-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LhGSInH+DgzouUMBmts5O1kSJqtdzb8n6DF1qXQ8UidEe30ZAdz/bIegXHmQxMrZ HMyrUHsi8oMHQZ/AUZK4HA== 0000808515-96-000002.txt : 19960402 0000808515-96-000002.hdr.sgml : 19960402 ACCESSION NUMBER: 0000808515-96-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000808515 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 042979663 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16513 FILM NUMBER: 96542731 BUSINESS ADDRESS: STREET 1: C/O AMERICAN FINANCE GROUP STREET 2: 53 STATE STREET, 14TH FLOOR CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6175421200 MAIL ADDRESS: STREET 1: C/O AMERICAN FINANCE GROUP STREET 2: 53 STATE STREET, 14TH FLOOR CITY: BOSTON STATE: MA ZIP: 02109 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number 0-16513 American Income Partners III-C Limited Partnership (Exact name of registrant as specified in its charter) Massachusetts 04-2979663 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 98 N. Washington St., Fifth Floor, Boston, MA 02114 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 854-5800 Securities registered pursuant to Section 12(b) of the Act NONE Title of each class Name of each exchange on which registered Securities registered pursuant to Section 12(g) of the Act: 774,130 Units Representing Limited Partnership Interest (Title of class) (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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes XX No State the aggregate market value of the voting stock held by nonaffiliates of the registrant. Not applicable. Securities are nonvoting for this purpose. Refer to Item 12 for further information. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to security holders for the year ended December 31, 1995 (Part I and II)
-3- AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP FORM 10-K TABLE OF CONTENTS Page PART I Item 1. Business 3 Item 2. Properties 5 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 5 PART II Item 5. Market for the Partnership's Securities and Related Security Holder Matters 6 Item 6. Selected Financial Data 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 8. Financial Statements and Supplementary Data 7 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 8 PART III Item 10. Directors and Executive Officers of the Partnership 9 Item 11. Executive Compensation 10 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions 11 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14-17
PART I Item 1. Business. (a) General Development of Business AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP (the "Partnership") was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the "Uniform Act") on September 29, 1987 for the purpose of acquiring and leasing to third parties a diversified portfolio of capital equipment. Partners' capital initially consisted of contributions of $1,000 from the Managing General Partner (AFG Leasing Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). On December 30, 1987, the Partnership issued 774,130 units representing assignments of limited partnership interests (the "Units") to 1,397 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. Subsequent to the Partnership's Closing, the Partnership had five General Partners: AFG Leasing Incorporated, a Massachusetts corporation, Kestutis J. Makaitis, Daniel J. Roggemann, Martin F. Laughlin, and Geoffrey A. MacDonald (collectively, the "General Partners"). Messrs. Makaitis, Roggemann and Laughlin subsequently elected to withdraw as Individual General Partners. The General Partners, each of which is affiliated with American Finance Group ("AFG"), a Massachusetts partnership, are not required to make any other capital contributions except as may be required under the Uniform Act and Section 6.1(b) of the Amended and Restated Agreement and Certificate of Limited Partnership (the "Restated Agreement"). (b) Financial Information About Industry Segments The Partnership is engaged in only one industry segment: the business of acquiring capital equipment and leasing the equipment to creditworthy lessees on a full payout or operating lease basis. Full payout leases are those in which aggregate noncancellable rents equal or exceed the Purchase Price of the leased equipment. Operating leases are those in which the aggregate noncancellable rental payments are less than the Purchase Price of the leased equipment. Industry segment data is not applicable. (c) Narrative Description of Business The Partnership was organized to acquire a diversified portfolio of capital equipment subject to various full payout and operating leases and to lease the equipment to third parties as income-producing investments. More specifically, the Partnership's primary investment objectives are to acquire and lease equipment which will: 1. Generate quarterly cash distributions; 2. Preserve and protect invested capital; and 3. Maintain substantial residual value for ultimate sale. The Partnership has the additional objective of providing certain federal income tax benefits. The Closing Date of the Offering of Units of the Partnership was December 30, 1987. The initial purchase of equipment and the associated lease commitments occurred on December 30, 1987. The acquisition of the equipment and its associated leases is described in detail in Note 3 to the Financial Statements included in Item 14, herein. The Partnership is expected to terminate no later than December 31, 1998. The Partnership has no employees; however, it entered into a Management Agreement with AFG (the "Manager"). The Manager's role, among other things, is to (i) evaluate, select, negotiate, and consummate the acquisition of equipment, (ii) manage the leasing, re-leasing, financing, and refinancing of equipment, and (iii) arrange the resale of equipment. The Manager is compensated for such services as described in the Restated Agreement, as amended, Item 13 herein and in Note 4 to the financial statements included in Item 14, herein. The Partnership's investment in equipment is, and will continue to be, subject to various risks, including physical deterioration, technological obsolescence and defaults by lessees. A principal business risk of owning and leasing equipment is the possibility that aggregate lease revenues and equipment sale proceeds will be insufficient to provide an acceptable rate of return on invested capital after payment of all debt service costs and operating expenses. Consequently, the success of the Partnership is largely dependent upon the ability of the Managing General Partner and its Affiliates to forecast technological advances, the ability of the lessees to fulfill their lease obligations and the quality and marketability of the equipment at the time of sale. In addition, the leasing industry is very competitive. Although all funds available for acquisitions have been invested in equipment, subject to noncancellable lease agreements, the Partnership will encounter considerable competition when equipment is re-leased or sold at the expiration of primary lease terms. The Partnership will compete with lease programs offered directly by manufacturers and other equipment leasing companies, including limited partnerships and trusts, organized and managed similarly to the Partnership and including other AFG sponsored partnerships and trusts, which may seek to re-lease or sell equipment within their own portfolios to the same customers as the Partnership. Many competitors have greater financial resources and more experience than the Partnership, the Managing General Partner and the Manager. Generally, the Partnership is prohibited from reinvesting the proceeds generated by refinancing or selling equipment. Accordingly, it is anticipated that the Partnership will begin to liquidate its portfolio of equipment at the expiration of the initial and renewal lease terms and to distribute the net liquidation proceeds. As an alternative to sale, the Partnership may enter re-lease agreements when considered advantageous by the Managing General Partner and the Manager. In accordance with the Partnership's stated investment objectives and policies, the Managing General Partner is also considering winding-up the Partnership's operations, including the liquidation of its entire portfolio. Revenue from major individual lessees which accounted for 10% or more of lease revenue during the years ended December 31, 1995, 1994 and 1993 is incorporated herein by reference to Note 2 to the financial statements in the 1995 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the Securities and Exchange Commission. Default by a lessee under a lease may cause equipment to be returned to the Partnership at a time when the Managing General Partner or the Manager is unable to arrange for the re-lease or sale of such equipment. This could result in the loss of a material portion of anticipated revenues and significantly weaken the Partnership's ability to repay related debt. AFG is a successor to the business of American Finance Group, Inc., a Massachusetts corporation engaged since its inception in 1980 in various aspects of the equipment leasing business. In 1990, certain members of AFG's management, principally Geoffrey A. MacDonald, Chief Executive Officer and co-founder of AFG, established AFG Holdings (Massachusetts) Limited Partnership ("Holdings Massachusetts") to acquire ownership and control of AFG. Holdings Massachusetts effected this event by acquiring all of the equity interests of AFG's two partners, AFG Holdings Illinois Limited Partnership ("Holdings Illinois") and AFG Corporation. Holdings Massachusetts incurred significant indebtedness to finance this acquisition, a significant portion of which was scheduled to mature in 1995. On December 16, 1994, the senior lender to Holdings Massachusetts (the "Senior Lender") assumed control of its security interests in Holdings Illinois and AFG Corporation and sold all such interests to GDE Acquisitions Limited Partnership, a Massachusetts limited partnership owned and controlled entirely by Gary D. Engle, President and member of the Executive Committee of AFG. As a result of this transaction, GDE Acquisitions Limited Partnership acquired all of the assets, rights and obligations of AFG from the Senior Lender and assumed control of AFG. Geoffrey A. MacDonald remains as Chief Executive Officer of AFG and member of its Executive Committee. (d) Financial Information About Foreign and Domestic Operations and Export Sales Not applicable. Item 2. Properties. Incorporated herein by reference to Note 3 to the financial statements in the 1995 Annual Report. Item 3. Legal Proceedings. Incorporated herein by reference to Note 7 to the financial statements in the 1995 Annual Report. Item 4. Submission of Matters to a Vote of Security Holders. None. PART II Item 5. Market for the Partnership's Securities and Related Security Holder Matters. (a) Market Information There is no public market for the resale of the Units and it is not anticipated that a public market for resale of the Units will develop. (b) Approximate Number of Security Holders At December 31, 1995, there were 1,227 recordholders of Units in the Partnership. (c) Dividend History and Restrictions Pursuant to Article VI of the Restated Agreement, as amended, the Partnership's Distributable Cash From Operations and Distributable Cash From Sales or Refinancings are determined and distributed to the Partners quarterly. Each quarter's distribution may vary in amount. Distributions may be made to the Managing General Partner prior to the end of the fiscal quarter; however, the amount of such distribution reflects only amounts to which the Managing General Partner is entitled at the time such distribution is made. Currently, there are no restrictions that materially limit the Partnership's ability to distribute Distributable Cash From Operations and Distributable Cash From Sales or Refinancings or that the Partnership believes are likely to materially limit the future distribution of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings. The Partnership expects to continue to distribute all Distributable Cash From Operations and Distributable Cash From Sales or Refinancings on a quarterly basis.
Distributions in 1995 and 1994 were as follows: General Recognized Total Partners Owners Total 1995 distributions $ 879,693 $ 8,797 $ 870,896 Total 1994 distributions 1,563,899 15,639 1,548,260 Total $ 2,443,592 $ 24,436 $ 2,419,156
Distributions payable at December 31, 1995 and 1994 were $146,615 and $390,975, respectively. "Distributable Cash From Operations" means the net cash provided by the Partnership's normal operations after general expenses and current liabilities of the Partnership are paid, reduced by any reserves for working capital and contingent liabilities to be funded from such cash, to the extent deemed reasonable by the Managing General Partner, and increased by any portion of such reserves deemed by the Managing General Partner not to be required for Partnership operations and reduced by all accrued and unpaid Equipment Management Fees and, after Payout, further reduced by all accrued and unpaid Subordinated Remarketing Fees. Distributable Cash From Operations does not include any Distributable Cash From Sales or Refinancings. "Distributable Cash From Sales or Refinancings" means Cash From Sales or Refinancings as reduced by (i)(a) amounts realized from any loss or destruction of equipment which the Managing General Partner determines shall be reinvested in similar equipment for the remainder of the original lease term of the lost or destroyed equipment, or in isolated instances, in other equipment, if the Managing General Partner determines that investment of such proceeds will significantly improve the diversity of the Partnership's equipment portfolio, and subject in either case to satisfaction of all existing indebtedness secured by such equipment to the extent deemed necessary or appropriate by the Managing General Partner, and (b) the proceeds from the sale of an interest in equipment pursuant to any agreement governing a joint venture which the Managing General Partner determines will be invested in additional equipment or interests in equipment and which ultimately are so reinvested and (ii) any accrued and unpaid Equipment Management Fees and, after Payout, any accrued and unpaid Subordinated Remarketing Fees. "Cash From Sales or Refinancings" means cash received by the Partnership from sale or refinancing transactions, as reduced by (i)(a) all debts and liabilities of the Partnership required to be paid as a result of sale or refinancing transactions, whether or not then due and payable (including any liabilities on an item of equipment sold which are not assumed by the buyer and any remarketing fees required to be paid to persons not affiliated with the General Partners, but not including any Subordinated Remarketing Fees whether or not then due and payable) and (b) any reserves for working capital and contingent liabilities funded from such cash to the extent deemed reasonable by the Managing General Partner and (ii) increased by any portion of such reserves deemed by the Managing General Partner not to be required for Partnership operations. In the event the Partnership accepts a note in connection with any sale or refinancing transaction, all payments subsequently received in cash by the Partnership with respect to such note shall be included in Cash From Sales or Refinancings, regardless of the treatment of such payments by the Partnership for tax or accounting purposes. If the Partnership receives purchase money obligations in payment for equipment sold, which are secured by liens on such equipment, the amount of such obligations shall not be included in Cash From Sales or Refinancings until the obligations are fully satisfied. Each distribution of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings of the Partnership shall be made 99% to the Recognized Owners and 1% to the General Partners until Payout and 85% to the Recognized Owners and 15% to the General Partners after Payout. "Payout" is defined as the first time when the aggregate amount of all distributions to the Recognized Owners of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings equals the aggregate amount of the Recognized Owners' original capital contributions plus a cumulative annual return of 10% (compounded quarterly and calculated beginning with the last day of the month of the Partnership's Closing Date) on their aggregate unreturned capital contributions. For purposes of this definition, capital contributions shall be deemed to have been returned only to the extent that distributions of cash to the Recognized Owners exceed the amount required to satisfy the cumulative annual return of 10% (compounded quarterly) on the Recognized Owners' aggregate unreturned capital contributions, such calculation to be based on the aggregate unreturned capital contributions outstanding on the first day of each fiscal quarter. Distributable Cash From Operations and Distributable Cash From Sales or Refinancings ("Distributions") are distributed within 60 days after the completion of each quarter, beginning with the first full quarter following the Partnership's Closing Date. Each Distribution is described in a statement sent to the Recognized Owners. Item 6. Selected Financial Data. Incorporated herein by reference to the section entitled "Selected Financial Data" in the 1995 Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Incorporated herein by reference to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1995 Annual Report. Item 8. Financial Statements and Supplementary Data. Incorporated herein by reference to the financial statements and supplementary data included in the 1995 Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Partnership. (a-b) Identification of Directors and Executive Officers The Partnership has no Directors or Officers. As indicated in Item 1 of this report, AFG Leasing Incorporated is the Managing General Partner of the Partnership. Under the Restated Agreement, as amended, the Managing General Partner is responsible for the operation of the Partnership's properties and the Recognized Owners have no right to participate in the control of such operations. The names, titles and ages of the Directors and Executive Officers of the Managing General Partner as of March 15, 1996 are as follows:
DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER (See Item 13) Name Title Age Term Geoffrey A. MacDonald Chief Executive Officer, Until a Chairman and a member of the successor Executive Committee of AFG and is duly President and a Director of the elected Managing General Partner 47 and qualified Gary D. Engle President, Chief Operating Officer and a member of the Executive Committee of AFG 47 Gary M. Romano Vice President and Controller of AFG and Clerk of the Managing General Partner 36 James F. Livesey Vice President, Aircraft and Vessels 46 of AFG Sandra L. Simonsen Vice President, Information Systems 45 of AFG (c) Identification of Certain Significant Persons None. (d) Family Relationship No family relationship exists among any of the foregoing Partners, Directors or Executive Officers. (e) Business Experience Mr. MacDonald, age 47 is a co-founder, Chief Executive Officer, Chairman and a member of the Executive Committee of AFG and President and a Director of the Managing General Partner. Mr. MacDonald served as a co-founder, Director and Senior Vice President of AFG's predecessor corporation from 1980 to 1988. Mr. MacDonald is Vice President of American Finance Group Securities Corp. and a limited partner in Atlantic Acquisition Limited Partnership ("AALP"). Prior to co-founding AFG's predecessor, Mr. MacDonald held various executive and management positions in the leasing and pharmaceutical industries. Mr. MacDonald holds an M.B.A. from Boston College and a B.A. degree from the University of Massachusetts (Amherst). Mr. Engle, age 47 is President, Chief Operating Officer, and a member of the Executive Committee of AFG and President of AFG Realty Corporation. Mr. Engle is Vice President, and a Director of certain of AFG's affiliates. On December 16, 1994, Mr. Engle acquired control of AFG, the Managing General Partner and each of AFG's subsidiaries. Mr. Engle controls the general partner of AALP and is also a limited partner in AALP. From 1987 to 1990, Mr. Engle was a principal and co-founder of Cobb Partners Development, Inc., a real estate and mortgage banking company. From 1980 to 1987, Mr. Engle was Senior Vice President and Chief Financial Officer of Arvida Disney Company, a large scale community development company owned by Walt Disney Company. Prior to 1980, Mr. Engle served in various management consulting and institutional brokerage capacities. Mr. Engle has an M.B.A. from Harvard University and a B.S. degree from the University of Massachusetts (Amherst). Mr. Romano, age 36, is Vice President and Controller of AFG and certain of its affiliates and Clerk of the Managing General Partner. Mr. Romano joined AFG in November 1989 and was appointed Vice President and Controller in April 1993. Prior to joining AFG, Mr. Romano was Assistant Controller for a privately-held real estate company which he joined in 1987. Mr. Romano held audit staff and manager positions at Ernst & Whinney from 1982 to 1986. Mr. Romano is a C.P.A. and holds a B.S. degree from Boston College. Mr. Livesey, age 46, is Vice President, Aircraft and Vessels, of AFG. Mr. Livesey joined AFG in October, 1989, and was promoted to Vice President in January, 1992. Prior to joining AFG, Mr. Livesey held sales and marketing positions with two privately-held equipment leasing firms. Mr. Livesey holds an M.B.A. from Boston College and B.A. degree from Stonehill College. Ms. Simonsen, age 45, joined AFG in February 1990 and was promoted to Vice President, Information Systems in April 1992. Prior to joining AFG, Ms. Simonsen was Vice President, Information Systems with Investors Mortgage Insurance Company which she joined in 1973. Ms. Simonsen provided systems consulting for a subsidiary of American International Group and authored a software program published by IBM. Ms. Simonsen holds a B.A. degree from Wilson College.
(f) Involvement in Certain Legal Proceedings None. (g) Promoters and Control Persons See Item 10 (a-b) above. Item 11. Executive Compensation. (a) Cash Compensation Currently, the Partnership has no employees. However, under the terms of the Restated Agreement, as amended, the Partnership is obligated to pay all costs of personnel employed full or part-time by the Partnership, including officers or employees of the Managing General Partner or its Affiliates. There is no plan at the present time to make any officers or employees of the Managing General Partner or its Affiliates employees of the Partnership. The Partnership has not paid and does not propose to pay any options, warrants or rights to the officers or employees of the Managing General Partner or its Affiliates. (b) Compensation Pursuant to Plans None. (c) Other Compensation Although the Partnership has no employees, as discussed in Item 11(a), pursuant to section 10.4 of the Restated Agreement, as amended, the Partnership incurs a monthly charge for personnel costs of the Manager for persons engaged in providing administrative services to the Partnership. A description of the remuneration paid by the Partnership to the Manager for such services is included in Item 13, herein and in Note 4 to the financial statements included in Item 14, herein. (d) Compensation of Directors None. (e) Termination of Employment and Change of Control Arrangement There exists no remuneration plan or arrangement with the General Partners or the Managing General Partner or its Affiliates which results or may result from their resignation, retirement or any other termination. Item 12. Security Ownership of Certain Beneficial Owners and Management. By virtue of its organization as a limited partnership, the Partnership has outstanding no securities possessing traditional voting rights. However, as provided in Section 11.2(a) of the Restated Agreement, as amended (subject to Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners have voting rights with respect to: 1. Amendment of the Restated Agreement; 2. Termination of the Partnership; 3. Removal of the General Partners; and 4. Approval or disapproval of the sale of all, or substantially all, of the assets of the Partnership (except in the orderly liquidation of the Partnership upon its termination and dissolution).
As of March 1, 1996, the following person or group owns beneficially more than 5% of the Partnership's 774,130 outstanding Units: Name and Amount Percent Title Address of of Beneficial of of Class Beneficial Owner Ownership Class Units Representing Atlantic Acquisition Limited Partnership Limited Partnership 98 North Washington Street 76,690 Units 9.91% Interests Boston, MA 02114 Messrs. Engle and MacDonald have ownership interests in AALP. See Item 10 of this report.
The ownership and organization of AFG is described in Item 1 of this report. Item 13. Certain Relationships and Related Transactions. The Managing General Partner of the Partnership is AFG Leasing Incorporated, an affiliate of AFG. (a) Transactions with Management and Others All operating expenses incurred by the Partnership are paid by AFG on behalf of the Partnership and AFG is reimbursed at its actual cost for such expenditures. Fees and other costs incurred during the years ended December 31, 1995, 1994 and 1993 which were paid or accrued by the Partnership to AFG or its Affiliates, are as follows: 1995 1994 1993 Equipment management fees $ 37,999 $ 77,970 $ 122,766 Interest expense - affiliate -- 2,955 -- Administrative charges 20,052 12,000 14,955 Reimbursable operating expenses due to third parties 74,892 103,534 63,221 Total $ 132,943 $ 196,459 $ 200,942
As provided under the terms of the Management Agreement, AFG is compensated for its services to the Partnership. Such services include all aspects of acquisition, management and sale of equipment. For acquisition services, AFG is compensated by an amount equal to 4.75% of Equipment Base Price paid by the Partnership. For management services, AFG is compensated by an amount equal to the lesser of (i) 5% of gross lease rental revenue or (ii) fees which the Managing General Partner reasonably believes to be competitive for similar services for similar equipment. Both of these fees are subject to certain limitations defined in the Management Agreement. Compensation to AFG for services connected to the sale of equipment is calculated as the lesser of (i) 3% of gross sale proceeds or (ii) one-half of reasonable brokerage fees otherwise payable under arm's length circumstances. Payment of the remarketing fee is subordinated to Payout and is subject to certain limitations defined in the Management Agreement. Interest expense - affiliate represents interest incurred on legal costs in connection with a state sales tax dispute involving certain equipment owned by the Partnership and other affiliated investment programs sponsored by AFG. Legal costs incurred by AFG to resolve this matter and the interest thereon was allocated to the Partnership and other affected investment programs. Administrative charges represent amounts owed to AFG, pursuant to Section 10.4 of the Restated Agreement, as amended, for persons employed by AFG who are engaged in providing administrative services to the Partnership. Reimbursable operating expenses due to third parties represent costs paid by AFG on behalf of the Partnership which are reimbursed to AFG. All equipment was purchased from AFG, one of its affiliates, including other equipment leasing programs sponsored by AFG, or from third-party sellers. The Partnership's Purchase Price was determined by the method described in Note 2 to the financial statements, included in Item 14, herein. All rents and proceeds from the sale of equipment are paid directly to either AFG or to a lender. AFG temporarily deposits collected funds in a separate interest-bearing escrow account prior to remittance to the Partnership. At December 31, 1995, the Partnership was owed $28,196 for such funds and the interest thereon. These funds were remitted to the Partnership in January 1996. On August 18, 1995, Atlantic Acquisition Limited Partnership ("AALP"), a newly formed Massachusetts limited partnership owned and controlled by certain principals of AFG, commenced a voluntary cash Tender Offer (the "Offer") for up to approximately 45% of the outstanding units of limited partner interest in this Partnership and 20 affiliated partnerships sponsored and managed by AFG. The Offer was subsequently amended and supplemented in order to provide additional disclosure to unitholders; increase the offer price; reduce the number of units sought to approximately 35% of the outstanding units; and extend the expiration date of the Offer to October 20, 1995. Following commencement of the Offer, certain legal actions were initiated by interested persons against AALP, each of the general partners (4 in total) of the 21 affected programs, and various other affiliates and related parties. One action, a class action brought in the United States District Court for the District of Massachusetts (the "Court") on behalf of the unitholders (limited partners), sought to enjoin the Offer and obtain unspecified monetary damages. A settlement of this litigation was approved by the Court on November 15, 1995. A second class action, brought in the Superior Court of the Commonwealth of Massachusetts (the "Superior Court") seeking to enjoin the Offer, obtain unspecified monetary damages, and intervene in the first class action, was dismissed by the Superior Court. The Plaintiffs have filed an appeal in this matter. The limited partners of the Partnership tendered approximately 76,690 units or 9.91% of the total outstanding units of the Partnership to AALP. The operations of the Partnership are not expected to be adversely affected by these proceedings or settlements. (b) Certain Business Relationships None. (c) Indebtedness of Management to the Partnership None. (d) Transactions with Promoters See Item 13(a) above. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Documents filed as part of this report: (1) Financial Statements: Report of Independent Auditors...................................................................* Statements of Financial Position at December 31, 1995 and 1994....................................................................* Statement of Operations for the years ended December 31, 1995, 1994 and 1993.............................................* Statement of Changes in Partners' Capital for the years ended December 31, 1995, 1994 and 1993.............................................* Statement of Cash Flows for the years ended December 31, 1995, 1994 and 1993.............................................* Notes to the Financial Statements................................................................* (2) Financial Statement Schedules: None required. (3) Exhibits: Except as set forth below, all Exhibits to Form 10-K, as set forth in Item 601 of Regulation S-K, are not applicable. Exhibit Number 4 Amended and Restated Agreement and Certificate of Limited Partnership included as Exhibit A to the Prospectus which is included in Registration Statement on Form S-1 (No. 33-11160). 13 The 1995 Annual Report to security holders, a copy of which is furnished for the information of the Securities and Exchange Commission. Such Report, except for those portions thereof which are incorporated herein by reference, is not deemed "filed" with the Commission. 23 Consent of Independent Auditors. 99 (a) Lease agreement with Northwest Airlines, Inc. was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 as Exhibit 28 (c) and is incorporated herein by reference. * Incorporated herein by reference to the appropriate portion of the 1995 Annual Report to security holders for the year ended December 31, 1995. (See Part II)
Exhibit Number 99 (b) Lease agreement with Bally's Health and Tennis Corporation was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 as Exhibit 28 (d) and is incorporated herein by reference. 99 (c) Lease agreement with Healthcare Financial Services, Inc. was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 as Exhibit 28 (e) and is incorporated herein by reference. 99 (d) Lease agreement with Marriott Corporation was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 as Exhibit 28 (f) and is incorporated herein by reference. 99 (e) Lease agreement with Equicor, Incorporated was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 as Exhibit 99 (f) and is incorporated herein by reference. 99 (f) Lease agreement with ING Aviation Leasing is filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 and is incorporated herein. (b) Reports on Form 8-K None. Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of American Income Partners III-C Limited Partnership of our report dated March 12, 1996, included in the 1995 Annual Report to the Partners of American Income Partners III-C Limited Partnership. ERNST & YOUNG LLP Boston, Massachusetts March 12, 1996 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. No annual report has been sent to the Recognized Owners. A report will be furnished to the Recognized Owners subsequent to the date hereof. No proxy statement has been or will be sent to the Recognized Owners. -17- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on behalf of the registrant and in the capacity and on the date indicated. AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP By: AFG Leasing Incorporated, a Massachusetts corporation and the Managing General Partner of the Registrant. By: /s/ By: /s/ Geoffrey A. MacDonald Gary D. Engle Chief Executive Officer, President, Chief Operating Chairman, and a member of the Officer and a member of the Executive Committee of AFG and Executive Committee of AFG President and a Director of the (Principal Financial Officer) Managing General Partner (Principal Executive Officer) Date: March 29, 1996 Date: March 29, 1996 By: /s/ Gary M. Romano Vice President and Controller of AFG and Clerk of the Managing General Partner (Principal Accounting Officer) Date: March 29, 1996
EX-13 2
-1- AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP INDEX TO ANNUAL REPORT TO THE PARTNERS Page SELECTED FINANCIAL DATA 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3-6 FINANCIAL STATEMENTS: Report of Independent Auditors 7 Statement of Financial Position at December 31, 1995 and 1994 8 Statement of Operations for the years ended December 31, 1995, 1994 and 1993 9 Statement of Changes in Partners' Capital for the years ended December 31, 1995, 1994 and 1993 10 Statement of Cash Flows for the years ended December 31, 1995, 1994 and 1993 11 Notes to the Financial Statements 12-20 ADDITIONAL FINANCIAL INFORMATION: Schedule of Excess (Deficiency) of Total Cash Generated to Cost of Equipment Disposed 21 Statement of Cash and Distributable Cash From Operations, Sales and Refinancings 22 Schedule of Costs Reimbursed to the Managing General Partner and its Affiliates as Required by Section 10.4 of the Amended and Restated Agreement and Certificate of Limited Partnership 23
SELECTED FINANCIAL DATA The following data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the financial statements. For each of the five years in the period ended December 31, 1995: Summary of Operations 1995 1994 1993 1992 1991 Lease revenue $ 759,978 $ 1,559,404 $ 2,455,320 $ 2,797,390 $ 3,821,984 Net income (loss) $ 2,905 $ 553,031 $ 548,926 $ (516,438) $ 13,951 Per Unit: Net income (loss) $ -- $ 0.71 $ 0.70 $ (0.66) $ 0.02 Cash distributions $ 1.12 $ 2.00 $ 2.00 $ 2.25 $ 4.00 Financial Position Total assets $ 3,255,373 $ 4,706,805 $ 6,209,042 $ 8,012,646 $ 11,935,050 Total long-term obligations $ 27,614 $ 372,398 $ 775,058 $ 1,508,185 $ 2,876,953 Partners' capital $ 3,014,738 $ 3,891,526 $ 4,902,394 $ 5,917,367 $ 8,193,191
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year ended December 31, 1995 compared to the year ended December 31, 1994 and the year ended December 31, 1994 compared to the year ended December 31, 1993 Overview As an equipment leasing partnership, American Income Partners III-C Limited Partnership (the "Partnership") was organized to acquire a diversified portfolio of capital equipment subject to lease agreements with third parties. The Partnership was designed to progress through three principal phases: acquisitions, operations, and liquidation. During the operations phase, a period of approximately six years, all equipment in the Partnership's portfolio progresses through various stages. Initially, all equipment generates rental revenues under primary term lease agreements. During the life of the Partnership, these agreements expire on an intermittent basis and equipment held pursuant to the related leases are renewed, re-leased or sold, depending on prevailing market conditions and the assessment of such conditions by American Finance Group ("AFG") to obtain the most advantageous economic benefit. Over time, a greater portion of the Partnership's original equipment portfolio becomes available for remarketing and cash generated from operations and from sales or refinancings begins to fluctuate. Ultimately, all equipment will be sold and the Partnership will be dissolved. In accordance with the Partnership's stated investment objectives and policies, the Managing General Partner is considering the winding-up of the Partnership's operations, including the liquidation of its entire portfolio. The Partnership's operations commenced in 1987. Results of Operations For the year ended December 31, 1995, the Partnership recognized lease revenue of $759,978 compared to $1,559,404 and $2,455,320 for the years ended December 31, 1994 and 1993, respectively. The decrease in lease revenue from 1993 to 1995 was expected and resulted principally from primary lease term expirations and the sale of equipment. The Partnership also earns interest income from temporary investments of rental receipts and equipment sales proceeds in short-term instruments. The Partnership's equipment portfolio includes certain assets in which the Partnership holds a proportionate ownership interest. In such cases, the remaining interests are owned by AFG or an affiliated equipment leasing program sponsored by AFG. Proportionate equipment ownership enables the Partnership to further diversify its equipment portfolio by participating in the ownership of selected assets, thereby reducing the general levels of risk which could result from a concentration in any single equipment type, industry or lessee. The Partnership and each affiliate individually report, in proportion to their respective ownership interests, their respective shares of assets, liabilities, revenues, and expenses associated with the equipment. In 1995, the Partnership sold equipment which had been fully depreciated to existing lessees and third parties. These sales resulted in a net gain, for financial statement purposes, of $358,128 compared to a net gain in 1994 and 1993 of $325,112 and $348,313 on equipment having a net book value of $3,411 and $172,717, respectively. It cannot be determined whether future sales of equipment will result in a net gain or a net loss to the Partnership, as such transactions will be dependent upon the condition and type of equipment being sold and its marketability at the time of sale. In addition, the amount of gain or loss reported for financial statement purposes is partly a function of the amount of accumulated depreciation associated with the equipment being sold. The ultimate realization of residual value for any type of equipment is dependent upon many factors, including AFG's ability to sell and re-lease equipment. Changing market conditions, industry trends, technological advances, and many other events can converge to enhance or detract from asset values at any given time. AFG attempts to monitor these changes in order to identify opportunities which may be advantageous to the Partnership and which will maximize total cash returns for each asset. The total economic value realized upon final disposition of each asset is comprised of all primary lease term revenues generated from that asset, together with its residual value. The latter consists of cash proceeds realized upon the asset's sale in addition to all other cash receipts obtained from renting the asset on a re-lease, renewal or month-to-month basis. The Partnership classifies such residual rental payments as lease revenue. Consequently, the amount of gain or loss reported in the financial statements is not necessarily indicative of the total residual value the Partnership achieved from leasing the equipment. Depreciation expense was $441,939, $1,146,582 and $2,007,019 for the years ended December 31, 1995, 1994 and 1993, respectively. For financial reporting purposes, to the extent that an asset is held on primary lease term, the Partnership depreciates the difference between (i) the cost of the asset and (ii) the estimated residual value of the asset on a straight-line basis over such term. For purposes of this policy, estimated residual values represent estimates of equipment values at the date of primary lease expiration. To the extent that an asset is held beyond its primary lease term, the Partnership continues to depreciate the remaining net book value of the asset on a straight-line basis over the asset's remaining economic life (See Note 2 to the financial statements herein.) The Partnership recorded a write-down of the carrying value of its interest in an L1011-50 aircraft representing an impairment, during the year ended December 31, 1995. The resulting charge, $580,300 ($0.74 per limited partnership unit) in 1995 was based on a comparison of the estimated net realizable value and corresponding carrying value for the Partnership's interest in the aircraft. Net realizable value was estimated based on (I) third-party appraisals of the Partnership's aircraft and (ii) AFG's assessment of prevailing market conditions for similar aircraft. In recent years, market values for used commercial jet aircraft have deteriorated. Consistent price competition and other pressures within the airline industry have inhibited sustained profitability for many carriers. Most major airlines have had to re-evaluate their aircraft fleets and operating strategies. Such issues complicate the determination of net realizable value for specific aircraft, and particularly used aircraft, because cost-benefit and market considerations may differ significantly between major airlines. Aircraft condition, age, passenger capacity, distance capability, fuel efficiency, and other factors also influence market demand and market value for passenger jet aircraft. Interest expense was $3,627 or less than 1% of lease revenue in 1995, $29,209 or 1.9% of lease revenue in 1994 and $71,913 or 2.9% of lease revenue in 1993. Interest expense in future years will continue to decline in amount and as a percentage of lease revenue as the principal balance of notes payable is reduced through the application of rent receipts to outstanding debt. Management fees were 5% of lease revenue in the years ended December 31, 1995, 1994 and 1993 and will not change as a percentage of lease revenue in future years. Operating expenses consist principally of administrative charges, professional service costs, such as audit and legal fees, as well as printing, distribution and remarketing expenses. In certain cases, equipment storage or repairs and maintenance costs may be incurred in connection with equipment being remarketed. Collectively, operating expenses represented 12.5%, 7.4%, and 3.2% of lease revenue in 1995, 1994 and 1993, respectively. Operating expenses in 1994 included repair and maintenance costs incurred in connection with the re-lease of an L1011-50 aircraft to a third party and legal costs incurred in connection with a sales tax dispute. The amount of future operating expenses cannot be predicted with certainty; however, such expenses are usually higher during the acquisition and liquidation phases of a partnership. Other fluctuations typically occur in relation to the volume and timing of remarketing activities. Liquidity and Capital Resources and Discussion of Cash Flows The Partnership by its nature is a limited life entity which was established for specific purposes described in the preceding "Overview". As an equipment leasing program, the Partnership's principal operating activities derive from asset rental transactions. Accordingly, the Partnership's principal source of cash from operations is provided by the collection of periodic rents. These cash inflows are used to satisfy debt service obligations associated with leveraged leases, and to pay management fees and operating costs. Operating activities generated net cash inflows of $1,035,824, $1,300,157, and $2,466,302 in 1995, 1994 and 1993, respectively. Future renewal, re-lease and equipment sale activities will cause a gradual decline in the Partnership's lease revenues and corresponding sources of operating cash. Overall, expenses associated with rental activities, such as management fees, and net cash flow from operating activities will decline as the Partnership experiences a higher frequency of remarketing events. During 1995, the Partnership and other affiliated partnerships, executed a renegotiated and extended lease agreement in connection with two DC-10-40 aircraft leased by Northwest Airlines, Inc. ("Northwest"). Pursuant to the agreement, Northwest will continue to lease these aircraft until September 3, 2000. The Partnership, which owns a 1.4% interest in these aircraft, will receive $42,334 each year through December 31, 1999 and $31,750 during the year ending December 31, 2000. Ultimately, the Partnership will dispose of all assets under lease. This will occur principally through sale transactions whereby each asset will be sold to the existing lessee or to a third party. Generally, this will occur upon expiration of each asset's primary or renewal/re-lease term. In certain instances, casualty or early termination events may result in the disposal of an asset. Such circumstances are infrequent and usually result in the collection of stipulated cash settlements pursuant to terms and conditions contained in the underlying lease agreements. Cash expended for equipment acquisitions and cash realized from asset disposal transactions are reported under investing activities on the accompanying Statement of Cash Flows. During 1994, the Partnership capitalized $12,620 in connection with the upgrade of an L1011-50 aircraft. In 1995, the Partnership realized $358,128 in equipment sale proceeds compared to $328,523 and $521,030 in 1994 and 1993, respectively. Future inflows of cash from asset disposals will vary in timing and amount and will be influenced by many factors including, but not limited to, the frequency and timing of lease expirations, the type of equipment being sold, its condition and age, and future market conditions. The Partnership obtained long-term financing in connection with certain equipment leases. The origination of such indebtedness and the subsequent repayments of principal are reported as components of financing activities. Cash inflows of $179,813 in 1993 resulted from leveraging a portion of the Partnership's equipment portfolio with third-party lenders. No leveragings of equipment occurred in 1994 and 1995. Each note payable is recourse only to the specific equipment financed and to the minimum rental payments contracted to be received during the debt amortization period (which period generally coincides with the lease rental term). As rental payments are collected, a portion or all of the rental payment is used to repay the associated indebtedness. The amount of cash used to repay debt obligations will continue to decline as the principal balance of notes payable is reduced through the collection and application of rents. Cash distributions to the General Partners and Recognized Owners are declared and generally paid within fifteen days following the end of each calendar quarter. The payment of such distributions is presented as a component of financing activities. For the year ended December 31, 1995, the Partnership declared total cash distributions of Distributable Cash From Operations and Distributable Cash From Sales and Refinancings of $879,693. In accordance with the Amended and Restated Agreement and Certificate of Limited Partnership (the "Restated Agreement, as amended"), the Recognized Owners were allocated 99% of these distributions, or $870,896, and the General Partners were allocated 1%, or $8,797. The fourth quarter 1995 cash distribution was paid on January 22, 1996. Cash distributions paid to the Recognized Owners consist of both a return of and a return on capital. To the extent that cash distributions consist of Cash From Sales or Refinancings, substantially all of such cash distributions should be viewed as a return of capital. Cash distributions do not represent and are not indicative of yield on investment. Actual yield on investment cannot be determined with any certainty until conclusion of the Partnership and will be dependent upon the collection of all future contracted rents, the generation of renewal and/or re-lease rents, and the residual value realized for each asset at its disposal date. Future market conditions, technological changes, the ability of AFG to manage and remarket the assets, and many other events and circumstances, could enhance or detract from individual asset yields and the collective performance of the Partnership's equipment portfolio. The future liquidity of the Partnership will be influenced by the foregoing and will be greatly dependent upon the collection of contractual rents and the outcome of residual activities. The Managing General Partner anticipates that cash proceeds resulting from these sources will satisfy the Partnership's future expense obligations. However, the amount of cash available for distribution in future periods will fluctuate. Equipment lease expirations and asset disposals will cause the Partnership's net cash from operating activities to diminish over time; and equipment sale proceeds will vary in amount and period of realization. In addition, the Partnership may be required to incur asset refurbishment or upgrade costs in connection with future remarketing activities. Accordingly, fluctuations in the level of quarterly cash distributions will occur during the life of the Partnership. REPORT OF INDEPENDENT AUDITORS To the Partners of American Income Partners III-C Limited Partnership: We have audited the accompanying statements of financial position of American Income Partners III-C Limited Partnership as of December 31, 1995 and 1994, and the related statements of operations, changes in partners' capital, and cash flows for each of the three years in the period ended December 31, 1995. 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 American Income Partners III-C Limited Partnership at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Additional Financial Information identified in the Index to Annual Report to the Partners is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ERNST & YOUNG LLP Boston, Massachusetts March 12, 1996 The accompanying notes are an integral part of these financial statements.
-8- AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP STATEMENT OF FINANCIAL POSITION December 31, 1995 and 1994 1995 1994 ASSETS Cash and cash equivalents $ 763,103 $ 837,988 Rents receivable, net of allowance for doubtful accounts of $20,000 and $50,000 at December 31, 1995 and 1994, respectively 11,190 258,991 Accounts receivable - affiliate 28,196 134,703 Equipment at cost, net of accumulated depreciation of $5,067,104 and $6,662,559 at December 31, 1995 and 1994, respectively 2,452,884 3,475,123 Total assets $ 3,255,373 $ 4,706,805 LIABILITIES AND PARTNERS' CAPITAL Notes payable $ 27,614 $ 372,398 Accrued interest 148 11,861 Accrued liabilities 21,914 17,414 Accrued liabilities - affiliate 15,007 1,949 Deferred rental income 29,337 20,682 Cash distributions payable to partners 146,615 390,975 Total liabilities 240,635 815,279 Partners' capital (deficit): General Partners (139,770) (131,002) Limited Partnership Interests (774,130 Units; initial purchase price of $25 each) 3,154,508 4,022,528 Total partners' capital 3,014,738 3,891,526 Total liabilities and partners' capital $ 3,255,373 $ 4,706,805
The accompanying notes are an integral part of these financial statements. -1- The accompanying notes are an integral part of these financial statements. -10-
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP STATEMENT OF OPERATIONS for the years ended December 31, 1995, 1994 and 1993 1995 1994 1993 Income: Lease revenue $ 759,978 $ 1,559,404 $ 2,455,320 Interest income 43,608 37,810 25,167 Gain on sale of equipment 358,128 325,112 348,313 Total income 1,161,714 1,922,326 2,828,800 Expenses: Depreciation 441,939 1,146,582 2,007,019 Write-down of equipment 580,300 -- -- Interest expense 3,627 26,254 71,913 Interest expense - affiliate -- 2,955 -- Equipment management fees - affiliate 37,999 77,970 122,766 Operating expenses - affiliate 94,944 115,534 78,176 Total expenses 1,158,809 1,369,295 2,279,874 Net income $ 2,905 $ 553,031 $ 548,926 Net income per limited partnership unit $ -- $ 0.71 $ 0.70 Cash distributions declared per limited partnership unit $ 1.12 $ 2.00 $ 2.00
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL for the years ended December 31, 1995, 1994 and 1993 General Partners Recognized Owners Amount Units Amount Total Balance at December 31, 1992 $ (110,743) 774,130 $ 6,028,110 $ 5,917,367 Net income - 1993 5,489 -- 543,437 548,926 Cash distributions declared (15,639) -- (1,548,260) (1,563,899) Balance at December 31, 1993 (120,893) 774,130 5,023,287 4,902,394 Net income - 1994 5,530 -- 547,501 553,031 Cash distributions declared (15,639) -- (1,548,260) (1,563,899) Balance at December 31, 1994 (131,002) 774,130 4,022,528 3,891,526 Net income - 1995 29 -- 2,876 2,905 Cash distributions declared (8,797) -- (870,896) (879,693) Balance at December 31, 1995 $ (139,770) 774,130 $ 3,154,508 $ 3,014,738
The accompanying notes are an integral part of these financial statements. -11-
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS for the years ended December 31, 1995, 1994 and 1993 1995 1994 1993 Cash flows from (used in) operating activities: Net income $ 2,905 $ 553,031 $ 548,926 Adjustments to reconcile net income to net cash from operating activities: Depreciation 441,939 1,146,582 2,007,019 Write-down of equipment 580,300 -- -- Gain on sale of equipment (358,128) (325,112) (348,313) Decrease in allowance for doubtful accounts (30,000) -- (25,000) Changes in assets and liabilities: Decrease (increase) in: rents receivable 277,801 53,853 140,622 accounts receivable - affiliate 106,507 (39,488) 198,552 Increase (decrease) in: accrued interest (11,713) (26,569) (30,116) accrued liabilities 4,500 (46,086) (8,000) accrued liabilities - affiliate 13,058 (10,486) (16,614) deferred rental income 8,655 (5,568) (774) Net cash from operating activities 1,035,824 1,300,157 2,466,302 Cash flows from (used in) investing activities: Purchase of equipment -- (12,620) -- Proceeds from equipment sales 358,128 328,523 521,030 Net cash from investing activities 358,128 315,903 521,030 Cash flows from (used in) financing activities: Proceeds from notes payable -- -- 179,813 Principal payments - notes payable (344,784) (402,660) (912,940) Distributions paid (1,124,053) (1,563,899) (1,563,899) Net cash used in financing activities (1,468,837) (1,966,559) (2,297,026) Net increase (decrease) in cash and cash equivalents (74,885) (350,499) 690,306 Cash and cash equivalents at beginning of year 837,988 1,188,487 498,181 Cash and cash equivalents at end of year $ 763,103 $ 837,988 $ 1,188,487 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 15,340 $ 55,778 $ 102,029
- -20- AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP Notes to the Financial Statements December 31, 1995 NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS The Partnership was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the "Uniform Act") on September 29, 1987, for the purpose of acquiring and leasing to third parties a diversified portfolio of capital equipment. Partners' capital initially consisted of contributions of $1,000 from the Managing General Partner (AFG Leasing Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). On December 30, 1987 the Partnership issued 774,130 units representing assignments of limited partnership interests (the "Units") to 1,397 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. Subsequent to the Partnership's Closing, the Partnership had five General Partners: AFG Leasing Incorporated, a Massachusetts corporation, Kestutis J. Makaitis, Daniel J. Roggemann, Martin F. Laughlin and Geoffrey A. MacDonald (collectively the "General Partners"). Messrs. Makaitis, Roggemann and Laughlin subsequently elected to withdraw as Individual General Partners. The General Partners, each of which is affiliated with American Finance Group ("AFG"), a Massachusetts partnership, are not required to make any other capital contributions to the Partnership, except as May be required under the Uniform Act and Section 6.1(b) of the Amended and Restated Agreement and Certificate of Limited Partnership (the "Restated Agreement"). AFG is a successor to the business of American Finance Group, Inc., a Massachusetts corporation engaged since its inception in 1980 in various aspects of the equipment leasing business. In 1990, certain members of AFG's management, principally Geoffrey A. MacDonald, Chief Executive Officer and co-founder of AFG, established AFG Holdings (Massachusetts) Limited Partnership ("Holdings Massachusetts") to acquire ownership and control of AFG. Holdings Massachusetts effected this event by acquiring all of the equity interests of AFG's two partners, AFG Holdings Illinois Limited Partnership ("Holdings Illinois") and AFG Corporation. Holdings Massachusetts incurred significant indebtedness to finance this acquisition, a significant portion of which was scheduled to mature in 1995. On December 16, 1994, the senior lender to Holdings Massachusetts (the "Senior Lender") assumed control of its security interests in Holdings Illinois and AFG Corporation and sold all such interests to GDE Acquisitions Limited Partnership, a Massachusetts limited partnership owned and controlled entirely by Gary D. Engle, President and a member of the Executive Committee of AFG. As a result of this transaction, GDE Acquisitions Limited Partnership acquired all of the assets, rights and obligations of AFG from the Senior Lender and assumed control of AFG. Geoffrey A. MacDonald remains as Chief Executive Officer of AFG and member of its Executive Committee. Significant operations commenced December 30, 1987 when the Partnership made its initial equipment purchase. Pursuant to the Restated Agreement, as amended, Distributable Cash From Operations and Distributable Cash From Sales or Refinancings will be allocated 99% to the Recognized Owners and 1% to the General Partners until Payout and 85% to the Recognized Owners and 15% to the General Partners after Payout. Payout will occur when the Recognized Owners have received distributions equal to their original investment plus a cumulative annual return of 10% (compounded quarterly) on undistributed invested capital. Under the terms of a Management Agreement between the Partnership and AFG, management services are provided by AFG to the Partnership at fees which the Managing General Partner believes to be competitive for similar services. (Also see Note 4.) AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of Cash Flows The Partnership considers liquid investment instruments purchased with a maturity of three months or less to be cash equivalents. From time to time, the Partnership invests excess cash with large institutional banks in reverse repurchase agreements with overnight maturities. Under the terms of the agreements, title to the underlying securities passes to the Partnership. The securities underlying the agreements are book entry securities. At December 31, 1995, the Partnership had $760,000 invested in reverse repurchase agreements secured by U.S. Treasury Bills or interests in U.S. Government securities. Revenue Recognition Rents are payable to the Partnership monthly, quarterly or semi-annually and no significant amounts are calculated on factors other than the passage of time. The leases are accounted for as operating leases and are noncancellable. Rents received prior to their due dates are deferred. Future minimum rents of $979,127 are due as follows: For the year ending December 31, 1996 $ 486,996 1997 347,281 1998 70,766 1999 42,334 2000 31,750 Total $ 979,127
Revenue from major individual lessees which accounted for 10% or more of lease revenue during the years ended December 31, 1995, 1994 and 1993 is as follows: 1995 1994 1993 Northwest Airlines, Inc. $ 276,941 $ 339,581 $ 402,458 ING Aviation Leasing $ 135,942 -- -- Marriott Corporation -- $ 187,762 $ 249,378 Equicor, Incorporated -- $ 187,196 -- Bally's Health and Tennis Corporation -- $ 185,940 $ 444,726 Healthcare Financial Services, Inc. -- -- $ 428,048
During 1995, the Partnership and other affiliated partnerships, executed a renegotiated and extended lease agreement in connection with two DC-10-40 aircraft leased by Northwest Airlines, Inc. ("Northwest"). Pursuant to the agreement, Northwest will continue to lease these aircraft until September 3, 2000. The Partnership, which owns a 1.4% interest in these aircraft, will receive $42,334 each year through December 31, 1999 and $31,750 during the year ending December 31, 2000. At December 31, 1993, the Managing General Partner decreased the aggregate amount reserved against potentially uncollectable rents to $50,000. This caused an increase in lease revenue of $25,000 in 1993. The reserve was reviewed and considered adequate as of December 31, 1994. During 1995, this reserve was further reduced to $20,000 resulting in an increase in lease revenue of $30,000. It cannot be determined whether the Partnership will recover any past due rents in the future; however, the Managing General Partner will pursue the collection of all such items. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Equipment on Lease All equipment was acquired from AFG, one of its affiliates, including other equipment leasing programs sponsored by AFG, or from third-party sellers. Equipment cost represents asset base price plus acquisition fees and was determined in accordance with the Restated Agreement, as amended, and certain regulatory guidelines. Asset base price is affected by the relationship of the seller to the Partnership as summarized herein. Where the seller of the equipment was AFG or an affiliate, asset base price was the lower of (i) the actual price paid for the equipment by AFG or the affiliate plus all actual costs accrued by AFG or the affiliate while carrying the equipment less the amount of all rents earned by AFG or the affiliate prior to selling the equipment or (ii) fair market value as determined by the Managing General Partner in its best judgment, including all liens and encumbrances on the equipment and other actual expenses. Where the seller of the equipment was a third party who did not manufacture the equipment, asset base price was the lower of (i) the price invoiced by the third party or (ii) fair market value as determined by the Managing General Partner. Where the seller of the equipment was a third party who also manufactured the equipment, asset base price was the manufacturer's invoice price, which price was considered to be representative of fair market value. Depreciation The Partnership's depreciation policy is intended to allocate the cost of equipment over the period during which it produces economic benefit. The principal period of economic benefit is considered to correspond to each asset's primary lease term, which term generally represents the period of greatest revenue potential for each asset. Accordingly, to the extent that an asset is held on primary lease term, the Partnership depreciates the difference between (i) the cost of the asset and (ii) the estimated residual value of the asset on a straight-line basis over such term. For purposes of this policy, estimated residual values represent estimates of equipment values at the date of primary lease expiration. To the extent that an asset is held beyond its primary lease term, the Partnership continues to depreciate the remaining net book value of the asset on a straight-line basis over the asset's remaining economic life. Periodically, the Managing General Partner evaluates the net carrying value of equipment to determine whether it exceeds estimated net realizable value. Adjustments to reduce the net carrying value of equipment are recorded in those instances where estimated net realizable value is considered to be less than net carrying value. Such adjustments are reflected separately on the accompanying Statement of Operations as Write-Down of Equipment. The ultimate realization of residual value for any type of equipment is dependent upon many factors, including AFG's ability to sell and re-lease equipment. Changing market conditions, industry trends, technological advances, and many other events can converge to enhance or detract from asset values at any given time. AFG attempts to monitor these changes in order to identify opportunities which may be advantageous to the Partnership and which will maximize total cash returns for each asset. Allocation of Profits and Losses For financial statement purposes, net income or loss is allocated to each Partner according to their respective ownership percentages (99% to the Recognized Owners and 1% to the General Partners). See Note 6 concerning allocation of income or loss for income tax purposes. Net Income and Cash Distributions Per Unit Net income and cash distributions per Unit are based on 774,130 Units outstanding during each of the three years in the period ended December 31, 1995 and computed after allocation of the General Partners' 1% share of net income and cash distributions. Accrued Liabilities - Affiliate Unpaid operating expenses paid by AFG on behalf of the Partnership are reported as Accrued Liabilities - Affiliate. (See Note 4.) Provision for Income Taxes No provision or benefit from income taxes is included in the accompanying financial statements. The Partners are responsible for reporting their proportionate shares of the Partnership's taxable income or loss and other tax attributes on their tax returns. Impact of Recently Issued Accounting Standards In March 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Partnership will adopt Statement 121 in the first quarter of 1996 and, based on current circumstances, does not believe the impact of adoption to be material to the financial statements of the Partnership.
NOTE 3 - EQUIPMENT The following is a summary of equipment owned by the Partnership at December 31, 1995. In the opinion of AFG, the acquisition cost of the equipment did not exceed its fair market value. Lease Term Equipment Equipment Type (Months) at Cost Location Aircraft 36-108 $ 5,665,903 MN/Foreign Materials handling 1-84 479,664 CA/FL/LA/MI/NC/OR/TX/WI Retail store fixtures 1-84 341,058 IN Locomotives 57-60 273,767 GA/MI/MO/OH/OK Communications 36-84 246,374 CT/MA/ME/NH/NJ/NY/PA/RI/VA/VT Manufacturing 60 195,271 CA Medical 58 162,007 LA Computers & peripherals 1-60 148,665 MI/PA Furniture & fixtures 17-84 7,279 CA Total equipment cost 7,519,988 Accumulated depreciation (5,067,104) Equipment, net of accumulated depreciation $ 2,452,884
In certain cases, the cost of the Partnership's equipment represents a proportionate ownership interest. The remaining interests are owned by AFG or an affiliated equipment leasing program sponsored by AFG. The Partnership and each affiliate individually report, in proportion to their respective ownership interests, their respective shares of assets, liabilities, revenues, and expenses associated with the equipment. Proportionate equipment ownership enables the Partnership to further diversify its equipment portfolio by participating in the ownership of selected assets, thereby reducing the general levels of risk which could result from a concentration in any single equipment type, industry or lessee. At December 31, 1995, the Partnership's equipment portfolio included equipment having a proportionate original cost of $5,940,809, representing approximately 79% of total equipment cost. Certain of the equipment and related lease payment streams were used to secure term loans with third-party lenders. The preceding summary of equipment includes leveraged equipment having an original cost of approximately $341,058 which had been fully depreciated at December 31, 1995. (See Note 5.) Generally, the costs associated with maintaining, insuring and operating the Partnership's equipment are incurred by the respective lessees pursuant to terms specified in their individual lease agreements with the Partnership. As equipment is sold to third parties, or otherwise disposed of, the Partnership recognizes a gain or loss equal to the difference between the net book value of the equipment at the time of sale or disposition and the proceeds realized upon sale or disposition. The ultimate realization of estimated residual value in the equipment is dependent upon, among other things, AFG's ability to maximize proceeds from selling or re-leasing the equipment upon expiration of the primary lease terms. At December 31, 1995, the Partnership held no equipment for sale or re-lease. The Partnership recorded a write-down of the carrying value of its interest in an L1011-50 aircraft representing an impairment, during the year ended December 31, 1995. The resulting charge, $580,300 ($0.74 per limited partnership unit) in 1995 was based on a comparison of the estimated net realizable value and corresponding carrying value for the Partnership's interest in the aircraft.
NOTE 4 - RELATED PARTY TRANSACTIONS All operating expenses incurred by the Partnership are paid by AFG on behalf of the Partnership and AFG is reimbursed at its actual cost for such expenditures. Fees and other costs incurred during each of the three years in the period ended December 31, 1995, which were paid or accrued by the Partnership to AFG or its Affiliates, are as follows: 1995 1994 1993 Equipment management fees $ 37,999 $ 77,970 $ 122,766 Interest expense - affiliate -- 2,955 -- Administrative charges 20,052 12,000 14,955 Reimbursable operating expenses due to third parties 74,892 103,534 63,221 Total $ 132,943 $ 196,459 $ 200,942
As provided under the terms of the Management Agreement, AFG is compensated for its services to the Partnership. Such services include all aspects of acquisition, management and sale of equipment. For acquisition services, AFG is compensated by an amount equal to 4.75% of Equipment Base Price paid by the Partnership. For management services, AFG is compensated by an amount equal to the lesser of (i) 5% of gross lease rental revenues or (ii) fees which the Managing General Partner reasonably believes to be competitive for similar services for similar equipment. Both of these fees are subject to certain limitations defined in the Management Agreement. Compensation to AFG for services connected to the sale of equipment is calculated as the lesser of (i) 3% of gross sale proceeds or (ii) one-half of reasonable brokerage fees otherwise payable under arm's length circumstances. Payment of the remarketing fee is subordinated to Payout and is subject to certain limitations defined in the Management Agreement. Interest expense - affiliate represents interest incurred on legal costs in connection with a state sales tax dispute involving certain equipment owned by the Partnership and other affiliated investment programs sponsored by AFG. Legal costs incurred by AFG to resolve this matter and the interest thereon was allocated to the Partnership and other affected investment programs. Administrative charges represent amounts owed to AFG, pursuant to Section 10.4 of the Restated Agreement, as amended, for persons employed by AFG who are engaged in providing administrative services to the Partnership. Reimbursable operating expenses due to third parties represent costs paid by AFG on behalf of the Partnership which are reimbursed to AFG. All equipment was acquired from AFG, one of its affiliates, including other equipment leasing programs sponsored by AFG, or from third-party sellers. The Partnership's Purchase Price was determined by the method described in Note 2. All rents and proceeds from the sale of equipment are paid directly to either AFG or to a lender. AFG temporarily deposits collected funds in a separate interest-bearing escrow account prior to remittance to the Partnership. At December 31, 1995, the Partnership was owed $28,196 by AFG for such funds and the interest thereon. These funds were remitted to the Partnership in January 1996. On August 18, 1995, Atlantic Acquisition Limited Partnership ("AALP"), a newly formed Massachusetts limited partnership owned and controlled by certain principals of AFG, commenced a voluntary cash Tender Offer (the "Offer") for up to approximately 45% of the outstanding units of limited partner interest in this Partnership and 20 affiliated partnerships sponsored and managed by AFG. The Offer was subsequently amended and supplemented in order to provide additional disclosure to unitholders; increase the offer price; reduce the number of units sought to approximately 35% of the outstanding units; and extend the expiration date of the Offer to October 20, 1995. Following commencement of the Offer, certain legal actions were initiated by interested persons against AALP, each of the general partners (4 in total) of the 21 affected programs, and various other affiliates and related parties. One action, a class action brought in the United States District Court for the District of Massachusetts (the "Court") on behalf of the unitholders (limited partners), sought to enjoin the Offer and obtain unspecified monetary damages. A settlement of this litigation was approved by the Court on November 15, 1995. A second class action, brought in the Superior Court of the Commonwealth of Massachusetts (the "Superior Court") seeking to enjoin the Offer, obtain unspecified monetary damages, and intervene in the first class action, was dismissed by the Superior Court. The Plaintiffs have filed an appeal in this matter. The limited partners of the Partnership tendered approximately 76,690 units or 9.91% of the total outstanding units of the Partnership to AALP. The operations of the Partnership are not expected to be adversely affected by these proceedings or settlements. NOTE 5 - NOTES PAYABLE Notes payable at December 31, 1995, consisted of an installment note of $27,614 payable to a bank. The installment note is non-recourse, with an interest rate of 7.13% and is collateralized by the equipment and assignment of related lease payments. The installment note will be fully amortized by non-cancelable rents. The annual maturities of the installment note payable are as follows: For the year ending December 31, 1996 $ 25,390 1997 2,224 Total $ 27,614 NOTE 6 - INCOME TAXES The Partnership is not a taxable entity for federal income tax purposes. Accordingly, no provision for income taxes has been recorded in the accounts of the Partnership. For financial statement purposes, the Partnership allocates net income or loss to each class of partner according to their respective ownership percentages (99% to the Recognized Owners and 1% to the General Partners). This convention differs from the income or loss allocation requirements for income tax and Dissolution Event purposes as delineated in the Restated Agreement, as amended. For income tax purposes, the Partnership allocates net income or loss in accordance with the provisions of such agreement. The Restated Agreement, as amended, requires that upon dissolution of the Partnership, the General Partners will be required to contribute to the Partnership an amount equal to any negative balance which may exist in the General Partners' tax capital account. At December 31, 1995, the General Partners had a positive tax capital account balance.
The following is a reconciliation between net income reported for financial statement and federal income tax reporting purposes for the years ended December 31, 1995, 1994 and 1993: 1995 1994 1993 Net income $ 2,905 $ 553,031 $ 548,926 Financial statement depreciation in excess of tax depreciation 206,107 533,415 1,212,187 Write-down of equipment 580,300 -- -- Prepaid rental income 8,655 (5,568) (774) Other (30,000) (76,370) 47,884 Net income for federal income tax reporting purposes $ 767,967 $ 1,004,508 $ 1,808,223
The following is a reconciliation between partners' capital reported for financial statement and federal income tax reporting purposes for the years ended December 31, 1995 and 1994: 1995 1994 Partners' capital $ 3,014,738 $ 3,891,526 Add back selling commissions and organization and offering costs 818,141 818,141 Financial statement distributions in excess of tax distributions 1,466 3,910 Cumulative difference between federal income tax and financial statement income (loss) (1,554,440) (2,319,502) Partners' capital for federal income tax reporting purposes $ 2,279,905 $ 2,394,075 Financial statement distributions in excess of tax distributions and cumulative difference between federal income tax and financial statement income (loss) represent timing differences.
NOTE 7 - LEGAL PROCEEDINGS In 1991, a lessee of the Partnership, Healthcare Financial Services, Inc. and Healthcare International, Inc., the guarantor of certain lease obligations of Healthcare Financial Services, Inc., (collectively, the "Debtors") filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code. The Partnership and certain other AFG-sponsored programs filed a proof of claim in this case. A portion of the Partnership's affected equipment, having an original cost of $1,274,487, was sold in 1993 and resulted in a net gain of approximately $4,000 for financial statement purposes. The remaining equipment, having an original cost of $162,007 and representing approximately 2% of the Partnership's aggregate equipment portfolio at December 31, 1995, is fully depreciated and is being rented to the Debtors on a month-to-month basis. All rental payments owed through December 31, 1995 have been collected. The Chapter 11 proceeding of the Debtors were dismissed on July 21, 1994. This bankruptcy did not have a material adverse effect on the financial position of the Partnership. On March 15, 1993, Herman's Sporting Goods, Inc., a lessee of the Partnership (the "Debtor"), filed for protection under Chapter 11 of the Bankruptcy Code in the United States District Court, Trenton, New Jersey. The Chapter 11 proceeding remains pending. Certain unpaid rents due to the Partnership were scheduled by the Debtor as unsecured claims. Upon order of the Bankruptcy Court, renewal rental schedules for all equipment leased to the Debtor by the Partnership were executed and are currently in effect. On August 23, 1994, the Court confirmed the Debtor's First Modified Plan of Reorganization, as Amended and Modified, and the Partnership has received two of the three scheduled payments from the Debtor with respect to its unsecured claims. The Partnership's equipment portfolio includes equipment on lease to the Debtor with an original cost of approximately $246,000, which is fully depreciated for financial reporting purposes and represents approximately 3% of the Partnership's aggregate equipment portfolio at December 31, 1995. All scheduled renewal lease rents from the Debtor have been collected to date and the Partnership has not experienced any material losses as a result of this bankruptcy. NOTE 8 - SUBSEQUENT EVENT On January 1, 1995, AFG entered into a series of agreements with PLM International, Inc., a Delaware corporation headquartered in San Francisco, California ("PLM"), whereby PLM would: (i) purchase, in a multi-step transaction, certain of AFG's assets and (ii) provide accounting, asset management and investor services to AFG and certain of AFG's affiliates, including the Partnership and all other equipment leasing programs managed by AFG (the "Investment Programs"). On January 3, 1996, AFG and PLM executed an amendment to the 1995 agreements whereby PLM purchased: (i) AFG's lease origination business and associated contracts, (ii) the rights to the name "American Finance Group" and associated logo, and (iii) certain furniture, fixtures and computer software. PLM hired AFG's marketing force and certain other support personnel effective January 1, 1996 in connection with the transaction and relinquished its responsibilities under the 1995 agreements to provide accounting, asset management and investor services to AFG, its affiliates and the Investment Programs after December 31, 1995. Accordingly, AFG and its affiliates retain ownership and control and all authority and rights with respect to each of the general partners or managing trustees of the Investment Programs; and AFG, as Manager, will continue to provide accounting, asset management and investor services to the Partnership. Pursuant to the 1996 amendment to the 1995 agreements, AFG and certain of its affiliates agreed not to compete with the lease origination business sold to PLM for a period of five years. AFG reserved the right to satisfy all equipment needs of the Partnership and all other Investment Programs and reserved certain other rights not material to the Partnership. AFG also agreed to change its name, except where it is used in connection with the Investment Programs. AFG's management considers the amendment to the 1995 agreements to be in the best interest of AFG and the Partnership. -21- AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST OF EQUIPMENT DISPOSED for the years ended December 31, 1995, 1994 and 1993 The Partnership classifies all rents from leasing equipment as lease revenue. Upon expiration of the primary lease terms, equipment may be sold, rented on a month-to-month basis or re-leased for a defined period under a new or extended lease agreement. The proceeds generated from selling or re-leasing the equipment, in addition to any month-to-month revenues, represent the total residual value realized for each item of equipment. Therefore, the financial statement gain or loss, which reflects the difference between the net book value of the equipment at the time of sale or disposition and the proceeds realized upon sale or disposition, may not reflect the aggregate residual proceeds realized by the Partnership for such equipment.
The following is a summary of cash excess associated with equipment dispositions occurring in the years ended December 31, 1995, 1994 and 1993. 1995 1994 1993 Rents earned prior to disposal of equipment, net of interest charges $ 2,438,614 $ 3,575,224 $ 4,573,586 Sale proceeds realized upon disposition of equipment 358,128 328,523 521,030 Total cash generated from rents and equipment sale proceeds 2,796,742 3,903,747 5,094,616 Original acquisition cost of equipment disposed 2,617,694 3,238,512 4,724,006 Excess of total cash generated to cost of equipment disposed $ 179,048 $ 665,235 $ 370,610
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS, SALES AND REFINANCINGS for the year ended December 31, 1995 Sales and Operations Refinancings Total Net income (loss) $ (355,223) $ 358,128 $ 2,905 Add back: Depreciation 441,939 -- 441,939 Write-down of equipment 580,300 -- 580,300 Management fees 37,999 -- 37,999 Decrease in allowance for doubtful accounts (30,000) -- (30,000) Less: Principal reduction of notes payable (344,784) -- (344,784) Cash from operations, sales and refinancings 330,231 358,128 688,359 Less: Management fees (37,999) -- (37,999) Distributable cash from operations, sales and refinancings 292,232 358,128 650,360 Other sources and uses of cash: Cash at beginning of year 837,988 -- 837,988 Net change in receivables and accruals 398,808 -- 398,808 Less: Cash distributions paid (765,925) (358,128) (1,124,053) Cash at end of year $ 763,103 -- $ 763,103
AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP SCHEDULE OF COSTS REIMBURSED TO THE MANAGING GENERAL PARTNER AND ITS AFFILIATES AS REQUIRED BY SECTION 10.4 OF THE AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP December 31, 1995 For the year ended December 31, 1995, the Partnership reimbursed the Managing General Partner and its Affiliates for the following costs: Operating expenses $ 82,424 EX-27 3
5 12-MOS DEC-31-1995 DEC-31-1995 763,103 0 59,386 20,000 0 802,489 7,519,988 5,067,104 3,255,373 213,021 27,614 0 0 0 3,014,738 3,255,373 0 1,161,714 0 0 1,155,182 0 3,627 2,905 0 2,905 0 0 0 2,905 0 0
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