<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File No. 0-18364
----------------
American Income Partners V-C Limited Partnership
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code (617) 854-5800
(Former name, former address and former fiscal year, if changed since last
report.)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [_] No [_]
--------------------------------------------------------------------------------
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<PAGE>
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position
at June 30, 2000 and December 31, 1999............................... 3
Statement of Operations
for the three and six months ended June 30, 2000 and 1999............ 4
Statement of Cash Flows
for the six months ended June 30, 2000 and 1999...................... 5
Notes to the Financial Statements..................................... 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 9-13
PART II. OTHER INFORMATION:
Items 1-6...................................................................... 14
</TABLE>
2
<PAGE>
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
June 30, 2000 and December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.............................. $1,137,894 $3,389,520
Rents receivable....................................... -- 87,000
Accounts receivable--affiliate......................... 21,619 27,866
Investment in real estate venture...................... 2,374,677 --
Equipment at cost, net of accumulated depreciation of
$2,808,506 and $2,954,086 at June 30, 2000 and
December 31, 1999, respectively....................... 13,118 26,236
---------- ----------
Total assets....................................... $3,547,308 $3,530,622
========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities.................................... $ 195,914 $ 218,567
Accrued liabilities--affiliate......................... 2,189 10,419
Deferred rental income................................. -- 18,000
Cash distributions payable to partners................. -- 82,643
---------- ----------
Total liabilities.................................. 198,103 329,629
---------- ----------
Partners' capital (deficit):
General Partner....................................... (864,050) (871,461)
Limited Partnership Interests (930,443 Units; initial
purchase price of $25 each).......................... 4,213,255 4,072,454
---------- ----------
Total partners' capital............................ 3,349,205 3,200,993
---------- ----------
Total liabilities and partners' capital............ $3,547,308 $3,530,622
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
For the three and six months ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
--------------------------- -------------------------
2000 1999 2000 1999
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Income:
Lease revenue........... $ 77,355 $ 118,189 $ 161,673 $259,530
Interest income......... 17,001 42,616 56,807 78,229
Gain on sale of
equipment.............. 37,350 425,825 37,350 425,825
------------- ------------- ------------ ------------
Total income......... 131,706 586,630 255,830 763,584
------------- ------------- ------------ ------------
Expenses:
Depreciation............ 6,559 6,559 13,118 13,118
Equipment management
fees--affiliate........ 3,633 5,672 7,609 12,502
Operating expenses--
affiliate.............. 38,340 82,626 71,568 135,491
Partnership's share of
unconsolidated real
estate venture's loss.. 12,984 -- 15,323 --
------------- ------------- ------------ ------------
Total expenses....... 61,516 94,857 107,618 161,111
------------- ------------- ------------ ------------
Net income............... $ 70,190 $ 491,773 $ 148,212 $ 602,473
============= ============= ============ ============
Net income per limited
partnership unit........ $ .07 $ .50 $ .15 $ .62
============= ============= ============ ============
Cash distributions
declared per limited
partnership unit........ $ -- $ .08 $ -- $ .17
============= ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
For the six months ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income............................................... $ 148,212 $ 602,473
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation........................................... 13,118 13,118
Gain on sale of equipment.............................. (37,350) (425,825)
Partnership's share of unconsolidated real estate
venture's loss........................................ 15,323 --
Changes in assets and liabilities
Decrease in:
Rents receivable....................................... 87,000 5,353
Accounts receivable--affiliate......................... 6,247 129,409
Increase (decrease) in:
Accrued liabilities.................................... (22,653) (56,622)
Accrued liabilities--affiliate......................... (8,230) 39,963
Deferred rental income................................. (18,000) 15,530
Other liabilities...................................... -- (201,000)
---------- ----------
Net cash provided by operating activities............ 183,667 122,399
---------- ----------
Cash flows provided by (used in) investing activities:
Proceeds from equipment sales........................... 37,350 425,825
Investment in real estate venture....................... (2,390,000) --
---------- ----------
Net cash provided by (used in) investing activities.. (2,352,650) 425,825
---------- ----------
Cash flows used in financing activities:
Distributions paid...................................... (82,643) (165,286)
---------- ----------
Net cash used in financing activities................ (82,643) (165,286)
---------- ----------
Net (decrease) increase in cash and cash equivalents..... (2,251,626) 382,938
Cash and cash equivalents at beginning of period......... 3,389,520 2,913,800
---------- ----------
Cash and cash equivalents at end of period............... $1,137,894 $3,296,738
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
Note 1--Basis Of Presentation
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles for interim financial information and
with 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 1999 Annual Report.
Except as disclosed herein, there have been no material changes to the
information presented in the footnotes to the 1999 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, 2000 and December 31, 1999 and results of operations for
the three and six month periods ended June 30, 2000 and 1999 have been made and
are reflected.
Note 2--Cash
At June 30, 2000, American Income Partners V-C Limited Partnership (the
"Partnership") had $1,021,703 invested in federal agency discount notes,
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities, or other highly liquid overnight investments.
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. In certain instances, the Partnership
may enter renewal or re-lease agreements which expire beyond the Partnership's
anticipated dissolution date. This circumstance is not expected to prevent the
orderly wind-up of the Partnership's business activities as the General Partner
and Equis Financial Group Limited Partnership ("EFG") would seek to sell the
then-remaining equipment assets either to the lessee or to a third party,
taking into consideration the amount of future noncancellable rental payments
associated with the attendant lease agreements. See also Note 6 to the
financial statements presented in the Partnership's 1999 Annual Report
regarding the Class Action Lawsuit. Future minimum rents of $356,736 are due as
follows:
<TABLE>
<CAPTION>
For the year ending June 30, 2001.......................... $215,961
<S> <C>
2002...................................... 140,775
--------
Total...................................... $356,736
========
</TABLE>
Note 4--Equipment
The following is a summary of equipment owned by the Partnership at June 30,
2000. Remaining Lease Term (Months), as used below, represents the number of
months remaining from June 30, 2000 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.
6
<PAGE>
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Remaining
Lease Term Equipment,
Equipment Type (Months) at Cost
-------------- ----------- ----------
<S> <C> <C>
Construction and mining.................... 6-21 $2,345,427
Materials handling......................... 0-9 264,179
Motor vehicles............................. 0 212,018
----------
Total equipment cost 2,821,624
Accumulated depreciation 2,808,506
----------
Equipment, net of
accumulated depreciation $ 13,118
==========
</TABLE>
At June 30, 2000, all of the Partnership's equipment was subject to
contracted leases or being leased on a month-to-month basis.
Note 5--Investment in Real Estate Venture
On March 8, 2000, the Partnership and 10 affiliated partnerships (the
"Exchange Partnerships") collectively loaned $32.0 million to Echelon
Residential Holdings LLC ("Echelon Residential Holdings"), a newly formed real
estate development company. Echelon Residential Holdings is owned by several
investors, including James A. Coyne, Executive Vice President of EFG. Mr.
Coyne, in his individual capacity, is the only equity investor in Echelon
Residential Holdings related to EFG.
The Partnership's participation in the loan is $2,390,000. Echelon
Residential Holdings, through a wholly-owned subsidiary (Echelon Residential
LLC), used the loan proceeds to acquire various real estate assets from Echelon
International Corporation, a Florida-based real estate company. The loan has a
term of 30 months, maturing on September 8, 2002, and an annual interest rate
of 14% for the first 24 months and 18% for the final six months. Interest
accrues and compounds monthly and is payable at maturity. In connection with
the transaction, Echelon Residential Holdings has pledged a security interest
in all of its right, title and interest in and to its membership interests in
Echelon Residential LLC to the Exchange Partnerships as collateral.
Using the guidance set forth in the Third Notice to Practitioners by the
American Institute of Certified Public Accountants ("AICPA") in February 1986
entitled "ADC Arrangements" (the "Third Notice"), the Partnership has evaluated
this investment to determine whether loan, joint venture or real estate
accounting is appropriate. Such determination affects the Partnership's balance
sheet classification of the investment and the recognition of revenues derived
therefrom. The Third Notice was issued to address those real estate
acquisition, development and construction arrangements where a lender has
virtually the same risk and potential awards as those of owners or joint
ventures. Emerging Issues Task Force ("EITF") 86-21, "Application of the AICPA
Notice to Practitioners regarding Acquisition, Development and Construction
Arrangements to Acquisition of an Operating Property" expanded the
applicability of the Third Notice to entities other than financial
institutions.
Based on the applicability of the Third Notice, EITF 86-21 and consideration
of the economic substance of the transaction, the loan is considered to be an
investment in a real estate venture for accounting purposes. In accordance with
the provisions of Statement of Position No. 78-9, "Accounting for Investments
in Real Estate Ventures", the Partnership reports its share of income or loss
of Echelon Residential Holdings under the equity method of accounting.
7
<PAGE>
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
The investment is net of the Partnership's share of losses in this real
estate venture. For the three and six months ended June 30, 2000, the
Partnership's share of losses is $ 12,984 and $15,323, respectively, and is
reflected on the Statement of Operations as "Partnership's share of
unconsolidated real estate venture's loss".
The summarized financial information for Echelon Residential Holdings as of
and for the six months ended June 30, 2000 is as follows:
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Total assets $54,704,360
Total liabilities $50,914,020
Total equity $ 3,790,340
Total revenues $ 905,751
Total expenses $ 2,593,700
Net loss $(1,687,949)
</TABLE>
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 the six month periods ended
June 30, 2000 and 1999, which were paid or accrued by the Partnership to EFG or
its Affiliates, are as follows:
<TABLE>
<CAPTION>
For the six months ended
June 30,
------------------------
2000 1999
------------------------
<S> <C> <C>
Equipment management fees............................ $ 7,609 $ 12,502
Administrative charges............................... 25,206 51,460
Reimbursable operating expenses due to third
parties............................................. 46,362 84,031
----------- ------------
Total............................................ $ 79,177 $ 147,993
=========== ============
</TABLE>
All rents and proceeds from the sale of equipment are paid directly to EFG.
EFG temporarily deposits collected funds in a separate interest-bearing escrow
account prior to remittance to the Partnership. At June 30, 2000, the
Partnership was owed $21,619 by EFG for such funds and the interest thereon.
These funds were remitted to the Partnership in July 2000.
Note 7--Legal Proceedings
As described more fully in the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1999, 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. In
addition, the Partnership's 1999 Annual Report describes certain other pending
litigation that has arisen out of the conduct of the Partnership's business,
principally involving disputes or disagreements with lessees over lease terms
and conditions.
8
<PAGE>
AMERICAN INCOME PARTNERS V-C 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-C
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 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 6 to the financial statements presented in the
Partnership's 1999 Annual Report, the remarketing of the Partnership's
equipment, and the performance of the Partnership's non-equipment assets.
Three and six months ended June 30, 2000 compared to the three and six months
ended June 30, 1999
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 6 to the financial statements presented in the
Partnership's 1999 Annual Report. Pursuant to the Amended and Restated
Agreement and Certificate of Limited Partnership (the "Restated Agreement, as
amended"), the Partnership is scheduled to be dissolved by December 31, 2001.
Results of Operations
For the three and six months ended June 30, 2000, the Partnership recognized
lease revenue of $77,355 and $161,673, respectively, compared to $118,189 and
$259,530, respectively, for the same periods in 1999. The decrease in lease
revenue from 1999 to 2000 resulted from the lease term expirations and the sale
of equipment. In the future, lease revenue will continue to decline due to
lease term expirations and equipment sales.
Prior to the quarter ended June 30, 1999, the Partnership's equipment
portfolio included certain assets in which the Partnership held a proportionate
ownership interest. In such cases, the remaining interests were owned by an
affiliated equipment leasing program sponsored by Equis Financial Group Limited
Partnership ("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 reported,
in proportion to their respective ownership interests, their respective shares
of assets, liabilities, revenues, and expenses associated with the equipment.
Interest income for the three and six months ended June 30, 2000 was $17,001
and $56,807 compared to $42,616 and $78,229 for the same periods in 1999.
Interest income is typically generated from temporary investment of rental
receipts and equipment sale proceeds in short-term instruments. On March 8,
2000, the Partnership utilized $2,390,000 of available cash for a loan to
Echelon Residential Holdings LLC ("Echelon Residential Holdings"). (See Note 5
to the financial statements herein). The amount of future interest income is
expected to fluctuate as a result of changing interest rates and the amount of
cash available for investment, among other factors.
9
<PAGE>
During the three months ended June 30, 2000 and 1999, the Partnership sold
fully-depreciated equipment to existing lessees and third parties resulting in
a net gain, for financial statement purposes, of $37,350 and $425,825,
respectively. There were no equipment sales in the three months ended March 31,
2000 and 1999. The 1999 equipment sales included $408,000 related to the
Partnership's interests in two Boeing 725-251 ADV aircraft.
It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Partnership, as such transactions will be
dependent upon the condition and type of equipment being sold and its
marketability at the time of sale. In addition, the amount of gain or loss
reported for financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological 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 $6,559 and $13,118, respectively for each of the
three and the six month periods ended June 30, 2000 and 1999. 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.
Management fees were $3,633 and $7,609 for the three and six months ended
June 30, 2000 compared to $5,672 and $12,502 for the same periods in 1999.
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 $38,340 and $71,568, respectively, for the three and
six months ended June 30, 2000 compared to $82,626 and $135,491, respectively,
for the same periods in 1999. In 1999, operating expenses included
approximately $7,000 related to the refurbishment of an aircraft engine and an
adjustment for 1998 actual administrative charges and third-party costs of
approximately $27,000. 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.
For the three and six months ended June 30, 2000, the Partnership's share of
losses in Echelon Residential Holdings were $12,984 and $15,323, respectively,
and are reflected on the Statement of Operations as "Partnership's share of
unconsolidated real estate venture's loss". See further discussion below.
10
<PAGE>
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 net cash inflows of $183,667 and $122,399 for
the six months ended June 30, 2000 and 1999, 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 also will decline as the Partnership experiences a
higher frequency of remarketing events. See additional discussion below
regarding the loan made by the Partnership to Echelon Residential Holdings in
March 2000.
Cash realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During the six months
ended June 30, 2000 and 1999, the Partnership realized equipment sale proceeds
of $37,350 and $425,825, respectively. 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.
In December 1998, the Partnership sold its interest in an aircraft for
proceeds of $261,000, of which $201,000 was deposited into EFG's customary
escrow account and transferred to the Partnership in January 1999. Due to
certain associated contingencies, the Partnership deferred recognition of the
sale until the second quarter of 1999. See the Partnership's 1999 Annual Report
for further discussion of this deferred sale.
At June 30, 2000, the Partnership was due aggregate future minimum lease
payments of $356,736 from contractual lease agreements (see Note 3 to the
financial statements). At the expiration of the individual 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.
In connection with a preliminary settlement agreement for the Class Action
Lawsuit described in Note 6 to the financial statements presented in the
Partnership's 1999 Annual Report, the Partnership is permitted to invest in new
equipment or other business activities, subject to certain limitations. On
March 8, 2000, the Partnership and 10 affiliated partnerships (the "Exchange
Partnerships") collectively loaned $32.0 million to Echelon Residential
Holdings, a newly-formed real estate development company owned by several
investors, including James A. Coyne, Executive Vice President of EFG. Mr.
Coyne, in his individual capacity, is the only equity investor in Echelon
Residential Holdings related to EFG.
The Partnership's participation in the loan is $2,390,000. Echelon
Residential Holdings, through a wholly-owned subsidiary (Echelon Residential
LLC), used the loan proceeds to acquire various real estate assets from Echelon
International Corporation, a Florida-based real estate company. The loan has a
term of 30 months, maturing on September 8, 2002, and an annual interest rate
of 14% for the first 24 months and 18% for the final six months. Interest
accrues and compounds monthly and is
11
<PAGE>
payable at maturity. In connection with the transaction, Echelon Residential
Holdings has pledged a security interest in all of its right, title and
interest in and to its membership interests in Echelon Residential to the
Exchange Partnerships as collateral.
As discussed in Note 5 in the Partnership's financial statements, the loan
is considered to be an investment in a real estate venture for accounting
purposes. In accordance with the provisions of Statement of Position No. 78-9,
"Accounting for Investments in Real Estate Ventures", the Partnership reports
its share of income or loss in Echelon Residential Holdings under the equity
method of accounting.
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.
Cash distributions to the General Partner and Recognized Owners had been
declared and generally paid within fifteen days following the end of each
calendar quarter. The payment of such distributions is reported under financing
activities on the accompanying Statement of Cash Flows. No cash distributions
were declared for the six months ended June 30, 2000.
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 release rents, and the residual value realized for each asset at
its disposal date.
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 5 to the financial statements presented in the
Partnership's 1999 Annual Report. For instance, selling commissions and
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 and the difference between distributions
(declared vs. paid) for income tax and financial reporting 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 June 30, 2000. 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 Restated Agreement,
as amended, requires that upon the dissolution of the Partnership, the General
12
<PAGE>
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, 1999, the General Partner had a positive tax capital
account balance.
The outcome of the Class Action Lawsuit described in Note 6 to the financial
statements presented in the Partnership's 1999 Annual Report will be the
principal factor in determining the future of the Partnership's operations. The
proposed settlement to that lawsuit, if effected, will materially change the
future organizational structure and business interests of the Partnership, as
well as its cash distribution policies. In addition, commencing with the first
quarter of 2000, the General Partner suspended the payment of quarterly cash
distributions pending final resolution of the Class Action Lawsuit.
Accordingly, future cash distributions are not expected to be paid until the
Class Action Lawsuit is adjudicated.
13
<PAGE>
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP
FORM 10-Q
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
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
27 Financial Data Schedule
Item 6(b). Reports on Form 8-K
Response: None
EXHIBIT INDEX
-------------
EXHIBIT DESCRIPTION
------- -----------
27 Financial Data Schedule
</TABLE>
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-C LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporated, a
Massachusetts corporation and the General
Partner of the Registrant.
/s/ Michael J. Butterfield
By: ______________________________________________
Michael J. Butterfield
Treasurer of AFG Leasing IV Incorporated
(Duly Authorized Officer and
Principal Accounting Officer)
Date: August 14, 2000
15
