<PAGE> 1
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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 (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization
1300 E. Woodfield Road, Suite 312, Schaumburg, Illinois 60173
- ------------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 240-6200
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
- ------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of class)
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 report(s)), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
<PAGE> 2
PART I
ITEM 1 - BUSINESS
Datronic Equipment Income Fund XVIII, L.P. (the "Partnership"), a Delaware
Limited Partnership, was formed on April 12, 1989. The Partnership offered Units
of Limited Partnership Interests (the "Units") during 1989 and early 1990
raising $99,999,500 of limited partner funds.
As more fully described in Part II, Item 8, Notes 1 and 5, during the second
calendar quarter of 1992, it was learned that Edmund J. Lopinski, Jr., the
president, director and majority stockholder of Datronic Rental Corp. ("DRC"),
the then general partner, in conjunction with certain other parties, may have
diverted approximately $13.3 million of assets from the Datronic Partnerships
and Transamerica Equipment Leasing Income Fund, L. P. ("TELIF") for his/their
direct or indirect benefit. During 1992, a class action lawsuit was filed and
subsequently certified on behalf of the limited partners in the Datronic
Partnerships against DRC, various officers of DRC and various other parties. On
March 4, 1993, a settlement (the "Settlement") was approved to resolve certain
portions of the suit to enable the operations of the Datronic Partnerships to
continue while permitting the ongoing pursuit of claims against alleged
wrongdoers. In connection with the Settlement, DRC was replaced by Lease
Resolution Corporation ("LRC") as General Partner of the Partnership.
The Partnership was formed to acquire a variety of low-technology,
high-technology and other equipment for lease to unaffiliated third parties
under full payout leases as well as to acquire equipment subject to existing
leases. The cash generated during the Partnership's Operating Phase from such
investments was used to pay the operating costs of the Partnership, make
distributions to the limited partners and the general partner (subject to
certain limitations) and reinvest in additional equipment for lease. During the
Partnership's Liquidating Phase, which began April 12, 1995, the cash generated
from such investments is used to pay the liquidating costs of the Partnership
and make cash distributions to the limited partners and the general partner
(subject to certain limitations). Concurrent with the commencement of the
Liquidating Phase, the Partnership ceased reinvestment in equipment and leases
and began the orderly liquidation of the Partnership's assets.
A presentation of information about industry segments, geographic regions, raw
materials or seasonality is not applicable and would not be material to an
understanding of the Partnership's business taken as a whole. Since the
Partnership ceased investing in leases effective April 12, 1995, a discussion of
sources and availability of leases, backlog and competition is not material to
an understanding of the Partnership's future activity.
2
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The Partnership has no employees. LRC, the General Partner, employed 21 persons
at December 31, 1999 all of whom attend to the operations of the Datronic
Partnerships.
ITEM 2 - PROPERTIES
The Partnership's operations are located in leased premises of approximately
15,000 square feet in Schaumburg, Illinois.
LRC occupies approximately 3,800 square feet of office space in Schaumburg,
Illinois in a real estate property that is a Recovered Asset (see Part II, Item
8, Note 5) held for the benefit of the Datronic Partnerships.
ITEM 3 - LEGAL PROCEEDINGS
Reference is made to Part II, Item 8, Note 8 for a discussion of material legal
proceedings involving the Partnership.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of limited partners during the fourth
quarter of the fiscal year covered by this report through the solicitation of
proxies or otherwise.
3
<PAGE> 4
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED
LIMITED PARTNER AND GENERAL PARTNER MATTERS
Market Information
The Units are not listed on any exchange or national market system, and there is
no established public trading market for the Units. To the best of LRC's
knowledge, no trading market exists for the Units that would jeopardize the
Partnership's status for federal income tax purposes.
As of March 13, 2000, the records of the Partnership show 6,354 record owners of
Units.
Distributions
Reference is made to Part II, Item 8, Notes 7 and 10 for a discussion of classes
of limited partners and distributions paid to limited partners and the general
partner.
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth selected financial data as of December 31, 1999,
1998, 1997, 1996, and 1995 and for the five years then ended. The amounts
presented are aggregated for all Classes (A, B, and C) of Limited Partners,
unless otherwise noted. This information should be read in conjunction with the
financial statements included in Item 8, which also reflect amounts for each of
the classes of limited partners.
4
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Statements of Revenue and
- -------------------------
Expenses Data
-------------
(in thousands, except for
Unit amounts)
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $ 267 $ 1,492 $ 678 $ 2,432 $ 2,456
Total expenses 682 1,188 666 2,768 3,609
---------- --------- --------- --------- ---------
Net earnings (loss) $ (415) 304 12 (336) $ (1,153)
========== ========= ========= ========= =========
Net earnings (loss)
per Unit
Class A $ (2.27) $ .80 $ (.51) $ (3.72) $ (8.06)
========== ========= ========= ========= =========
Class B $ (2.00) $ 1.70 $ .22 $ (1.07) $ (5.03)
========== ========= ========= ========= =========
Class C $ (2.00) $ 1.70 $ .22 $ (1.07) $ (5.03)
========== ========= ========= ========= =========
Distributions per Unit
(per year)
Class A $ 39.50 $ - $ - $ - $ 6.25
========== ========= ========= ========= =========
Class B $ 29.70 $ - $ - $ 11.30 $ 44.47
========== ========= ========= ========= =========
Class C $ 28.48 $ - $ - $ 11.30 $ 44.47
========== ========= ========= ========= =========
Weighted average number
of Units outstanding
Class A 44,468 44,468 44,468 44,468 44,468
========== ========= ========= ========= =========
Class B 155,489 155,489 155,489 155,489 155,489
========== ========= ========= ========= =========
Class C 20 20 20 20 20
========== ========= ========= ========= =========
</TABLE>
Balance Sheet Data
- ------------------
(in thousands, except for
Unit amounts)
<TABLE>
<CAPTION>
As of December 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets $ 3,871 $ 10,753 $ 10,495 $ 10,823 $ 13,079
========== ========= ========= ========= =========
Total liabilities $ 60 $ 151 $ 197 $ 537 $ 692
========== ========= ========= ========= =========
Partners' equity $ 3,811 $ 10,602 $ 10,298 $ 10,286 $ 12,387
========== ========= ========= ========= =========
Book value per Unit
Class A $ 17.91 $ 59.68 $ 58.88 $ 59.38 $ 63.10
========== ========= ========= ========= =========
Class B $ 21.68 $ 53.38 $ 51.70 $ 51.48 $ 63.86
========== ========= ========= ========= =========
Class C $ 26.45 $ 58.15 $ 57.27 $ 57.05 $ 69.43
========== ========= ========= ========= =========
</TABLE>
5
<PAGE> 6
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis presents information pertaining to the
Partnership's operating results and financial condition.
RESULTS OF OPERATIONS
The Partnership had a net loss of $415,000 in 1999 in the aggregate for all
classes of partners. This compares to aggregate net income in 1998 and 1997 of
$304,000 and $12,000 respectively. Differences in operating results between
Liquidating and Continuing Limited Partners are attributable to lease income 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 years ended December 31, 1999 include the following:
Lease income:
Since April 1995, the Partnership has been in its Liquidating 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 over the three years ended December 31, 1999. This trend will
continue as the Partnership liquidates its remaining leases.
Litigation Proceeds:
Litigation proceeds represent the Partnership's proportionate share of
recoveries received during 1998 in connection with the resolution of litigation
against its former accountants. See Note 8 to the Partnership's financial
statements included in Item 8.
Recovery of Datronic Assets:
Recovery of Datronic Assets represents the Partnership's 22.2% share of
previously reserved cash balances held by a nominee company for the benefit of
the Datronic Partnerships. During 1998, potential claims against these funds
were resolved and a total of $750,000 was distributed proportionately to each of
the Datronic Partnerships. See Note 6 to the Partnership's financial statements
included in Item 8.
Interest income:
Interest income for all three years includes earnings on invested cash balances.
Interest income for 1998 was higher than 1997 because of higher average invested
cash balances. Interest income for 1999 was less than 1998 because the $6.4
million cash distribution paid to Limited Partners in April 1999 reduced average
invested cash balances.
General Partner's expense reimbursement:
General Partner's expense reimbursement represents payments to LRC for expenses
it incurred as general partner. These expenses include expenses incurred by LRC
in its management of the day-to-day
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operations of the Partnership. See Note 10 to the Partnership's financial
statements included in Item 8.
Professional fees - litigation:
Professional fees - litigation represent fees paid in connection with the
Partnership's litigation which is described in Note 8 to the Partnership's
financial statements included in Item 8. The 1998 and 1997 amounts reflect fees
paid in connection with the litigation against the Partnership's former
accountants. Included in the 1998 amount are contingent fees paid or accrued
based on amounts recovered. The decrease in 1999 fees reflects the fact that all
major litigation was concluded during 1998 and only incidental matters remained
in 1999.
Professional fees - other:
Professional fees - other for the three years ended December 31, 1999 reflect a
decreasing level of professional services required as a result of the decrease
in the Partnership's lease portfolio and related activities.
Credit for lease losses:
These credits reflect recoveries of previously reserved balances including
recoveries on the Master Lease agreement with CRCA in 1997, 1998 and 1999 of
$815,000, $384,000 and $228,000, respectively. See Note 4 to the Partnership's
financial statements included in Item 8.
Credit for loss on Diverted and other assets:
This credit represents the Partnership's share of any changes in the estimated
net realizable value of various assets held for the benefit of the Datronic
Partnerships. The credit in 1997 reflects a recovery of amounts previously
reserved for in 1995. Because of the fluctuating nature of real estate values
and the inherent difficulty of estimating the affects of future events, the
amounts ultimately realized from these assets could differ significantly from
their recorded amounts. See Note 5 to the Partnership's financial statements
included in Item 8.
LIQUIDITY AND CAPITAL RESOURCES
During 1999, Partnership assets continued to be converted to cash in order to
pay Partnership operating expenses and to provide for the ultimate liquidation
of the Partnership. During the year, Partnership cash and cash equivalents
decreased by $6,483,000 to $3,029,000 at December 31, 1999 from $9,512,000 at
December 31, 1998. This decrease is primarily due to distributions to Limited
Partners of $6,375,000 (see below) and by cash used in operations of $710,000,
partially offset by collections on leases of $374,000 and $228,000 from the sale
of a CRCA note receivable.
The General Partner has declared an additional distribution totaling $1.18
million, payable to Limited Partners who are owners of record on March 31, 2000.
This distribution will be allocated to each Limited Partner based on their
proportionate share of total partners' capital attributable to their Class.
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<PAGE> 8
The Partnership's sources of future liquidity are expected to come from
cash-on-hand, cash receipts from leases owned by the Partnership and the
proceeds from the sale of the remaining Diverted Assets (consisting primarily of
an office building in Schaumburg, Illinois). The lease portfolio is scheduled to
be fully liquidated by May 2000. The general partner expects that the building
will be sold during 2000 and the proceeds included in a subsequent distribution
to Limited Partners.
The Partnership's interest in the Schaumburg office building is carried at
$517,000 (see Note 5 to the Partnership's financial statements included in Item
8). At March 1993, the date LRC was appointed general partner, the building was
approximately 40% occupied. Since then, occupancy has increased to more than 80%
and base rental rates have increased by 75%. Accordingly, the general partner
believes that the value of the building has increased and that this value will
be realized when the building is sold. The amount to be realized from the sale
of the building, however, cannot be determined until it is sold.
After all assets are disposed of and the proceeds distributed to the Limited
Partners, the Partnership will be required to file final reports with the
Securities and Exchange Commission and the Internal Revenue Service. The general
partner expects this to occur sometime during 2001.
IMPACT OF INFLATION AND CHANGING PRICES
Inflation is not expected to have any significant direct, determinable effect on
the Partnership's business or financial condition.
IMPACT OF YEAR 2000 ISSUE
The Year 2000 Issue relates to computer programs that use two digits rather than
four to define the year. This could cause date-sensitive software to recognize
the digits "00" as the year 1900 rather than 2000. During 1999, LRC completed
installation and implementation of new accounting and related software that is
fully capable of meeting the operating requirements of the Partnership in the
year 2000. The ongoing use of this software since December 31, 1999 has
confirmed that it is Year 2000 compliant. In addition, the Partnership's banks
have advised LRC that they are also Year 2000 compliant. The Partnership has
experienced no Year 2000 problems with the banks' computer systems.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for in this disclosure is not applicable to the
Registrant.
8
<PAGE> 9
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Audited Financial Statements: Page(s)
-------
Independent Auditors' Report 10-11
Balance Sheets
In Total for All Classes
of Limited Partners at December 31,
1999 and 1998 12
By Class of Limited Partner
December 31, 1999 13
December 31, 1998 14
Statements of Revenue and Expenses
In Total for All Classes of Limited Partners
for the years ended December 31,
1999, 1998 and 1997 15
By Class of Limited Partner for the years ended
December 31, 1999 16
December 31, 1998 17
December 31, 1997 18
Statements of Changes in Partners' Equity
for the years ended December 31,
1999, 1998 and 1997 19
Statements of Cash Flows
In Total for All Classes of Limited Partners
for the years ended December 31,
1999, 1998 and 1997 20
By Class of Limited Partner for the years ended
December 31, 1999 21
December 31, 1998 22
December 31, 1997 23
Notes to Financial Statements 24-34
9
<PAGE> 10
INDEPENDENT AUDITORS' REPORT
The Partners of Datronic
Equipment Income Fund XVIII, L.P.
We have audited the accompanying balance sheets in total for all classes of
limited partners of DATRONIC EQUIPMENT INCOME FUND XVIII, L.P. ("the
Partnership") as of December 31, 1999 and 1998 and the related statements of
revenue and expenses in total for all classes of limited partners, of changes in
partners' equity and of cash flows in total for all classes of limited partners
for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership as of December
31, 1999 and 1998, and the results of its operations in total for all classes of
limited partners and its cash flows in total for all classes of limited partners
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the Partnership's
financial statements taken as a whole. As described in Note 2, the accounting
records of the Partnership are maintained to reflect the interests of each of
the classes of limited partners. Additional information consisting of the
balance sheets by class of limited partner as of December 31, 1999 and 1998, the
statements of revenue and expenses by class of limited partner and the
statements of cash flows by class of limited partner for the three years in the
period ended December 31, 1999 have been prepared by management solely for the
information of the limited partners and are not a required part of the financial
statements. This additional information has been subjected to the auditing
10
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procedures applied in the audit of the Partnership's financial statements and,
in our opinion, has been allocated to the respective classes of limited partners
in accordance with the terms of the Amended Partnership Agreement described in
Note 10 and is fairly stated in all material respects in relation to the
Partnership's financial statements taken as a whole.
As explained more fully in Notes 1 and 5, the former President and Majority
Stockholder of Datronic Rental Corporation ("DRC"), the general partner of the
Partnership until March 4, 1993, and others are alleged to have diverted, for
their benefit, approximately $13 million from the Partnership and related
entities -- Datronic Equipment Income Fund XVI, XVII, XIX, XX, L.P., Datronic
Finance Income Fund I, L.P. and Transamerica Equipment Leasing Income Fund, L.P.
(collectively "the Partnerships" Substantially all of the assets known to have
been improperly acquired with the diverted funds have been recovered for the
benefit of the Partnerships.
Altschuler, Melvoin and Glasser LLP
Chicago, Illinois
March 14, 2000
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DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
BALANCE SHEETS
IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
December 31,
---------------------------
1999 1998
---- ----
ASSETS
- ------
Cash and cash equivalents $ 3,029,060 $ 9,511,921
Judgment receivable, net - 133,420
Net investment in direct financing
leases 49,019 314,607
Residual interest in CRCA - -
Diverted and other assets, net 792,838 792,838
Datronic assets, net - -
----------- -----------
$ 3,870,917 $10,752,786
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and accrued
expenses $ 45,178 $ 88,555
Lessee rental deposits 14,377 62,674
----------- -----------
Total liabilities 59,555 151,229
Total partners' equity 3,811,362 10,601,557
----------- -----------
$ 3,870,917 $10,752,786
=========== ===========
See accompanying notes to financial statements.
12
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DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
BALANCE SHEETS
BY CLASS OF LIMITED PARTNER
December 31, 1999
-----------------------------------------
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
ASSETS
- ------
Cash and cash equivalents $ 570,937 $2,458,123 $3,029,060
Net investment in direct financing
leases - 49,019 49,019
Residual interest in CRCA - - -
Diverted and other assets, net 176,327 616,511 792,838
Datronic assets, net - - -
---------- ---------- ----------
$ 747,264 $3,123,653 $3,870,917
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and accrued
expenses $ 8,524 $ 36,654 $ 45,178
Lessee rental deposits - 14,377 14,377
---------- ---------- ----------
Total liabilities 8,524 51,031 59,555
Total partners' equity 738,740 3,072,622 3,811,362
---------- ---------- ----------
$ 747,264 $3,123,653 $3,870,917
========== ========== ==========
See accompanying notes to financial statements.
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DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
BALANCE SHEETS
BY CLASS OF LIMITED PARTNER
December 31, 1998
--------------------------------------------
Liquidating Continuing
Limited Limited
Partners Partners Total
------------ ----------- -----------
ASSETS
- ------
Cash and cash equivalents $ 2,417,775 $ 7,094,146 $ 9,511,921
Judgment receivable, net 29,673 103,747 133,420
Net investment in direct financing
leases - 314,607 314,607
Residual interest in CRCA - - -
Diverted and other assets, net 176,327 616,511 792,838
Datronic assets, net - - -
----------- ----------- -----------
$ 2,623,775 $ 8,129,011 $10,752,786
=========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and accrued
expenses $ 17,395 $ 71,160 $ 88,555
Lessee rental deposits 9,434 53,240 62,674
----------- ----------- -----------
Total liabilities 26,829 124,400 151,229
Total partners' equity 2,596,946 8,004,611 10,601,557
----------- ----------- -----------
$ 2,623,775 $ 8,129,011 $10,752,786
=========== =========== ===========
See accompanying notes to financial statements.
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DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
For the years ended December 31,
-------------------------------------------
1999 1998 1997
---- ---- ----
Revenue:
Lease income $ 42,995 $ 155,065 $ 313,851
Litigation proceeds - 762,767 -
Recovery of Datronic assets - 166,500 -
Interest income 223,774 407,535 364,777
----------- ----------- -----------
266,769 1,491,867 678,628
----------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 827,189 836,454 1,254,994
Professional fees - litigation 55,825 763,399 442,186
Professional fees - other 93,579 113,143 124,043
Other operating expenses 41,503 60,568 54,646
Credit for lease losses (336,088) (585,477) (1,080,652)
Credit for loss on Diverted
and other assets - - (128,772)
----------- ----------- -----------
682,008 1,188,087 666,445
----------- ----------- -----------
Net earnings (loss) $ (415,239) $ 303,780 $ 12,183
=========== =========== ===========
Net earnings (loss)
- General Partner $ (4,152) $ 3,038 $ 122
=========== =========== ===========
Net earnings (loss)
- Limited Partners $ (411,087) $ 300,742 $ 12,061
=========== =========== ===========
See accompanying notes to financial statements.
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DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1999
Liquidating Continuing
Limited Limited
Partners Partners Total
--------- --------- ---------
Revenue:
Lease income $ 3,326 $ 39,669 $ 42,995
Interest income 40,274 183,500 223,774
--------- --------- ---------
43,600 223,169 266,769
--------- --------- ---------
Expenses:
General Partner's expense
reimbursement 172,177 655,012 827,189
Professional fees - litigation 12,415 43,410 55,825
Professional fees - other 17,735 75,844 93,579
Other operating expenses 9,156 32,347 41,503
Credit for lease losses (66,072) (270,016) (336,088)
--------- --------- ---------
145,411 536,597 682,008
--------- --------- ---------
Net loss $(101,811) $(313,428) $(415,239)
========= ========= =========
Net loss - General Partner $ (1,018) $ (3,134) $ (4,152)
========= ========= =========
Net loss - Limited Partners $(100,793) $(310,294) $(411,087)
========= ========= =========
Net loss per limited
partnership unit $ (2.27) $ (2.00)
========= =========
Weighted average number of limited
partnership units outstanding 44,468 155,509
========= =========
See accompanying notes to financial statements.
16
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DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1998
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Revenue:
Lease income $ 11,065 $ 144,000 $ 155,065
Litigation proceeds 169,640 593,127 762,767
Recovery of Datronic assets 37,030 129,470 166,500
Interest income 85,836 321,699 407,535
----------- ----------- -----------
303,571 1,188,296 1,491,867
----------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 166,129 670,325 836,454
Professional fees - litigation 169,780 593,619 763,399
Professional fees - other 19,974 93,169 113,143
Other operating expenses 13,341 47,227 60,568
Credit for lease losses (101,743) (483,734) (585,477)
----------- ----------- -----------
267,481 920,606 1,188,087
----------- ----------- -----------
Net earnings $ 36,090 $ 267,690 $ 303,780
=========== =========== ===========
Net earnings - General Partner $ 361 $ 2,677 $ 3,038
=========== =========== ===========
Net earnings - Limited Partners $ 35,729 $ 265,013 $ 300,742
=========== =========== ===========
Net earnings per limited
partnership unit $ 0.80 $ 1.70
=========== ===========
Weighted average number of limited
partnership units outstanding 44,468 155,509
=========== ===========
See accompanying notes to financial statements.
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DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Lease income $ 8,502 $ 305,349 $ 313,851
Interest income 75,046 289,731 364,777
----------- ----------- -----------
83,548 595,080 678,628
----------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 263,409 991,585 1,254,994
Professional fees - litigation 98,342 343,844 442,186
Professional fees - other 25,106 98,937 124,043
Other operating expenses 11,817 42,829 54,646
Credit for lease losses (263,689) (816,963) (1,080,652)
Credit for loss on Diverted
and other assets (28,639) (100,133) (128,772)
----------- ----------- -----------
106,346 560,099 666,445
----------- ----------- -----------
Net earnings (loss) $ (22,798) $ 34,981 $ 12,183
=========== =========== ===========
Net earnings (loss) - General Partner $ (228) $ 350 $ 122
=========== =========== ===========
Net earnings (loss) - Limited Partners $ (22,570) $ 34,631 $ 12,061
=========== =========== ===========
Net earnings (loss) per limited
partnership unit $ (0.51) $ 0.22
=========== ===========
Weighted average number of limited
partnership units outstanding 44,468 155,509
=========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE> 19
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the three years ended December 31, 1999
<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, 1996 $ - $ 2,583,654 $ 7,701,940 $ 10,285,594
Net earnings (loss) 122 (22,570) 34,631 12,183
Allocation of General
Partner's Equity (122) (228) 350 -
-------- ------------ ------------ ------------
Balance, December 31, 1997 - 2,560,856 7,736,921 10,297,777
Net earnings 3,038 35,729 265,013 303,780
Allocation of General
Partner's Equity (3,038) 361 2,677 -
-------- ------------ ------------ ------------
Balance, December 31, 1998 - 2,596,946 8,004,611 10,601,557
-------- ------------ ------------ ------------
Distributions to partners - (1,756,395) (4,618,561) (6,374,956)
Net loss (4,152) (100,793) (310,294) (415,239)
Allocation of General
Partner's Equity 4,152 (1,018) (3,134) -
-------- ------------ ------------ ------------
Balance, December 31, 1999 $ - $ 738,740 $ 3,072,622 $ 3,811,362
======== ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 20
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CASH FLOWS
IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (415,239) $ 303,780 $ 12,183
Adjustments to reconcile net earnings
(loss) to net cash used in operating
activities:
Credit for lease losses (336,088) (585,477) (1,080,652)
Credit for loss on Diverted
and other assets - - (128,772)
Changes in assets and liabilities:
Judgment receivable, net 133,420 (133,420) -
Accounts payable and
accrued expenses (43,377) 5,041 (208,302)
Lessee rental deposits (48,297) (50,814) (131,672)
Due from management
company - - 59,676
----------- ----------- -----------
(709,581) (460,890) (1,477,539)
----------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 374,176 1,316,471 3,050,927
Residual interest in CRCA 227,500 - -
Distribution of Diverted and other
assets - 739,480 -
----------- ----------- -----------
601,676 2,055,951 3,050,927
----------- ----------- -----------
Cash flows from financing activities:
Distributions to Limited Partners (6,374,956) - -
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (6,482,861) 1,595,061 1,573,388
Cash and cash equivalents:
Beginning of year 9,511,921 7,916,860 6,343,472
----------- ----------- -----------
End of year $ 3,029,060 $ 9,511,921 $ 7,916,860
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
20
<PAGE> 21
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CASH FLOWS
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1999
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (101,811) $ (313,428) $ (415,239)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (66,072) (270,016) (336,088)
Changes in assets and liabilities:
Judgment receivable, net 29,673 103,747 133,420
Accounts payable and
accrued expenses (8,871) (34,506) (43,377)
Lessee rental deposits (9,434) (38,863) (48,297)
----------- ----------- -----------
(156,515) (553,066) (709,581)
----------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 15,476 358,700 374,176
Residual interest in CRCA 50,596 176,904 227,500
----------- ----------- -----------
66,072 535,604 601,676
----------- ----------- -----------
Cash flows from financing activities:
Distributions to Limited Partners (1,756,395) (4,618,561) (6,374,956)
----------- ----------- -----------
Net decrease in cash and
cash equivalents (1,846,838) (4,636,023) (6,482,861)
Cash and cash equivalents:
Beginning of year 2,417,775 7,094,146 9,511,921
----------- ----------- -----------
End of year $ 570,937 $ 2,458,123 $ 3,029,060
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
21
<PAGE> 22
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CASH FLOWS
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 36,090 $ 267,690 $ 303,780
Adjustments to reconcile net earnings
to net cash used in operating
activities:
Credit for lease losses (101,743) (483,734) (585,477)
Changes in assets and liabilities:
Judgment receivable, net (29,673) (103,747) (133,420)
Accounts payable and
accrued expenses 2,294 2,747 5,041
Lessee rental deposits (9,352) (41,462) (50,814)
----------- ----------- -----------
(102,384) (358,506) (460,890)
----------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 101,743 1,214,728 1,316,471
Distribution of Diverted and other
assets 164,461 575,019 739,480
----------- ----------- -----------
266,204 1,789,747 2,055,951
----------- ----------- -----------
Net increase in cash and
cash equivalents 163,820 1,431,241 1,595,061
Cash and cash equivalents:
Beginning of year 2,253,955 5,662,905 7,916,860
----------- ----------- -----------
End of year $ 2,417,775 $ 7,094,146 $ 9,511,921
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
22
<PAGE> 23
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
STATEMENTS OF CASH FLOWS
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (22,798) $ 34,981 $ 12,183
Adjustments to reconcile net earnings
(loss) to net cash used in operating
activities:
Credit for lease losses (263,689) (816,963) (1,080,652)
Credit for loss on Diverted
and other assets (28,639) (100,133) (128,772)
Changes in assets and liabilities:
Accounts payable and
accrued expenses (42,888) (165,414) (208,302)
Lessee rental deposits (26,315) (105,357) (131,672)
Due from management
company 12,674 47,002 59,676
----------- ----------- -----------
(371,655) (1,105,884) (1,477,539)
----------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 268,180 2,782,747 3,050,927
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (103,475) 1,676,863 1,573,388
Cash and cash equivalents:
Beginning of year 2,357,430 3,986,042 6,343,472
----------- ----------- -----------
End of year $ 2,253,955 $ 5,662,905 $ 7,916,860
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
23
<PAGE> 24
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997
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. Through March 4, 1993, Datronic
Rental Corporation ("DRC") was the general partner of the Partnership and
Datronic Equipment Income Funds XVI, XVII, XIX, XX and Datronic Finance Income
Fund I, (collectively, the "Datronic Partnerships") and was co-general partner
of Transamerica Equipment Leasing Income Fund, L.P. ("TELIF").
In 1992, it was alleged that the chairman of DRC (who was also its president and
majority stockholder), in conjunction with various other parties, had
misappropriated and commingled $13.3 million of funds belonging to this and the
other Datronic Partnerships and TELIF. The Partnership's portion of these funds
was $2.4 million. In connection with a partial settlement of a class action
lawsuit arising from these allegations, Lease Resolution Corporation ("LRC")
replaced DRC as general partner of this and the other Datronic Partnerships on
March 4, 1993. LRC is a Delaware non-stock corporation formed for the sole
purpose of acting as general partner of the Datronic Partnerships.
On April 12, 1995, the Partnership began its Liquidating Phase under which it
has ceased investing in new leases and began the orderly liquidation of its
assets.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statements - The accounting records of the Partnership are
being maintained to reflect the interests of each of the classes of limited
partners (see Note 10). Each class of limited partner is not a separate legal
entity holding title to individual assets nor the obligor of individual
liabilities. Accordingly, assets allocated to a specific class of limited
partner are available to settle claims of the Partnership as a whole. Additional
information consisting of the balance sheets by class of limited partner as of
December 31, 1999 and 1998, the statements of revenue and expenses by class of
limited partner and the statements of cash flows by class of limited partner for
the three years ended December 31, 1999 have been prepared to present
allocations of the various categories of assets, liabilities, revenue, expenses
and cash flows of the Partnership to each of the classes of limited partners in
accordance with the Amended Partnership Agreement. In addition, the general
partner's equity has been allocated to each class of limited partner for
24
<PAGE> 25
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
purposes of additional information because the equity attributable to the
general partner will be allocated to the limited partners upon final dissolution
of the Partnership. For purposes of this additional information, the interests
of the Class B and Class C Limited Partners have been combined as "Continuing
Limited Partners." At December 31, 1999, the amounts per Unit relating to these
two classes are identical with the exception that the per Unit value of Class C
Limited Partners is $4.77 per Unit higher than the Class B Limited Partners
because, in accordance with the 1993 Settlement, Class Counsel fees and expenses
related to the Settlement, net of Datronic Assets, were not allocated to the
Class C Limited Partners (see Note 6).
Cash and Cash Equivalents - Cash and cash equivalents consist principally of
overnight investments in high quality, short-term corporate demand notes
(commercial paper). Due to the nature of the Partnership's commercial paper
investments, Management does not believe there is any significant market risk
associated with such investments. Amounts due (to) from the general partner
(LRC) and other Datronic Partnerships are also included.
Net Investment in Direct Financing Leases - Net investment in direct financing
leases consists of the present value of future minimum lease payments and
residuals under non-cancelable lease agreements. Residuals are valued at the
estimated fair market value of the underlying equipment at lease termination.
Leases are classified as non-performing when it is determined that the only
remaining course of collection is litigation. All balances relating to the lease
are netted together and no further income is accrued when a lease is classified
as non-performing.
Lease income includes interest earned on the present value of lease payments and
residuals (recognized over the term of the lease to yield a constant periodic
rate of return), interest collected on non-performing leases, late fees, and
other lease related items.
Allowance for Lease Losses - An allowance is recorded to reflect estimated
losses inherent in the existing portfolio of leases. Additions to the allowance
are made by means of a provision for lease losses, which is charged to expense.
Recoveries of amounts previously reserved are reflected as credits to the
provision for lease loss. The amounts shown in the accompanying Statements of
Revenue and Expenses reflect the net effect of provisions and recoveries.
Write-offs are deducted from the allowance.
25
<PAGE> 26
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
Due (to) from General Partner and Other Datronic Partnerships - In the
ordinary course of the Partnership's day-to-day operations, there are occasions
when the general partner and/or other Datronic Partnerships owe amounts to, and
are owed amounts from, the Partnership. It is the Partnership's policy not to
charge (credit) interest on these payable (receivable) balances and to include
them as cash equivalents.
Net Earnings (Loss) per Limited Partnership Unit - Net earnings (loss) per
unit is based on net earnings (loss) after giving effect to a 1% allocation to
the general partner. The remaining 99% of net earnings (loss) for each of the
Liquidating and Continuing Limited Partners is divided by the weighted-average
number of units outstanding to arrive at net earnings (loss) per limited
partnership unit for each class of limited partner.
Use of Estimates - In preparing financial statements in conformity with
generally accepted accounting principles, Management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3 - NET INVESTMENT IN DIRECT FINANCING LEASES:
The components of the net investment in direct financing leases at December 31,
1999 and 1998 are as follows:
December 31, 1999
----------------------------------------
Liquidating Continuing
Limited Limited
Partners Partners Total
--------- --------- ---------
Performing leases
Minimum lease payments
receivable $ - $ 17,461 $ 17,461
Unearned income - (116) (116)
--------- --------- ---------
Total performing leases - 17,345 17,345
Non-performing leases 73,157 650,181 723,338
--------- --------- ---------
Net investment in direct
financing leases before
allowance 73,157 667,526 740,683
Allowance for lease losses (73,157) (618,507) (691,664)
--------- --------- ---------
Net investment in direct
financing leases $ - $ 49,019 $ 49,019
========= ========= =========
Billed and outstanding balances
included in net investment
in direct financing leases $ - $ 2,382 $ 2,382
========= ========= =========
26
<PAGE> 27
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
-------------------------------------------
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Performing leases
Minimum lease payments
receivable $ 1,608 $ 319,317 $ 320,925
Unearned income - (17,386) (17,386)
----------- ----------- -----------
Total performing leases 1,608 301,931 303,539
Non-performing leases 94,904 832,246 927,150
----------- ----------- -----------
Net investment in direct
financing leases before
allowance 96,512 1,134,177 1,230,689
Allowance for lease losses (96,512) (819,570) (916,082)
----------- ----------- -----------
Net investment in direct
financing leases $ - $ 314,607 $ 314,607
=========== =========== ===========
Billed and outstanding balances
included in net investment
in direct financing leases $ 1,608 $ 4,790 $ 6,398
=========== =========== ===========
An analysis of the changes in the allowance for lease losses by Class of Limited
Partner for 1997, 1998 and 1999 follows:
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Balance at December 31, 1996 $ 1,736,837 $ 6,813,143 $ 8,549,980
Recoveries (263,689) (816,963) (1,080,652)
Write-offs (1,346,665) (4,826,197) (6,172,862)
----------- ----------- -----------
Balance at December 31, 1997 126,483 1,169,983 1,296,466
Recoveries (16,441) (185,486) (201,927)
Write-offs (13,530) (164,927) (178,457)
----------- ----------- -----------
Balance at December 31, 1998 96,512 819,570 916,082
Recoveries (15,476) (93,112) (108,588)
Write-offs (7,879) (107,951) (115,830)
----------- ----------- -----------
Balance at December 31, 1999 $ 73,157 $ 618,507 $ 691,664
=========== =========== ===========
The 1997 recoveries and write-offs relate primarily to a Master Lease Agreement
between the Partnership and CRCA. See Note 4.
27
<PAGE> 28
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
The Partnership leased equipment with lease terms generally ranging from two to
five years. All remaining minimum payments are scheduled to be received on
performing leases during 2000.
NOTE 4 - RESIDUAL INTEREST IN CRCA
Residual interest in CRCA represents the Partnership's fully reserved, 65%
interest in the remaining assets of Computer Rental Corporation of America, Inc.
("CRCA"). Fund XX holds the remaining 35% interest. At December 31, 1999, the
only remaining CRCA asset was $24,000 of cash.
LRC originally obtained all of the stock of CRCA for the benefit of the
Partnership and Fund XX in 1992 as the result of CRCA's default on a lease
agreement between it and the two Partnerships. In 1996, CRCA sold all of its
assets to Personal Computer Rental Corp. ("PCR") for $6.2 million in notes.
During 1998 PCR defaulted on its $4.2 million subordinated note and in April
1999, CRCA sold this note to PCR's senior secured creditor for $250,000.
Since 1996, a total of $2.43 million was collected against these notes,
including the $250,000 received in April 1999. Of this, $1.58 million was
distributed to the Partnership and the balance to Fund XX. The Partnership
credited these recoveries against its provision (credit) for lease losses in the
years received by the Partnership (1996 - $154,655, 1997 - $815,074, 1998 -
$383,549, and 1999 - $227,500.) The Partnership's 65% share of any residual cash
that may remain after payment of expenses will also be credited against the
provision for lease losses when paid to the Partnership.
NOTE 5 - DIVERTED AND OTHER ASSETS:
The $13.3 million of funds allegedly misappropriated from the Datronic
Partnerships and TELIF (collectively the "Partnerships") (see Note 1) were
commingled by the alleged wrongdoers with $10.3 million of funds and used to
acquire various assets. $20.7 million of such assets (collectively, "Diverted
and other assets") were subsequently recovered for the benefit of the
Partnerships and each Partnership was assigned an undivided pro rata interest in
them. These assets are held by a nominee company. The Partnership has an 18.4%
interest in these assets.
The Partnership's interest in these Diverted and other assets was recorded at
its proportionate share of their estimated net realizable value as of March
1993, the date LRC was appointed general partner. Provisions for losses were
recorded when it was determined that net realizable value of any of these assets
had declined below its March 1993 value. Gains are recognized only when
realized. Diverted and other assets recorded by the Partnership are reduced as
it receives cash distributions from the nominee company. Since 1993, LRC has
been liquidating these assets and distributing available funds to the
Partnerships. The remaining Diverted and other assets at December 31, 1999 had a
net book value of $4.3 million (Partnership's share $793,000). These assets
consisted of a seven-story office building in Schaumburg, Illinois ($2.8
million, Partnership's share $517,000) and $2.0 million of cash primarily
generated by the operations of the building (Partnership's share $368,000), less
a reserve for expenses for the liquidation of the nominee company ($500,000,
Partnership's share $92,000).
28
<PAGE> 29
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
Due to increased occupancy and rental rates since March 1993, the general
partner believes that the fair market value of the office building exceeds its
remaining net book value. The amount to be realized from the sale of the
building, however, cannot be determined until it is sold, which is expected to
occur sometime during 2000.
During March 2000, $1.5 million of cash (Partnership's share $276,000) was
distributed from the nominee company to the Partnerships for distribution to the
Limited Partners. During 1998, $4.0 million of cash (Partnership's share
$739,000) was transferred from the nominee company. The Partnership's 1997
Statement of Revenue and Expenses includes a $129,000 realized gain on the
disposal of a real estate limited partnership interest that was part of Diverted
and other assets. This gain is included in "Credit for loss on Diverted and
other assets".
NOTE 6 - DATRONIC ASSETS:
At December 31, 1999, Datronic Assets consisted of the Partnership's 22.2%
interest in fully reserved residual cash of $45,000 held by a nominee company
for the benefit of the Class A and B Limited Partners of the Datronic
Partnerships. The reserves are in anticipation of future costs or claims that
may be paid by the nominee.
Originally, Datronic Assets consisted of all of DRC's net assets which were
transferred to an LRC nominee company for the purpose of reimbursing the Class A
and B Limited Partners for legal fees paid in connection with the 1993
court-approved partial settlement of class action litigation (see Notes 1 and
2). Since then, all but $45,000 of the $1,732,000 (Partnership's share $385,000)
realized from the liquidation of the Datronic Assets has been distributed to the
Partnerships, including $750,000 (Partnership's share $166,500) during 1998. The
$166,500 realized by the Partnership during 1998
29
<PAGE> 30
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
was previously fully reserved for claims that were ultimately resolved during
1998 and is shown in the accompanying Statements of Revenue and Expenses as
"Recovery of Datronic Assets". The $166,500 and all previously realized Datronic
Assets have been allocated to the Class A and B Limited Partners.
Upon dissolution of the nominee company, any portion of the $45,000 that may
remain after payment of expenses will be distributed to the Partnerships in
proportion to each Partnership's interest in the Datronic assets.
NOTE 7 - PARTNERS' EQUITY:
Distributions per Unit to the Limited Partners for 1999 were:
Class A $ 39.50
Class B $ 29.70
Class C $ 28.48
The per unit amounts for each class include a $2.87 per unit distribution
resulting from litigation proceeds from settlements with the Partnerships'
former accounts (see Note 8).
No distributions were made in 1997 or 1998.
The Partnership began its Liquidating Phase on April 12, 1995. Pursuant to the
Amended Partnership Agreement, all distributions made before that date were paid
on a per-unit basis and all subsequent distributions, with the exception of any
litigation proceeds, were based on the positive Capital Account balances of each
limited partner within each Class (see Note 10).
At December 31, 1999, 1998 and 1997, there were 44,468 Class A Units, 155,489
Class B Units, 20 Class C Units, and one General Partner Unit outstanding.
Funds raised by each Class and cumulative distributions to limited partner by
Class from the Partnership's formation through December 31, 1999 are:
Funds Cumulative
Raised Distributions
------ -------------
Class A $22,234,000 $15,811,720
Class B 77,744,500 55,704,374
Class C 10,000 7,142
----------- -----------
Total $99,988,500 $71,523,236
=========== ===========
30
<PAGE> 31
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
NOTE 8 - LITIGATION:
CLAIMS AGAINST PROFESSIONALS
During 1992, various class action lawsuits and Partnership cross- claims were
filed against the Partnerships' former securities counsel (Siegan, Barbakoff,
Gomberg & Kane - "Siegan") alleging breach of fiduciary duty and the
Partnerships' former independent accountants (Weiss and Company and Price
Waterhouse) alleging professional negligence, breach of contract, and violations
of Section 11 of the Securities Act of 1933. As of December 31, 1996, the claims
against the Partnerships' former accountants remained open.
During 1998, the claims against the Partnerships' former accountants were
resolved. Weiss paid the Partnerships a total of $2.44 million in exchange for a
release from all Partnership claims and dismissal of the class claims against
it. After payment of $609,000 in contingent legal fees, $1.83 million of net
proceeds were distributed to the Partnerships (the Partnership's share was
$439,000).
Also during 1998, a jury verdict found Price Waterhouse negligent in the conduct
of their prior audits of the Partnerships and awarded damages of $739,300. After
payment of $185,000 of contingent legal fees, $556,000 of net proceeds were
distributed to the Partnerships in early 1999 (the Partnership's share was
$133,000).
The gross proceeds from Weiss and Price Waterhouse are included in the 1998
Statement of Revenue and Expenses as "Litigation proceeds". The contingent legal
fees are included in the Statement of Revenue and Expenses as part of
"Professional fees litigation".
OTHER CLAIMS
During 1994, a suit was filed on behalf of Datronic Partnerships XVII, XVIII,
and XIX arising from their 1990 purchase of a lease portfolio. The suit alleged
fraud and breach of contract against the original owner. During 1995, the U. S.
District court for the Northern District of Illinois dismissed the claim for
lack of jurisdiction. LRC, on behalf of the affected partnerships, re-filed the
complaint in the Circuit Court of Cook County, Illinois in the amount of $5.5
million, plus punitive damages and interest. During 1999, the Circuit Court
dismissed the complaint on the grounds that the re-filing constituted an
unallowable second re-filing of the complaint. LRC has appealed this ruling and
the appeal is pending in the Illinois Appellate Court.
31
<PAGE> 32
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
The defendant filed a counterclaim against all of the Datronic Partnerships
seeking damages in connection with a 1992 transaction. The counterclaim seeks
damages for the defendant's fees, along with certain other damages. LRC believes
the counterclaim is without merit and is vigorously defending it.
NOTE 9 - PARTNERSHIP MANAGEMENT:
LRC directly manages the day-to-day operations of the Datronic Partnerships. The
cost of these services is allocated to each partnership based on the level of
services performed for each partnership. These expenses are reimbursed to LRC
pursuant to the terms of the Amended Partnership Agreement (see Note 10) and are
included in "General Partner's expense reimbursement".
General Partner's expense reimbursement for 1997, 1998, and 1999 also includes
consulting fees paid to two of the principals of New Era Funding, the
Partnership's management company prior to July 1996. Each principal was paid
$200,000 a year through March 31, 1999, when the consulting agreements expired.
These fees were allocated to each of the Partnerships based on the relative
level of services performed for each.
NOTE 10 - PARTNERSHIP AGREEMENT:
As part of the 1993 Settlement, each limited partner elected to become a Class
A, B or C Limited Partner.
Class A Limited Partners
This class elected to begin liquidating their interest in the Partnership as of
the Settlement date. Accordingly, each Class A Limited Partner is entitled to
receive cash distributions equal to their pro rata share of the net proceeds
from the disposition of assets owned by the Partnership on the Settlement Date,
plus their pro rata interest in the net proceeds from the disposition of
Datronic Assets, Diverted and other assets, and temporary investments. In
addition, Class A Limited Partners participated in the Class Action.
Class B Limited Partners
This class elected not to begin liquidation of their interest in the Partnership
as of the Settlement Date. Until the Liquidating Phase of the Partnership began
on April 12, 1995, each Class B Limited Partner received cash distributions
equal to 11% annually of their
32
<PAGE> 33
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
Adjusted Capital Contributions (as that term is defined in the Amended
Partnership Agreement). Available cash in excess of that required to pay these
distributions was invested in equipment and equipment leases ("New Investments")
and temporary investments on behalf of the Class B Limited Partners. In
addition, Class B Limited Partners participated in the Class Action.
Class C Limited Partners
This class elected not to participate in the Class Action. Therefore, each Class
C Limited Partner: (i) preserved their individual claims against DRC and the
other defendants, (ii) did not participate in the Class Action, and (iii) did
not participate in the Settlement. In all other respects, including
distributions from the Partnership, Class C Limited Partners are the same as
Class B Limited Partners.
Concurrent with the beginning of the Liquidating Phase on April 12, 1995, the
Partnership ceased making New Investments and the General Partner (LRC) began
the orderly liquidation of Partnership assets. Pursuant to this, cash reserves
are to be maintained sufficient to satisfy all liabilities of the Partnership
and provide for future contingencies. Cash available for distribution after
satisfying such requirements ("Cash Flow Available for Distribution") will be
distributed to the General and Limited Partners as described below.
During the Liquidating Phase, net Partnership proceeds from all sources, less
cash reserves needed to satisfy Partnership liabilities and provide for future
contingencies will be apportioned among the Class A, B and C Limited Partners,
each class as a group, in accordance with each class' interest in each type of
asset. Then, Liquidating Distributions will be made to the Limited Partners
within each class in accordance with the positive Capital Account balance of
each Limited Partner until all Limited Partners' Capital Account balances are
zero, and thereafter, pro rata based on the number of units outstanding.
The Amended Partnership Agreement provides for the General Partner (LRC) to
receive quarterly distributions equal to 1% of the Cash Flow Available for
Distribution. In addition, LRC receives reimbursement for expenses incurred in
excess of those covered by the 1% distribution. These expense reimbursements are
paid one quarter in advance and are adjusted based on LRC's actual expenses. LRC
allocates its expenses to each of the Datronic Partnerships based on its
activities performed for each Partnership. LRC is entitled to no other fees or
reimbursements from the Partnership.
33
<PAGE> 34
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
The following summarizes the total of all payments to LRC during the three years
ended December 31, 1999:
Year ended December 31,
--------------------------------------
1999 1998 1997
---- ---- ----
1% Distribution $ - $ - $ 21,233
Expense Reimbursement in excess
of the 1% Distribution 4,057,634 4,079,994 5,369,846
---------- ---------- ----------
Total $4,057,634 $4,079,994 $5,391,079
========== ========== ==========
The Partnership's share of these payments were:
Year ended December 31,
--------------------------------------
1999 1998 1997
---- ---- ----
1% Distribution $ - $ - $ -
Expense Reimbursement in excess
of the 1% Distribution 827,189 836,454 1,254,994
---------- ---------- ----------
Total $ 827,189 $ 836,454 $1,254,994
========== ========== ==========
NOTE 11 - CONCENTRATION OF CREDIT RISK:
At December 31, 1999, there are no significant concentrations of business
activity in any industry or with any one lessee. The Partnership maintains a
security interest in all equipment until the lessee's obligations are fulfilled.
34
<PAGE> 35
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONCLUDED
NOTE 12 - INCOME TAXES:
The Partnership is not subject to Federal income taxes and, accordingly, no
provision or credit for such taxes is reflected in the accompanying financial
statements. Instead, the tax effects of the Partnership's activities are
includable in the individual tax returns of its partners. The following table
reconciles the Partnership's net operating results determined in accordance with
generally accepted accounting principles with those reported for Federal income
tax purposes in total for all Partners and by Class of Partner for the year
ended December 31, 1999.
Liquidating Continuing
General Limited Limited
Partner Partners Partners Total
--------- --------- --------- ---------
Net loss per
accompanying statements $ (4,152) $(100,793) $(310,294) $(415,239)
Effect of principal
repayments treated as
income for tax purposes (378) (8,612) (28,858) (37,848)
Provision for recovery of
Diverted and other assets 1,467 32,299 112,952 146,718
Other, net (119) (2,401) (9,291) (11,811)
--------- --------- --------- ---------
Loss for Federal income
tax purposes in total $ (3,182) $ (79,507) $(235,491) $(318,180)
========= ========= ========= =========
35
<PAGE> 36
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants or disagreements with accountants on
accounting and financial disclosure.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no employees or directors. LRC was formed in December 1992
in contemplation of the Settlement for the sole purpose of acting as the general
partner for each of the Datronic Partnerships. LRC became general partner in
1993. LRC has a nominal net worth.
LRC, as a non-stock, not-for-profit corporation, does not have stockholders. The
executive officers of LRC are also the members of the Board of Directors of LRC.
None of the executive officers of LRC were previously affiliated with Datronic.
While LRC's duration is perpetual, it is anticipated that it will liquidate and
dissolve following the liquidation and dissolution of the last remaining
Datronic Partnership.
LRC's Board of Directors and executive officers, together with certain pertinent
information regarding their background, are set forth below:
Director
Name Position and Office Since
- ----------------- -------------------------- -----
Donald D. Torisky Chairman of the Board and
Chief Executive Officer 12/92
Robert P. Schaen Vice-Chairman of the Board and
Chief Financial Officer 12/92
Arthur M. Mintz Vice-Chairman of the Board and
General Counsel 12/92
Donald D. Torisky, age 61, has been associated with LRC since its inception in
1992. Mr. Torisky is also President of Barrington Management and Consulting,
Inc. where, prior to March 1993, he coordinated management consulting
opportunities for national and international Fortune 500 finance companies. From
1987 to 1990, Mr. Torisky worked with the TransAmerica Corporation as an
Executive Vice-President and board member of the TransAmerica Finance Group. Mr.
Torisky also served as the President and Chief Executive Officer of TransAmerica
Commercial Finance Corporation. With TransAmerica, Mr. Torisky managed and
directed a diversified financial services portfolio of $4.6 billion with
branches in the United States, Canada,
36
<PAGE> 37
the United Kingdom and Australia. From 1962 to 1987, Mr. Torisky was with the
Borg-Warner Corporation. In 1983 he became President and Chief Executive Officer
of Borg-Warner Financial Services and an officer of Borg-Warner Corp. Mr.
Torisky has completed the Advanced Management Program at the Harvard Graduate
School of Business Administration. Mr. Torisky served honorably in the United
States Marine Corps, and holds a license in life, accident, and health insurance
and a Series 6 NASD license.
Robert P. Schaen, age 73, has been associated with LRC since its inception in
1992. Prior to his association with LRC, Mr. Schaen retired from Ameritech in
1991 after 39 years of service with the Bell System and Ameritech. At his
retirement he was the Vice-President and Comptroller of Ameritech. He started
his Bell System career with New York Telephone Company in 1952, was promoted and
transferred to AT&T in 1962, and thereafter, promoted and transferred to
Illinois Bell Telephone Company in 1965 where he managed personnel, accounting,
data systems and general operations prior to being elected Comptroller and
Assistant Secretary. In 1983, Mr. Schaen was named Vice-President and
Comptroller of Ameritech. Mr. Schaen served as a naval officer in the Pacific
Theater during World War II and retired from the Naval Reserve Intelligence
Service in 1968 with the rank of Commander. He graduated from Hobart College in
Geneva, New York in 1948 and after graduation remained there as a mathematics
and statistics instructor. In 1967 Mr. Schaen completed the Advanced Management
Program at the Harvard Graduate School of Business Administration.
Arthur M. Mintz, age 63, has been associated with LRC since its inception in
1992. Mr. Mintz is also Chairman of the Board of Olicon Imaging Systems, Inc.,
which was founded in 1991. Olicon Imaging Systems, Inc. is a teleradiology
company serving approximately 800 hospitals nationwide. Since 1987, he has also
served as President of AMRR Leasing Corporation and Vice President and General
Counsel of Mobile M.R. Venture, Ltd. In 1983, Mr. Mintz was a founder of
Diasonics, Incorporated and served as its Corporate Counsel. Diasonics was
listed on the New York Stock Exchange prior to its acquisition by Elsinth in
1995. In 1957, Mr. Mintz obtained a Bachelor of Arts Degree from Northwestern
University and in 1959, obtained his J.D. from Northwestern University School of
Law. Thereafter, Mr. Mintz served in the United States Army and was honorably
discharged. From 1965 to 1982, Mr. Mintz was a principal with the law firms of
Mintz, Raskin, Rosenberg, Lewis & Cohen (1965-1975), Mintz, Raskin and Lewis
(1975-1979), and Arthur M. Mintz, Ltd., P.C. (1979-1982).
Any change in the compensation of a director of LRC must be approved by the
other two non-interested members of the Board of Directors.
37
<PAGE> 38
ITEM 11 - MANAGEMENT REMUNERATION
The Partnership has no officers or directors and instead is managed by the
general partner, LRC.
The Partnership Agreement, as amended, provides for LRC to receive reimbursement
for its operating expenses incurred in relation to its functions as General
Partner of the Datronic Partnerships. These reimbursements are detailed in Note
10 to the Partnership's financial statements included in Item 8.
Compensation paid to the Chief Executive Officer of LRC during 1999 was as
follows:
Chairman of the
Board and Chief All Other
Executive Officer Salary Compensation(b)
----------------- ------ ------------
Donald D. Torisky $515,441 $3,200(a)
(a) Represents the value of LRC's contribution to LRC's Savings and Retirement
Plan allocable to Mr. Torisky for services rendered during 1999.
(b) Information concerning Bonus, Other Annual Compensation, Restricted Stock
Award, Option/SARs and LTIP Payouts is not applicable.
This compensation was included in LRC's operating expenses reimbursed by all
Datronic Partnerships. The Partnership's share of such expense reimbursements,
including the 1% of Cash Flow Available for Distribution, was 20.39%.
The compensation of the other four highly compensated LRC executives, when
allocated to the Partnership, individually do not exceed $100,000.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
None.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has no officers or directors and instead is managed by the
general partner, LRC.
The Partnership Agreement, as amended, provides for LRC to receive reimbursement
for its operating expenses incurred in relation to its functions as General
Partner of the Datronic Partnerships. These reimbursements are detailed in Note
10 to the Partnership's financial statements included in Item 8.
38
<PAGE> 39
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
See index to Financial Statements included in Item 8 of this report.
(2) Financial Statement Schedules
None.
(3) Exhibits
The Exhibits listed in the Exhibit Index immediately following the
signature page are filed as a part of this report.
(b) Reports on Form 8-K
None
39
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 28th day of March
2000.
DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
March 28, 2000 By: Lease Resolution Corporation,
General Partner
By: /s/ Donald D. Torisky
-----------------------------
Donald D. Torisky
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated and on the dates indicated.
By: /s/ Donald D. Torisky March 28, 2000
------------------------------
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 March 28, 2000
------------------------------
Robert P. Schaen
Vice-Chairman and
Chief Financial Officer,
Lease Resolution Corporation,
General Partner of Datronic
Equipment Income Fund XVIII, L.P.
By: /s/ Arthur M. Mintz March 28, 2000
------------------------------
Arthur M. Mintz
Vice-Chairman and General Counsel,
Lease Resolution Corporation,
General Partner of Datronic
Equipment Income Fund XVIII, L.P.
40
<PAGE> 41
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
41
<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-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,029,060
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,870,917
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,811,362
<TOTAL-LIABILITY-AND-EQUITY> 3,870,917
<SALES> 0
<TOTAL-REVENUES> 266,769
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 41,503
<LOSS-PROVISION> (336,088)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (415,239)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
