<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13
or 15 (d) of the Securities
Exchange Act of 1934
-----------------------------------
For the Quarter Ended
September 30, 1996 Commission File Number 0-21260
- --------------------- -------------------------------
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 36-3763539
- -------------------- ---------------------------
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 XX, L.P.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
September 30, 1996 (unaudited)
December 31, 1995
Statements of Revenue and Expenses (unaudited)
For the three months ended September 30, 1996
For the three months ended September 30, 1995
For the nine months ended September 30, 1996
For the nine months ended September 30, 1995
Statements of Changes in Partners' Equity
For the nine months ended September 30, 1996
(unaudited)
Statements of Cash Flows (unaudited)
For the nine months ended September 30, 1996
For the nine months ended September 30, 1995
Notes to Financial Statements
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Items 1-6.
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
BALANCE SHEETS
September 30, 1996 - Unaudited
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents $105,419 $1,299,910 $1,405,329
Installment contract receivable,
net 44,908 619,415 664,323
Net investment in direct
financing leases 54,456 3,068,522 3,122,978
Diverted and other assets, net 15,325 211,382 226,707
Organization costs, net of
accumulated amortization 8,502 117,268 125,770
Acquisition costs, net of
accumulated amortization 8,540 117,792 126,332
-------- ---------- ----------
$237,150 $5,434,289 $5,671,439
======== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and
accrued expenses $ 605 $ 36,962 $ 37,567
Lessee rental deposits 3,734 53,932 57,666
Due to management company 91 1,259 1,350
-------- ---------- ----------
Total liabilities 4,430 92,153 96,583
Total partners' equity 232,720 5,342,136 5,574,856
-------- ---------- ----------
$237,150 $5,434,289 $5,671,439
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
- 3 -
<PAGE> 4
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
BALANCE SHEETS
December 31, 1995
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents $253,297 $2,470,149 $2,723,446
Installment contract receivable,
net 70,792 976,434 1,047,226
Net investment in direct
financing leases 122,399 4,547,783 4,670,182
Diverted and other assets, net 15,325 211,382 226,707
Organization costs, net of
accumulated amortization 18,066 249,193 267,259
Acquisition costs, net of
accumulated amortization 18,148 250,308 268,456
-------- ---------- ----------
$498,027 $8,705,249 $9,203,276
======== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and
accrued expenses $ 2,975 $ 75,779 $ 78,754
Lessee rental deposits 5,675 80,762 86,437
Due to management company 8 25,908 25,916
-------- ---------- ----------
Total liabilities 8,658 182,449 191,107
Total partners' equity 489,369 8,522,800 9,012,169
-------- ---------- ----------
$498,027 $8,705,249 $9,203,276
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
- 4 -
<PAGE> 5
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Revenue:
Lease income $ 7,048 $ 185,604 $ 192,652
Interest income 3,240 59,774 63,014
-------- --------- ---------
10,288 245,378 255,666
-------- --------- ---------
Expenses:
Amortization of organization
and equipment acquisition costs 6,391 88,146 94,537
Management fees-New Era 12,323 207,533 219,856
General Partner's expense
reimbursement credit (Note 7) (5,224) (72,065) (77,289)
Professional fees 2,784 39,890 42,674
Other operating expenses 765 10,651 11,416
Credit for lease losses (25,000) - (25,000)
-------- --------- ---------
(7,961) 274,155 266,194
-------- --------- ---------
Net earnings (loss) $ 18,249 $ (28,777) $ (10,528)
======== ========= =========
Net earnings (loss) -
General Partner $ 182 $ (287) $ (105)
======== ========= =========
Net earnings (loss) -
Limited Partners $ 18,067 $ (28,490) $ (10,423)
======== ========= =========
Net earnings (loss) per
Limited Partnership Unit $3.54 $(0.40)
===== ======
Weighted average number
of Limited Partnership Units
outstanding 5,100 70,396
===== ======
</TABLE>
See accompanying notes to financial statements.
- 5 -
<PAGE> 6
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Revenue:
Lease income $ 22,955 $452,346 $475,301
Settlement proceeds (Note 5) 10,870 149,932 160,802
Interest income 4,772 66,213 70,985
-------- -------- --------
38,597 668,491 707,088
-------- -------- --------
Expenses:
Amortization of organization
and equipment acquisition costs 6,392 88,146 94,538
Management fees-New Era 14,472 257,801 272,273
General Partner's
expense reimbursement 3,165 43,647 46,812
Professional fees (Note 5) 7,627 105,479 113,106
Other operating expenses 627 10,276 10,903
-------- -------- --------
32,283 505,349 537,632
-------- -------- --------
Net earnings $ 6,314 $163,142 $169,456
======== ======== ========
Net earnings -
General Partner $ 63 $ 1,632 $ 1,695
======== ======== ========
Net earnings -
Limited Partners $ 6,251 $161,510 $167,761
======== ======== ========
Net earnings per Limited
Partnership Unit $1.23 $ 2.29
===== ======
Weighted average number
of Limited Partnership Units
outstanding 5,100 70,396
===== ======
</TABLE>
See accompanying notes to financial statements.
- 6 -
<PAGE> 7
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the nine months ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Revenue:
Lease income (Note 6) $ 36,846 $ 798,269 $ 835,115
Interest income 11,511 183,548 195,059
-------- ---------- ----------
48,357 981,817 1,030,174
-------- --------- ----------
Expenses:
Amortization of organization
and equipment acquisition costs 19,172 264,441 283,613
Management fees-New Era 37,997 817,560 855,557
General Partner's
expense reimbursement
(Notes 6 and 7) 1,569 21,637 23,206
Professional fees 10,649 149,847 160,496
Other operating expenses 1,632 30,610 32,242
Credit for lease losses (25,000) - (25,000)
-------- ---------- ----------
46,019 1,284,095 1,330,114
-------- ---------- ----------
Net earnings (loss) $ 2,338 $ (302,278) $ (299,940)
======== ========== ==========
Net earnings (loss) -
General Partner $ 23 $ (3,023) $ (3,000)
======== ========== ==========
Net earnings (loss) -
Limited Partners $ 2,315 $ (299,255) $ (296,940)
======== ========== ==========
Net earnings (loss) per
Limited Partnership Unit $ .45 $(4.25)
====== ======
Weighted average number
of Limited Partnership Units
outstanding 5,100 70,396
===== ======
</TABLE>
See accompanying notes to financial statements.
- 7 -
<PAGE> 8
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the nine months ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Revenue:
Lease income $ 51,982 $1,114,135 $1,166,117
Settlement proceeds (Note 5) 10,870 149,932 160,802
Interest income 15,977 220,858 236,835
-------- ---------- ----------
78,829 1,484,925 1,563,754
-------- ---------- ----------
Expenses:
Amortization of organization
and equipment acquisition costs 19,173 264,441 283,614
Management fees-New Era 45,265 877,144 922,409
General Partner's
expense reimbursement 13,822 190,644 204,466
Professional fees (Note 5) 19,326 266,929 286,255
Other operating expenses 1,296 24,431 25,727
Credit for losses on installment
contract receivable (6,084) (83,916) (90,000)
-------- ---------- ----------
92,798 1,539,673 1,632,471
-------- ---------- ----------
Net Loss $(13,969) $ (54,748) $ (68,717)
======== ========== ==========
Net loss -
General Partner $ (140) $ (547) $ (687)
======== ========== ==========
Net loss -
Limited Partners $(13,829) $ (54,201) $ (68,030)
======== ========== ==========
Net loss per Limited
Partnership Unit $(2.71) $(0.77)
====== ======
Weighted average number
of Limited Partnership Units
outstanding 5,100 70,396
====== ======
</TABLE>
See accompanying notes to financial statements.
- 8 -
<PAGE> 9
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
General Limited Limited Total
Partner's Partners' Partners' Partners'
Equity Equity Equity Equity
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $(278,256)* $ 504,666 $ 8,785,759 $ 9,012,169
Distributions to partners (Note 3) (62,378) (258,009) (2,816,986) (3,137,373)
Net earnings (loss) (3,000) 2,315 (299,255) (299,940)
Allocation of General
Partner's equity 343,634 (16,252) (327,382) -
--------- ---------- ----------- -----------
Balance, September 30, 1996 $ - $ 232,720 $ 5,342,136 $ 5,574,856
========= ========= =========== ===========
</TABLE>
* Balance as previously reported was $0 due to allocation of $15,297 and
$262,959 to Liquidating and Continuing Limited Partners' Equity,
respectively.
See accompanying notes to financial statements.
- 9 -
<PAGE> 10
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 2,338 $ (302,278) $ (299,940)
Adjustments to reconcile net
earnings (loss) to net cash
used in operating activities:
Amortization expense 19,172 264,441 283,613
Credit for lease losses (25,000) - (25,000)
Changes in assets and liabilities:
Accounts payable and accrued
expenses (2,370) (38,817) (41,187)
Lessee rental deposits (1,941) (26,830) (28,771)
Due to management company 83 (24,649) (24,566)
--------- ----------- -----------
(7,718) (128,133) (135,851)
--------- ----------- -----------
Cash flows from investing activities:
Purchases of lease receivables - (1,375,398) (1,375,398)
Principal collections on leases 90,538 2,274,409 2,364,947
Sale of leases (Note 4) 2,405 580,250 582,655
Principal collections on
installment contract receivable 25,884 357,019 382,903
--------- ----------- -----------
118,827 1,836,280 1,955,107
--------- ----------- -----------
Cash flows from financing activities:
Distributions to Limited Partners (a) (258,009) (2,816,986) (3,074,995)
Distributions to General Partner (978) (61,400) (62,378)
--------- ----------- -----------
(258,987) (2,878,386) (3,137,373)
--------- ----------- -----------
Net decrease in cash and
cash equivalents (147,878) (1,170,239) (1,318,117)
Cash and cash equivalents:
Beginning of year 253,297 2,470,149 2,723,446
--------- ------------ -----------
End of third quarter $ 105,419 $ 1,299,910 $ 1,405,329
========= =========== ===========
</TABLE>
(a) Distributions during the period were $50.59 per unit for Liquidating
Limited Partners and $40.02 per unit for Continuing Limited Partners
(see Note 3).
See accompanying notes to financial statements.
- 10 --
<PAGE> 11
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1995
(Unaudited)
- -
<TABLE>
<CAPTION>
Liquidating C-ontinuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Cash flows from operating activities:-
Net loss $ (13,969) $ (54,748) $ (68,717)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Amortization expense 19,173 264,441 283,614
Credit for losses on installment
contracts receivable (6,084) (83,916) (90,000)
Changes in assets and liabilities:
Accounts payable and accrued
expenses (1,803) (28,485) (30,288)
Lessee rental deposits 535 9,739 10,274
Due to Management Company 82 1,915 1,997
---------- ------------ ------------
(2,066) 108,946 106,880
---------- ------------ ------------
Cash flows from investing activities:
Purchases of lease receivables - (2,673,737) (2,673,737)
Principal collections on leases 165,765 3,077,454 3,243,219
Sale of leases (Note 4) 96,637 3,915,537 4,012,174
Distribution of diverted and other assets 5,622 77,541 83,163
Distribution of Datronic assets 2,710 37,377 40,087
Principal collections on
installment contracts receivable 29,550 407,590 437,140
Repayments of commercial lease paper 2,730 37,653 40,383
---------- ------------ ------------
303,014 4,879,415 5,182,429
---------- ------------ ------------
Cash flows from financing activities:
Distributions to Limited Partners (a) (216,995) (3,170,399) (3,387,394)
Distributions to General Partner (3,108) (59,819) (62,927)
---------- ------------ ------------
(220,103) (3,230,218) (3,450,321)
----------- ------------ ------------
Net increase in cash and
cash equivalents 80,845 1,758,143 1,838,988
Cash and cash equivalents:
Beginning of year 222,562 2,063,899 2,286,461
---------- ------------ ------------
End of third quarter $ 303,407 $ 3,822,042 $ 4,125,449
========== ============ ============
</TABLE>
(a) Distributions during the period were $42.55 per unit for Liquidating
Limited Partners and $45.04 per unit for Continuing Limited Partners.
See accompanying notes to financial statements.
- 11 -
<PAGE> 12
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE 1 - ORGANIZATION:
Datronic Equipment Income Fund XX, L.P., a Delaware Limited Partnership (the
"Partnership"), was formed on April 30, 1991 for the purpose of acquiring and
leasing both high- and low-technology equipment. The offering of limited
partnership units terminated on May 1, 1992. Reference is made to Notes 4, 5,
6 and 7 to the Partnership's financial statements included in the 1995 Form
10-K for a discussion of the alleged diversion of Partnership assets in 1991
and 1992 and the subsequent litigation and settlement, change in general
partner, new classes of limited partners established and amendments to the
Partnership Agreement which occurred.
NOTE 2 - BASIS OF FINANCIAL STATEMENTS:
The accompanying financial statements should be read in conjunction with the
Partnership's financial statements included in the 1995 Form 10-K. The
financial information furnished herein is unaudited but in the opinion of
Management includes all adjustments necessary (all of which are normal
recurring adjustments) for a fair presentation of financial condition and
results of operations. See Note 3 to the Partnership's financial statements
included in the 1995 Form 10-K.
NOTE 3 - LIMITED PARTNERSHIP DISTRIBUTIONS:
Distributions to Liquidating Limited Partners were suspended after payment of
the July 1, 1996 distribution and distributions to Continuing Limited Partners
were reduced from 12% annually to an annual rate of 6% effective after the July
1, 1996 distribution.
NOTE 4 - LEASE PORTFOLIO SALES:
During the nine months ended September 30, 1996, the Partnership and Fund XIX
each entered into separate lease purchase agreements with Linc Anthem
Corporation to sell equipment leases at a discount rate of 11.75% which
resulted in aggregate net proceeds of approximately $1.5 million. The
Partnership's proceeds were approximately $583,000. Of this amount,
approximately $580,000 was allocable to Continuing Limited Partners of which,
approximately $410,000 has been invested in new leases.
- 12 -
<PAGE> 13
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
NOTES TO FINANCIAL STATEMENTS
During the nine months ended September 30, 1995, the Partnership, Fund XVIII,
Fund XIX, and Finance Income Fund I each entered into separate lease purchase
agreements with Southern Pacific Thrift & Loan Association to sell equipment
leases at discount rates ranging from 10.75% to 12.25% which resulted in
aggregate net proceeds of approximately $16.7 million. The Partnership's
proceeds were approximately $4 million. Of this amount, approximately $3.9
million was allocable to Continuing Limited Partners and invested in new
leases.
NOTE 5 - SETTLEMENT WITH FORMER ATTORNEYS:
On August 10, 1995, the United States District Court of the Northern District
of Illinois, Eastern Division, approved as fair, reasonable and adequate, a
settlement with all the Datronic Partnership's and the Partnerships' former
attorneys, Siegan, Barbakoff, Gomberg & Kane in the aggregate amount of
$1,775,000 ($160,802 for the Partnership) or $2.13 per unit (see Note 5 to the
Partnership's financial statements included in the 1995 Form 10-K). A total of
$683,147 of expenses, ($61,888 for the Partnership), consisting primarily of
professional fees, were incurred in connection with this recovery resulting in
a net recovery of $1,091,853 or $1.31 per unit. However, since the
Partnerships had previously paid $239,397 ($21,688 for the Partnership) of
these expenses, a total of $1,331,250 or $1.60 per unit was available for
distribution. Accordingly, on October 1, 1995, the Partnership distributed
$1.60 per unit to Liquidating Limited Partners and to Continuing Limited
Partners. All settlement proceeds and all related expenses were allocated to
all unit holders of the Datronic Partnerships based on the number of limited
partnership units owned.
NOTE 6 - PCR TRANSACTIONS:
During the second quarter of 1996 the Partnership received $352,225 of cash in
full and complete satisfaction of a certain master sublease agreement with PCR
further described in Note 11 to the Partnership's financial statements included
in the 1995 Form 10-K. Included in lease income is $288,530 related to the
payoff of the PCR sublease comprised of previously unrecognized lease income of
$261,137 and the recognition of previously unearned lease income of $27,393.
The Partnership also received during the second quarter of 1996, $83,507 of
cash representing the Partnership's share of remittances
- 13 -
<PAGE> 14
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
NOTES TO FINANCIAL STATEMENTS
received by LRC in full and complete satisfaction of certain note obligations
issued by PCR in connection with the sale of PCR stock as further described in
Note 12 to the Partnership's financial statements included in the 1995 Form
10-K. A gain on the sale of PCR stock of $19,018 has been included in lease
income.
Further, during the second quarter of 1996 the Partnership received a credit
from LRC of $69,492 representing the Partnership's share of remittances
received by LRC from PCR in full and complete satisfaction of a management and
consulting contract entered into in connection with the sale of PCR stock as
further described in Note 12 to the Partnership's financial statements included
in the 1995 Form 10-K. The credit represents a reduction of LRC expenses
otherwise payable by the Partnership and has been recorded as an offset against
the General Partner's expense reimbursement.
NOTE 7 - CRCA TRANSACTIONS:
As previously disclosed, Computer Rental Corp. of America (CRCA) sold
substantially all of its assets for $700,000 to New CRCA, a newly-formed
company owned by an executive of LRC, (see Note 14 to the Partnership's
financial statements included in the 1995 Form 10-K). Subsequently in 1996,
New CRCA received an offer from PCR to purchase substantially the same assets
sold to New CRCA in the aforementioned transaction for an amount substantially
in excess of the purchase price paid by New CRCA. In order to ensure that the
Partnership and Fund XVIII received maximum benefit from the sale of CRCA, CRCA
repurchased the assets sold to New CRCA for $659,659, the original purchase
price plus tax liabilities accrued by New CRCA less payments made on the
original promissory note. The repurchase price was paid in the form of cash
($116,000) and the cancellation of the unpaid promissory note given by New CRCA
($543,659).
On September 13, 1996, CRCA sold all of the assets repurchased from New CRCA
(excluding cash) to a subsidiary of PCR (PCR Sub) for approximately $6.2
million. The purchase price was paid in the form of a senior note of
$1,500,000, a subordinated note of approximately $4,200,000, and the assumption
of approximately $500,000 of liabilities. Both notes bear interest at 9%.
Principal and interest are payable monthly in the aggregate amount of
approximately $118,000 commencing November 1, 1996. All principal payments are
to be applied to the senior note. The unpaid principal balances aggregating
$4.8 million are due November 1, 1997. The senior note is secured by a
priority security
- 14 -
<PAGE> 15
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
NOTES TO FINANCIAL STATEMENTS
interest in the assets of PCR Sub. The subordinated note is secured by a
security interest in the assets of PCR Sub which is subordinate to a $14
million security interest of another PCR creditor.
CRCA will utilize existing cash balances of approximately $750,000 and amounts
received on the notes to liquidate all liabilities not assumed by PCR Sub,
including expenses associated with the sale, and subject to Court approval,
settlement of claims of the former stockholders of CRCA under the indemnity
provisions of the bylaws of CRCA for $150,000 (see Note 8). Remaining funds
will be allocated 35% to the Partnership and 65% to Fund XVIII in accordance
with their respective interests in the Master Lease with CRCA (see Note 14 to
the Partnership's financial statements included in the 1995 Form 10-K). The
Partnership and Fund XVIII will record recoveries on the Master Lease with CRCA
as the cash is received.
CRCA paid LRC $289,263 for CRCA related expenses previously incurred by LRC and
charged to the Partnership and Fund XVIII as General Partner's expense
reimbursement. The amounts repaid to LRC by CRCA has been allocated to the
Partnership and Fund XVIII in the manner in which those expenses were
originally charged (35% and 65%, respectively). Accordingly, LRC paid $101,242
to the Partnership and $188,021 to Fund XVIII in September 1996.
NOTE 8 - SUBSEQUENT EVENT:
On October 2, 1996, LRC, on behalf of the Datronic Partnerships, Class Counsel,
on behalf of the Class, and the former stockholders of CRCA, entered into a
proposed settlement whereby: a) LRC will authorize the payment of $150,000 by
CRCA to the former shareholders of CRCA under the indemnity provisions of the
bylaws of CRCA, b) all parties agree to remise, release and discharge the other
parties from any and all claims, actions, causes of action, demands or suits
including claims against the former officers of Datronic, including a current
officer of LRC and current officers of New Era (see Note 5 to the Partnership's
financial statements included in the 1995 Form 10-K), and c) the former
shareholders of CRCA agree to release all claims against Recovered Assets. On
February 28, 1997, the Court will hold a hearing to determine the fairness,
reasonableness and adequacy of the proposed settlement.
- 15 -
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of liquidity and capital resources covers
material changes in the Partnership's financial condition from December 31,
1995 through September 30, 1996. The discussion and analysis of results of
operations is for the three and nine month periods ended September 30, 1996 as
compared to the corresponding periods in 1995.
Financial Condition, Liquidity and Capital Resources
During the nine months ended September 30, 1996, Partnership assets continued
to be converted to cash in order to pay Partnership operating expenses, acquire
new leases for the Continuing Limited Partners and make distributions to
Limited Partners and the General Partner.
Installment contract receivable decreased approximately $383,000 during the
nine months ended September 30, 1996 due to scheduled principal collections.
Net investment in direct financing leases decreased approximately $1,547,000
during the nine months ended September 30, 1996. This decrease is primarily
attributable to principal collections of approximately $2,365,000 and sales of
leases of approximately $583,000 (see Note 4 to the financial statements
included in Item 1) partially offset by investments in new leases for the
Continuing Limited Partners of approximately $1,375,000 and a credit for lease
losses of $25,000.
Accounts payable and accrued expenses decreased approximately $41,000 during
the nine months ended September 30, 1996 primarily due to payment of legal fees
and sales and use taxes.
Lessee rental deposits decreased approximately $29,000 during the nine months
ended September 30, 1996 primarily due to overpayments returned to lessees.
In the aggregate, partners' equity decreased approximately $3.4 million during
the nine months ended September 30, 1996 due to a net loss of approximately
$300,000 and distributions to partners of approximately $3,137,000.
During the nine months ended September 30, 1996, the Partnership's operating
activities resulted in an approximate use of $136,000 of cash. This was due
principally to a net loss of approximately $300,000, a decrease in accounts
payable and accrued expenses of approximately $41,000, a decrease in lessee
rental deposits of
- 16 -
<PAGE> 17
$29,000, a decrease in due to management company of approximately $25,000 and a
non-cash credit for lease losses of $25,000 partially offset by a non-cash
amortization expense of approximately $284,000. During the period, cash flows
from investing activities aggregated approximately $1,955,000 relating
primarily to principal collections on leases of approximately $2,365,000,
scheduled repayments on an installment contract receivable of approximately
$383,000 and sales of leases of approximately $583,000, net of purchases of
lease receivables for the benefit of the Continuing Limited Partners of
approximately $1,375,000. Cash flows used for financing activities of
approximately $3,137,000, consisted of distributions to Limited Partners of
approximately $3,075,000 and to the General Partner of approximately $62,000.
The Partnership's principal sources of liquidity on both a long-term and
short-term basis are cash on hand and receipts from leases and an installment
contract receivable. In addition, the Partnership's sources of liquidity on a
long-term basis are expected to include proceeds from the sale of diverted and
other assets and, possibly, portions of the Partnership's lease portfolio which
may be sold in bulk. Management believes that its sources of liquidity in the
short and long-term are sufficient to meet its operating cash obligations.
Distributions to the Liquidating Limited Partners were suspended after payment
of the July 1, 1996 distribution and distributions to Continuing Limited
Partners were reduced from an annual rate of 12% to an annual rate of 6%
effective after the July 1, 1996 distribution. Distributions to Liquidating
Limited Partners were suspended and distributions to Continuing Limited
Partners were reduced to ensure that sufficient cash will be available to
pursue recoveries under pending litigation with the Partnership's former
accountants and others and to liquidate the Partnership in an orderly manner.
The provisions of the Amended Partnership Agreement require the Partnership to
enter its liquidating phase on May 1, 1997. Lease reinvestment activity is
prohibited during the liquidating phase and in any period in which full Target
Distributions have not been paid.
The continued operation and eventual liquidation of the Partnership involves
numerous complex issues which have to be resolved. These issues relate to the
timing and realizability of lease-related assets, diverted and other assets,
Datronic assets, litigation and the liquidation of the other Datronic
Partnerships (see Notes 4, 5 and 8 to the Partnership's financial statements
included in the 1995 Form 10-K). These issues make it difficult to predict the
time and costs necessary to operate and liquidate the Partnership in an orderly
manner. As a result of these uncertainties, it is not possible to predict the
timing and availability of cash for
- 17 -
<PAGE> 18
future distributions to Limited Partners. However, it is likely that the
amount of future distributions to the Limited Partners will ultimately be
significantly less than the amount of Partner's Equity reflected in the
September 30, 1996 Balance Sheets (see financial statement included in Item 1).
Results of Operations
Lease income decreased approximately $283,000 and $331,000 for the three and
nine months ended September 30, 1996 as compared to the corresponding periods
in 1995. The decreases are primarily due to a declining lease portfolio and
CRCA Master Lease repayments received in the third quarter of 1995 versus none
in 1996 partially offset by income resulting from transactions with PCR of
approximately $308,000 in 1996 (see Note 6 to the financial statements included
in Item 1).
Settlement proceeds of approximately $161,000 resulted from a settlement with
the Partnership's former attorneys. See Note 5 to the financial statements
included in Item 1.
Interest income decreased approximately $8,000 and $42,000 for the three and
nine months ended September 30, 1996 as compared to the corresponding periods
in 1995. The decreases are primarily due to an overall decline in the
installment contract receivable balance and, with respect to the nine months,
the recognition in the second quarter of 1995 of previously deferred income
related to an installment contract receivable which had not been deemed
collectible.
Management fees-New Era represent amounts paid New Era for managing the
Partnership on a day-to-day basis and for acquiring leases for the Continuing
Limited Partners. These fees amounted to approximately $220,000 and $856,000,
respectively, for the three and nine months ended September 30, 1996 as compared
to $272,000 and $922,000, respectively, for the same periods in 1995. See Note 7
to the Partnership's financial statements included in the 1995 Form 10-K.
The General Partner's expense reimbursement represents the amount paid to LRC
in excess of LRC's 1% share of cash flow available for distribution. Total
amounts paid to LRC are primarily a function of the amount of time LRC spends
on the activities of the Partnership and the timing of certain LRC expenses.
Total amounts charged (credited) by LRC for the three and nine months ended
September 30, 1996 were approximately ($31,000) and $85,000, respectively,
(($77,000) and $23,000, respectively, representing the General Partner's
expense reimbursement and $46,000 and $62,000, respectively, representing LRC's
1% of cash flow available for distribution) as compared to approximately
$62,000 and
- 18 -
<PAGE> 19
$267,000, respectively, ($47,000 and $204,000, respectively, representing the
General Partner's expense reimbursement and $15,000 and $63,000, respectively,
representing LRC's 1% cash flow available for distribution) for the
corresponding periods ended September 30, 1995. Part of these decreases are
attributable to reimbursements from LRC for CRCA (approximately $101,000 in the
third quarter of 1996) and PCR (approximately $69,000 in the second quarter of
1996) related expenses previously charged as General Partner expense (see Notes
6 and 7 to the financial statements included in Item 1).
Professional Fees decreased approximately $70,000 and $126,000 for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995. These decreases are primarily due to the fees paid in 1995 in
connection with the settlement with the Partnership's former attorneys (see
Note 5 to the financial statements included in Item 1) and collections as well
as decreased consulting fees.
The 1996 credit for lease losses and the 1995 credit for losses on installment
contract receivable reflect Management's assessment of potential losses and
actual collections in excess of those anticipated in prior years.
- 19 -
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Part I, Item 1, Note 8 for a discussion of legal
proceedings involving claims made by the former stockholders of CRCA.
Reference is made to Item 3 - Legal Proceedings in the Partnership's December
31, 1995 Form 10-K for a discussion of material legal proceedings involving the
Partnership.
Reference is made to Part II, Item 1 - Legal Proceedings in the Partnership's
March 31, 1996 Form 10-Q for a discussion of legal proceedings involving claims
against diverted and other assets.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
The Partnership filed a Form 8-K, dated September 30, 1996 concerning
transactions with CRCA.
- 20 -
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized, on the 11th day of November 1996.
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
Registrant
By: DONALD D. TORISKY
------------------------------------------
Donald D. Torisky
Chairman and Chief Executive Officer
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XX, L.P.
By: DOUGLAS E. VAN SCOY
------------------------------------------
Douglas E. Van Scoy
Chief Financial Officer and Director
New Era Funding Corp.
Managing Agent of
Datronic Equipment Income Fund XX, L.P.
- 21 -
<PAGE> 22
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.
- 22 -
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized, on the 11th day of November 1996.
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
Registrant
By: _______________________________________
Donald D. Torisky
Chairman and Chief Executive Officer
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XX, L.P.
By: _______________________________________
Douglas E. Van Scoy
Chief Financial Officer and Director
New Era Funding Corp.
Managing Agent of
Datronic Equipment Income Fund XX, L.P.
- 18 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND THE STATEMENTS OF REVENUE AND EXPENSES AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,405,329
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,671,439
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,574,856
<TOTAL-LIABILITY-AND-EQUITY> 5,671,439
<SALES> 0
<TOTAL-REVENUES> 1,030,174
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 32,242
<LOSS-PROVISION> (25,000)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (299,940)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
