,527,893 in equipment sale
proceeds compared to $716,977 for the same period in 1995. Future inflows of
cash from asset disposals will vary in timing and amount and will be
11
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
influenced by many factors including, but not limited to, the frequency and
timing of lease expirations, the type of equipment being sold, its condition and
age, and future market conditions.
On November 30, 1995, upon the expiration of its lease term, Northwest
Airlines, Inc., returned a Boeing 727-251 Advanced aircraft (the "Aircraft") in
which the Partnership has a 22.4% ownership interest with a cost and net book
value to the Partnership of approximately $2,421,000 and $399,000, respectively,
at September 30, 1996. The Aircraft is currently undergoing heavy maintenance
expected to cost the Partnership approximately $144,000, all of which was
incurred or accrued during the nine months ended September 30, 1996. The
Partnership has entered into a new agreement to re-lease this aircraft (see
Results of Operations).
The Partnership obtained long-term financing in connection with certain
equipment leases. The repayments of principal related to such indebtedness are
reported as a component of financing activities. Each note payable is recourse
only to the specific equipment financed and to the minimum rental payments
contracted to be received during the debt amortization period (which period
generally coincides with the lease rental term). As rental payments are
collected, a portion or all of the rental payment is used to repay the
associated indebtedness. The amount of cash used to repay debt increased during
the nine months ended September 30, 1996 due to the repayment of principal
indebtedness of $1,378,279 related to certain railroad equipment sold on
September 30, 1996. See Note 4 to the financial statements for additional
discussion of this transaction. In future periods, the amount of cash used to
repay debt obligations will decline as the principal balance of notes payable is
reduced through the collection and application of rents.
Cash distributions to the General Partner and Recognized Owners are
declared and generally paid within fifteen days following the end of each
calendar quarter. The payment of such distributions is presented as a component
of financing activities. For the nine months ended September 30, 1996, the
Partnership declared total cash distributions of Distributable Cash From
Operations and Distributable Cash From Sales and Refinancings of $5,900,510. In
accordance with the Amended and Restated Agreement and Certificate of Limited
Partnership, the Recognized Owners were allocated 95% of these distributions, or
$5,605,485, and the General Partner was allocated 5%, or $295,025. The third
quarter 1996 cash distribution was paid on October 15, 1996.
Cash distributions paid to the Recognized Owners consist of both a return of
and a return on capital. To the extent that cash distributions consist of Cash
From Sales or Refinancings, substantially all of such cash distributions should
be viewed as a return of capital. Cash distributions do not represent and are
not indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each asset at
its disposal date. Future market conditions, technological changes, the ability
of AFG to manage and remarket the assets, and many other events and
circumstances, could enhance or detract from individual asset yields and the
collective performance of the Partnership's equipment portfolio.
Further, the Partnership's future cash distributions will be adversely
affected by the bankruptcy of Midway Airlines, Inc., as the Partnership will be
unable to realize any future residual value for these aircraft. Notwithstanding
such adverse impact, the overall investment results to be achieved by the
Partnership will be dependent upon the collective performance results of all of
the Partnership's equipment leases.
The future liquidity of the Partnership will be influenced by the foregoing
and will be greatly dependent upon the collection of contractual rents and the
outcome of residual activities. The General Partner anticipates that cash
proceeds resulting from these sources will satisfy the Partnership's future
expense obligations. However, the amount of cash for distribution in future
periods will fluctuate. Equipment lease expirations and asset disposals will
12
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
cause the Partnership's net cash from operating activities to diminish over time
and equipment sale proceeds will vary in amount and period of realization. In
addition, the Partnership may be required to incur asset refurbishment or
upgrade costs in connection with future remarketing activities. Accordingly,
fluctuations in the level of quarterly cash distributions will occur during the
life of the Partnership.
13
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6(a). Exhibits
Response: None
Item 6(b). Reports on Form 8-K
Response: None
14
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporated, a Massachusetts
corporation and the General Partner of the
Registrant.
By: /s/ Michael J. Butterfield
---------------------------
Michael J. Butterfield
Treasurer of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Accounting Officer)
Date: November 13, 1996
-----------------
By: /s/ Gary M. Romano
-------------------
Gary M. Romano
Clerk of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: November 13, 1996
-----------------
15
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,091,283
<SECURITIES> 0
<RECEIVABLES> 3,581,152
<ALLOWANCES> 5,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,667,435
<PP&E> 12,489,223
<DEPRECIATION> 10,447,534
<TOTAL-ASSETS> 8,709,124
<CURRENT-LIABILITIES> 4,896,672
<BONDS> 261,911
0
0
<COMMON> 0
<OTHER-SE> 3,550,541
<TOTAL-LIABILITY-AND-EQUITY> 8,709,124
<SALES> 3,339,961
<TOTAL-REVENUES> 4,388,818
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,821,070
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,165
<INCOME-PRETAX> 2,498,583
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,498,583
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,498,583
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
