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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 March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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For Quarter Ended March 31, 1997 Commission File No. 0-18364
American Income Partners V-A Limited Partnership
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(Exact name of registrant as specified in its charter)
Massachusetts 04-3057303
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Boston, MA 02114
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
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- --------------------------------------------------------------------------------
(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
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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
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position
at March 31, 1997 and December 31, 1996 3
Statement of Operations
for the three months ended March 31, 1997 and 1996 4
Statement of Cash Flows
for the three months ended March 31, 1997 and 1996 5
Notes to the Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
PART II. OTHER INFORMATION:
Items 1 - 6 14
2
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
March 31, 1997 and December 31, 1996
(Unaudited)
March 31, December 31,
1997 1996
------------ ------------
ASSETS
Cash and cash equivalents $ 2,082,543 $ 1,709,301
Rents receivable, net of allowance for doubtful
accounts of $5,000 196,391 214,338
Accounts receivable - affiliate 39,126 484,358
Equipment at cost, net of accumulated depreciation
of $8,922,107 and $9,264,523 at March 31, 1997
and December 31, 1996, respectively 1,738,453 1,858,784
------------ ------------
Total assets $ 4,056,513 $ 4,266,781
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Notes payable $ 108,900 $ 144,594
Accrued interest 1,410 1,836
Accrued liabilities 48,318 38,430
Accrued liabilities - affiliate 24,726 95,991
Deferred rental income 10,436 11,664
Cash distributions payable to partners 181,665 181,665
------------ ------------
Total liabilities 375,455 474,180
------------ ------------
Partners' capital (deficit): (1,346,918) (1,341,341)
General Partner
Limited Partnership Interests
(1,380,661 Units; initial purchase price of
$25 each) 5,027,976 5,133,942
------------ ------------
Total partners' capital 3,681,058 3,792,601
------------ ------------
Total liabilities and partners' capital $ 4,056,513 $ 4,266,781
------------ ------------
------------ ------------
The accompanying notes are an integral part
of these financial statements.
3
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
for the three months ended March 31, 1997 and December 31, 1996
(Unaudited)
1997 1996
---------- ----------
Income:
Lease revenue $ 245,447 $ 924,485
Interest income 24,940 21,003
Gain on sale of equipment 44,300 118,975
---------- ----------
Total income 314,687 1,064,463
---------- ----------
Expenses:
Depreciation 120,331 529,905
Interest expense 2,363 29,814
Equipment management fees - affiliate 12,272 50,908
Operating expenses - affiliate 109,599 206,968
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Total expenses 244,565 817,595
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Net income $ 70,122 $ 246,868
---------- ----------
---------- ----------
Net income
per limited partnership unit $ 0.05 $ 0.17
---------- ----------
---------- ----------
Cash distribution declared
per limited partnership unit $ 0.12 $ 0.38
---------- ----------
---------- ----------
The accompanying notes are an integral part
of these financial statements.
4
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Cash flows from (used in) operating activities:
Net income $ 70,122 $ 246,868
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 120,331 529,905
Gain on sale of equipment (44,300) (118,975)
Changes in assets and liabilities
Decrease (increase) in:
rents receivable 17,947 (68,277)
accounts receivable - affiliate 445,232 (48,920)
Increase (decrease) in:
accrued interest (426) (2,399)
accrued liabilities 9,888 133,750
accrued liabilities - affiliate (71,265) 17,005
deferred rental income (1,228) 105,210
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Net cash from operating activities 546,301 794,167
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Cash flows from investing activities:
Proceeds from equipment sales 44,300 148,000
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Net cash from investing activities 44,300 148,000
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Cash flows used in financing activities:
Principal payments - notes payable (35,694) (167,933)
Distributions paid (181,665) (726,664)
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Net cash used in financing activities (217,359) (894,597)
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Net increase in cash and cash equivalents 373,242 47,570
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period 1,709,301 1,832,111
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$ 2,082,543 $ 1,879,681
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 2,789 $ 32,213
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The accompanying notes are an integral part
of these financial statements.
5
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1997
(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 1996 Annual Report. Except as disclosed
herein, there has been no material change to the information presented in the
footnotes to the 1996 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at March 31, 1997 and December 31, 1996 and results of operations for
the three month periods ended March 31, 1997 and 1996 have been made and are
reflected.
NOTE 2 - CASH
At March 31, 1997, the Partnership had $1,975,000 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 or quarterly 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
$1,623,531 are due as follows:
For the year ending March 31, 1998 $ 1,392,726
1999 230,805
-----------
Total $ 1,623,531
-----------
-----------
NOTE 4 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at March
31, 1997. In the opinion of Equis Financial Group Limited Partnership ("EFG"),
(formerly American Finance Group), the acquisition cost of the equipment did not
exceed its fair market value.
6
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to Financial Statements
(Continued)
Lease Term Equipment
Equipment Type (Months) at Cost
- ----------------------------------- ---------- -------------
Aircraft 10-72 $ 4,596,188
Vessels 57 3,666,680
Materials handling 6-60 1,175,580
Computers and peripherals 3-48 579,954
Retail store fixtures 48-60 247,961
Communications 12-60 226,017
Research and test 60 108,304
Tractors and heavy duty trucks 1-84 54,240
Furniture and fixtures 60 5,636
--------------
Total equipment cost 10,660,560
Accumulated depreciation (8,922,107)
--------------
Equipment, net of accumulated depreciation $ 1,738,453
--------------
--------------
At March 31, 1997, the Partnership's equipment portfolio included
equipment having a proportionate original cost of $8,502,006 representing
approximately 80% of total equipment cost.
The summary above includes equipment held for sale or re-lease with a cost
and net book value of approximately $2,663,000 and $292,000, respectively, at
March 31, 1997 (see also Note 8 - Subsequent Event). The 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 $290,000, respectively, at
March 31, 1997. This aircraft was returned upon expiration of its lease term on
November 30, 1995 and is currently undergoing heavy maintenance expected to cost
the Partnership approximately $284,000, all of which was accrued or incurred at
March 31, 1997. The Partnership has experienced delays in the completion of the
Aircraft's heavy maintenance. The Partnership entered into a new 18-month lease
agreement with Transmeridian Airlines, to release the Aircraft at a base monthly
rent to the Partnership of $17,920 for 8 months and $15,680 for 10 months,
effective upon completion of the heavy maintenance.
NOTE 5 - RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Partnership are paid by EFG on
behalf of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during each of the three month
periods ended March 31, 1997 and 1996, which were paid or accrued by the
Partnership to EFG or its Affiliates, are as follows:
1997 1996
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Equipment management fees $ 12,272 $ 50,908
Administrative charges 9,141 5,250
Reimbursable operating expenses
due to third parties 100,458 201,718
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Total $ 121,871 $ 257,876
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------------- -------------
7
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to Financial Statements
(Continued)
All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Partnership.
At March 31, 1997, the Partnership was owed $39,126 by EFG for such funds and
the interest thereon. These funds were remitted to the Partnership in April
1997.
NOTE 6 - NOTES PAYABLE
Notes payable at March 31, 1997 consisted of one installment note of
$108,900 payable to a bank. The installment note is non-recourse, and bears a
fluctuating interest rate based on the London Inter-Bank Offered Rate plus a
margin (5.7% at March 31, 1997). The installment note is collateralized by the
equipment and assignment of the related lease payments and will be fully
amortized by noncancellable rents in the year ending March 31, 1998. The
carrying amount of notes payable approximates fair value at March 31, 1997.
NOTE 7 - LEGAL PROCEEDINGS
On July 27, 1995, EFG, on behalf of the Partnership and other EFG-
sponsored investment programs, filed an action in the Commonwealth of
Massachusetts Superior Court Department of the Trial Court in and for the County
of Suffolk, for damages and declaratory relief against a lessee of the
Partnership, National Steel Corporation ("National Steel"), under a certain
Master Lease Agreement ("MLA") for the lease of certain equipment. EFG is
seeking the reimbursement by National Steel of certain sales and/or use taxes
paid to the State of Illinois and other remedies provided by the MLA. On
August 30, 1995, National Steel filed a Notice of Removal which removed the case
to the United States District Court, District of Massachusetts. On
September 7, 1995, National Steel filed its Answer to EFG's Complaint along with
Affirmative Defenses and Counterclaims, seeking declaratory relief and alleging
breach of contract, implied covenant of good faith and fair dealing and specific
performance. EFG filed its Answer to these counterclaims on September 29, 1995.
Though the parties have been discussing settlement with respect to this matter
for some time, to date, the negotiations have been unsuccessful.
Notwithstanding these discussions, EFG recently filed an Amended and
Supplemental Complaint alleging a further default by National Steel under the
MLA and EFG recently filed a Summary Judgment on all claims and counterclaims.
The matter remains pending before the Court. The Partnership has not
experienced any material losses as a result of this action.
NOTE 8 - SUBSEQUENT EVENT
On April 30, 1997, the vessel partnerships, in which the Partnership and
certain affiliated investment programs are limited partners and through which
the Partnership and the affiliated investment programs shared economic interests
in three cargo vessels (the "Vessels") leased by KGJS/Gearbulk Holdings Limited
(the "Lessee"), exchanged their ownership interests in the Vessels for 1,987,000
shares of common stock in Banyan Strategic Land Fund II ("Banyan") and a
purchase money note of $8,219,500 (the "Note"). Banyan is a Delaware
corporation organized on April 14, 1987 and has its common stock listed on
NASDAQ. Banyan holds certain real estate investments, the most significant
being a 274 acre site near Malibu, California ("Rancho Malibu").
The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Banyan and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Banyan or by any other party that otherwise would not have
been paid to EFG had the Partnership sold its beneficial interest in the Vessels
directly to the Lessee. The
8
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to Financial Statements
(Continued)
Lessee prepaid all of its remaining contracted rental obligations and purchased
the Vessels in two closings occurring on May 6, 1997 and May 12, 1997. The
above-referenced Note was repaid with $3,800,000 of cash and delivery of a
$4,419,500 note from Banyan (the "Banyan Note").
As a result of the exchange transaction and its original 46.46% beneficial
ownership interest in Larkfield, one of the three Vessels, the Partnership
received $727,090 in cash and is the beneficial owner of 341,435 shares of
Banyan common stock and holds a beneficial interest in the Banyan Note of
$771,449.
Cash equal to the amount of the Banyan Note is being held by Banyan in a
segregated account pending the outcome of certain shareholder proposals.
Specifically, as part of the exchange, Banyan agreed to seek consent ("Consent")
from its shareholders to: (1) amend its certificate of incorporation and by-
laws; (2) make additional amendments to restrict the acquisition of its common
stock in a way to protect Banyan's net operating loss carry-forwards, and (3)
engage EFG to provide administrative services to Banyan, which services EFG will
provide at cost. If the Consent is not obtained, repayment of the Banyan Note
will be accelerated and repaid from the cash held in the segregated account.
If the Consent is obtained, the Banyan Note will be amortized over three years
and bear an annual interest rate of 10%.
In connection with the Banyan transaction, Gary D. Engle, President and
Chief Executive Officer of EFG, joined the Board of Directors of Banyan and
James A. Coyne, Senior Vice President of EFG became Banyan's Chief Operating
Officer. The agreement also provides that a majority of the Board of
Directors remain independent of Banyan and EFG. Provided Consent is received
by October 31, 1997, Banyan has agreed to declare a $0.20 per share dividend
to be paid on all shares, including those beneficially owned by the
Partnership.
The General Partner believes that the underlying tangible assets of
Banyan, particularly the Rancho Malibu property, can be sold or developed on a
tax free basis due to Banyan's net operating loss carryforwards and can provide
an attractive economic return to the Partnership.
9
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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 MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1996:
OVERVIEW
The Partnership was organized in 1989 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment subject
to lease agreements with third parties. The Partnership's stated investment
objectives and policies contemplated that the Partnership would wind-up its
operations within approximately seven years of its inception. Accordingly, the
General Partner is pursuing the remarketing of all of the Partnership's
remaining equipment and expects to engage an investment advisor to provide
assistance and evaluate alternative remarketing strategies. Currently, the
General Partner anticipates that it will wind-up the operations of the
Partnership and make a liquidating distribution to the Partners, net of any cash
reserves which the General Partner may consider appropriate, within the next
twelve months and possibly by December 31, 1997.
RESULTS OF OPERATIONS
For the three months ended March 31, 1997, the Partnership recognized
lease revenue of $245,447 compared to $924,485 for the same period in 1996. The
decrease in lease revenue between 1996 and 1997 was expected and resulted
principally from renewal lease term expirations and the sale of equipment. 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 an affiliated equipment leasing program
sponsored by EFG. 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 months ended March 31, 1997, the Partnership sold equipment
which had been fully depreciated to existing lessees and third parties. These
sales resulted in a net gain, for financial statement purposes, of $44,300
compared to a net gain of $118,975 on equipment having a net book value of
$29,025 for the same period in 1996.
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 EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological
10
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
advances, and many other events can converge to enhance or detract from asset
values at any given time. EFG 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 was $120,331 and $529,905 for the three months ending
March 31, 1997 and 1996, respectively. 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 $2,363, or 1% of lease revenue for the three months
ended March 31, 1997 compared to $29,814, or 3.2% of lease revenue for the same
period in 1996. 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.
In addition, the General Partner expects to use a portion of the Partnership's
available cash to retire indebtedness.
Management fees were approximately 5% and 5.5% of lease revenue for the
three months ended March 31, 1997 and 1996, respectively. Management fees
during the three months ended March 31, 1996 included $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. Significant operating expenses were incurred in 1996 and 1997 due to
heavy maintenance and airframe overhaul costs incurred or accrued in connection
with the Partnership's interests in two Boeing 727 aircraft. Certain of the
costs incurred in the first quarter of 1996 were subsequently reimbursed by the
former lessee of the related aircraft. In 1996, the Partnership entered into a
new 36-month lease agreement with Sunworld International Airlines, Inc. to re-
lease one of the aircraft at a base rent to the Partnership of $14,560 per month
(see discussion below relating to the second aircraft). 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 generally 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
11
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
activities generated net cash inflows of $546,301 and $794,167 for the three
months ended March 31, 1997 and 1996, 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 realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During the three months
ended March 31, 1997, the Partnership realized $44,300 in equipment sale
proceeds compared to $148,000 for the same period in 1996. Future inflows of
cash from asset disposals will vary in timing and amount and will be 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. The Partnership's
interest in the Aircraft had a cost and net book value of approximately
$2,421,000 and $290,000, respectively, at March 31, 1997. The Aircraft is
currently undergoing heavy maintenance expected to cost the Partnership
approximately $284,000, all of which was accrued or incurred at March 31, 1997.
The Partnership entered into a 18-month lease agreement with Transmeridian
Airlines to release the Aircraft at a base monthly rent to the Partnership of
$17,920 for 8 months and $15,680 for 10 months, effective upon completion of the
heavy maintenance. The Partnership has experienced delays in the completion of
the Aircraft's heavy maintenance.
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 Partnership's notes payable are scheduled to be
fully amortized during the year ending March 31, 1998. In addition, the General
Partner expects to use a portion of the Partnership's available cash to retire
indebtedness.
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 three months ended March 31, 1997, the
Partnership declared total cash distributions of Distributable Cash From
Operations and Distributable Cash From Sales and Refinancings of $181,665. In
accordance with the Amended and Restated Agreement and Certificate of Limited
Partnership, the Recognized Owners were allocated 95% of these distributions, or
$172,582, and the General Partner was allocated 5%, or $9,083. The first
quarter 1997 cash distribution was paid on April 14, 1997.
Cash distributions paid to the Recognized Owners consist of both a return
of and a return on 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
12
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
asset at its disposal date. Future market conditions, technological changes,
the ability of EFG 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.
The Partnership's future cash distributions will be adversely affected by
the bankruptcy of a former lessee of the Partnership, Midway Airlines, Inc.
("Midway"). In 1993, the Partnership's interests in two DC-9-30 aircraft leased
by Midway were transferred to a designee of the lender in lieu of foreclosure.
Although this bankruptcy had no immediate adverse effect on the Partnership's
cash flow, as the Partnership had almost fully leveraged its ownership interest
in the underlying aircraft, this event resulted in the Partnership's loss of any
future interest in the residual value of the 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 available for distribution in
future periods will fluctuate. Equipment lease expirations and asset disposals
will 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 future quarterly cash distributions are
anticipated.
13
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Legal Proceedings
Response:
Refer to Note 7 to the financial statements herein.
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: May 15, 1997
----------------------------------------------------
By: /s/ Gary M. Romano
----------------------------------------------------
Gary M. Romano
Clerk of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 15, 1997
----------------------------------------------------
15
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,082,543
<SECURITIES> 0
<RECEIVABLES> 240,517
<ALLOWANCES> 5,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,318,060
<PP&E> 10,660,560
<DEPRECIATION> 8,922,107
<TOTAL-ASSETS> 4,056,513
<CURRENT-LIABILITIES> 266,555
<BONDS> 108,900
0
0
<COMMON> 0
<OTHER-SE> 3,681,058
<TOTAL-LIABILITY-AND-EQUITY> 4,056,513
<SALES> 245,447
<TOTAL-REVENUES> 314,687
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 242,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,363
<INCOME-PRETAX> 70,122
<INCOME-TAX> 0
<INCOME-CONTINUING> 70,122
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,122
<EPS-PRIMARY> 0
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