<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
------------------------------------------------
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 March 31, 1999 Commission File No. 0-18364
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3057303
- ---------------------------------- -----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88 BROAD STREET, BOSTON, MA 02110
- ---------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
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 X No
---- ----
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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 March 31, 1999 and December 31, 1998 3
Statement of Operations
for the three months ended March 31, 1999 and 1998 4
Statement of Changes in Partners' Capital
for the three months ended March 31, 1999 5
Statement of Cash Flows
for the three months ended March 31, 1999 and 1998 6
Notes to the Financial Statements 7-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-19
PART II. OTHER INFORMATION:
Items 1 - 6 20
</TABLE>
2
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
March 31, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,369,244 $ 2,448,960
Rents receivable 3,594 6,643
Accounts receivable - affiliates 26,854 787,967
Note receivable - affiliate 771,450 771,450
Investment securities - affiliate 123,772 140,844
Equipment at cost, net of accumulated depreciation
of $5,486,899 and $5,498,839 at March 31, 1999
and December 31, 1998, respectively -- --
----------- -----------
Total assets $ 4,294,914 $ 4,155,864
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities $ 316,276 $ 350,276
Accrued liabilities - affiliate 13,681 6,864
Deferred rental income -- 9,219
Other liabilities 1,074,981 750,400
Cash distributions payable to partners 136,250 136,250
----------- -----------
Total liabilities 1,541,188 1,253,009
----------- -----------
Partners' capital (deficit):
General Partner (1,393,285) (1,385,829)
Limited Partnership Interests
(1,380,661 Units; initial purchase price of $25 each) 4,147,011 4,288,684
----------- -----------
Total partners' capital 2,753,726 2,902,855
----------- -----------
Total liabilities and partners' capital $ 4,294,914 $ 4,155,864
----------- -----------
----------- -----------
</TABLE>
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, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Income:
Lease revenue $ 31,593 $117,616
Interest income 38,509 33,315
Interest income - affiliate 19,022 19,286
Gain on sale of equipment 1,000 --
-------- --------
Total income 90,124 170,217
-------- --------
Expenses:
Depreciation -- 80,952
Equipment management fees - affiliate 1,580 5,881
Operating expenses - affiliate 84,351 39,750
-------- --------
Total expenses 85,931 126,583
-------- --------
Net income $ 4,193 $ 43,634
-------- --------
-------- --------
Net income
per limited partnership unit $ -- $ 0.03
-------- --------
-------- --------
Cash distribution declared
per limited partnership unit $ 0.09 $ 0.09
-------- --------
-------- --------
</TABLE>
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 CHANGES IN PARTNERS' CAPITAL
for the three months ended March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
General Recognized Owners
Partner ----------------------------------
Amount Units Amount Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $(1,385,829) 1,380,661 $ 4,288,684 $ 2,902,855
Net income 210 -- 3,983 4,193
Unrealized loss on investment
securities - affiliate (854) -- (16,218) (17,072)
----------- ----------- ----------- -----------
Comprehensive loss (644) -- (12,235) (12,879)
----------- ----------- ----------- -----------
Cash distribution declared (6,812) -- (129,438) (136,250)
----------- ----------- ----------- -----------
Balance at March 31, 1999 $(1,393,285) 1,380,661 $ 4,147,011 $ 2,753,726
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
5
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from (used in) operating activities:
Net income $ 4,193 $ 43,634
Adjustments to reconcile net income to net cash from operating activities:
Depreciation -- 80,952
Gain on sale of equipment (1,000) --
Changes in assets and liabilities
Decrease in:
Rents receivable 3,049 1,272
Accounts receivable - affiliates 761,113 13,932
Increase (decrease) in:
Accrued liabilities (34,000) 1,462
Accrued liabilities - affiliate 6,817 (6,157)
Deferred rental income (9,219) 14,020
Other liabilities 324,581 --
----------- -----------
Net cash from operating activities 1,055,534 149,115
----------- -----------
Cash flows from investing activities:
Proceeds from equipment sales 1,000 --
----------- -----------
Net cash from investing activities 1,000 --
----------- -----------
Cash flows used in financing activities:
Distributions paid (136,250) (136,250)
----------- -----------
Net cash used in financing activities (136,250) (136,250)
----------- -----------
Net increase in cash and cash equivalents 920,284 12,865
Cash and cash equivalents at beginning of period 2,448,960 2,614,272
----------- -----------
Cash and cash equivalents at end of period $ 3,369,244 $ 2,627,137
----------- -----------
----------- -----------
</TABLE>
Supplemental disclosure of non-cash activity:
See Note 5 to the financial statements regarding the reduction of the
Partnership's carrying value of its investment securities - affiliate
during the three months ended March 31, 1999.
The accompanying notes are an integral part
of these financial statements.
6
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
March 31, 1999
(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 1998 Annual Report. Except as disclosed herein, there
has been no material change to the information presented in the footnotes to the
1998 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, 1999 and December 31, 1998 and results of operations for
the three month periods ended March 31, 1999 and 1998 have been made and are
reflected.
NOTE 2 - CASH
At March 31, 1999, the Partnership had $3,256,604 invested in federal
agency discount notes and 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 $7,806
are due as follows:
<TABLE>
<CAPTION>
<S> <C>
For the year ending March 31, 2000 $7,277
2001 529
------
Total $7,806
------
------
</TABLE>
NOTE 4 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at March
31, 1999. Remaining Lease Term (Months), as used below, represents the number of
months remaining from March 31, 1999 under contracted lease terms and is
presented as a range when more than one lease agreement is contained in the
stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale or re-lease or being leased on a month-to-month
basis. In the opinion of EFG, the acquisition cost of the equipment did not
exceed its fair market value.
7
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
<TABLE>
<CAPTION>
REMAINING
LEASE TERM EQUIPMENT
EQUIPMENT TYPE (MONTHS) AT COST
- --------------------- ---------- ------------
<S> <C> <C>
Aircraft 0 $ 4,596,188
Materials handling 0-14 849,719
Communications 0 40,992
------------
Total equipment cost 5,486,899
Accumulated depreciation (5,486,899)
------------
Equipment, net of accumulated depreciation $ --
------------
------------
</TABLE>
At March 31, 1999, the Partnership's equipment portfolio included equipment
having a proportionate original cost of $4,596,188 representing approximately
84% of total equipment cost.
At March 31, 1999, the Partnership had fully-depreciated equipment held for
sale with a cost of approximately $4,596,000. This equipment represents the
Partnership's proportionate interests in two Boeing 727-251 ADV aircraft. See
below for discussion related to the Partnership's interests in these aircraft.
The summary above also includes equipment being leased on a month to month
basis.
DEFERRED SALES
The Partnership and certain affiliated investment programs (collectively,
the "Programs") own a Boeing 727-251 ADV jet aircraft that was leased to
Sunworld International Airlines, Inc. ("Sunworld"). In January 1999, upon
expiration of the lease term, the Programs entered into an agreement to sell the
aircraft to Sunworld for $2,450,000. The sale agreement permits Sunworld to
return the aircraft to the Programs, subject to certain conditions, on or before
April 10, 1999.
At March 31, 1999, the Partnership had received $324,581, representing a
portion of the Partnership's total sale proceeds which is classified as a
component of other liabilities on the accompanying Statement of Financial
Position at March 31, 1999. The Partnership received the remainder of the sale
proceeds in April 1999; see Note 8 - Subsequent Event. Due to the contingent
nature of the sale, the Partnership has deferred recognition of the sale until
expiration of the return option on April 10, 1999. The Partnership's interest in
the aircraft had a cost of $2,175,454 and was fully depreciated at March 31,
1999.
In November 1998, the Programs entered into an agreement to sell their
ownership interests in a Boeing 727-251 ADV aircraft and three engines
(collectively the "Aircraft") to a third party (the "Purchaser"). The Programs
will receive gross sale proceeds of $4,350,000. Previously, the Aircraft had
been leased to Transmeridian Airlines ("Transmeridian"). In December 1998, the
Purchaser remitted $3,350,000 for the Aircraft, excluding one of three engines
which had been damaged while the Aircraft was leased to Transmeridian. (See Note
7 to the financial statements presented in the Partnership's 1998 Annual Report
regarding legal action undertaken by the Programs related to Transmeridian and
the damaged engine). The Purchaser also deposited $1,000,000 into a third-party
escrow account (the "Escrow") pending repair of the damaged engine and
re-installation of the refurbished engine on the Aircraft. Upon installation,
the escrow agent will transfer the Escrow amount plus interest thereon to the
Programs. Currently, the engine is being refurbished at the expense of the
Programs. The associated cost is estimated to be approximately $336,000, of
which the Partnership's share is approximately $75,000. The Partnership accrued
$58,000 of these costs in 1998 and the balance was incurred in the three months
ended March 31, 1999.
8
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
The Programs also are required to reimburse the Purchaser for its cost to
lease a substitute engine during the period that the damaged engine is being
repaired. This cost is expected to be approximately $114,000, of which the
Partnership's share is approximately $26,000, all of which was accrued in 1998
in connection with the litigation referenced above. Upon completion of the
engine repair and re-installation, the Escrow plus all interest thereon will be
transferred to the Programs.
In addition, the purchase and sale agreement permits the Purchaser to
return the Aircraft to the Programs, subject to a number of conditions, for
$4,350,000, reduced by an amount equivalent to $450 multiplied by the number of
flight hours since the Aircraft's most recent C Check. Among the conditions
precedent to the Purchaser's returning the Aircraft, the Purchaser must have
completed its intended installation of hush-kitting on the Aircraft to conform
to Stage 3 noise regulations. This work was completed in January 1999. The
Purchaser's return option expires on May 15, 1999.
Due to the contingent nature of the sale, the Partnership has deferred
recognition of the sale and a resulting gain at March 31, 1999 until expiration
of the Purchaser's return option on May 15, 1999. The Partnership's share of the
December proceeds was $750,400, which amount was deposited into EFG's customary
escrow account and transferred to the Partnership, together with the
Partnership's other December rental receipts, in January 1999. At March 31,
1999, such amount was reflected as a component of other liabilities on the
accompanying Statement of Financial Position. The remainder of the sale
consideration, or $1,000,000, will be paid to the Programs upon release of the
Escrow discussed above. The Partnership's share of this payment will be
$224,000. The Partnership's interest in the Aircraft had a cost of $2,420,734
and was fully depreciated at March 31, 1999.
NOTE 5 - INVESTMENT SECURITIES - AFFILIATE / NOTE RECEIVABLE - AFFILIATE
As a result of an exchange transaction in 1997, the Partnership owns 34,144
shares of Semele Group, Inc. ("Semele") common stock and holds a beneficial
interest in a note from Semele (the "Semele Note") of $771,450. The Semele Note
bears an annual interest rate of 10% and will be amortized over three years with
mandatory principal reductions, if and to the extent that net proceeds are
received by Semele from the sale or refinancing of its principal real estate
asset consisting of an undeveloped 274-acre parcel of land near Malibu,
California ("Rancho Malibu"). The Partnership recognized interest income of
$19,022 related to the Semele Note during the three months ended March 31, 1999.
In accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, marketable
equity securities classified as available-for-sale are carried at fair value.
During the three months ended March 31, 1999, the Partnership decreased the
carrying value of its investment in Semele common stock to $3.625 per share (the
quoted price of the Semele stock on NASDAQ SmallCap Market at March 31, 1999)
resulting in an unrealized loss of $17,072. This loss was reported as a
component of comprehensive loss, included in partners' capital.
NOTE 6 - 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, 1999 and 1998, which were paid or accrued by the
Partnership to EFG or its Affiliates, are as follows:
9
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Equipment management fees $ 1,580 $ 5,881
Administrative charges 14,709 14,709
Reimbursable operating expenses
due to third parties 69,642 25,041
------- -------
Total $85,931 $45,631
------- -------
------- -------
</TABLE>
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, 1999, the Partnership was owed $7,832 by EFG for such funds and the
interest thereon. These funds were remitted to the Partnership in April 1999.
NOTE 7 - LEGAL PROCEEDINGS
In January 1998, certain plaintiffs (the "Plaintiffs") filed a class and
derivative action, captioned LEONARD ROSENBLUM, ET AL. V. EQUIS FINANCIAL GROUP
LIMITED PARTNERSHIP, ET AL., in the United States District Court for the
Southern District of Florida (the "Court") on behalf of a proposed class of
investors in 28 equipment leasing programs sponsored by EFG, including the
Partnership (collectively, the "Nominal Defendants"), against EFG and a number
of its affiliates, including the General Partner, as defendants (collectively,
the "Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had
filed an earlier derivative action, captioned LEONARD ROSENBLUM, ET AL. V. EQUIS
FINANCIAL GROUP LIMITED PARTNERSHIP, ET AL., in the Superior Court of the
Commonwealth of Massachusetts on behalf of the Nominal Defendants against the
Defendants. Both actions are referred to herein collectively as the "Class
Action Lawsuit".
The Plaintiffs have asserted, among other things, claims against the
Defendants on behalf of the Nominal Defendants for violations of the Securities
Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary
duty, and violations of the partnership or trust agreements that govern each of
the Nominal Defendants. The Defendants have denied, and continue to deny, that
any of them have committed or threatened to commit any violations of law or
breached any fiduciary duties to the Plaintiffs or the Nominal Defendants.
On July 16, 1998, counsel for the Defendants and the Plaintiffs executed a
Stipulation of Settlement setting forth terms pursuant to which a settlement of
the Class Action Lawsuit is intended to be achieved and which, among other
things, is expected to reduce the burdens and expenses attendant to continuing
litigation. The Stipulation of Settlement was based upon and superseded a
Memorandum of Understanding between the parties dated March 9, 1998 which
outlined the terms of a possible settlement. The Stipulation of Settlement was
filed with the Court on July 23, 1998 and was preliminarily approved by the
Court on August 20, 1998 when the Court issued its "Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
for Notice of, and Hearing on, the Proposed Settlement" (the "August 20 Order").
Prior to issuing a final order, the Court will hold a fairness hearing that will
be open to all interested parties and permit any party to object to the
settlement. The investors of the Partnership and all other plaintiff class
members in the Class Action Lawsuit will receive a Notice of Settlement and
other information pertinent to the settlement of their claims that will be
mailed to them in advance of the fairness hearing. Since first executing the
Stipulation of Settlement, the Court has scheduled two fairness hearings, the
first on December 11, 1998 and the second on March 19, 1999, each of which was
postponed because of delays in finalizing certain information materials that are
subject to regulatory review prior to being distributed to investors.
10
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AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
On March 15, 1999, counsel for the Plaintiffs and the Defendants entered
into an amended stipulation of settlement (the "Amended Stipulation") which was
filed with the Court on March 15, 1999. The Amended Stipulation was
preliminarily approved by the Court by its "Modified Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
For Notice of, and Hearing On, the Proposed Settlement" dated March 22, 1999
(the "March 22 Order"). The Amended Stipulation, among other things, divides the
Class Action Lawsuit into two separate sub-classes that can be settled
individually. This revision is expected to expedite the settlement of one
sub-class by the middle of 1999. However, the second sub-class, involving the
Partnership and 10 affiliated partnerships (collectively referred to as the
"Exchange Partnerships"), is expected to remain pending for a longer period due,
in part, to the complexity of the proposed settlement pertaining to this class.
Specifically, the settlement of the second sub-class is premised on the
consolidation of the Exchange Partnerships' net assets (the "Consolidation"),
subject to certain conditions, into a single successor company ("Newco"). Under
the proposed Consolidation, the partners of the Exchange Partnerships would
receive both common stock in Newco and a cash distribution; and thereupon the
Exchange Partnerships would be dissolved. In addition, EFG would contribute
certain management contracts, operations personnel, and business opportunities
to Newco and cancel its current management contracts with all of the Exchange
Partnerships. Newco would operate as a finance company specializing in the
acquisition, financing and servicing of equipment leases for its own account and
for the account of others on a contract basis. Newco also would use its best
efforts to list its shares on the NASDAQ National Market or another national
exchange or market as soon after the Consolidation as Newco deems that market
conditions and its business operations are suitable for listing its shares and
Newco has satisfied all necessary regulatory and listing requirements. The
potential benefits and risks of the Consolidation will be presented in a
Solicitation Statement that will be mailed to all of the partners of the
Exchange Partnerships as soon as the associated regulatory review process is
completed and at least 60 days prior to the fairness hearing. A preliminary
Solicitation Statement was filed with the Securities and Exchange Commission on
August 24, 1998 and remains pending. Class members will be notified of the
actual fairness hearing date when it is confirmed.
One of the principal objectives of the Consolidation is to create a company
that would have the potential to generate more value for the benefit of existing
limited partners than other alternatives, including continuing the Partnership's
customary business operations until all of its assets are disposed in the
ordinary course of business. To facilitate the realization of this objective,
the Amended Stipulation provides, among other things, that commencing March 22,
1999, the Exchange Partnerships may collectively invest up to 40% of the total
aggregate net asset values of all of the Exchange Partnerships in any
investment, including additional equipment and other business activities that
the general partners of the Exchange Partnerships and EFG reasonably believe to
be consistent with the anticipated business interests and objectives of Newco,
subject to certain limitations, including that the Exchange Partnerships retain
sufficient cash balances to pay their respective shares of the cash distribution
referenced above in connection with the proposed Consolidation.
In the absence of the Court's authorization to enter into such activities,
the Partnership's Restated Agreement, as amended, would not permit new
investment activities without the approval of limited partners owning a majority
of the Partnership's outstanding Units. Accordingly, to the extent that the
Partnership invests in new equipment, the Manager (being EFG) will (i) defer,
until the earlier of the effective date of the Consolidation or December 31,
1999, any acquisition fees resulting therefrom and (ii) limit its management
fees on all such assets to 2% of rental income. In the event that the
Consolidation is consummated, all such acquisition and management fees will be
paid to Newco. To the extent that the Partnership invests in other business
activities not consisting of equipment acquisitions, the Manager will forego any
acquisition fees and management fees related to such investments. In the event
that the Partnership has acquired new investments, but the Partnership does not
participate in the Consolidation, Newco will acquire such new investments for an
amount equal to the Partnership's net equity investment plus an annualized
return thereon of 7.5%. Finally, in the event that the Partnership has acquired
new investments and the Consolidation is not effected, the General Partner will
use its
11
<PAGE>
best efforts to divest all such new investments in an orderly and timely fashion
and the Manager will cancel or return to the Partnership any acquisition or
management fees resulting from such new investments.
The Amended Stipulation and previous Stipulation of Settlement prescribe
certain conditions necessary to effecting final settlements, including providing
the partners of the Exchange Partnerships with the opportunity to object to the
participation of their partnership in the Consolidation. Assuming the proposed
settlement is effected according to present terms, the Partnership's share of
legal fees and expenses related to the Class Action Lawsuit is estimated to be
approximately $78,000 all of which was accrued and expensed by the Partnership
in 1998. In addition, the Partnership's share of fees and expenses related to
the proposed Consolidation is estimated to be approximately $227,000, all of
which was accrued and expensed by the Partnership in 1998.
While the Court's August 20 Order enjoined certain class members, including
all of the partners of the Partnership, from transferring, selling, assigning,
giving, pledging, hypothecating, or otherwise disposing of any Units pending the
Court's final determination of whether the settlement should be approved, the
March 22 Order permits the partners to transfer Units to family members or as a
result of the divorce, disability or death of the partner. No other transfers
are permitted pending the Court's final determination of whether the settlement
should be approved. The provision of the August 20 Order which enjoined the
General Partners of the Exchange Partnerships from, among other things,
recording any transfers not in accordance with the Court's order remains
effective.
There can be no assurance that settlement of either sub-class of the Class
Action Lawsuit will receive final Court approval and be effected. There also can
be no assurance that all or any of the Exchange Partnerships will participate in
the Consolidation because if limited partners owning more than one-third of the
outstanding Units of a partnership object to the Consolidation, then that
partnership will be excluded from the Consolidation. The General Partner and its
affiliates, in consultation with counsel, concur that there is a reasonable
basis to believe that final settlements of each sub-class will be achieved.
However, in the absence of final settlements approved by the Court, the
Defendants intend to defend vigorously against the claims asserted in the Class
Action Lawsuit. Neither the General Partner nor its affiliates can predict with
any degree of certainty the cost of continuing litigation to the Partnership or
the ultimate outcome.
In addition to the foregoing, the Partnership is a party to other lawsuits
that have arisen out of the conduct of its business, principally involving
disputes or disagreements with lessees over lease terms and conditions. Refer to
the Partnership's Annual Report on Form 10-K for the year ended December 31,
1998 for a description of these matters. The following is an update to the
Partnership's prior disclosure on Form 10-K for 1998:
ACTION INVOLVING NATIONAL STEEL CORPORATION
EFG, on behalf of the Partnership and certain affiliated investment
programs (collectively, the "Plaintiffs"), filed an action in the Commonwealth
of Massachusetts Superior Court, Department of the Trial Court in and for the
County of Suffolk on July 27, 1995, for damages and declaratory relief against a
lessee of the Partnership, National Steel Corporation ("National Steel"). The
Complaint seeks reimbursement from National Steel of certain sales and/or use
taxes paid to the State of Illinois in connection with equipment leased by
National Steel from the Plaintiffs and other remedies provided under the Master
Lease Agreement ("MLA"). On August 30, 1995, National Steel filed a Notice of
Removal, which removed the case to United States District Court, District of
Massachusetts. On September 7, 1995, National Steel filed its Answer to the
Plaintiff's Complaint along with Affirmative Defenses and Counterclaims and
sought declaratory relief, alleging breach of contract, implied covenant of good
faith and fair dealing, and specific performance. The Plaintiffs filed an Answer
to National Steel's Counterclaims on September 29, 1995. The parties discussed
settlement with respect to this matter for some time; however, the negotiations
were unsuccessful. The Plaintiffs filed an Amended and Supplemental Complaint
alleging further default under the MLA and filed a motion for Summary Judgment
on all claims and Counterclaims. The Court held a hearing on the Plaintiff's
motion in December 1997 and later entered a decision
12
<PAGE>
dismissing certain of National Steel's Counterclaims, finding in favor of the
Plaintiffs on certain issues and in favor of National Steel on other issues. In
March 1999, the Plaintiffs obtained payment for certain of the disputed items
and, on May 11, 1999, the parties executed a comprehensive settlement agreement
to resolve remaining issues. The General Partner does not expect the outcome of
this action to have a material adverse effect on the Partnership's financial
position or results of operations.
ACTION INVOLVING NORTHWEST AIRLINES, INC.
On September 22, 1995, Investors Asset Holding Corp. and First Security
Bank, N.A., trustees of the Partnership and certain affiliated investment
programs (collectively, the "Plaintiffs"), filed an action in United States
District Court for the District of Massachusetts against a lessee of the
Partnership, Northwest Airlines, Inc. ("Northwest"). The Complaint alleges that
Northwest did not fulfill its maintenance obligations under its Lease Agreements
with the Plaintiffs and seeks declaratory judgment concerning Northwest's
obligations and monetary damages. Northwest filed an Answer to the Plaintiffs'
Complaint and a motion to transfer the venue of this proceeding to Minnesota.
The Court denied Northwest's motion. On June 29, 1998, a United States
Magistrate Judge recommended entry of partial summary judgment in favor of the
Plaintiffs. Northwest appealed this decision. On April 15, 1999, the United
States District Court Judge adopted the Magistrate Judge's recommendation and
entered partial summary judgment in favor of the Plaintiffs. The General Partner
believes that the Plaintiff's claims ultimately will prevail and that the
Partnership's financial position will not be adversely affected by the outcome
of this action.
NOTE 8 - SUBSEQUENT EVENT
On April 10, 1999, Sunworld's option to return a Boeing 727-251 ADV
aircraft that it had purchased from the Partnership and certain affiliated
investment programs in January 1999 expired. Subsequently, the Partnership
received the balance of its share of the sale proceeds for this asset. In
aggregate, the Partnership received total sale proceeds of $548,800. The
aircraft was fully depreciated at the date of its disposal. See also Note 4.
13
<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.
Certain statements in this quarterly report of American Income Partners V-A
Limited Partnership (the "Partnership") that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made herein. These factors include, but are not limited to, the
outcome of the Class Action Lawsuit described in Note 7 to the accompanying
financial statements, the collection of all rents due under the Partnership's
lease agreements and the remarketing of the Partnership's equipment.
YEAR 2000 ISSUE
The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. The
Partnership uses information systems provided by Equis Financial Group Limited
Partnership (formerly American Finance Group) ("EFG") and has no information
systems of its own. EFG has adopted a plan to address the Year 2000 Issue that
consists of four phases: assessment, remediation, testing, and implementation
and has elected to utilize principally internal resources to perform all phases.
EFG has completed substantially all of its Year 2000 project at an aggregate
cost of less than $50,000 and at a di minimus cost to the Partnership. All costs
incurred in connection with EFG's Year 2000 project have been expensed as
incurred.
EFG's primary information software was coded by IBM at the point of
original design to use a four digit field to identify calendar year. All of the
Partnership's lease billings, cash receipts and equipment remarketing processes
are performed using this proprietary software. In addition, EFG has gathered
information about the Year 2000 readiness of significant vendors and third party
servicers and continues to monitor developments in this area. All of EFG's
peripheral computer technologies, such as its network operating system and
third-party software applications, including payroll, depreciation processing,
and electronic banking, have been evaluated for potential programming changes
and have required only minor modifications to function properly with respect to
dates in the year 2000 and thereafter. EFG understands that each of its and the
Partnership's significant vendors and third-party servicers are in the process,
or have completed the process, of making their systems Year 2000 compliant.
Substantially all parties queried have indicated that their systems would be
Year 2000 compliant by the end of 1998.
Presently, EFG is not aware of any outside customer with a Year 2000 Issue
that would have a material effect on the Partnership's results of operations,
liquidity, or financial position. The Partnership's equipment leases were
structured as triple net leases, meaning that the lessees are responsible for,
among other things, (i) maintaining and servicing all equipment during the lease
term, (ii) ensuring that all equipment functions properly and is returned in
good condition, normal wear and tear excepted, and (iii) insuring the assets
against casualty and other events of loss. Non-compliance with lease terms on
the part of a lessee, including failure to address Year 2000 Issues, could
result in lost revenues and impairment of residual values of the Partnership's
equipment assets under a worst-case scenario.
EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its or the
Partnership's business operations. However, EFG has no means of ensuring that
all customers, vendors and third-party servicers will conform ultimately to Year
2000 standards. The effect of this risk to the Partnership is not determinable.
14
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Form 10-Q
PART I. FINANCIAL INFORMATION
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1998:
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. Presently, the Partnership is a Nominal
Defendant in a Class Action Lawsuit, the outcome of which could significantly
alter the nature of the Partnership's organization and its future business
operations. See Note 7 to the accompanying financial statements. Pursuant to the
Restated Agreement, as amended, the Partnership is scheduled to be dissolved by
December 31, 2000.
RESULTS OF OPERATIONS
For the three months ended March 31, 1999, the Partnership recognized lease
revenue of $31,593 compared to $117,616 for the same period in 1998. The
decrease in lease revenue between 1998 and 1999 resulted principally from
renewal lease term expirations and the sale of equipment. In the future, lease
revenue will continue to decline due to lease term expirations and the sale of
equipment.
Interest income for the three months ended March 31, 1999 was $57,531
compared to $52,601 for the same period in 1998. Interest income is typically
generated from temporary investment of rental receipts and equipment sale
proceeds in short-term instruments. Interest income in 1999 and 1998 included
$19,022 and $19,286, respectively, earned on a note receivable from Semele
Group, Inc. ("Semele") (see Note 5 to the financial statements herein). The
amount of future interest income is expected to fluctuate in relation to
prevailing interest rates, the collection of lease revenue and the proceeds from
equipment sales.
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 enabled the Partnership to
further diversify its equipment portfolio at inception by participating in the
ownership of selected assets, thereby reducing the general levels of risk which
could have resulted 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, 1999, 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 $1,000. There
were no equipment sales during the three months ended March 31, 1998. The
results of future sales of equipment will be dependent upon the condition and
type of equipment being sold and its marketability at the time of sale.
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 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.
15
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Form 10-Q
PART I. FINANCIAL INFORMATION
Depreciation expense was $80,952 for the three months ending March 31,
1998. The Partnership's equipment was fully depreciated at March 31, 1998.
Management fees were 5% of lease revenue for the three months ended March
31, 1999 and 1998. 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 were $84,351 for the three months ended March 31, 1999,
compared to $39,750 for the same period in 1998. In 1999, operating expenses
included approximately $17,000 related to the refurbishment of an aircraft
engine (see Note 4 to the financial statements). Other operating expenses
consist principally of administrative charges, professional service costs, such
as audit and legal fees, as well as printing, distribution and other remarketing
expenses. In certain cases, equipment storage or repairs and maintenance costs
may be incurred in connection with equipment being remarketed.
LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS
The Partnership by its nature is a limited life entity. 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 pay management fees and operating
costs. Operating activities generated a net cash outflow of $19,447
(excluding the receipt of proceeds of $1,074,981 related to the deferred
aircraft sales, discussed below) and a net cash inflow of $149,115 for the
three months ended March 31, 1999 and 1998, 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.
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, 1999, the Partnership realized $1,000 in equipment sale
proceeds. There were no equipment sales during the three months ending March 31,
1998. 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.
The Partnership and certain affiliated investment programs (collectively,
the "Programs") own a Boeing 727-251 ADV jet aircraft that was leased to
Sunworld International Airlines, Inc. ("Sunworld"). In January 1999, upon
expiration of the lease term, the Programs entered into an agreement to sell the
aircraft to Sunworld for $2,450,000. The sale agreement permits Sunworld to
return the aircraft to the Programs, subject to certain conditions, on or before
April 10, 1999.
At March 31, 1999, the Partnership had received $324,581, representing a
portion of the Partnership's total sale proceeds which is classified as a
component of other liabilities on the accompanying Statement of Financial
Position at March 31, 1999. The Partnership received the remainder of the sale
proceeds in April 1999; see Note 8 - Subsequent Event to the financial
statements. Due to the contingent nature of the sale, the Partnership has
deferred recognition of the sale until expiration of the return option on April
10, 1999. The Partnership's interest in the aircraft had a cost of $2,175,454
and was fully depreciated at March 31, 1999.
In November 1998, the Programs entered into an agreement to sell their
ownership interests in a Boeing 727-251 ADV aircraft and three engines
(collectively the "Aircraft") to a third party (the "Purchaser"). The Programs
will receive gross sale proceeds of $4,350,000. Previously, the Aircraft had
been leased to Transmeridian Airlines ("Transmeridian"). In December 1998, the
Purchaser remitted $3,350,000 for the Aircraft, excluding one of three engines
which had been damaged while the Aircraft was leased to Transmeridian. (See Note
7 to the financial
16
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Form 10-Q
PART I. FINANCIAL INFORMATION
statements presented in the Partnership's 1998 Annual Report regarding legal
action undertaken by the Programs related to Transmeridian and the damaged
engine). The Purchaser also deposited $1,000,000 into a third-party escrow
account (the "Escrow") pending repair of the damaged engine and re-installation
of the refurbished engine on the Aircraft. Upon installation, the escrow agent
will transfer the Escrow amount plus interest thereon to the Programs.
Currently, the engine is being refurbished at the expense of the Programs. The
associated cost is estimated to be approximately $336,000, of which the
Partnership's share is approximately $75,000. The Partnership accrued $58,000 of
these costs in 1998 and the balance was incurred in the three months ended March
31, 1999.
The Programs also are required to reimburse the Purchaser for its cost to
lease a substitute engine during the period that the damaged engine is being
repaired. This cost is expected to be approximately $114,000, of which the
Partnership's share is approximately $26,000, all of which was accrued in 1998
in connection with the litigation referenced above. Upon completion of the
engine repair and re-installation, the Escrow plus all interest thereon will be
transferred to the Programs.
In addition, the purchase and sale agreement permits the Purchaser to
return the Aircraft to the Programs, subject to a number of conditions, for
$4,350,000, reduced by an amount equivalent to $450 multiplied by the number of
flight hours since the Aircraft's most recent C Check. Among the conditions
precedent to the Purchaser's returning the Aircraft, the Purchaser must have
completed its intended installation of hush-kitting on the Aircraft to conform
to Stage 3 noise regulations. This work was completed in January 1999. The
Purchaser's return option expires on May 15, 1999.
Due to the contingent nature of the sale, the Partnership has deferred
recognition of the sale and a resulting gain at March 31, 1999 until expiration
of the Purchaser's return option on May 15, 1999. The Partnership's share of the
December proceeds was $750,400, which amount was deposited into EFG's customary
escrow account and transferred to the Partnership, together with the
Partnership's other December rental receipts, in January 1999. At March 31,
1999, such amount was reflected as a component of other liabilities on the
accompanying Statement of Financial Position. The remainder of the sale
consideration, or $1,000,000, will be paid to the Programs upon release of the
Escrow discussed above. The Partnership's share of this payment will be
$224,000. The Partnership's interest in the Aircraft had a cost of $2,420,734
and was fully depreciated at March 31, 1999.
At March 31, 1999, the Partnership was due aggregate future minimum lease
payments of $7,806 from contractual lease agreements (see Note 3 to the
financial statements). At the expiration of the individual renewal lease terms
underlying the Partnership's future minimum lease payments, the Partnership will
sell the equipment or enter re-lease or renewal agreements when considered
advantageous by the General Partner and EFG. Such future remarketing activities
will result in the realization of additional cash inflows in the form of
equipment sale proceeds or rents from renewals and re-leases, the timing and
extent of which cannot be predicted with certainty. This is because the timing
and extent of remarketing events often is dependent upon the needs and interests
of the existing lessees. Some lessees may choose to renew their lease contracts,
while others may elect to return the equipment. In the latter instances, the
equipment could be re-leased to another lessee or sold to a third-party.
Accordingly, as the terms of the currently existing contractual lease agreements
expire, the cash flows of the Partnership will become less predictable. In
addition, the Partnership will need cash outflows to pay management fees and
operating expenses.
In accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, marketable
equity securities classified as available-for-sale are carried at fair value.
During the three months ended March 31, 1999, the Partnership decreased the
carrying value of its investment in Semele common stock to $3.625 per share (the
quoted price of the Semele stock on NASDAQ SmallCap Market at March 31, 1999)
resulting in an unrealized loss of $17,072 compared to an unrealized gain of
$42,680 for the same period in 1998. The loss and gain were each reported as a
component of comprehensive loss and income
17
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Form 10-Q
PART I. FINANCIAL INFORMATION
included in partners' capital during the respective periods. The General Partner
believes that the underlying tangible assets of Semele, particularly the Rancho
Malibu property, can be sold or developed on a tax free basis due to Semele's
net operating loss carryforwards and can provide an attractive economic return
to the Partnership.
There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket equipment upon lease expiration. Liquidity is
especially important as the Partnership matures and sells equipment, because the
remaining equipment base consists of fewer revenue-producing assets that are
available to cover prospective cash disbursements. Insufficient liquidity could
inhibit the Partnership's ability to sustain its operations or maximize the
realization of proceeds from remarketing its remaining assets. In particular,
the Partnership's ownership interests in commercial aircraft involve unique
risks resulting from the specialized nature of these assets and the potential
for the Partnership to incur significant remarketing costs at lease expiration.
Accordingly, the General Partner has maintained significant cash reserves within
the Partnership in order to minimize the risk of a liquidity shortage primarily
in connection with the Partnership's aircraft. At March 31, 1999, the
Partnership owned interests in two Boeing 727 aircraft, both of which were under
contract to be sold to third-party buyers subject to the buyers' right to return
the aircraft on or before April 10, 1999 and May 15, 1999, respectively (see
discussion above).
In addition, the Partnership is a Nominal Defendant in a Class Action
Lawsuit described in Note 7 to the accompanying financial statements. A
preliminary court order has allowed the Partnership to invest in new equipment
or other activities, subject to certain limitations, effective March 22, 1999.
To the extent that the Partnership has exposure to aircraft investments that
could require capital reserves, the General Partner does not anticipate that the
Partnership will invest in new assets, regardless of its authority to do so.
Until the Class Action Lawsuit is adjudicated, the General Partner does not
expect that the level of future quarterly cash distributions paid by the
Partnership will be increased above amounts paid in the first quarter of 1999.
In addition, the proposed settlement, if effected, will materially change the
future organizational structure and business interests of the Partnership, as
well as its cash distribution policies. See Note 7 to the accompanying financial
statements.
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, 1999, the
Partnership declared total cash distributions of Distributable Cash From
Operations and Distributable Cash From Sales and Refinancings of $136,250. In
accordance with the Amended and Restated Agreement and Certificate of Limited
Partnership, the Recognized Owners were allocated 95% of these distributions, or
$129,438, and the General Partner was allocated 5%, or $6,812. The first quarter
1999 cash distribution was paid on April 15, 1999.
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 asset at
its disposal date.
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
18
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Form 10-Q
PART I. FINANCIAL INFORMATION
achieved by the Partnership will be dependent upon the collective performance
results of all of the Partnership's equipment leases.
The Partnership's capital account balances for federal income tax and for
financial reporting purposes are different primarily due to differing treatments
of income and expense items for income tax purposes in comparison to financial
reporting purposes (generally referred to as permanent or timing differences;
see Note 6 to the financial statements presented in the Partnership's 1998
Annual Report). For instance, selling commissions, organization and offering
costs pertaining to syndication of the Partnership's limited partnership units
are not deductible for federal income tax purposes, but are recorded as a
reduction of partners' capital for financial reporting purposes. Therefore, such
differences are permanent differences between capital accounts for financial
reporting and federal income tax purposes. Other differences between the bases
of capital accounts for federal income tax and financial reporting purposes
occur due to timing differences. Such items consist of the cumulative difference
between income or loss for tax purposes and financial statement income or loss,
the difference between distributions (declared vs. paid) for income tax and
financial reporting purposes, and the treatment of unrealized gains or losses on
investment securities, if any, for book and tax purposes. The principal
component of the cumulative difference between financial statement income or
loss and tax income or loss results from different depreciation policies for
book and tax purposes.
For financial reporting purposes, the General Partner has accumulated a
capital deficit at March 31, 1999. This is the result of aggregate cash
distributions to the General Partner being in excess of its capital contribution
of $1,000 and its allocation of financial statement net income or loss.
Ultimately, the existence of a capital deficit for the General Partner for
financial reporting purposes is not indicative of any further capital
obligations to the Partnership by the General Partner. The Amended and Restated
Agreement and Certificate of Limited Partnership, requires that upon the
dissolution of the Partnership, the General Partner will be required to
contribute to the partnership an amount equal to any negative balance which may
exist in the General Partner's tax capital account. At December 31, 1998, the
General Partner had a positive tax capital account balance.
The future liquidity of the Partnership will be influenced by, among other
factors, prospective market conditions, technological changes, the ability of
EFG to manage and remarket the Partnership's assets, and many other events and
circumstances, that could enhance or detract from individual asset yields and
the collective performance of the Partnership's equipment portfolio. However,
the outcome of the Class Action Lawsuit described in Note 7 to the accompanying
financial statements will be the principal factor in determining the future of
the Partnership's operations.
19
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-Q
PART II. OTHER 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
20
<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 14, 1999
-------------------------------------------------
By: /s/ GARY ROMANO
-------------------------------------------------
Gary M. Romano
Clerk of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: MAY 14, 1999
-------------------------------------------------
21
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,369,244
<SECURITIES> 123,772
<RECEIVABLES> 801,898
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,294,914
<PP&E> 5,486,899
<DEPRECIATION> (5,486,899)
<TOTAL-ASSETS> 4,294,914
<CURRENT-LIABILITIES> 1,541,188
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,753,726
<TOTAL-LIABILITY-AND-EQUITY> 4,294,914
<SALES> 0
<TOTAL-REVENUES> 90,124
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 85,931
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,193
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,193
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
