<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13
or 15 (d) of the Securities
Exchange Act of 1934
---------------------------------
For the Quarter Ended
September 30, 1996 Commission File Number 0-18650
- -------------------- --------------------------------
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
(Exact name of Registrant as specified in its charter)
------------------------------------------------------
Delaware 36-3639399
---------------- ---------------------------
State or other IRS Employer Identification
jurisdiction of Number
incorporation or
organization
1300 E. Woodfield Road, Suite 312 Schaumburg, Illinois 60173
- --------------------------------- ---------------------------
Address of principal City, State, Zip Code
executive offices
Registrant's telephone number: (847) 240-6200
---------------------------
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.
(1) Yes x No
---- ----
(2) Yes x No
---- ----
<PAGE> 2
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
September 30, 1996 (unaudited)
December 31, 1995
Statements of Revenue and Expenses (unaudited)
For the three months ended September 30, 1996
For the three months ended September 30, 1995
For the nine months ended September 30, 1996
For the nine months ended September 30, 1995
Statements of Changes in Partners' Equity
For the nine months ended September 30, 1996
(unaudited)
Statements of Cash Flows (unaudited)
For the nine months ended September 30, 1996
For the nine months ended September 30, 1995
Notes to Financial Statements (unaudited)
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Items 1-6.
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
BALANCE SHEETS
September 30, 1996 - Unaudited
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $2,184,369 $ 2,742,616 $4,926,985
Installment contracts receivable 113,501 396,844 510,345
Net investment in direct
financing leases 17,857 3,765,230 3,783,087
Diverted and other assets, net 332,605 1,162,921 1,495,526
---------- ----------- -----------
$2,648,332 $ 8,067,611 $10,715,943
========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and
accrued expenses $ 43,292 $ 174,078 $ 217,370
Lessee rental deposits 148,983 563,270 712,253
Due to management company 269 982 1,251
---------- ----------- -----------
Total liabilities 192,544 738,330 930,874
Total partners' equity 2,455,788 7,329,281 9,785,069
---------- ----------- -----------
$2,648,332 $ 8,067,611 $10,715,943
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
- 3 -
<PAGE> 4
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
BALANCE SHEETS
December 31, 1995
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $1,977,211 $ 1,432,420 $3,409,631
Installment contracts receivable 215,476 753,390 968,866
Net investment in direct
financing leases 343,356 6,771,767 7,115,123
Diverted and other assets, net 332,605 1,162,921 1,495,526
Restricted cash 20,152 70,460 90,612
---------- ----------- -----------
$2,888,800 $10,190,958 $13,079,758
========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and
accrued expenses $ 62,398 $ 246,147 $ 308,545
Lessee rental deposits 75,612 308,038 383,650
Due to management company 62 212 274
---------- ----------- -----------
Total liabilities 138,072 554,397 692,469
Total partners' equity 2,750,728 9,636,561 12,387,289
---------- ----------- -----------
$2,888,800 $10,190,958 $13,079,758
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
- 4 -
<PAGE> 5
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended September 30, 1996
<TABLE>
<CAPTION>
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Revenue:
Lease income (loss) $ (31,671) $ 20,164 $ (11,507)
Interest income 14,542 83,523 98,065
--------- --------- ---------
(17,129) 103,687 86,558
--------- --------- ---------
Expenses:
Management fees-New Era 71,482 260,067 331,549
General Partner's expense
reimbursement (Note 7) (9,362) (32,735) (42,097)
Professional fees 25,542 90,978 116,520
Other operating expenses 5,093 18,197 23,290
--------- --------- ---------
92,755 336,507 429,262
--------- --------- ---------
Net loss $(109,884) $(232,820) $(342,704)
========= ========= =========
Net loss - General Partner $ (1,099) $ (2,328) $ (3,427)
========= ========= =========
Net loss - Limited Partners $(108,785) $(230,492) $ 339,277)
========= ========= =========
Net loss per Limited
Partnership Unit $ (2.45) $ (1.48)
========= =========
Weighted average number
of Limited Partnership Units
outstanding 44,468 155,509
========= =========
</TABLE>
See accompanying notes to financial statements.
- 5 -
<PAGE> 6
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
--------- -------------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 29,170 $ 328,294 $ 357,464
Settlement proceeds (Note 5) 94,729 331,209 425,938
Interest income 17,571 76,336 93,907
--------- -------------- ----------
141,470 735,839 877,309
--------- -------------- ----------
Expenses:
Management fees-New Era 68,015 269,010 337,025
General Partner's
expense reimbursement 19,878 69,504 89,382
Professional fees (Note 5) 51,817 192,591 244,408
Other operating expenses 5,496 30,007 35,503
Provision for lease loss - 150,000 150,000
--------- ---------- ----------
145,206 711,112 856,318
--------- ---------- ----------
Net earnings (loss) $ (3,736) $ 24,727 $ 20,991
========= ========== ==========
Net earnings (loss) -
General Partner $ (37) $ 247 $ 210
========= ========== ==========
Net earnings (loss) -
Limited Partners $ (3,699) $ 24,480 $ 20,781
========= ========== ==========
Net earnings (loss) per
Limited Partnership Unit $(0.08) $ 0.16
========= ==========
Weighted average number
of Limited Partnership Units
outstanding 44,468 155,509
========= ==========
</TABLE>
See accompanying notes to financial statements.
- 6 -
<PAGE> 7
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the nine months ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Revenue:
Lease income (Note 6) $ 24,469 $ 547,765 $ 572,234
Interest income 44,320 237,777 282,097
--------- ---------- ----------
68,789 785,542 854,331
--------- ---------- ----------
Expenses:
Management fees-New Era 213,687 792,690 1,006,377
General Partner's expense
reimbursement (Notes 6 and 7) 65,213 228,010 293,223
Professional fees 73,100 263,318 336,418
Other operating expenses 11,729 42,982 54,711
--------- ---------- ----------
363,729 1,327,000 1,690,729
--------- ---------- ----------
Net loss $(294,940) $ (541,458) $ (836,398)
========= ========== ==========
Net loss - General Partner $ (2,949) $ (5,415) $ (8,364)
========= ========== ==========
Net loss - Limited Partners $(291,991) $ (536,043) $ (828,034)
========= ========== ==========
Net loss per Limited
Partnership Unit $(6.57) $(3.45)
====== ======
Weighted average number
of Limited Partnership Units
outstanding 44,468 155,509
====== =======
</TABLE>
See accompanying notes to financial statements.
- 7 -
<PAGE> 8
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the nine months ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Revenue:
Lease income $ 120,230 $1,163,895 $1,284,125
Settlement proceeds (Note 5) 94,729 331,209 425,938
Interest income 67,925 261,309 329,234
--------- ---------- ----------
282,884 1,756,413 2,039,297
--------- ---------- ----------
Expenses:
Amortization of organization
and equipment acquisition costs 32,445 113,443 145,888
Management fees-New Era 209,471 1,030,177 1,239,648
General Partner's
expense reimbursement 92,898 324,810 417,708
Professional fees (Note 5) 128,560 470,377 598,937
Other operating expenses 14,607 72,151 86,758
Provision for lease losses - 150,000 150,000
--------- ---------- ----------
477,981 2,160,958 2,638,939
--------- ---------- ----------
Net loss $(195,097) $ (404,545) $ (599,642)
========= ========= =========
Net loss -
General Partner $ (1,951) $ (4,045) $ (5,996)
========= ========== ==========
Net loss -
Limited Partners $(193,146) $ (400,500) $ (593,646)
========= ========== ==========
Net loss per Limited
Partnership Unit $(4.34) $ (2.58)
====== ==========
Weighted average number
of Limited Partnership Units
outstanding 44,468 155,509
====== =======
</TABLE>
See accompanying notes to financial statements.
- 8 -
<PAGE> 9
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
General Limited Limited Total
Partner's Partners' Partners' Partners'
Equity Equity Equity Equity
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $ (344,238)* $2,806,086 $ 9,925,441 $12,387,289
Distributions to partners
(Note 3) (8,570) - (1,757,252) (1,765,822)
Net loss (8,364) (291,991) (536,043) (836,398)
Allocation of General
Partner's equity 361,172 (58,307) (302,865)
----------- ---------- ----------- -----------
-
Balance, September 30, 1996 $ - $2,455,788 $ 7,329,281 $ 9,785,069
=========== ========== =========== ===========
</TABLE>
* Balance as previously reported was $0 due to allocation of $55,358 and
$288,880 to Liquidating and Continuing Limited Partners' Equity,
respectively.
See accompanying notes to financial statements.
- 9 -
<PAGE> 10
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (294,940) $ (541,458) $ (836,398)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Changes in assets and
liabilities:
Accounts payable and
accrued expenses (19,106) (72,069) (91,175)
Lessee rental deposits 73,371 255,232 328,603
Due to management company 207 770 977
---------- ------------ ------------
(240,468) (357,525) (597,993)
---------- ------------ ------------
Cash flows from investing activities:
Principal collections on leases 325,499 3,006,537 3,332,036
Principal collections on
installment contract receivable 101,975 356,546 458,521
Release of restricted cash 20,152 70,460 90,612
---------- ------------ ------------
447,626 3,433,543 3,881,169
---------- ------------ ------------
Cash flows from financing activities:
Distributions to Limited
Partners (a) - (1,757,252) (1,757,252)
Distributions to General Partner - (8,570) (8,570)
---------- ------------ ------------
- (1,765,822) (1,765,822)
---------- ------------ ------------
Net increase in cash
and cash equivalents 207,158 1,310,196 1,517,354
Cash and cash equivalents:
Beginning of year 1,977,211 1,432,420 3,409,631
---------- ------------ ------------
End of second quarter $2,184,369 $ 2,742,616 $ 4,926,985
========== ============ ============
</TABLE>
(a) Distributions during the period were $0 per unit for Liquidating Limited
Partners and $11.30 per unit for Continuing Limited Partners (see Note 3).
See accompanying notes to financial statements.
- 10 -
<PAGE> 11
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (195,097) $ (404,545) $ (599,642)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization expense 32,445 113,443 145,888
Provision for lease losses - 150,000 150,000
Changes in assets and liabilities:
Accounts payable and accrued
expenses (16,225) (79,337) (95,562)
Lessee rental deposits (1,281) 27,338 26,057
Due to Management Company (22) (30,202) (30,224)
---------- ----------- -----------
(180,180) (223,303) (403,483)
---------- ----------- -----------
Cash flows from investing activities:
Purchases of lease receivables - (2,834,959) (2,834,959)
Principal collections on leases 906,024 5,151,080 6,057,104
Sale of leases (Note 4) 35,267 1,300,791 1,336,058
Distribution of diverted and other assets 123,011 430,098 553,109
Distribution of Datronic assets 19,269 67,370 86,639
Principal collections on
installment contract receivable 95,369 333,451 428,820
---------- ----------- -----------
1,178,940 4,447,831 5,626,771
---------- ----------- -----------
Cash flows from financing activities:
Distributions to Limited Partners (a) (206,776) (4,965,072) (5,171,848)
Distributions to General Partner (10,620) (89,667) (100,287)
---------- ----------- -----------
(217,396) (5,054,739) (5,272,135)
---------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 781,364 (830,211) (48,847)
Cash and cash equivalents:
Beginning of year 1,118,691 3,002,502 4,121,193
---------- ----------- -----------
End of third quarter $1,900,055 $ 2,172,291 $ 4,072,346
========== =========== ===========
</TABLE>
(a) Distributions during the period were $4.65 per unit for Liquidating Limited
Partners and $31.93 per unit for Continuing Limited Partners (see Note 3).
See accompanying notes to financial statements.
- 11 -
<PAGE> 12
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE 1 - ORGANIZATION:
Datronic Equipment Income Fund XVIII, L.P., a Delaware Limited Partnership (the
"Partnership"), was formed on April 12, 1989 for the purpose of acquiring and
leasing both high-and low-technology equipment. Reference is made to Notes 4,
6, 7 and 8 to the Partnership's financial statements included in the 1995 Form
10-K for a discussion of the alleged diversion of Partnership assets in 1991
and 1992 and the subsequent litigation and settlement, change in general
partner, new classes of limited partners established and amendments to the
Partnership Agreement which occurred.
NOTE 2 - BASIS OF FINANCIAL STATEMENTS:
The accompanying financial statements should be read in conjunction with the
Partnership's financial statements included in the 1995 Form 10-K. The
financial information furnished herein is unaudited but in the opinion of
Management includes all adjustments necessary (all of which are normal
recurring adjustments) for a fair presentation of financial condition and
results of operations. See Note 3 to the Partnership's financial statements
included in the 1995 Form 10-K.
NOTE 3 - LIMITED PARTNERSHIP DISTRIBUTIONS:
Distributions to Liquidating Limited Partners were suspended after payment of
the July 1, 1995 distribution. Distributions to the Continuing Limited
Partners were suspended after payment of the April 1, 1996 distribution.
NOTE 4 - LEASE PORTFOLIO SALES:
During the nine months ended September 30, 1995, the Partnership, Fund XIX,
Fund XX, and Finance Income Fund I each entered into separate lease purchase
agreements with Southern Pacific Thrift & Loan Association to sell equipment
leases at discount rates ranging from 10.75% to 12.25% which resulted in
aggregate net proceeds of approximately $16.7 million. The Partnership's
proceeds were approximately $1.3 million. Of this amount, approximately all of
the proceeds were allocable to Continuing Limited Partners and invested in new
leases.
- 12 -
<PAGE> 13
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - SETTLEMENT WITH FORMER ATTORNEYS:
On August 10, 1995, the United States District Court of the Northern District
of Illinois, Eastern Division, approved as fair, reasonable and adequate, a
settlement with all the Datronic Partnerships and the Partnerships' former
attorneys, Siegan, Barbakoff, Gomberg & Kane in the aggregate amount of
$1,775,000 ($425,938 for the Partnership) or $2.13 per unit (see Note 6 to the
Partnership's financial statements included in the 1995 Form 10-K). A total of
$683,147 of expenses ($163,932 for the Partnership), consisting primarily of
professional fees, were incurred in connection with this recovery resulting in
a net recovery of $1,091,853 or $1.31 per unit. However, since the
Partnerships had previously paid $239,397 ($57,447 for the Partnership) of
these expenses, a total of $1,331,250 or $1.60 per unit was available for
distribution. Accordingly, on October 1, 1995, the Partnership distributed
$1.60 per unit to Liquidating Limited Partners and to Continuing Limited
Partners. All settlement proceeds and all related expenses have been allocated
to all unit holders of the Datronic Partnerships based on the number of limited
partnership units owned.
NOTE 6 - PCR TRANSACTION:
During the second quarter of 1996 the Partnership received $352,225 in full and
complete satisfaction of a certain master sublease agreement with PCR further
described in Note 12 to the Partnership's financial statements included in the
1995 Form 10-K. Included in lease income is $304,584 related to the payoff of
the PCR sublease comprised of previously unrecognized lease income of $277,190
and the recognition of previously unearned lease income of $27,394.
The Partnership also received during the second quarter of 1996, $83,507
representing the Partnership's share of remittances received by LRC in full and
complete satisfaction of certain note obligations issued by PCR in connection
with the sale of PCR stock as further described in Note 13 to the Partnership's
financial statements included in the 1995 Form 10-K. A gain on the sale of PCR
stock of $19,018 has been included in lease income.
Further, during the second quarter of 1996 the Partnership received a credit
from LRC of $74,275 representing the Partnership's share of remittances
received by LRC from PCR in full and complete satisfaction of a management and
consulting contract entered into
- 13 -
<PAGE> 14
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO FINANCIAL STATEMENTS
in connection with the sale of PCR stock as further described in Note 13 to the
Partnership's financial statements included in the 1995 Form 10-K. The credit
represents a reduction of LRC expenses otherwise payable by the Partnership and
has been recorded as an offset against the General Partner's expense
reimbursement.
NOTE 7 - CRCA TRANSACTIONS:
As previously disclosed, Computer Rental Corp. of America (CRCA) sold
substantially all of its assets for $700,000 to New CRCA, a newly-formed
company owned by an executive of LRC, (see Note 15 to the Partnership's
financial statements included in the 1995 Form 10-K). Subsequently in 1996,
New CRCA received an offer from PCR to purchase substantially the same assets
sold to New CRCA in the aforementioned transaction for an amount substantially
in excess of the purchase price paid by New CRCA. In order to ensure that the
Partnership and Fund XX received maximum benefit from the sale of CRCA, CRCA
repurchased the assets sold to New CRCA for $659,659, the original purchase
price plus tax liabilities accrued by New CRCA less payments made on the
original promissory note. The repurchase price was paid in the form of cash
($116,000) and the cancellation of the unpaid promissory note given by New CRCA
($543,659).
On September 13, 1996, CRCA sold all of the assets repurchased from New CRCA
(excluding cash) to a subsidiary of PCR (PCR Sub) for approximately $6.2
million. The purchase price was paid in the form of a senior note of
$1,500,000, a subordinated note of approximately $4,200,000, and the assumption
of approximately $500,000 of liabilities. Both notes bear interest at 9%.
Principal and interest are payable monthly in the aggregate amount of
approximately $118,000 commencing November 1, 1996. All principal payments are
to be applied to the senior note. The unpaid principal balances aggregating
$4.8 million are due November 1, 1997. The senior note is secured by a
priority security interest in the assets of PCR Sub. The subordinated note is
secured by a security interest in the assets of PCR Sub which is subordinate to
a $14 million security interest of another PCR creditor.
CRCA will utilize existing cash balances of approximately $750,000 and amounts
received on the notes to liquidate all liabilities not assumed by PCR Sub,
including expenses associated with the sale, and subject to Court approval,
settlement of claims of the former stockholders of CRCA under the indemnity
provisions of the bylaws
- 14 -
<PAGE> 15
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO FINANCIAL STATEMENTS
of CRCA for $150,000 (see Note 8). Remaining funds will be allocated 65% to
the Partnership and 35% to Fund XX in accordance with their respective
interests in the Master Lease with CRCA (see Note 15 to the Partnership's
financial statements included in the 1995 Form 10-K). The Partnership and Fund
XX will record recoveries on the Master Lease with CRCA as the cash is
received.
CRCA paid LRC $289,263 for CRCA related expenses previously incurred by LRC and
charged to the Partnership and Fund XX as General Partner's expense
reimbursement. The amounts repaid to LRC by CRCA has been allocated to the
Partnership and Fund XX in the manner in which those expenses were originally
charged (65% and 35%, respectively). Accordingly, LRC paid $188,021 to the
Partnership and $101,242 to Fund XX in September 1996.
NOTE 8 - SUBSEQUENT EVENT:
On October 2, 1996, LRC, on behalf of the Datronic Partnerships, Class Counsel,
on behalf of the Class, and the former stockholders of CRCA, entered into a
proposed settlement whereby: a) LRC will authorize the payment of $150,000 by
CRCA to the former shareholders of CRCA under the indemnity provisions of the
bylaws of CRCA, b) all parties agree to remise, release and discharge the other
parties from any and all claims, actions, causes of action, demands or suits
including claims against the former officers of Datronic, including a current
officer of LRC and current officers of New Era (see Note 6 to the Partnership's
financial statements included in the 1995 Form 10-K), and c) the former
shareholders of CRCA agree to release all claims against Recovered Assets. On
February 28, 1997, the Court will hold a hearing to determine the fairness,
reasonableness and adequacy of the proposed settlement.
- 15 -
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of liquidity and capital resources covers
material changes in the Partnership's financial condition from December 31,
1995 through September 30, 1996. The discussion and analysis of results of
operations is for the three and nine month periods ended September 30, 1996 as
compared to the corresponding periods in 1995.
Financial Condition, Liquidity and Capital Resources
During the nine months ended September 30, 1996, Partnership assets were
converted to cash in order to pay Partnership operating expenses, make
distributions to the Continuing Limited Partners and General Partner through
April 1, 1996 and to ensure that sufficient cash will be available to pursue
pending litigation and liquidate the Partnership in an orderly manner.
Installment contracts receivable decreased approximately $459,000 during the
nine months ended September 30, 1996 due to scheduled principal collections.
Net investment in direct financing leases decreased approximately $3,332,000
during the nine months ended September 30, 1996. This decrease is primarily
attributable to principal collections.
Restricted cash of approximately $91,000 has been included in cash and cash
equivalents due to the removal of claims against such cash (see Part II, Item 1
- - Legal Proceedings) and repayment to the Partnership with interest in June
1996.
Accounts payable and accrued expenses decreased approximately
$91,000 during the nine months ended September 30, 1996 primarily
due to the payment of legal fees and sales and use taxes.
Lessee rental deposits increased approximately $329,000 during the nine months
ended September 30, 1996 primarily due to an accrual for overpayments to be
returned to lessees partially offset by payments made to lessees.
In the aggregate, partners' equity decreased approximately $2.6 million during
the nine months ended September 30, 1996 due to a net loss of approximately
$836,000 and distributions to partners of approximately $1,766,000.
During the nine months ended September 30, 1996, the Partnership's operating
activities resulted in an approximate use of $598,000 of cash. This was due
principally to a net loss of approximately
- 16 -
<PAGE> 17
$836,000 and a decrease in accounts payable of approximately $91,000 reduced by
an increase in rental deposits and overpayments of approximately $329,000.
During the period, cash flows from investing activities aggregated
approximately $3,881,000 relating to principal collections on leases of
approximately $3,332,000, scheduled repayments on an installment contract
receivable of approximately $459,000 and the availability of restricted cash in
the amount of approximately $91,000. Cash flows used for financing activities
of approximately $1,766,000, consisted of distributions to Continuing Limited
Partners of approximately $1,757,000 and the General Partner of approximately
$9,000.
The Partnership's principal sources of liquidity on both a long-term and
short-term basis are receipts from leases, installment contracts receivable and
cash on hand. Additional sources of liquidity on a long-term basis are
expected to include proceeds from the sale of diverted and other assets and,
possibly, portions of the Partnership's lease portfolio which may be sold in
bulk. Management believes that its sources of liquidity in the short and
long-term are sufficient to meet its operating cash obligations. Distributions
to the Liquidating Limited Partners were suspended after the July 1, 1995
distribution and distributions to the Continuing Limited Partners were
suspended after the April 1, 1996 distribution. Distributions were suspended
to ensure that sufficient cash will be available to pursue recoveries under
pending litigation with the Partnership's former accountants and others and to
liquidate the Partnership in an orderly manner.
The continued operation and eventual liquidation of the Partnership involves
numerous complex issues which have to be resolved. These issues relate to the
timing and realizability of lease-related assets, diverted and other assets,
Datronic assets, litigation and the liquidation of the other Datronic
Partnerships (see Notes 4, 6 and 9 to the Partnership's financial statements
included in the 1995 Form 10-K). These issues make it difficult to predict the
time and costs necessary to operate and liquidate the Partnership in an orderly
manner. As a result of these uncertainties, it is not possible to predict the
timing and availability of cash for future distributions to Limited Partners.
However, it is likely that the amount of future distributions, if any, to the
Limited Partners will ultimately be significantly less than the amount of
Partner's Equity reflected in the September 30, 1996 Balance Sheets (see
financial statements included in Item 1).
- 17 -
<PAGE> 18
Results of Operations
Lease income decreased approximately $369,000 and $712,000 for the three and
nine month periods ended September 30, 1996 as compared to the corresponding
periods in 1995. The third quarter of 1996 includes a $200,000 provision for
the return of lease overpayments to lessees previously recorded as income. The
second quarter of 1996 includes an additional $200,000 provision for the return
of lease overpayments and $324,000 of income from transactions with PCR as
described in Note 6 to the financial statements included in Item 1. Excluding
these items, the decreases in lease income for the three and nine month periods
ended September 30, 1996 as compared to the corresponding periods in 1995 would
have been approximately $169,000 and $636,000, respectively, and are due
primarily to the declining lease portfolio.
Interest income decreased $47,000 for the nine month period ended September 30,
1996 as compared to the corresponding periods in 1995 primarily due to
declining installment contract receivable balances partially offset by the
recognition in the second quarter of 1996 of approximately $15,000 of interest
previously earned on restricted cash balances.
Settlement proceeds of approximately $426,000 recorded in the three and nine
month periods ended September 30, 1995 resulted from a settlement with the
Partnership's former attorneys. See Note 5 to the financial statements
included in Item 1.
Amortization of organization and equipment acquisition costs decreased
approximately $146,000 to zero for the nine month period ended September 30,
1996 as compared to the corresponding period in 1995 due to the completion of
the amortization of these costs in 1995.
Management fees-New Era represent amounts paid New Era for managing the
Partnership on a day-to-day basis and for acquiring leases for the Continuing
Limited Partners. These fees amounted to approximately $332,000 and $1,006,000
for the three and nine months ended September 30, 1996 as compared to $337,000
and $1,240,000 for the same periods in 1995. The decreases are attributable to
declining Partnership activity and the cessation of lease acquisitions in April
1995. See Note 8 to the Partnership's financial statements included in the
1995 Form 10-K.
The General Partner's expense reimbursement represents the amount paid to LRC
in excess of LRC's 1% share of cash flow available for distribution. Total
amounts paid to LRC are primarily a function of the amount of time LRC spends
on the activities of the Partnership and the timing of certain LRC expenses.
Total amounts
- 18 -
<PAGE> 19
charged (credited) by LRC for the three and nine months ended September 30,
1996 were approximately ($42,000) and $302,000, respectively, (($42,000) and
$293,000, respectively, representing the General Partner's expense
reimbursement and zero and $9,000, respectively, representing LRC's 1% of cash
flow available for distribution) as compared to approximately $114,000 and
$518,000, respectively, ($89,000 and $418,000, respectively, representing the
General Partner's expense reimbursement and $25,000 and $100,000, respectively,
representing LRC's 1% cash flow available for distribution) for the
corresponding periods ended September 30, 1995. See Note 7 to the
Partnership's financial statements included in the 1995 Form 10-K. The
decreases are attributable to a reimbursement from LRC of approximately
$188,000 in the third quarter of 1996 for CRCA expenses and a credit against
future expenses of $74,000 accrued in the second quarter of 1996 for PCR
related expenses both of which had previously been charged as General Partner's
expense reimbursement (see Notes 6 and 7 to the financial statements included
in Item 1).
Professional fees decreased approximately $128,000 and $263,000 for the three
and nine month periods ended September 30, 1996 as compared to the
corresponding period in 1995. These decreases are primarily due to the fees
paid in 1995 in connection with the settlement with the Partnership's former
attorneys (see Note 5 to the financial statements included in Item 1) and
collections as well as consulting service decreases.
- 19 -
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Part I, Item 1, Note 8 for a discussion of legal
proceedings involving claims made by the former stockholders of CRCA.
Reference is made to Item 3 - Legal Proceedings in the Partnership's December
31, 1995 Form 10-K, for a discussion of material legal proceedings involving
the Partnership.
Reference is made to Part II, Item 1 - Legal Proceeding in the Partnership's
March 31, 1996 Form 10-Q for a discussion of legal proceedings involving claims
against restricted cash and diverted and other assets.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
The Partnership filed a Form 8-K, dated September 30, 1996 concerning
transactions with CRCA.
- 20 -
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized, on the 11th day of November 1996.
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
Registrant
By: DONALD D. TORISKY
------------------------------------------
Donald D. Torisky
Chairman and Chief Executive Officer
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XVIII, L.P.
By: DOUGLAS E. VAN SCOY
------------------------------------------
Douglas E. Van Scoy
Chief Financial Officer and Director
New Era Funding Corp.
Managing Agent of
Datronic Equipment Income Fund XVIII, L.P.
- 21 -
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
27 Financial Data Schedule, which is submitted electronically to the Securities and Exchange Commission for
information only and not filed.
</TABLE>
- 22 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND THE STATEMENTS OF REVENUE AND EXPENSES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,926,985
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,715,943
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,785,069
<TOTAL-LIABILITY-AND-EQUITY> 10,715,943
<SALES> 0
<TOTAL-REVENUES> 854,331
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 54,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (836,398)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
