<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 March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
______________________
For Quarter Ended March 31, 1997 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 ___
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position
at March 31, 1997 and December 31, 1996 3
Statement of Operations
for the three months ended March 31, 1997 and 1996 4
Statement of Cash Flows
for the three months ended March 31, 1997 and 1996 5
Notes to the Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
PART II. OTHER INFORMATION:
Items 1 - 6 14
2
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
March 31, 1997 and December 31, 1996
(Unaudited)
March 31, December 31,
1997 1996
---------- ----------
ASSETS
Cash and cash equivalents $1,887,223 $1,961,623
Rents receivable, net of allowance
for doubtful accounts of $10,000 227,816 233,569
Accounts receivable - affiliate 93,873 459,038
Equipment at cost, net of accumulated depreciation
of $21,289,733 and $21,000,199 at March 31, 1997
and December 31, 1996, respectively 4,228,002 4,635,690
---------- ----------
Total assets $6,436,914 $7,289,920
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
Notes payable $ 385,127 $ 707,842
Accrued interest 5,117 7,428
Accrued liabilities 97,950 64,750
Accrued liabilities - affiliate 29,020 226,297
Deferred rental income 33,934 45,434
Cash distributions payable to partners 285,145 285,145
---------- ----------
Total liabilities 836,293 1,336,896
---------- ----------
Partners' capital (deficit):
General Partner (1,436,504) (1,418,884)
Limited Partnership Interests
(1,547,930 Units; initial purchase price of $25 each) 7,037,125 7,371,908
---------- ----------
Total partners' capital 5,600,621 5,953,024
---------- ----------
Total liabilities and partners' capital $6,436,914 $7,289,920
---------- ----------
---------- ----------
The accompanying notes are an integral part
of these financial statements.
3
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
for the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
--------- ----------
Income:
Lease revenue $ 552,640 $ 720,593
Interest income 27,011 50,019
Gain on sale of equipment 39,487 141,843
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Total income 619,138 912,455
--------- ----------
Expenses:
Depreciation 395,176 676,965
Interest expense 13,816 18,600
Equipment management fees - affiliate 27,334 42,071
Operating expenses - affiliate 250,070 529,150
--------- ----------
Total expenses 686,396 1,266,786
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Net loss $ (67,258) $ (354,331)
--------- ----------
--------- ----------
Net loss
per limited partnership unit $ (0.04) $ (0.22)
--------- ----------
--------- ----------
Cash distribution declared
per limited partnership unit $ 0.18 $ 0.38
--------- ----------
--------- ----------
The accompanying notes are an integral part
of these financial statements.
4
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
---------- ----------
Cash flows from (used in) operating activities:
Net loss $ (67,258) $ (354,331)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation 395,176 676,965
Gain on sale of equipment (39,487) (141,843)
Changes in assets and liabilities
Decrease (increase) in:
rents receivable 5,753 (68,885)
accounts receivable - affiliate 365,165 44,696
Increase (decrease) in:
accrued interest (2,311) 2,344
accrued liabilities 33,200 361,470
accrued liabilities - affiliate (197,277) 4,064
deferred rental income (11,500) 55,100
---------- ----------
Net cash from operating activities 481,461 579,580
---------- ----------
Cash flows from investing activities:
Proceeds from equipment sales 51,999 190,039
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Net cash from investing activities 51,999 190,039
---------- ----------
Cash flows used in financing activities:
Principal payments - notes payable (322,715) (95,634)
Distributions paid (285,145) (1,018,375)
---------- ----------
Net cash used in financing activities (607,860) (1,114,009)
---------- ----------
Net decrease in cash and cash equivalents (74,400) (344,390)
Cash and cash equivalents at beginning of period 1,961,623 4,352,348
---------- ----------
Cash and cash equivalents at end of period $1,887,223 $4,007,958
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 16,127 $ 16,256
---------- ----------
---------- ----------
The accompanying notes are an integral part
of these financial statements.
5
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
March 31, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing
Form 10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not
include all information and footnote disclosures required under generally
accepted accounting principles for complete financial statements and,
accordingly, the accompanying financial statements should be read in
conjunction with the footnotes presented in the 1996 Annual Report. Except
as disclosed herein, there has been no material change to the information
presented in the footnotes to the 1996 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at March 31, 1997 and December 31, 1996 and results of operations
for the three month periods ended March 31, 1997 and 1996 have been made and
are reflected.
NOTE 2 - CASH
At March 31, 1997, the Partnership had $1,775,000 invested in reverse
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities.
NOTE 3 - REVENUE RECOGNITION
Rents are payable to the Partnership monthly or quarterly and no
significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable.
Rents received prior to their due dates are deferred. Future minimum rents
of $3,566,160 are due as follows:
For the year ending March 31, 1998 $ 2,607,319
1999 782,325
2000 47,071
2001 47,071
2002 47,071
Thereafter 35,303
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Total $ 3,566,160
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-----------
NOTE 4 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at March
31, 1997. In the opinion of Equis Financial Group Limited Partnership
("EFG"), (formerly American Finance Group), the acquisition cost of the
equipment did not exceed its fair market value.
6
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
Lease Term Equipment
Equipment Type (Months) at Cost
- ------------------------------- ---------- ------------
Aircraft 1-38 $ 16,192,484
Vessels 57 4,205,030
Manufacturing 24-60 1,551,460
Materials handling 4-60 1,266,400
Computers and peripherals 6-51 886,571
Construction and mining 11-60 526,525
Communications 50-60 469,389
Trailers/intermodal containers 39-84 341,134
Retail store fixtures 12-60 30,320
Energy systems 9-60 29,996
Tractors and heavy duty trucks 1-84 18,426
-------------
Total equipment cost 25,517,735
Accumulated depreciation (21,289,733)
-------------
Equipment, net of accumulated depreciation $ 4,228,002
-------------
-------------
At March 31, 1997, the Partnership's equipment portfolio included equipment
having a proportionate original cost of $20,943,201, representing
approximately 82% of total equipment cost.
The summary above includes equipment held for re-lease or sale with a cost
and net book value of approximately $6,619,000 and $779,000, respectively, at
March 31, 1997 (See also Note 8 - Subsequent Event). The equipment includes
the Partnership's proportionate interest in a Boeing 727-251 Advanced
aircraft (the "Aircraft"), formerly leased to Northwest Airlines, Inc.,
having a cost and net book value of $6,484,000 and $777,000, respectively, at
March 31, 1997. This aircraft was returned upon expiration of its lease
term on November 30, 1995 and is currently undergoing heavy maintenance
expected to cost the Partnership approximately $764,000, all of which was
accrued or incurred at March 31, 1997. The Partnership entered into a
18-month lease agreement with Transmeridian Airlines to release the Aircraft
at a base monthly rent to the Partnership of $48,000 for 8 months and $42,000
for 10 months, effective upon completion of the heavy maintenance. The
Partnership has experienced delays in the completion of the Aircraft's heavy
maintenance.
NOTE 5 - RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Partnership are paid by EFG on
behalf of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during each of the three month
periods ended March 31, 1997 and 1996, which were paid or accrued by the
Partnership to EFG or its Affiliates, are as follows:
1997 1996
-------- --------
Equipment management fees $ 27,334 $ 42,071
Administrative charges 9,258 5,250
Reimbursable operating expenses
due to third parties 240,812 523,900
-------- --------
Total $277,404 $571,221
-------- --------
-------- --------
7
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the
Partnership. At March 31, 1997, the Partnership was owed $93,873 by EFG for
such funds and the interest thereon. These funds were remitted to the
Partnership in April 1997.
NOTE 6 - NOTES PAYABLE
Notes payable at March 31, 1997 consisted of installment notes of $385,127
payable to banks and institutional lenders. Two of the installment notes are
non-recourse, with interest rates of 10.12% and one note bears a fluctuating
interest rate based on the London Inter-Bank Offered Rate ("LIBOR") plus
1.5%. At March 31, 1997, the applicable LIBOR adjusted rate was 5.7%. The
installment notes are collateralized by the equipment and assignment of the
related lease payments and will be fully amortized by noncancellable rents in
the year ending March 31, 1998. The carrying value of notes payable
approximates fair value at March 31, 1997.
NOTE 7 - LEGAL PROCEEDINGS
On July 27, 1995, EFG, on behalf of the Partnership and other EFG-sponsored
investment programs, filed an action in the Commonwealth of Massachusetts
Superior Court Department of the Trial Court in and for the County of
Suffolk, for damages and declaratory relief against a lessee of the
Partnership, National Steel Corporation ("National Steel"), under a certain
Master Lease Agreement ("MLA") for the lease of certain equipment. EFG is
seeking the reimbursement by National Steel of certain sales and/or use taxes
paid to the State of Illinois and other remedies provided by the MLA. On
August 30, 1995, National Steel filed a Notice of Removal which removed the
case to the United States District Court, District of Massachusetts. On
September 7, 1995, National Steel filed its Answer to EFG's Complaint along
with Affirmative Defenses and Counterclaims, seeking declaratory relief and
alleging breach of contract, implied covenant of good faith and fair dealing
and specific performance. EFG filed its Answer to these counterclaims on
September 29, 1995. Though the parties have been discussing settlement with
respect to this matter for some time, to date, the negotiations have been
unsuccessful. Notwithstanding these discussions, EFG recently filed an
Amended and Supplemental Complaint alleging a further default by National
Steel under the MLA and EFG recently filed a Summary Judgment on all claims
and counterclaims. The matter remains pending before the Court. The
Partnership has not experienced any material losses as a result of this
action.
NOTE 8 - SUBSEQUENT EVENT
On April 30, 1997, the vessel partnerships, in which the Partnership and
certain affiliated investment programs are limited partners and through which
the Partnership and the affiliated investment programs shared economic
interests in three cargo vessels (the "Vessels") leased by KGJS/Gearbulk
Holdings Limited (the "Lessee"), exchanged their ownership interests in the
Vessels for 1,987,000 shares of common stock in Banyan Strategic Land Fund II
("Banyan") and a purchase money note of $8,219,500 (the "Note"). Banyan is a
Delaware corporation organized on April 14, 1987 and has its common stock
listed on NASDAQ. Banyan holds certain real estate investments, the most
significant being a 274 acre site near Malibu, California ("Rancho Malibu").
The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Banyan and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Banyan or by any other party that otherwise would not
have been paid to EFG had the Partnership sold its beneficial interest in the
Vessels directly to the Lessee. The
8
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
Lessee prepaid all of its remaining contracted rental obligations and
purchased the Vessels in two closings occurring on May 6, 1997 and May 12,
1997. The above-referenced Note was repaid with $3,800,000 of cash and
delivery of a $4,419,500 note from Banyan (the "Banyan Note").
As a result of the exchange transaction and its original 53.54% beneficial
ownership interest in Larkfield, one of the three Vessels, the Partnership
received $837,736 in cash and is the beneficial owner of 393,394 shares of
Banyan common stock and holds a beneficial interest in the Banyan Note of
$888,845.
Cash equal to the amount of the Banyan Note is being held by Banyan in a
segregated account pending the outcome of certain shareholder proposals.
Specifically, as part of the exchange, Banyan agreed to seek consent
("Consent") from its shareholders to: (1) amend its certificate of
incorporation and by-laws; (2) make additional amendments to restrict the
acquisition of its common stock in a way to protect Banyan's net operating
loss carry-forwards, and (3) engage EFG to provide administrative services to
Banyan, which services EFG will provide at cost. If the Consent is not
obtained, repayment of the Banyan Note will be accelerated and repaid from
the cash held in the segregated account. If the Consent is obtained, the
Banyan Note will be amortized over three years and bear an annual interest
rate of 10%.
In connection with the Banyan transaction, Gary D. Engle, President and
Chief Executive Officer of EFG, joined the Board of Directors of Banyan and
James A. Coyne, Senior Vice President of EFG became Banyan's Chief Operating
Officer. The agreement also provides that a majority of the Board of
Directors remain independent of Banyan and EFG. Provided Consent is received
by October 31, 1997, Banyan has agreed to declare a $0.20 per share dividend
to be paid on all shares, including those beneficially owned by the
Partnership.
The General Partner believes that the underlying tangible assets of Banyan,
particularly the Rancho Malibu property, can be sold or developed on a tax
free basis due to Banyan's net operating loss carryforwards and can provide
an attractive economic return to the Partnership.
9
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1996:
OVERVIEW
The Partnership was organized in 1989 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment
subject to lease agreements with third parties. The Partnership's stated
investment objectives and policies contemplated that the Partnership would
wind-up its operations within approximately seven years of its inception.
Accordingly, the General Partner is pursuing the remarketing of all of the
Partnership's remaining equipment and expects to engage an investment advisor
to provide assistance and evaluate alternative remarketing strategies.
Currently, the General Partner anticipates that it will wind-up the
operations of the Partnership and make a liquidating distribution to the
Partners, net of any cash reserves which the General Partner may consider
appropriate, within the next twelve months and possibly by December 31, 1997.
RESULTS OF OPERATIONS
For the three months ended March 31, 1997, the Partnership recognized lease
revenue of $552,640 compared to $720,593 for the same period in 1996. The
decrease in lease revenue from 1996 to 1997 was expected and resulted
principally from lease term expirations and the sale of equipment. The
Partnership also earns interest income from temporary investments of rental
receipts and equipment sales proceeds in short-term instruments.
The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are owned by an affiliated equipment leasing program
sponsored by EFG. Proportionate equipment ownership enables the Partnership
to further diversify its equipment portfolio by participating in the
ownership of selected assets, thereby reducing the general levels of risk
which could result from a concentration in any single equipment type,
industry or lessee. The Partnership and each affiliate individually report,
in proportion to their respective ownership interests, their respective
shares of assets, liabilities, revenues, and expenses associated with the
equipment.
For the three months ended March 31, 1997, the Partnership sold equipment
having a net book value of $12,512 to existing lessees and third parties.
These sales resulted in a net gain, for financial statement purposes, of
$39,487 compared to a net gain of $110,297 on equipment having a net book
value of $17,203 for the same period in 1996.
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. During the
three months ended March 31, 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 three months ended March 31, 1996. In addition, the remaining cash
consideration of $62,539 from the original transaction was recognized as
proceeds from equipment sales.
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.
10
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
PART 1. FINANCIAL INFORMATION
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.
Depreciation expense was $395,176 and $676,965 for the three months ended
March 31, 1997 and 1996, respectively. For financial reporting purposes, to
the extent that an asset is held on primary lease term, the Partnership
depreciates the difference between (i) the cost of the asset and (ii) the
estimated residual value of the asset on a straight-line basis over such
term. For purposes of this policy, estimated residual values represent
estimates of equipment values at the date of primary lease expiration. To
the extent that an asset is held beyond its primary lease term, the
Partnership continues to depreciate the remaining net book value of the asset
on a straight-line basis over the asset's remaining economic life.
Interest expense was $13,816 or 2.5% of lease revenue for the three months
ended March 31, 1997, and $18,600 or 2.6% of lease revenue for the same
period in 1996. Interest expense in future periods will continue to decline
in amount and as a percentage of lease revenue as the principal balance of
notes payable is reduced through the application of rent receipts to
outstanding debt. In addition, the General Partner expects to use a portion
of the Partnership's available cash to retire indebtedness.
Management fees were approximately 4.9% and 5.8% of lease revenue during
the three months ended March 31, 1997 and 1996, respectively. Management
fees during the three months ended March 31, 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. Significant operating expenses were incurred in
1996 and 1997 due to heavy maintenance and airframe overhaul costs incurred
or accrued in connection with the Partnership's interests in two Boeing 727
aircraft. Certain of the costs incurred in the first quarter of 1996 were
subsequently reimbursed by the former lessee of the related aircraft. In
1996, the Partnership entered into a new 36-month lease agreement with
Sunworld International Airlines, Inc. to re-lease one of the aircraft at a
base rent to the Partnership of $39,000 per month (see discussion below
relating to the second aircraft). The amount of future operating expenses
cannot be predicted with certainty; however, such expenses are usually higher
during the acquisition and liquidation phases of a partnership. Other
fluctuations typically occur in relation to the volume and timing of
remarketing activities.
11
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
PART 1. FINANCIAL INFORMATION
LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS
The Partnership by its nature is a limited life entity which was
established for specific purposes described in the preceding "Overview". As
an equipment leasing program, the Partnership's principal operating
activities derive from asset rental transactions. Accordingly, the
Partnership's principal source of cash from operations is generally provided
by the collection of periodic rents. These cash inflows are used to satisfy
debt service obligations associated with leveraged leases, and to pay
management fees and operating costs. Operating activities generated net cash
inflows of $481,461 and $579,580 in 1997 and 1996, respectively. Future
renewal, re-lease and equipment sale activities will cause a decline in the
Partnership's lease revenue and corresponding sources of operating cash.
Overall, expenses associated with rental activities, such as management fees,
and net cash flow from operating activities will also decline as the
Partnership experiences a higher frequency of remarketing events.
Ultimately, the Partnership will dispose of all assets under lease. This
will occur principally through sale transactions whereby each asset will be
sold to the existing lessee or to a third party. Generally, this will occur
upon expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of
an asset. Such circumstances are infrequent and usually result in the
collection of stipulated cash settlements pursuant to terms and conditions
contained in the underlying lease agreements.
Cash realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During the three
months ended March 31, 1997, the Partnership realized $51,999 in equipment
sale proceeds compared to $190,039 for the same period in 1996. Future
inflows of cash from asset disposals will vary in timing and amount and will
be influenced by many factors including, but not limited to, the frequency
and timing of lease expirations, the type of equipment being sold, its
condition and age, and future market conditions.
On November 30, 1995, upon the expiration of its lease term, Northwest
Airlines, Inc. returned a Boeing 727-251 Advanced aircraft (the "Aircraft")
in which the Partnership has a 60% ownership interest. The Partnership's
interest in the Aircraft had a cost and net book value of approximately
$6,484,000 and $777,000, respectively, at March 31, 1997. The Aircraft is
currently undergoing heavy maintenance expected to cost the Partnership
approximately $764,000, all of which was accrued or incurred at March 31,
1997. The Partnership entered into a 18-month lease agreement with
Transmeridian Airlines to release the Aircraft at a base monthly rent to the
Partnership of $48,000 for 8 months and $42,000 for 10 months, effective upon
completion of the heavy maintenance. The Partnership has experienced delays
in the completion of the Aircraft's heavy maintenance.
The Partnership obtained long-term financing in connection with certain
equipment leases. The repayments of principal related to such indebtedness
are reported as a component of financing activities. Each note payable is
recourse only to the specific equipment financed and to the minimum rental
payments contracted to be received during the debt amortization period (which
period generally coincides with the lease rental term). As rental payments
are collected, a portion or all of the rental payment is used to repay the
associated indebtedness. The Partnership's notes payable are scheduled to be
fully amortized by noncancellable rents during the year ending March 31,
1998. In addition, the General Partner expects to use a portion of the
Partnership's available cash to retire indebtedness.
Cash distributions to the General Partner and Recognized Owners are
declared and generally paid within fifteen days following the end of each
calendar quarter. The payment of such distributions is presented as a
component of financing activities. For the three months ended March 31,
1997, the Partnership declared total cash distributions of Distributable Cash
From Operations and Distributable Cash From Sales and Refinancings of
12
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AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
PART 1. FINANCIAL INFORMATION
$285,145. In accordance with the Amended and Restated Agreement and
Certificate of Limited Partnership, the Recognized Owners were allocated 95%
of these distributions, or $270,888, and the General Partner was allocated
5%, or $14,257. The first quarter 1997 cash distribution was paid on April
14, 1997.
Cash distributions paid to the Recognized Owners consist of both a return
of and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation
of renewal and/or re-lease rents, and the residual value realized for each
asset at its disposal date. Future market conditions, technological changes,
the ability of EFG to manage and remarket the assets, and many other events
and circumstances, could enhance or detract from individual asset yields and
the collective performance of the Partnership's equipment portfolio.
The future liquidity of the Partnership will be influenced by the foregoing
and will be greatly dependent upon the collection of contractual rents and
the outcome of residual activities. The General Partner anticipates that
cash proceeds resulting from these sources will satisfy the Partnership's
future expense obligations. However, the amount of cash available for
distribution in future periods will fluctuate. Equipment lease expirations
and asset disposals will cause the Partnership's net cash from operating
activities to diminish over time; and equipment sale proceeds will vary in
amount and period of realization. In addition, the Partnership may be
required to incur asset refurbishment or upgrade costs in connection with
future remarketing activities. Accordingly, fluctuations in the level of
future quarterly cash distributions are anticipated.
13
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Refer to Note 7 to the financial statements herein.
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6(a). Exhibits
Response: None
Item 6(b). Reports on Form 8-K
Response: None
14
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity
and on the date indicated.
AMERICAN INCOME PARTNERS V-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: May 15, 1997
-------------------------------------------
By: /s/ Gary Romano
---------------------------------------------
Gary M. Romano
Clerk of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 15, 1997
--------------------------------------------
15
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,887,223
<SECURITIES> 0
<RECEIVABLES> 331,689
<ALLOWANCES> 10,000
<INVENTORY> 0
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<PP&E> 25,517,735
<DEPRECIATION> 4,228,002
<TOTAL-ASSETS> 6,436,914
<CURRENT-LIABILITIES> 451,166
<BONDS> 385,127
0
0
<COMMON> 0
<OTHER-SE> 5,600,621
<TOTAL-LIABILITY-AND-EQUITY> 6,436,914
<SALES> 552,640
<TOTAL-REVENUES> 619,138
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 672,580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,816
<INCOME-PRETAX> (67,258)
<INCOME-TAX> 0
<INCOME-CONTINUING> (67,258)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,258)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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