FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended September 30, 1997 Commission file number 33-32125
Redwood Equipment Leasing Income Fund L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-1650971
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 727-4083
N/A
(Former Name, Former Address, and Former Fiscal Year,
if Changed Since Last Report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets 1
Statements of Operations 2
Statements of Partners' Capital 3
Statements of Cash Flows 4
Notes to Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information
Item 1. through Item 6. 8
Signatures 9
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 3
1997 1996
Assets
<S> <C> <C>
Cash and cash equivalents $ 332,611 $2,772,471
Lease payment and other receivables 191,780 33,098
Deposit - 10,000
Investment in direct finance leases, net 918,076 1,631,824
Total assets $ 1,442,467 $4,447,393
Liabilities and Partners' Capital
Accounts payable and accrued expenses $ 19,177 $ 18,656
Amounts due to affiliates 12,526 12,403
Advance rentals 9,261 40,634
Total liabilities 40,964 71,693
Partners' Capital
General Partner (117,095) (85,305)
Assignor Limited Partner:
Assignment of limited partnership interests - $25 stated
value per unit, 401,180 units outstanding 1,518,121 4,460,235
Limited partnership interests - $25 stated value per
unit, 40 units outstanding 277 570
Special Limited Partners 200 200
Total partners' capital 1,401,503 4,375,700
Total liabilities and partners' capital $ 1,442,467 $4,447,393
</TABLE>
See accompanying notes to financial statements
- -1-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
Revenues
<S> <C> <C> <C> <C>
Direct finance lease revenue $ 26,617 $ 43,776 $ 97,800 $ 143,487
Interest income 4,367 35,474 33,506 96,898
Gain from sale of leased equipment - 6,575 29,556 36,091
30,984 85,825 160,862 276,476
Expenses
Administrative expenses including
amounts to related party 14,659 13,008 52,149 49,442
Management fees to advisor 2,378 4,022 13,343 10,129
Professional fees 4,125 4,000 12,545 12,450
Amortization of acquisition costs 2,981 3,417 9,386 10,497
24,143 24,447 87,423 82,518
Net earnings $ 6,841 $ 61,378 $ 73,439 $ 193,958
Net earnings per unit of assignee
limited partnership interest $ 0.02 $ 0.15 $ 0.18 $ 0.47
</TABLE>
See accompanying notes to financial statements
- -2-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Statements of Partners' Capital
For the nine months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Assignee Assignor Special
Limited Limited Limited General
Partners Partner Partners Partner Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 4,460,235 $ 570 $ 200 $ (85,305)$ 4,375,700
Net earnings 72,698 7 - 734 73,439
Distributions to partners
Operations (607,732) (60) - (8,207) (615,999)
Return of capital (2,407,080) (240) - (24,317) (2,431,637)
Balance at September 30, 1997 $ 1,518,121 $ 277 $ 200 $ (117,095)$ 1,401,503
Balance at December 31, 1995 $ 5,020,712 $ 626 $ 200 $ (73,866)$ 4,947,672
Net earnings 190,060 19 - 3,879 193,958
Distributions to partners (601,770) (60) - (12,282) (614,112)
Balance at September 30, 1996 $ 4,609,002 $ 585 $ 200 $ (82,269)$ 4,527,518
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Statements of Cash Flows
For the nine months ended September 30, (Unaudited)
<TABLE> <CAPTION>
1997 1996
Cash flow from operating activities
<S> <C> <C>
Net earnings $ 73,439 $ 193,958
Adjustments to reconcile net earnings to net
cash provided by operating activities
Amortization of acquisition costs 9,386 10,497
Gain from sale of leased equipment (29,556) (36,091)
Changes in assets and liabilities
(Increase) decrease in lease payment and other receivables (16,682) 35,565
Decrease in deposit 10,000 -
Increase in accounts payable and accrued expenses 521 2,143
Increase (decrease) in amounts due to affiliates 123 (1,018)
Decrease in advance rentals (31,373) (3,969)
Net cash provided by (used in) operating activities 15,858 201,085
Cash flows from investing activities
Principal received on direct finance leases 503,418 532,560
Termination of direct finance leases 88,500 99,137
Net cash provided by investing activities 591,918 631,697
Cash flows from financing activities-
distributions to partners (3,047,636) (614,112)
Net increase (decrease) in cash and cash equivalents (2,439,860) 218,670
Cash and cash equivalents
Beginning of period 2,772,471 2,500,697
End of period $ 332,611 $ 2,719,367
</TABLE>
See accompanying notes to financial statements
- -4-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Notes to Financial Statements
September 30, 1997
(Unaudited)
Note 1 - The Partnership and Basis of Preparation
The accompanying financial statements of Redwood Equipment Leasing
Income Fund L.P. (the "Partnership") do not include all of the information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles. The unaudited interim
financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim periods
presented. All such adjustments are of a normal recurring nature. The unaudited
interim financial information should be read in conjunction with the financial
statements contained in the 1996 Annual Report.
Note 2 - Cash and Cash Equivalents
The Partnership considers all short-term investments with original
maturities of three months or less as cash equivalents. Cash and cash
equivalents consist of cash, money market accounts and other liquid short term
investments and are stated at cost, which approximates market value, at
September 30, 1997 and December 31, 1996.
Note 3 - Related Party Transactions
The Partnership's General Partner earned an asset management fee of
$5,894 and $6,141 (3% of distributable cash distributions to investors) and
received or was due reimbursement of $5,920 and $5,118 for certain costs
incurred relating to administrative services for the Partnership for the three
months ended September 30, 1997 and 1996, respectively.
As the management agent, Signet is entitled to an equipment and lease
management fee equal to 1.5% of gross lease rental payments as well as a fee for
services provided in acquiring and disposing of leased assets. For the three
months ended September 30, 1997 and 1996, Signet earned $2,378 and $4,022,
respectively in management and disposition fees.
Note 4 - Leases
Investment in direct finance leases with initial terms ranging from 34
to 82 months at September 30, 1997 and December 31, 1996 includes the following:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
<S> <C> <C>
Lease payments receivable $ 719,885 $ 1,259,277
Estimated residual value 308,466 542,237
Acquisition fees, net 9,130 18,516
Unearned income (96,849) (165,650)
Reserve for residual value loss (22,556) (22,556)
$ 918,076 $ 1,631,824
</TABLE>
During the first quarter of 1997, the Partnership learned that one of
its lessees is in default under the terms of its lease. However, pursuant to the
Security Agreement and Assignment of Lease, all rental payments due from this
lessee have been guaranteed by the lease originator. The guarantee obligations
have been honored by the lease originator and accordingly, the Partnership has
timely received all rental payments due under the lease.
-5-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Notes to Financial Statements
September 30, 1997
(Unaudited)
Note 4 - Leases - continued
During the third quarter of 1997, two lease schedules expired. In the
first transaction, the Partnership and lessee agreed to extend the lease for an
additional 24 months with monthly payments of $2,284 payable in advance. At the
expiration of the extended term, the lessee has the option of purchasing the
equipment at a price equal to the fair market sales value, not to exceed
$12,900. In the second transaction, the lessee has agreed to purchase the
equipment for the booked residual value of $142,000. The partnership expects to
receive the proceeds by year end. No gain from the sale of leased equipment was
recorded on either transaction.
All leases in the Partnership's portfolio are classified as direct
finance leases.
Note 5 - Net Earnings per Unit of Assigned Limited Partnership Interest
Net earnings per unit of assignee limited partnership interest is
disclosed on the Statements of Operations and is based upon 401,180 units
outstanding.
Note 6 - Subsequent Event
In November 1997, the Partnership will make a cash distribution
totaling $196,481 of which 99% will be allocated to assignee limited partners.
This distribution will be derived from principal payments received on direct
finance leases and certain other investing activities. Holders of assignee
limited partnership interests will receive cash distributions of approximately
$.48 per $25 unit.
-6-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1997, the Partnership had a working capital position
that included cash and cash equivalents of $332,611 and accounts payable and
accrued expenses of $19,177. The Partnership invests its cash balances in a
money market account. The Partnership is reserving $136,130 as working capital
reserves, but has the discretion to increase or decrease reserves as deemed
necessary. The unexpended offering proceeds and working capital reserves are
sufficient to satisfy the Partnership's liquidity requirements
Cash and cash equivalents decreased $36,689 during the third quarter of
1997. This decrease represented the combined effect of $42,371 provided by
operating activities, $154,110 received in principal payments on direct finance
leases, and $233,170 distributed to partners.
The Partnership made a distribution of $233,170 on August 8, 1997 from
funds generated from principal payments on direct finance leases. This
distribution increased the total distributions from the Partnership to
$9,309,245 to Unitholders or 92.81% of gross offering proceeds
Results of Operations
Direct finance lease revenue decreased $17,159 during the third quarter
of 1997 as compared to the third quarter of 1996, and $45,687 during the first
nine months of 1997 as compared to the first nine months of 1996. This decrease
resulted from scheduled lease terminations and an expected decline in the
portion of lease payments recognized as revenue (versus return of principal) for
existing leases.
Interest income decreased $31,107 during the third quarter of 1997 as
compared to the third quarter of 1996, and $63,392 during the first nine months
of 1997 as compared to the first nine months of 1996, due primarily to lower
cash balances after the return of capital distribution made in March 1997.
Total expenses decreased by $304 during the third quarter of 1997 as
compared to the third quarter of 1996, and increased $4,905 during the first
nine months of 1997 as compared to the first nine months of 1996. The increase
is primarily attributable to state taxes and disposition fees earned by the
Advisor.
During the first quarter of 1997, the Partnership learned that one of
its lessees is in default under the terms of its lease. However, pursuant to the
Security Agreement and Assignment of Lease, all rental payments due from this
lessee have been guaranteed by the lease originator. The guarantee obligations
have been honored by the lease originator and accordingly, the Partnership has
timely received all rental payments due under the lease.
Equipment Lease Acquisitions
During the third quarter of 1997, two lease schedules expired. In the
first transaction, the Partnership and lessee agreed to extend the lease for an
additional 24 months with monthly payments of $2,284 payable in advance. At the
expiration of the extended term, the lessee has the option of purchasing the
equipment at a price equal to the fair market sales value, not to exceed
$12,900. In the second transaction, the lessee has agreed to purchase the
equipment for the booked residual value of $142,000. The partnership expects to
receive the proceeds by year end. No gain from the sale of leased equipment was
recorded on either transaction.
As noted in prior reports, the Partnership has entered the Liquidation
Phase during which the remaining funds (net of reserves) were distributed to
investors. Future quarterly distributions will be dependent on funds generated
from operations, principal payments and proceeds from lease sales. The
Partnership will distribute $196,481 in November 1997 which was derived
primarily from cash provided by operating activities and principal payments
received during the quarter ended September 30, 1997.
-7-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable
Item 2. Changes in Securities
Inapplicable
Item 3. Defaults upon Senior Securities
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable
Item 5. Other Information
Inapplicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None
b) Reports on Form 8-K: None
-8-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
REDWOOD EQUIPMENT LEASING
INCOME FUND L.P.
DATE: 11/10/97 By: /s/ John M. Prugh
John M. Prugh
President and Director
Redwood Leasing, Inc.
General Partner
DATE: 11/10/97 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Redwood Leasing, Inc.
General Partner
-9-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with legend, if applicable)
</LEGEND>
<CIK> 0000857615
<NAME> Redwood Equipment Leasing
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 332,611
<SECURITIES> 0
<RECEIVABLES> 191,780
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 524,391
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,442,467
<CURRENT-LIABILITIES> 40,964
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,442,467
<SALES> 0
<TOTAL-REVENUES> 160,862
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 87,423
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 73,439
<INCOME-TAX> 0
<INCOME-CONTINUING> 73,439
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,439
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
