<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13
or 15 (d) of the Securities
Exchange Act of 1934
---------------------------------
For the Quarter Ended
June 30, 1998 Commission File Number 0-21260
- --------------------- -------------------------------
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 JUNE 30, 1998
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
June 30, 1998 (unaudited) 3
December 31, 1997 4
Statements of Revenue and Expenses (unaudited)
For the three months ended June 30, 1998 5
For the three months ended June 30, 1997 6
For the six months ended June 30, 1998 7
For the six months ended June 30, 1997 8
Statements of Changes in Partners' Equity
For the six months ended June 30, 1998
(unaudited) 9
Statements of Cash Flows (unaudited)
For the six months ended June 30, 1998 10
For the six months ended June 30, 1997 11
Notes to Financial Statements 12 - 13
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 14 - 16
PART II - OTHER INFORMATION
Items 1-6. 17
2
<PAGE> 3
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
BALANCE SHEETS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $210,329 $3,820,945 $4,031,274
Net investment in direct
financing leases - 707,894 707,894
Residual interest in CRCA - - -
Diverted and other assets, net 15,700 216,545 232,245
Datronic assets - - -
-------- ---------- ----------
$226,029 $4,745,384 $4,971,413
======== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and
accrued expenses $ 181 $ 13,408 $ 13,589
Lessee rental deposits 93 1,503 1,596
-------- ---------- ----------
Total liabilities 274 14,911 15,185
Total partners' equity 225,755 4,730,473 4,956,228
-------- ---------- ----------
$226,029 $4,745,384 $4,971,413
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
BALANCE SHEETS
December 31, 1997
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
--------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 221,305 $3,564,194 $3,785,499
Net investment in
direct financing leases - 1,101,279 1,101,279
Residual interest in CRCA - - -
Diverted and other assets, net 15,700 216,545 232,245
Datronic assets, net - - -
--------- ---------- ----------
$ 237,005 $4,882,018 $5,119,023
========= ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and
accrued expenses $ 355 $ 17,773 $ 18,128
Lessee rental deposits 1,916 38,461 40,377
--------- ---------- ----------
Total liabilities 2,271 56,234 58,505
Total partners' equity 234,734 4,825,784 5,060,518
--------- ---------- ----------
$ 237,005 $4,882,018 $5,119,023
========= ========== ==========
</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 June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 458 $ 33,657 $ 34,115
Interest income 2,702 44,861 47,563
----------- ---------- ----------
3,160 78,518 81,678
----------- ---------- ----------
Expenses:
General Partner's expense
reimbursement 7,693 126,701 134,394
Professional fees 9,918 139,833 149,751
Other operating expenses 405 5,599 6,004
Credit for lease losses (1,311) (18,086) (19,397)
----------- ---------- ----------
16,705 254,047 270,752
----------- ---------- ----------
Net loss $ (13,545) $ (175,529) $ (189,074)
=========== ========== ==========
Net loss - General Partner $ (135) $ (1,755) $ (1,890)
=========== ========== ==========
Net loss - Limited Partners $ (13,410) $ (173,774) $ (187,184)
=========== ========== ==========
Net loss per limited
partnership unit $(2.63) $(2.47)
====== ======
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 June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ---------
<S> <C> <C> <C>
Revenue:
Lease income $ 697 $ 69,924 $ 70,621
Interest income 2,259 31,458 33,717
----------- ---------- ---------
2,956 101,382 104,338
----------- ---------- ---------
Expenses:
Amortization of organization
and equipment acquisition costs 4,260 58,765 63,025
General Partner's expense
reimbursement 11,469 177,305 188,774
Professional fees 2,713 38,665 41,378
Other operating expenses 178 1,467 1,645
Credit for lease losses (8,366) (115,391) (123,757)
----------- ---------- ---------
$ 10,254 $ 160,811 $ 171,065
=========== ========== =========
Net loss $ (7,298) $ (59,429) $ (66,727)
=========== ========== =========
Net loss - General Partner $ (73) $ (594) $ (667)
=========== ========== =========
Net loss - Limited Partners $ (7,225) $ (58,835) $ (66,060)
=========== ========== =========
Net loss per limited
partnership unit $(1.42) $(0.84)
====== ======
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 six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 1,010 $ 76,652 $ 77,662
Interest income 5,479 87,781 93,260
----------- ---------- ----------
6,489 164,433 170,922
----------- ---------- ----------
Expenses:
General Partner's
expense reimbursement 16,615 271,591 288,206
Professional fees 16,377 229,562 245,939
Other operating expenses 758 10,751 11,509
Credit for lease losses (18,282) (252,160) (270,442)
----------- ---------- ----------
15,468 259,744 275,212
----------- ---------- ----------
Net loss $ (8,979) $ (95,311) $ (104,290)
=========== ========== ==========
Net loss - General Partner $ (90) $ (953) $ (1,043)
=========== ========== ==========
Net loss - Limited Partners $ (8,889) $ (94,358) $ (103,247)
=========== ========== ==========
Net loss per limited
partnership unit $(1.74) $(1.34)
====== ======
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 six months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 1,765 $ 150,613 $ 152,378
Interest income 4,262 63,691 67,953
----------- ---------- ----------
6,027 214,304 220,331
----------- ---------- ----------
Expenses:
Amortization of organization
and equipment acquisition costs 10,651 146,911 157,562
General Partner's
expense reimbursement 27,396 417,146 444,542
Professional fees 5,822 85,020 90,842
Other operating expenses 675 8,671 9,346
Credit for lease losses (16,794) (231,632) (248,426)
----------- ---------- ----------
27,750 426,116 453,866
----------- ---------- ----------
Net loss $ (21,723) $ (211,812) $ (233,535)
=========== ========== ==========
Net loss - General Partner $ (217) $ (2,118) $ (2,335)
=========== ========== ==========
Net loss - Limited Partners $ (21,506) $ (209,694) $ (231,200)
=========== ========== ==========
Net loss per limited
partnership unit $(4.22) $(2.98)
====== ======
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, 1997* $ - $ 234,734 $4,825,784 $5,060,518
Net loss (1,043) (8,889) (94,358) (104,290)
Allocation of General
Partner's Equity 1,043 (90) (953) -
--------- ----------- ---------- ----------
Balance, June 30, 1998 $ - $ 225,755 $4,730,473 $4,956,228
========= =========== ========== ==========
</TABLE>
* Balances are net of $16,232 and $292,656, of General Partner's equity
previously allocated to Liquidating and Continuing Limited Partners'
Equity.
See accompanying notes to financial statements.
9
<PAGE> 10
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (8,979) $ (95,311) $ (104,290)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (18,282) (252,160) (270,442)
Changes in assets and liabilities:
Accounts payable and accrued
expenses (174) (4,365) (4,539)
Lessee rental deposits (1,823) (36,958) (38,781)
----------- ---------- ----------
(29,258) (388,794) (418,052)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 18,282 645,545 663,827
----------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents (10,976) 256,751 245,775
Cash and cash equivalents:
Beginning of year 221,305 3,564,194 3,785,499
----------- ---------- ----------
End of second quarter $ 210,329 $3,820,945 $4,031,274
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (21,723) $ (211,812) $ (233,535)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization expense 10,651 146,911 157,562
Credit for lease losses (16,794) (231,632) (248,426)
Changes in assets and liabilities:
Accounts payable and accrued
expenses (1,963) (47,677) (49,640)
Lessee rental deposits (1,321) (8,607) (9,928)
Due to management company 2,306 39,066 41,372
----------- ---------- ----------
(28,844) (313,751) (342,595)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 45,698 1,192,534 1,238,232
----------- ---------- ----------
Cash flows from financing activities:
Distributions to Limited Partners - (185,672) (185,672)
----------- ---------- ----------
Net increase in cash and
cash equivalents 16,854 693,111 709,965
Cash and cash equivalents:
Beginning of year 198,315 2,336,816 2,535,131
----------- ---------- ----------
End of second quarter $ 215,169 $3,029,927 $3,245,096
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(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. See Notes 5, 8 and 10 to the
Partnership's financial statements included in the 1997 Form 10-K for a
discussion of the alleged diversion of Partnership assets in 1991 and 1992 and
the subsequent litigation and settlement, change in general partner, new
classes of limited partners established and amendments to the Partnership
Agreement 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 1997 Form 10-K. The
financial information furnished herein is unaudited but in the opinion of
Management includes all adjustments necessary (all of which are normal
recurring adjustments) for a fair presentation of financial condition and
results of operations. See Note 2 to the Partnership's financial statements
included in the 1997 Form 10-K.
NOTE 3 - LIMITED PARTNERSHIP DISTRIBUTIONS:
Distributions to Liquidating Limited Partners were suspended after payment of
the July 1, 1996 distribution and distributions to Continuing Limited Partners
were suspended after payment of the January 1, 1997 distribution.
NOTE 4 - SETTLEMENT OF LITIGATION:
On May 5, 1998, Lease Resolution Corporation (LRC), on behalf of Datronic
Equipment Income Funds XVI, XVII, XVIII, XIX, XX and Datronic Finance Income
Fund I, reached an agreement to settle all claims of the aforementioned
partnerships against Weiss & Co. ("Settlement Agreement"). (See Note 8 to the
financial statements included in the Partnership's 1997 Form 10-K). The
Settlement Agreement is contingent upon subsequent approval by the United States
District Court for the Northern District of Illinois, Eastern Division (the
"District Court") dismissing Weiss & Co. as a party defendant. Pursuant to the
terms of the Settlement Agreement, Weiss & Co. has agreed to pay LRC, on behalf
of the aforementioned partnerships, $2.4 million. LRC expects to determine the
appropriate allocation of these proceeds among the Partnerships, net of
contingent attorneys fees of $600,000, during the third quarter after
considering all relevant factors associated with the Settlement. Weiss & Co.
has transferred $2.4 million to an account; this
12
<PAGE> 13
amount will be transferred to LRC no later than 30 days following the District
Court entering an order of dismissal of Weiss & Co. The District Court has
scheduled a hearing for August 19, 1998 to entertain the motion for dismissal of
Weiss & Co. as a party defendant.
On June 10, 1998, a verdict was rendered finding Price Waterhouse liable for
negligence, but not guilty of breach of contract. On July 20, LRC and Price
Waterhouse both filed post trial motions requesting relief from the Court. The
Court is not expected to rule on these motions for several months.
13
<PAGE> 14
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of liquidity and capital resources covers
material changes in the Partnership's financial condition from December 31,
1997 through June 30, 1998. The discussion and analysis of results of
operations is for the three and six month periods ended June 30, 1998 as
compared to the corresponding periods in 1997.
Liquidity and Capital Resources
During the six months ended June 30, 1998, Partnership assets continued to be
converted to cash in order to pay Partnership operating expenses, liquidate
Partnership liabilities and provide for the ultimate liquidation of the
Partnership.
During the six months ended June 30, 1998, the Partnership's cash and cash
equivalents increased by $246,000 to $4,031,274 at June 30, 1998 from
$3,785,000 at December 31, 1997. This increase is primarily due to cash
receipts from collections on leases of $664,000 which includes a $207,000
recovery of a portion of the Partnership's residual interest in CRCA, partially
offset by cash used in operations of $418,000.
The Partnership's sources of liquidity on both a long-term and short-term basis
are expected to come principally from cash-on-hand and cash receipts from
leases owned by the Partnership. The lease portfolio is scheduled to be
substantially run out by the end of 2000, unless it is determined that it is in
the Partnership's best interest to dispose of the remaining portfolio earlier
through a bulk sale. In addition, the Partnership's sources of liquidity on a
long-term basis include proceeds from the sale of Diverted and other assets.
Management believes that its sources of liquidity in the short and long-term
are sufficient to meet its operating cash requirements, provide for ongoing
pursuit of litigation, and an orderly liquidation of the Partnership.
The continued operation and eventual liquidation of the Partnership involves
numerous complex issues which have to be resolved. These issues relate to the
timing and the amount to be realized from the liquidation of lease-related
assets, Diverted and other assets, Datronic assets, litigation and the
liquidation of the other Datronic Partnerships. These issues make it difficult
to predict the time and costs necessary to operate and liquidate the
Partnership in an orderly manner. As a result of these uncertainties, it is
unlikely that any significant additional distributions will be made until all
remaining assets are liquidated and the pending litigation is resolved. The
amount of future distributions, if any, to the Limited Partners, in all
likelihood, will be significantly less than the amount of partners' equity
reflected in the June 30, 1998 balance sheets (see Partnership's financial
statements included in Item 1.)
14
<PAGE> 15
Results of Operations
The Partnership had net losses of $189,000 and $104,000 for the three and six
month periods ended June 30, 1998, respectively, in the aggregate for all
classes of partners. This compares to aggregate net losses of $67,000 and
$234,000 for the same periods in 1997. Differences in operating results
between Liquidating and Continuing Limited Partners are attributable to lease
income, acquisition costs, and expenses associated with new lease investments
made since the March 4, 1993 Settlement. Liquidating Limited Partners do not
participate in these post Settlement activities. Significant factors affecting
overall operating results for the three and six month periods ended June 30,
1998 as compared to the corresponding periods in 1997 include the following:
Lease income:
Since January 1997, the Partnership has been in its Liquidation Phase which
prohibits investing in any new leases. Accordingly, the lease portfolio has
continued to decrease as collections are made, resulting in a continued decline
in lease income for the three and six month periods ended June 30, 1998 as
compared to the corresponding periods in 1997.
Interest income:
Interest income increased for the three and six month periods ended June 30,
1998 as compared to the corresponding periods in 1997 as a result of increased
invested cash balances.
Amortization of organization and equipment acquisition costs:
Amortization of organization and equipment acquisition costs ended as of May
1997 when these costs became fully amortized.
General Partner's expense reimbursement:
The decrease for the three and six month periods ended June 30, 1998 is
primarily due to changes in the premium payments for D&O insurance, relocation
costs and reductions in staff and related costs. Through the first quarter
1997, D&O insurance premiums were paid on an annual basis; however, in
September 1997 a one-time premium was paid that extended coverage through the
ultimate liquidation date of the Partnership. Included in the second quarter
of 1997 is a one-time charge for relocating staff to reduced office space.
Professional fees:
The 1998 increase reflects fees paid in connection with the ongoing litigation
against the Partnership's former accountants. As of August 14, 1998 the
litigation process continues. This increase is partially offset by the
decreasing level of professional services required in such areas as collections,
consulting and auditing. These decreases are the result of the decrease in the
Partnership's lease portfolio and related activities.
Credit for lease losses:
The credit primarily reflects collections on previously reserved balances. The
1998 and 1997 amounts also include $207,000 and $248,000, respectively, of
recoveries on the residual interest in
15
<PAGE> 16
CRCA. See Note 4 to the Partnership's financial statements included in the 1997
Form 10-K.
16
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 - Legal Proceedings in the Partnership's December
31, 1997 Form 10-K for a discussion of material legal proceedings involving the
Partnership.
Reference is made to Part I, Item 1, Note 4 for a discussion of legal
proceedings involving claims against Weiss & Co. and Price Waterhouse.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
None.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized, on the 14th day of August 1998.
DATRONIC EQUIPMENT INCOME FUND XX, L.P.
Registrant
By: /s/ DONALD D. TORISKY
-----------------------
Donald D. Torisky
Chairman and Chief Executive Officer,
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XX, L.P.
By: /s/ ROBERT P. SCHAEN
----------------------
Robert P. Schaen
Vice-Chairman and Chief Financial Officer,
Lease Resolution Corporation,
General Partner of
Datronic Equipment Income Fund XX, L.P.
18
<PAGE> 19
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.
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet and the Statements of Revenue and Expenses and is qualified in its
entirety by reference to such Report on Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,031,274
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,971,413
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,956,228
<TOTAL-LIABILITY-AND-EQUITY> 4,971,413
<SALES> 0
<TOTAL-REVENUES> 170,922
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,509
<LOSS-PROVISION> (270,442)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (104,290)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
