<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
June 30, 1998 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 JUNE 30, 1998
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
<TABLE>
<CAPTION>
<S> <C>
June 30, 1998 (unaudited) 3
December 31, 1997 4
Statements of Revenue and Expenses (unaudited)
For the three months ended June 30, 1998 5
For the three months ended June 30, 1997 6
For the six months ended June 30, 1998 7
For the six months ended June 30, 1997 8
Statements of Changes in Partners' Equity
For the six months ended June 30, 1998
(unaudited) 9
Statements of Cash Flows (unaudited)
For the six months ended June 30, 1998 10
For the six months ended June 30, 1997 11
Notes to Financial Statements (unaudited) 12
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 16
PART II - OTHER INFORMATION
Items 1-6. 17
</TABLE>
2
<PAGE> 3
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
BALANCE SHEETS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -----------
<S> <C> <C> <C>
ASSETS
------
Cash and cash equivalents $2,171,520 $5,918,402 $ 8,089,922
Net investment in direct
financing leases - 638,257 638,257
Residual interest in CRCA - - -
Diverted and other assets, net 340,788 1,191,530 1,532,318
Datronic assets, net - - -
----------- ---------- -----------
$2,512,308 $7,748,189 $10,260,497
=========== ========== ===========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable and
accrued expenses $ 14,453 $ 60,897 $ 75,350
Lessee rental deposits 15,088 81,622 96,710
----------- ---------- -----------
Total liabilities 29,541 142,519 172,060
Total partners' equity 2,482,767 7,605,670 10,088,437
----------- ---------- -----------
$2,512,308 $7,748,189 $10,260,497
=========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
BALANCE SHEETS
December 31, 1997
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -----------
<S> <C> <C> <C>
ASSETS
------
Cash and cash equivalents $2,253,955 $5,662,905 $ 7,916,860
Net investment in direct
financing leases - 1,045,601 1,045,601
Residual interest in CRCA - - -
Diverted and other assets, net 340,788 1,191,530 1,532,318
Datronic assets, net - - -
----------- ---------- -----------
$2,594,743 $7,900,036 $10,494,779
=========== ========== ===========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable and
accrued expenses $ 15,101 $ 68,413 $ 83,514
Lessee rental deposits 18,786 94,702 113,488
----------- ---------- -----------
Total liabilities 33,887 163,115 197,002
Total partners' equity 2,560,856 7,736,921 10,297,777
----------- ---------- -----------
$2,594,743 $7,900,036 $10,494,779
=========== ========== ===========
</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 June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 3,068 $ 44,368 $ 47,436
Interest income 22,567 81,589 104,156
----------- ---------- ----------
25,635 125,957 151,592
----------- ---------- ----------
Expenses:
General Partner's expense
reimbursement 41,680 167,011 208,691
Professional fees 79,734 282,820 362,554
Other operating expenses 2,813 9,795 12,608
Credit for lease loss (3,716) (45,992) (49,708)
----------- ---------- ----------
120,511 413,634 534,145
----------- ---------- ----------
Net loss $ (94,876) $ (287,677) $ (382,553)
=========== ========== ==========
Net loss -
General Partner $ (949) $ (2,877) $ (3,826)
=========== ========== ==========
Net loss -
Limited Partners $ (93,927) $ (284,800) $ (378,727)
=========== ========== ==========
Net loss per limited
partnership unit $ (2.11) $ (1.83)
=========== ==========
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 June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ---------
<S> <C> <C> <C>
Revenue:
Lease income $ 3,057 $ 86,817 $ 89,874
Interest income 18,544 72,062 90,606
----------- ---------- ---------
21,601 158,879 180,480
----------- ---------- ---------
Expenses:
General Partner's expense
reimbursement 83,932 300,723 384,655
Professional fees 19,548 72,949 92,497
Other operating expenses 270 1,164 1,434
Credit for lease losses (69,936) (244,524) (314,460)
----------- ---------- ---------
33,814 130,312 164,126
----------- ---------- ---------
Net earnings (loss) $ (12,213) $ 28,567 $ 16,354
=========== ========== =========
Net earnings (loss) -
General Partner $ (122) $ 286 $ 164
=========== ========== =========
Net earnings (loss) -
Limited Partners $ (12,091) $ 28,281 $ 16,190
=========== ========== =========
Net earnings (loss) per limited
partnership unit $ (.27) $ .18
=========== ==========
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 six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 10,528 $ 104,996 $ 115,524
Interest income 44,258 163,137 207,395
----------- ---------- ----------
54,786 268,133 322,919
----------- ---------- ----------
Expenses:
General Partner's expense
reimbursement 89,943 356,259 446,202
Professional fees 133,373 471,874 605,247
Other operating expenses 5,960 21,307 27,267
Credit for lease losses (96,401) (450,056) (546,457)
----------- ---------- ----------
132,875 399,384 532,259
----------- ---------- ----------
Net loss $ (78,089) $ (131,251) $ (209,340)
=========== ========== ==========
Net loss -
General Partner $ (781) $ (1,312) $ (2,093)
=========== ========== ==========
Net loss -
Limited Partners $ (77,308) $ (129,939) $ (207,247)
=========== ========== ==========
Net loss per limited
partnership unit $ (1.74) $ (.84)
=========== ==========
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 six months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ---------
<S> <C> <C> <C>
Revenue:
Lease income $ 6,483 $ 192,558 $ 199,041
Interest income 32,254 133,255 165,509
----------- ---------- ---------
38,737 325,813 364,550
----------- ---------- ---------
Expenses:
General Partner's expense
reimbursement 183,364 657,833 841,197
Professional fees 35,832 133,601 169,433
Other operating expenses 4,636 17,289 21,925
Credit for lease losses (170,578) (491,410) (661,988)
----------- ---------- ---------
53,254 317,313 370,567
----------- ---------- ---------
Net earnings (loss) $ (14,517) $ 8,500 $ (6,017)
=========== ========== =========
Net earnings (loss) -
General Partner $ (145) $ 85 $ (60)
=========== ========== =========
Net earnings (loss) -
Limited Partners $ (14,372) $ 8,415 $ (5,957)
=========== ========== =========
Net earnings (loss) per limited
partnership unit $ (.32) $ .05
=========== ==========
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, 1997* $ - $ 2,560,856 $7,736,921 $10,297,777
Net loss (2,093) (77,308) (129,939) (209,340)
Allocation of General
Partner's Equity 2,093 (781) (1,312) -
--------- ----------- ---------- -----------
Balance, June 30, 1998 $ - $ 2,482,767 $7,605,670 $10,088,437
========= =========== ========== ===========
</TABLE>
* Balances are net of $57,257 and $298,788, of General Partner's equity
previously allocated to Liquidating and Continuing Limited Partners'
Equity.
See accompanying notes to financial statements.
9
<PAGE> 10
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (78,089) $(131,251) $ (209,340)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Credit for lease losses (96,401) (450,056) (546,457)
Changes in assets and
liabilities:
Accounts payable and
accrued expenses (648) (7,516) (8,164)
Lessee rental deposits (3,698) (13,080) (16,778)
----------- ---------- ----------
(178,836) (601,903) (780,739)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 96,401 857,400 953,801
----------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents (82,435) 255,497 173,062
Cash and cash equivalents:
Beginning of year 2,253,955 5,662,905 7,916,860
----------- ---------- ----------
End of second quarter $ 2,171,520 $5,918,402 $8,089,922
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (14,517) $ 8,500 $ (6,017)
Adjustments to reconcile net earnings
(loss) to net cash used in operating
activities:
Credit for lease losses (170,578) (491,410) (661,988)
Changes in assets and liabilities:
Accounts payable and accrued
expenses (41,969) (160,540) (202,509)
Lessee rental deposits (8,738) (38,825) (47,563)
Due from management company 12,674 47,002 59,676
----------- ---------- ----------
(223,128) (635,273) (858,401)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 174,760 1,687,521 1,862,281
----------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents (48,368) 1,052,248 1,003,880
Cash and cash equivalents:
Beginning of year 2,357,430 3,986,042 6,343,472
----------- ---------- ----------
End of second quarter $ 2,309,062 $5,038,290 $7,347,352
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(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. See Notes 5, 8, and 10 to the
Partnership's financial statements included in the 1997 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 that 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 1997 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 2 to the Partnership's financial statements
included in the 1997 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 - SETTLEMENT OF LITIGATION:
On May 5, 1998, Lease Resolution Corporation (LRC), on behalf of Datronic
Equipment Income Funds XVI, XVII, XVIII, XIX, XX and Datronic Finance Income
Fund I, reached an agreement to settle all claims of the aforementioned
partnerships against Weiss & Co. ("Settlement Agreement"). (See Note 8 to the
financial statements included in the Partnership's 1997 Form 10-K). The
Settlement Agreement is contingent upon subsequent approval by the United States
District Court for the Northern District of Illinois, Eastern Division (the
"District Court") dismissing Weiss & Co. as a party defendant. Pursuant to the
terms of the Settlement Agreement, Weiss & Co. has agreed to pay LRC, on behalf
of the aforementioned partnerships, $2.4 million. LRC expects to determine the
appropriate allocation of these proceeds among the Partnerships, net of
contingent attorneys fees of $600,000, during the third quarter after
considering all relevant factors associated with the Settlement. Weiss & Co.
has transferred $2.4 million to an escrow account; this amount will be
transferred to LRC no later than 30 days following the District Court entering
an order of dismissal of Weiss & Co. The District Court has scheduled a hearing
for August 19, 1998 to entertain the motion for dismissal of Weiss & Co. as a
party defendant.
On June 10, 1998, a verdict was rendered finding Price Waterhouse liable for
negligence, but not guilty of breach of contract. On July 20, LRC and Price
Waterhouse both filed post trial motions requesting relief from the Court. The
Court is not expected to rule on these motions for several months.
12
<PAGE> 13
PART I
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,
1997 through June 30, 1998. The discussion and analysis of results of
operations is for the three and six month periods ended June 30, 1998 as
compared to the corresponding periods in 1997.
Liquidity and Capital Resources
During the six months ended June 30, 1998, Partnership assets continued to be
converted to cash in order to pay Partnership operating expenses, liquidate
Partnership liabilities and increase cash balances for the ultimate liquidation
of the Partnership.
During the six months ended June 30, 1998, the Partnership's cash and cash
equivalents increased by $173,000 to $8,090,000 at June 30, 1998 from
$7,917,000 at December 31, 1997. This increase is primarily due to cash
receipts from collections on leases of $954,000 which includes a $384,000
recovery of a portion of the Partnership's residual interest in CRCA, partially
offset by cash used in operations of $781,000.
The Partnership's sources of liquidity on both a long-term and short-term basis
are expected to come principally from cash-on-hand and cash receipts from
leases owned by the Partnership. The lease portfolio is scheduled to be
substantially run out by the end of 1999, unless it is determined that it is in
the Partnership's best interest to dispose of the remaining portfolio earlier
through a bulk sale. In addition, the Partnership's sources of liquidity on a
long-term basis include proceeds from the sale of Diverted and other assets.
Management believes that its sources of liquidity in the short and long-term
are sufficient to meet its operating cash requirements, provide for ongoing
pursuit of litigation, and an orderly liquidation of the Partnership.
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 the amount to be realized from the liquidation of lease-related
assets, Diverted and other assets, Datronic assets, litigation and the
liquidation of the other Datronic Partnerships. 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
unlikely that any significant additional distributions will be made until all
remaining assets are liquidated and the pending litigation is resolved. The
amount of future distributions, if any, to the Limited Partners, in
13
<PAGE> 14
all likelihood, will be significantly less than the amount of partners' equity
reflected in the June 30, 1998 balance sheets (see Partnership's financial
statements included in Item 1).
Results of Operations
The Partnership had net loss of $383,000 for the three months ended and
$209,000 for the six months ended June 30, 1998 in the aggregate for all
classes of partners. This compares to an aggregate net income of $16,000 for
the three months ended and net loss of $6,000 for the six months ended June 30,
1997. Differences in operating results between Liquidating and Continuing
Limited Partners are attributable to lease income, acquisition costs, and
expenses associated with new lease investments made since the March 4, 1993
Settlement. Liquidating Limited Partners do not participate in these post
Settlement activities. Significant factors affecting overall operating results
for the three and six month periods ended June 30, 1998 as compared to the
same periods in 1997 include the following:
Lease income:
Since April 1995, the Partnership has been in its Liquidation Phase which
prohibits investing in any new leases. Accordingly, the lease portfolio has
continued to decrease as collections are made, resulting in a continued decline
in lease income for the three and six months ended June 30, 1998 as compared to
the corresponding periods in 1997.
Interest income:
Interest income increased for the three and six months ended June 30, 1998 as
compared to the corresponding periods in 1997 as a result of increased invested
cash balances.
General Partner's expense reimbursement:
The decrease for the three and six month periods ended June 30, 1998 is
primarily due to changes in the premium payments for D&O insurance, relocation
costs and reductions in staff and related costs. Through the first quarter
1997, D&O insurance premiums were paid on an annual basis; however, in
September 1997 a one-time premium was paid that extended coverage through the
ultimate liquidation date of the Partnership. Included in the second quarter
1997 is a one-time charge for relocating staff to reduced office space.
Professional fees:
The 1998 increase reflects fees paid in connection with the ongoing litigation
against the Partnership's former accountants. As of August 14, 1998 the
litigation process continues. This increase is partially offset by the
decreasing level of professional services required in such areas as
collections, consulting and auditing. These decreases are the result of the
decrease in the Partnership's lease portfolio and related activities.
Credit for lease losses:
The credits for 1998 and 1997 reflect recoveries of lease balances previously
reserved. 1998 and 1997 amounts also include $384,000 and $461,000,
respectively, of recoveries on the residual interest in CRCA. See Note 4 to
the Partnership's financial statements included in the 1997 Form 10-K.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 - Legal Proceedings in the Partnership's December
31, 1997 Form 10-K, for a discussion of material legal proceedings involving
the Partnership.
Reference is made to Part I, Item 1, Note 4 for a discussion of legal
proceedings involving claims against Weiss & Co. and Price Waterhouse.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
None.
15
<PAGE> 16
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 14th day of August 1998.
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
Registrant
By: /s/ 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: /s/ ROBERT P. SCHAEN
-------------------------------------------
Robert P. Schaen
Vice-Chairman and Chief Financial Officer,
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XVIII, L.P.
16
<PAGE> 17
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>
17
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,089,922
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,260,497
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,088,437
<TOTAL-LIABILITY-AND-EQUITY> 10,260,497
<SALES> 0
<TOTAL-REVENUES> 322,919
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,267
<LOSS-PROVISION> (546,457)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (209,340)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
