<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
OR
[__] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------- -----------------------
-----------------------
For Quarter Ended June 30, 1996 Commission File No. 0-18365
American Income Partners V-B Limited Partnership
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3061971
- ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Boston, MA 02114
- ---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
---------------------------
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----------- ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes No
----------- ----------
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
INDEX
Page
----
PART I. FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C>
Statement of Financial Position
at June 30, 1996 and December 31, 1995 3
Statement of Operations
for the three and six months ended June 30, 1996 and 1995 4
Statement of Cash Flows
for the six months ended June 30, 1996 and 1995 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
</TABLE>
2
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $2,890,784 $ 4,352,348
Contractual right for equipment -- 62,539
Rents receivable, net of allowance
for doubtful accounts of $10,000 328,946 180,609
Accounts receivable - affiliate 214,993 223,343
Equipment at cost, net of accumulated
depreciation of $29,957,552 and
$29,880,329 at June 30, 1996
and December 31, 1995, respectively 6,134,763 6,667,583
---------- -----------
Total assets $9,569,486 $11,486,422
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Notes payable $ 938,875 $ 1,157,906
Accrued interest 10,123 7,703
Accrued liabilities 211,650 20,000
Accrued liabilities - affiliate 14,209 29,887
Other liabilities -- 31,546
Deferred rental income 44,662 43,297
Cash distributions payable to partners 611,026 1,018,375
----------- -----------
Total liabilities 1,830,545 2,308,714
----------- -----------
Partners' capital (deficit):
General Partner (1,329,589) (1,257,650)
Limited Partnership Interests
(1,547,930 Units; initial purchase
price of $25 each) 9,068,530 10,435,358
----------- -----------
Total partners' capital 7,738,941 9,177,708
----------- -----------
Total liabilities and partners'
capital $ 9,569,486 $11,486,422
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
for the three and six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
-------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Income:
Lease revenue $710,504 $1,000,673 $1,431,097 $2,270,229
Interest income 42,193 66,281 92,212 126,880
Gain on sale of equipment 56,151 71,492 197,994 195,370
-------- ---------- ---------- ----------
Total income 808,848 1,138,446 1,721,303 2,592,479
-------- ---------- ---------- ----------
Expenses:
Depreciation 453,698 762,829 1,130,663 1,613,101
Interest expense 23,934 44,839 42,534 92,573
Equipment management fees
- affiliate 34,144 45,679 76,215 100,748
Operating expenses - affiliate 159,456 30,494 688,606 87,932
-------- ---------- ---------- ----------
Total expenses 671,232 883,841 1,938,018 1,894,354
-------- ---------- ---------- ----------
Net income (loss) $137,616 $ 254,605 $ (216,715) $ 698,125
======== ========== ========== ==========
Net income (loss)
per limited partnership unit $ 0.08 $ 0.16 $ (0.13) $ 0.43
======== ========== ========== ==========
Cash distributions declared
per limited partnership unit $ 0.38 $ 0.63 $ 0.75 $ 1.25
======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from (used in) operating
activities:
Net income (loss) $ (216,715) $ 698,125
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation 1,130,663 1,613,101
Gain on sale of equipment (197,994) (195,370)
Changes in assets and liabilities
Decrease (increase) in:
rents receivable (148,337) 127,887
accounts receivable - affiliate 8,350 1,604,304
Increase (decrease) in:
accrued interest 2,420 (6,120)
accrued liabilities 191,650 (500)
accrued liabilities - affiliate (15,678) (75,851)
deferred rental income 1,365 (16,595)
----------- -----------
Net cash from operating
activities 755,724 3,748,981
----------- -----------
Cash flows from (used in) investing
activities:
Purchase of equipment (657,000) --
Proceeds from equipment sales 288,144 726,583
----------- -----------
Net cash from (used in) investing
activities (368,856) 726,583
----------- -----------
Cash flows from (used in) financing
activities:
Proceeds from notes payable -- 789,005
Principal payments - notes payable (219,031) (984,388)
Distributions paid (1,629,401) (2,036,750)
----------- -----------
Net cash used in financing
activities (1,848,432) (2,232,133)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (1,461,564) 2,243,431
------------ -----------
Cash and cash equivalents at beginning
of period 4,352,348 2,634,613
----------- -----------
Cash and cash equivalents at end of
period $ 2,890,784 $ 4,878,044
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for
interest $ 40,114 $ 98,693
=========== ===========
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
See Note 4 to the financial statements.
The accompanying notes are an integral part
of these financial statements.
5
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
June 30, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing Form
10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not
include all information and footnote disclosures required under generally
accepted accounting principles for complete financial statements and,
accordingly, the accompanying financial statements should be read in conjunction
with the footnotes presented in the 1995 Annual Report. Except as disclosed
herein, there has been no material change to the information presented in the
footnotes to the 1995 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at June 30, 1996 and December 31, 1995 and results of operations for
the three and six month periods ended June 30, 1996 and 1995 have been made and
are reflected.
NOTE 2 - CASH
- -------------
At June 30, 1996, the Partnership had $2,885,000 invested in reverse
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities.
NOTE 3 - REVENUE RECOGNITION
- ----------------------------
Rents are payable to the Partnership monthly, quarterly or semi-annually and
no significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of
$4,427,641 are due as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
For the year ending June 30, 1997 $2,087,212
1998 1,486,434
1999 689,247
2000 47,071
2001 47,071
Thereafter 70,606
-----------
Total $4,427,641
===========
</TABLE>
NOTE 4 - EQUIPMENT
- ------------------
The following is a summary of equipment owned by the Partnership at June 30,
1996. In the opinion of American Finance Group ("AFG"), the acquisition cost of
the equipment did not exceed its fair market value.
6
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
<TABLE>
<CAPTION>
Lease Term Equipment
Equipment Type (Months) at Cost
- -------------- ----------- ------------
<S> <C> <C>
Aircraft 1-38 $ 18,596,648
Computers and peripherals 6-51 6,303,454
Vessels 57 4,205,030
Materials handling 4-60 2,331,153
Manufacturing 24-60 1,617,997
Trailers/intermodal containers 39-84 1,170,954
Tractors and heavy duty trucks 39-84 759,499
Construction and mining 11-60 574,375
Communications 50-60 469,389
Retail store fixtures 12-60 33,820
Energy systems 9-60 29,996
----------
Total equipment cost 36,092,315
Accumulated depreciation (29,957,552)
----------
Equipment, net of accumulated depreciation $ 6,134,763
----------
</TABLE>
During September and November of 1995, the Partnership transferred its
ownership interest in certain trailers, previously leased to The Atchison Topeka
and Santa Fe Railroad, having a net book value of $70,221, to a third party for
cash consideration of $143,500 which resulted in a net gain of $73,279. In
December 1995, the Partnership replaced a portion of the trailers with
comparable trailers and leased such trailers to a new lessee. The transaction
was accounted for as a like-kind exchange for income tax reporting purposes. The
cost of the new trailers, $341,383, was reduced by $41,733, representing the
amount of gain deferred on the original trailers. The Partnership funded this
transaction with $80,961 of cash consideration and long-term financing of
$260,422. The remaining gain of $31,546 was deferred in anticipation of
completing an additional like-kind exchange in 1996 and was reported as Other
Liabilities on the Statement of Financial Position at December 31, 1995. During
the six months ended June 30, 1996, the Partnership elected not to replace the
remaining trailers and, accordingly, the remaining deferred gain of $31,546 was
recognized as Gain on Sale of Equipment on the Statement of Operations during
the six months ended June 30, 1996. In addition, the remaining cash
consideration of $62,539 from the original transaction, which was reported as
Contractual Right for Equipment on the Statement of Financial Position at
December 31, 1995, was recognized as proceeds from equipment sales.
At June 30, 1996, the Partnership's equipment portfolio included equipment
having a proportionate original cost of $28,101,922, representing approximately
78% of total equipment cost.
The summary above includes equipment held for re-lease or sale with a cost and
net book value of approximately $8,572,000 and $1,002,000, respectively, at June
30, 1996. This equipment includes the Partnership's proportionate interest in a
Boeing 727-251 Advanced aircraft (the "Aircraft"), formerly leased to Northwest
Airlines, Inc., having a cost and net book value of $5,827,110 and $539,000,
respectively, at June 30, 1996. 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 $360,000, all of
which was accrued during the three months ended March 31, 1996. The Partnership
entered into a new 28-month lease agreement with Transmeridian Airlines to re-
lease the Aircraft at a base rent to the Partnership of $42,900 per month,
effective upon completion of the heavy maintenance. In addition, at June 30,
1996, the Partnership's portfolio included a proportionate interest in two
Boeing 727-251 Advanced aircraft which were sold in July 1996 (See Note 7).
7
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
NOTE 5 - RELATED PARTY TRANSACTIONS
- -----------------------------------
All operating expenses incurred by the Partnership are paid by AFG on behalf
of the Partnership and AFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during each of the six month
periods ended June 30, 1996 and 1995, which were paid or accrued by the
Partnership to AFG or its Affiliates, are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Equipment management fees $ 76,215 $100,748
Administrative charges 10,500 10,500
Reimbursable operating expenses
due to third parties 678,106 77,432
-------- --------
Total $764,821 $188,680
======== ========
</TABLE>
All rents and proceeds from the sale of equipment are paid directly to either
AFG or to a lender. AFG temporarily deposits collected funds in a separate
interest-bearing escrow account prior to remittance to the Partnership. At June
30, 1996, the Partnership was owed $214,993 by AFG for such funds and the
interest thereon. These funds were remitted to the Partnership in July 1996.
NOTE 6 - NOTES PAYABLE
- ----------------------
Notes payable at June 30, 1996 consisted of installment notes of $938,875
payable to banks and institutional lenders. All of the installment notes are
non-recourse, with interest rates ranging between 7.04% and 10.12%, except one
note which bears a fluctuating interest rate based on the London Inter-Bank
Offered Rate ("LIBOR") plus 1.5%. At June 30, 1996, the applicable LIBOR
adjusted rate was approximately 6.98%. The installment notes are collateralized
by the equipment and assignment of the related lease payments and will be fully
amortized by noncancellable rents. The carrying value of notes payable
approximates fair value at June 30, 1996.
The annual maturities of the installment notes payable are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
For the year ending June 30, 1997 $482,201
1998 275,580
1999 35,451
2000 38,029
2001 40,794
Thereafter 66,820
---------
Total $938,875
=========
</TABLE>
8
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
NOTE 7 - SUBSEQUENT EVENT
- -------------------------
During July 1996, the Partnership sold its interest in two Boeing 727-251
Advanced aircraft to the lessee, Northwest Airlines, Inc. The Partnership
received lease termination rents of $265,796 and sale proceeds of $615,218. At
June 30, 1996, the net carrying value of these aircraft to the Partnership was
$431,853.
9
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
- --------------
Three and six months ended June 30, 1996 compared to the three and six months
- -----------------------------------------------------------------------------
ended June 30, 1995:
- --------------------
Overview
- --------
As an equipment leasing partnership, the Partnership was organized to acquire
a diversified portfolio of capital equipment subject to lease agreements with
third parties. The Partnership was designed to progress through three principal
phases: acquisitions, operations, and liquidation. During the operations
phase, a period of approximately six years, all equipment in the Partnership's
portfolio will progress through various stages. Initially, all equipment will
generate rental revenues under primary term lease agreements. During the life
of the Partnership, these agreements will expire on an intermittent basis and
equipment held pursuant to the related leases will be renewed, re-leased or
sold, depending on prevailing market conditions and the assessment of such
conditions by AFG to obtain the most advantageous economic benefit. Over time,
a greater portion of the Partnership's original equipment portfolio will become
available for remarketing and cash generated from operations and from sales or
refinancings will begin to fluctuate. Ultimately, all equipment will be sold
and the Partnership will be dissolved. The Partnership's operations commenced
in 1989.
Results of Operations
- ---------------------
For the three and six months ended June 30, 1996, the Partnership recognized
lease revenue of $710,504 and $1,431,097, respectively, compared to $1,000,673
and $2,270,229 for the same periods in 1995. The decrease in lease revenue from
1995 to 1996 was expected and resulted principally from primary lease term
expirations, including leases with Northwest Airlines, Inc. (Northwest), 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 AFG or an affiliated equipment leasing program
sponsored by AFG. Proportionate equipment ownership enables the Partnership to
further diversify its equipment portfolio by participating in the ownership of
selected assets, thereby reducing the general levels of risk which could result
from a concentration in any single equipment type, industry or lessee. The
Partnership and each affiliate individually report, in proportion to their
respective ownership interests, their respective shares of assets, liabilities,
revenues, and expenses associated with the equipment.
For the three months ended June 30, 1996, the Partnership sold equipment
having a net book value of $41,954 to existing lessees and third parties. These
sales resulted in a net gain, for financial statement purposes, of $56,151
compared to a net gain of $71,492 on equipment having a net book value of
$226,591 for the same period in 1995.
For the six months ended June 30, 1996, the Partnership sold equipment having
a net book value of $59,157 to existing lessees and third parties. These sales
resulted in a net gain, for financial statement purposes, of $166,448 compared
to a net gain of $195,370 on equipment having a net book value of $531,213 for
the same period in 1995.
10
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
During 1995, the Partnership transferred its ownership interest in certain
trailers previously leased to The Atchison Topeka and Santa Fe Railroad. The
Partnership intended to replace all of the trailers with comparable trailers and
account for the transaction as a like-kind exchange for income tax reporting
purposes, a portion of which was completed in 1995. A gain of $31,546,
pertaining to the trailers which had not been exchanged in 1995, was deferred in
anticipation of completing the exchange in 1996. This amount was reported as
Other Liabilities on the Statement of Financial Position at December 31, 1995.
During the first quarter of 1996, the Partnership elected not to replace the
remaining trailers and, accordingly, the remaining deferred gain of $31,546 was
recognized as Gain on Sale of Equipment on the Statement of Operations for the
six months ended June 30, 1996. In addition, the remaining cash consideration of
$62,539 from the original transaction, which was reported as Contractual Right
for Equipment on the Statement of Financial Position at December 31, 1995, was
recognized as proceeds from equipment sales. See Note 4 to the financial
statements for additional discussion of this transaction.
It cannot be determined whether future sales of equipment will result in a net
gain or a net loss to the Partnership, as such transactions will be dependent
upon the condition and type of equipment being sold and its marketability at the
time of sale. In addition, the amount of gain or loss reported for financial
statement purposes is partly a function of the amount of accumulated
depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including AFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. AFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Partnership and which will
maximize total cash returns for each asset.
The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset, together
with its residual value. The latter consists of cash proceeds realized upon the
asset's sale in addition to all other cash receipts obtained from renting the
asset on a re-lease, renewal or month-to-month basis. The Partnership
classifies such residual rental payments as lease revenue. Consequently, the
amount of gain or loss reported in the financial statements is not necessarily
indicative of the total residual value the Partnership achieved from leasing the
equipment.
Depreciation expense for the three and six months ended June 30, 1996 was
$453,698 and $1,130,663, respectively, compared to $762,829 and $1,613,101 for
the same periods in 1995. For financial reporting purposes, to the extent that
an asset is held on primary lease term, the Partnership depreciates the
difference between (i) the cost of the asset and (ii) the estimated residual
value of the asset on a straight-line basis over such term. For purposes of
this policy, estimated residual values represent estimates of equipment values
at the date of primary lease expiration. To the extent that an asset is held
beyond its primary lease term, the Partnership continues to depreciate the
remaining net book value of the asset on a straight-line basis over the asset's
remaining economic life.
Interest expense was $23,934 and $42,534 or 3.4% and 3% of lease revenue for
the three and six months ended June 30, 1996, respectively, compared to $44,839
and $92,573 or 4.5% and 4.1% of lease revenue for the same periods in 1995.
Interest expense in future periods will continue to decline in amount and as a
percentage of lease revenue as the principal balance of notes payable is reduced
through the application of rent receipts to outstanding debt.
Management fees were 4.8% and 5.3% of lease revenue for the three and six
months ended June 30, 1996, respectively, compared to 4.6% and 4.4% of lease
revenue for each of the same periods in 1995. Management fees during the six
11
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
months ended June 30, 1996 include $7,780, 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.
The increase in operating expenses from 1995 to 1996 was due primarily to heavy
maintenance costs of approximately $614,000 incurred or accrued in connection
with certain of the Partnership's Boeing 727 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 provided by the collection of periodic rents. These
cash inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs. Operating
activities generated net cash inflows of $755,724 and $3,748,981 for the six
months ended June 30, 1996 and 1995, respectively. Future renewal, re-lease and
equipment sale activities will continue to cause a gradual 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 continue to decline as the
Partnership experiences a higher frequency of remarketing events.
Ultimately, the Partnership will dispose of all assets under lease. This will
occur principally through sale transactions whereby each asset will be sold to
the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of an
asset. Such circumstances are infrequent and usually result in the collection
of stipulated cash settlements pursuant to terms and conditions contained in the
underlying lease agreements.
Cash expended for equipment acquisitions and cash realized from asset disposal
transactions are reported under investing activities on the accompanying
Statement of Cash Flows. During the six months ended June 30, 1996, the
Partnership expended $657,000 to replace certain aircraft engines. There were no
equipment acquisitions during the same period in 1995. During the six months
ended June 30, 1996, the Partnership realized $288,144 in equipment sale
proceeds compared to $726,583 for the same period in 1995. 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 60% ownership interest with a cost and net book
value to the Partnership of $5,827,110 and $539,000, respectively, at June 30,
1996. The Aircraft is currently undergoing heavy maintenance expected to cost
the Partnership approximately $360,000, all of which was accrued during the
12
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
three months ended March 31, 1996. The Partnership entered into a new 28-month
lease agreement with Transmeridian Airlines to re-lease the Aircraft at a base
rent to the Partnership of $42,900 per month, effective upon completion of the
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. In future periods, the amount of cash used to repay
debt obligations will continue to decline as the principal balance of notes
payable is reduced through the collection and application of rents.
Cash distributions to the General Partner and Recognized Owners are declared
and generally paid within fifteen days following the end of each calendar
quarter. The payment of such distributions is presented as a component of
financing activities. For the six months ended June 30, 1996, the Partnership
declared total cash distributions of Distributable Cash From Operations and
Distributable Cash From Sales and Refinancings of $1,222,052. In accordance
with the Amended and Restated Agreement and Certificate of Limited Partnership,
the Recognized Owners were allocated 95% of these distributions, or $1,160,949,
and the General Partner was allocated 5%, or $61,103. The second quarter 1996
cash distribution was paid on July 15, 1996.
Cash distributions paid to the Recognized Owners consist of both a return of
and a return on capital. To the extent that cash distributions consist of Cash
From Sales or Refinancings, substantially all of such cash distributions should
be viewed as a return of capital. Cash distributions do not represent and are
not indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each asset at
its disposal date. Future market conditions, technological changes, the ability
of AFG to manage and remarket the assets, and many other events and
circumstances, could enhance or detract from individual asset yields and the
collective performance of the Partnership's equipment portfolio.
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. In July 1996, the Partnership will collect cash
of $881,014, consisting of lease termination rents equal to $265,796 and sale
proceeds equal to $615,218, from the sale of its interests in two Boeing 727-
Advanced jet aircraft to the lessee, Northwest Airlines, Inc. The amount of
cash available for distribution to the Partners in future periods will be
affected by this and other remarketing activities, which, depending upon timing,
the amounts realized and other considerations, such as market conditions and any
cash reserves retained by the Partnership, may cause the level of future
quarterly cash distributions to fluctuate. Further, equipment lease expirations
and asset disposals will cause the Partnership's net cash from operating
activities to diminish over time. In addition, the Partnership may be required
to incur asset refurbishment or upgrade costs in connection with future
remarketing activities. Notwithstanding such circumstances, the General Partner
anticipates that cash proceeds resulting from the Partnership's rental and
remarketing activities will satisfy the Partnership's future expense
obligations.
13
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6(a). Exhibits
Response: None
Item 6(b). Reports on Form 8-K
Response: None
14
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.
AMERICAN INCOME PARTNERS V-B 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: August 14, 1996
----------------------------------------
By: /s/ Gary M. Romano
----------------------------------------
Gary M. Romano
Clerk of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: August 14, 1996
----------------------------------------
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,890,784
<SECURITIES> 0
<RECEIVABLES> 553,939
<ALLOWANCES> 10,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,444,723
<PP&E> 36,092,315
<DEPRECIATION> 29,957,552
<TOTAL-ASSETS> 9,569,486
<CURRENT-LIABILITIES> 891,670
<BONDS> 938,875
0
0
<COMMON> 0
<OTHER-SE> 7,738,941
<TOTAL-LIABILITY-AND-EQUITY> 9,569,486
<SALES> 0
<TOTAL-REVENUES> 1,721,303
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,938,018
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,534
<INCOME-PRETAX> (216,715)
<INCOME-TAX> 0
<INCOME-CONTINUING> (216,715)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (216,715)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
