-----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, QRIIT2xIFyF9VnmAIzhgjIBU+RgbdptyRnrTgWgxDwL7RZ9oWsQ9I9dhD9pBbkMQ 6D5pabqA00kjM2RokUjDRw== 0000912057-97-010601.txt : 19970329 0000912057-97-010601.hdr.sgml : 19970329 ACCESSION NUMBER: 0000912057-97-010601 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INCOME PARTNERS IV B LP CENTRAL INDEX KEY: 0000826930 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 043024966 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17523 FILM NUMBER: 97566349 BUSINESS ADDRESS: STREET 1: 98 NORTH WASHINGTON ST CITY: BOSTON STATE: MA ZIP: 02114 BUSINESS PHONE: 618545800 MAIL ADDRESS: STREET 1: 98 NORTH WASHINGTON ST CITY: BOSTON STATE: MA ZIP: 02114 10-K 1 10-K 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, 1996 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 0-17523 American Income Partners IV-B Limited Partnership - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-3024966 - --------------------------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 98 North Washington Street, 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: 873,935 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 |X| 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, 1996 (Part I and II) AMERICAN INCOME PARTNERS IV-B 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 8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 8 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 11 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 12 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 16-17 PART I ITEM 1. BUSINESS. (a) General Development of Business AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP (the Partnership) was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the Uniform Act) on September 29, 1988, 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 IV Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). On December 29, 1988, the Partnership issued 873,935 units, representing assignments of limited partnership interests (the Units) to 1,331 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. On December 31, 1996, the General Partners of the Partnership caused the Partnership's Amended and Restated Agreement and Certificate of Limited Partnership (the Restated Agreement, as amended) to be canceled by filing a Certificate of Cancellation with the Massachusetts Secretary under the Uniform Act. Accordingly, the Partnership was dissolved on December 31, 1996. The Partnership originally had four General Partners: AFG Leasing IV Incorporated, a Massachusetts corporation established in 1987 and a wholly-owned subsidiary of American Finance Group (AFG), a Massachusetts general partnership, which subsequently became Equis Financial Group Limited Partnership (collectively referred to herein as AFG), Daniel J. Roggemann, Martin F. Laughlin, and Geoffrey A. MacDonald (collectively the General Partners). Messrs. Roggemann and Laughlin subsequently elected to withdraw as Individual General Partners. AFG Leasing IV Incorporated is also the general partner or managing general partner of certain affiliated partnerships sponsored by AFG. (b) Financial Information About Industry Segments The Partnership was 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 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 were to acquire and lease equipment which would: 1. Generate quarterly cash distributions; 2. Preserve and protect invested capital; and 3. Maintain substantial residual value for ultimate sale. 3 The Partnership had the additional objective of providing certain federal income tax benefits. The Closing Date of the Offering of Units of the Partnership was December 29, 1988. The initial purchase of equipment and the associated lease commitments occurred on December 30, 1988. The Partnership completed the disposition of its entire equipment portfolio on September 30, 1996 and the dissolution of the Partnership occurred on December 31, 1996. The Partnership had no employees; however, it entered into a Management Agreement with AF/AIP Programs Limited Partnership. At the same time, AF/AIP Programs Limited Partnership entered into an identical Management Agreement with AFG (the Manager) (collectively, the Management Agreement). The Manager's role, among other things, was 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 was 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 was 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 was 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. Revenue from major individual lessees which accounted for 10% or more of lease revenue during the years ended December 31, 1996, 1995 and 1994 is incorporated herein by reference to Note 2 to the financial statements in the 1996 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the Securities and Exchange Commission. Equis Financial Group Limited Partnership (Equis) is a Massachusetts partnership formerly known as American Finance Group (AFG). AFG was established in 1988 as a Massachusetts general partnership and succeeded American Finance Group, Inc., a Massachusetts corporation organized in 1980. Equis and its subsidiaries (collectively, the Company) are engaged in various aspects of the equipment leasing business, including Equis' role as Equipment Manager or Advisor to the Partnership and several other Direct-Participation equipment leasing programs sponsored or co-sponsored by AFG (the Other Investment Programs). The Company arranges to broker or originate equipment leases, acts as remarketing agent and asset manager, and provides leasing support services, such as billing, collecting and asset tracking. The general partner of Equis, with a 1% controlling interest, is Equis Corporation, a Massachusetts corporation owned and controlled entirely by Gary D. Engle, its President and Chief Executive Officer. Equis Corporation also owns a controlling 1% general partner interest in Equis' 99% limited partner, GDE Acquisition Limited Partnership (GDE LP). Equis Corporation and GDE LP were established in December 1994 by Mr. Engle for the sole purpose of acquiring the business of AFG. 4 In January 1996, the Company sold certain assets of AFG relating primarily to the business of originating new leases, and the name "American Finance Group," and its acronym to a third party (the Buyer). AFG changed its name to Equis Financial Group Limited Partnership after the sale was concluded. Pursuant to terms of the sale agreements, Equis agreed not to compete with the Buyer's lease origination business for a period of five years; however, Equis is permitted to originate certain equipment leases, principally those involving noninvestment grade lessees and ocean-going vessels, which are not in competition with the Buyer. In addition, the sale agreements specifically reserved to Equis the rights to continue using the name American Finance Group and its acronym in connection with the Partnership and the Other Investment Programs and to continue managing all assets owned by the Partnership and the Other Investment Programs, including the right to satisfy all required equipment acquisitions utilizing either brokers or the Buyer. Geoffrey A. MacDonald, Chairman of Equis Corporation and Gary D. Engle agreed not to compete with the sold business on terms and conditions similar to those for the Company. (d) Financial Information About Foreign and Domestic Operations and Export Sales Not applicable. ITEM 2. PROPERTIES. None. ITEM 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings to which the Partnership is a party or which involve any of its equipment or leases. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 5 PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S SECURITIES AND RELATED SECURITY HOLDER MATTERS. (a) Market Information There was no public market for the resale of the Units. (b) Approximate Number of Security Holders At December 31, 1996, there were no 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 were determined and distributed to the Partners quarterly. Distributions in 1996 and 1995 were as follows: GENERAL RECOGNIZED TOTAL PARTNERS OWNERS Total 1996 distributions $3,820,152 $ 38,202 $3,781,950 Total 1995 distributions 1,268,972 12,690 1,256,282 ---------- ---------- ---------- Total $5,089,124 $ 50,892 $5,038,232 ========== ========== ========== Distributions payable at December 31, 1995 were $275,863. There were no distributions payable at December 31, 1996. 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 6 secured by such equipment to the extent deemed necessary or appropriate by the Managing General Partner, or (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 10.5% (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 10.5% (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. The Partnership did not achieve Payout. Distributable Cash From Operations and Distributable Cash From Sales or Refinancings (Distributions) were distributed within 45 days after the completion of each quarter, beginning with the first full quarter following the Partnership's Closing Date. The Partnership has distributed $21,238,799 to the Recognized Owners and $214,533 to the General Partners since inception. Substantially all of the distributions to the Recognized Owners represent a return of capital. ITEM 6. SELECTED FINANCIAL DATA. Incorporated herein by reference to the section entitled Selected Financial Data in the 1996 Annual Report. 7 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 1996 Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Incorporated herein by reference to the financial statements and supplementary data included in the 1996 Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 8 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP. (a-b) Identification of Directors and Executive Officers The Partnership has had no Directors or Officers. As indicated in Item 1 of this report, AFG Leasing IV Incorporated was the Managing General Partner of the Partnership. Under the Restated Agreement, as amended, the Managing General Partner was responsible for the operation of the Partnership's properties and the Recognized Owners have had 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 of the Partnership as of March 15, 1997 were as follows: DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER OF THE PARTNERSHIP (SEE ITEM 13) NAME TITLE AGE TERM Geoffrey A. MacDonald Chairman, and a member of the 48 Until a Executive Committee of Equis and successor is President and a Director of the duly elected General Partner and qualified Gary D. Engle President and Chief Executive 48 Officer and a member of the Executive Committee of Equis Gary M. Romano Executive Vice President and Chief 37 Operating Officer of Equis and Clerk of the General Partner Michael J. Butterfield Vice President, Finance and 37 Treasurer of Equis and Treasurer of the General Partner James F. Livesey Vice President, Aircraft and 47 Vessels of Equis Sandra L. Simonsen Senior Vice President, Information 46 Systems of Equis Gail D. Ofgant Vice President, Lease Operations of 31 Equis (c) Identification of Certain Significant Persons None. 9 (d) Family Relationship No family relationship exists among any of the foregoing Partners, Directors or Executive Officers. (e) Business Experience Mr. MacDonald, age 48, is a co-founder of Equis' predecessor, AFG, Chairman and a member of the Executive Committee of Equis 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 48, is President, Chief Executive Officer and a member of the Executive Committee of Equis and President of AFG Realty Corporation. Mr. Engle is Vice President, and a Director of certain of Equis' 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 37, is Executive Vice President and Chief Operating Officer of Equis and certain of its affiliates and Clerk of the Managing General Partner. Mr. Romano joined AFG in November 1989 and was appointed Executive Vice President and Chief Operating Officer in April 1996. 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. Butterfield, age 37, is Vice President, Finance and Treasurer of Equis and Treasurer of the Managing General Partner. Mr. Butterfield joined AFG in June 1992 and was appointed Vice President, Finance and Treasurer in April 1996. Prior to joining AFG, Mr. Butterfield was an Audit Manager with Ernst & Young LLP, which he joined in 1987. Mr. Butterfield was employed in public accounting and industry positions in New Zealand and London (U.K.) prior to coming to the United States in 1987. Mr. Butterfield attained his Associate Chartered Accountant (A.C.A.) professional qualification in New Zealand and has completed his C.P.A. requirements in the United States. He holds a Bachelor of Commerce degree from the University of Otago, Dunedin, New Zealand. Mr. Livesey, age 47, is Vice President, Aircraft and Vessels of Equis. 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. 10 Ms. Simonsen, age 46, joined AFG in February 1990 and was promoted to Senior Vice President, Information Systems of Equis in April 1996. 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. Ms. Ofgant, age 31, is Vice President, Lease Operations of Equis and certain of its affiliates. Ms. Ofgant joined AFG in June 1989, and was promoted to Manager, Lease Operations in April 1994. In April 1996, Ms. Ofgant was appointed Vice President, Lease Operations. Prior to joining AFG, Ms. Ofgant was employed by Security Pacific National Trust Company. Ms. Ofgant holds a B.S. degree in Finance from Providence 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 The Partnership had no employees. However, under the terms of the Restated Agreement, as amended, the Partnership was 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. The Partnership did not 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 had no employees, as discussed in Item 11(a), pursuant to section 10.4 of the Restated Agreement, as amended, the Partnership incurred 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. 11 (e) Termination of Employment and Change of Control Arrangement There exists no remuneration plan or arrangement with the Individual General Partner or the Managing General Partner or its Affiliates which would have resulted 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 had 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 had 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). 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 IV Incorporated, an affiliate of AFG. (a) Transactions with Management and Others All operating expenses incurred by the Partnership were paid by AFG on behalf of the Partnership and AFG was 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, 1996 which were paid or accrued by the Partnership to AFG or its Affiliates, are as follows: 1996 1995 1994 Equipment management fees $ 43,215 $ 55,193 $ 97,368 Administrative charges 29,329 17,592 12,000 Reimbursable operating expenses due to third parties 96,555 55,877 52,581 -------- -------- -------- Total $169,099 $128,662 $161,949 ======== ======== ======== As provided under the terms of the Management Agreement, AFG was compensated for its services to the Partnership. Such services included all aspects of acquisition, management and sale of equipment. For acquisition services, AFG was compensated by an amount equal to 4.75% of Equipment Base Price paid by the Partnership. For management services, AFG was compensated by an amount equal to the 12 lesser of (i) 5% of gross lease rental revenue earned by the Partnership or (ii) fees which the Managing General Partner reasonably believed to be competitive for similar services for similar equipment. Both of these fees were subject to certain limitations defined in the Management Agreement. As Payout was not achieved, AFG received no compensation for services connected to the sale of equipment, under its subordinated remarketing agreement. Administrative charges represent amounts owed to AFG, pursuant to Section 10.4 of the Restated Agreement, as amended, for persons employed by AFG who were 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 were 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 were paid directly to either AFG or to a lender. AFG temporarily deposited collected funds in a separate interest-bearing escrow account prior to remittance to the Partnership. 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 (Recognized Owners), sought to enjoin the Offer and obtain unspecified monetary damages. A settlement of this litigation was approved by the Court on November 15, 1995. The Plaintiffs filed an appeal in this matter. On November 26, 1996, the United States Court of Appeals for the First Circuit handed down a decision affirming the Court's approval of the settlement. 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 Recognized Owners of the Partnership tendered 85,141 units or 9.74% of the total outstanding units of the Partnership to AALP. In September 1996, AALP sold these units to Equis for $368,074. On September 30, 1996, the Partnership sold all of its remaining equipment assets. The remarketing effort, described in Notes 1 and 4 to the financial statements, was undertaken jointly by 15 individual equipment leasing programs, consisting of the Partnership and 14 affiliated partnerships (Other Affected Partnerships). Thirteen of the programs, including the Partnership, sold all of their equipment assets (the Liquidated Programs); and two programs sold only their proportionate ownership interests in certain assets owned jointly with one or more of the Liquidated Programs (collectively, the Sale Assets). Substantially all of the Partnership's equipment assets of material value represented partial ownership interests whereby the Partnership owned less than a 100% interest in the equipment it sold. The remaining interests in such assets were owned by one or more of the Other Affected Partnerships. 13 On September 30, 1996, the Partnership and each of the Other Affected Partnerships executed individual purchase and sale agreements with RSL Finance Limited Partnership II (the Buyer) for all of the Sale Assets, except for one McDonnell Douglas MD-82 aircraft leased to Northwest Airlines, Inc. (the NWA Aircraft), hereafter the Sale Assets, as Revised. The NWA Aircraft, in which the Partnership owned a proportionate interest of 14.5%, was purchased by the lessee pursuant to a separate negotiation. The Partnership realized $1,332,848 of net sale proceeds for the Sale Assets, as Revised and $1,890,800 for the NWA Aircraft. The latter included early termination rental payments of $235,625 from the lessee. At the date of sale, the Sale Assets, as Revised and the NWA Aircraft had net book values of $1,187,754 and $1,771,276, respectively. In aggregate, the Partnership and the Other Affected Partnerships realized, prior to transaction costs, $32,997,000 for all of the Sale Assets, as Revised and $13,200,000 for the NWA Aircraft. Net proceeds from the NWA Aircraft were allocated to the owners of the NWA Aircraft according to their respective percentage ownership interests. Net proceeds from the Sale Assets, as Revised were allocated to the Partnership and to each of the Other Affected Partnerships based upon an apportionment of the sales price among all equipment comprising the Sale Assets, as Revised according to each asset's estimated re-sale value, as determined by an independent appraiser. The Buyer is a limited partnership established to acquire the Sale Assets, as Revised, and has no direct affiliation with the Partnership, the Other Affected Partnerships, the General Partners or AFG. The sole general partner of the Buyer is RSL Holdings, Inc. (RSL). An affiliate of RSL purchased a significant limited partnership interest in a direct-participation equipment leasing program co-sponsored by AFG in 1992. AFG acquired this interest in 1993 for cash and assumption of indebtedness. There have been no other business dealings between the Buyer and AFG and their affiliates. On October 10, 1996, the Managing General Partner entered into a Cross Partnership Agreement (the Agreement) with the general partners of certain of the Other Affected Partnerships participating in the sales transactions described above. Pursuant to the Agreement, the Partnership and each of the other partnerships agreed to set aside a contingency reserve for future liabilities. The Agreement provides that obligations of any individual partnership which are not associated with the sales transactions will directly reduce that partnership's reserve balance, whereas costs pertaining to the sales transactions will be allocated against the reserve balances of the Partnership and each of the other partnerships on a proportionate basis. If the reserve balance of the Partnership is depleted to zero, the reserve balances contributed by the other partnerships will be debited on a proportionate basis to cover the deficit. If the reserve balances of any one of the other partnerships is depleted to zero, the reserve balance of the Partnership and any other partnerships having a positive reserve balance shall be debited on a proportionate basis to cover the deficit. Upon termination of the Agreement, any remaining monies will be distributed to the partners of those partnerships with positive reserve balances. At December 31, 1996, the Partnership had a contingency reserve balance of $375,274. To the extent that this contingency reserve is not necessary to satisfy any unforeseen liabilities of the Partnership, it will be remitted to the Partners. (b) Certain Business Relationships None. 14 (c) Indebtedness of Management to the Partnership None. (d) Transactions with Promoters See Item 13(a) above. 15 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 * Statement of Financial Position at December 31, 1995 * Statement of Changes in Net Assets in Liquidation for the Period October 1, 1996 to December 31, 1996 * Statement of Operations for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 * Statement of Changes in Partners' Capital for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 * Statement of Cash Flows for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 * 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. * Incorporated herein by reference to the appropriate portion of the 1996 Annual Report to security holders for the year ended December 31, 1996. (See Part II). 16 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. 33-19513). 13 The 1996 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 Kristian Gerhard Jebsen Skipsrederi A/S, was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 as Exhibit 28(b) and is incorporated herein by reference. 99(b) Lease agreement with Northwest Airlines, Inc., was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 as Exhibit 28(c) and is incorporated herein by reference. 99(c) Lease agreement with Building Materials Corporation of America, was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 as Exhibit 99(e) and is incorporated herein by reference. 99(d) Lease agreement with Fred Meyer, Inc., was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 as Exhibit 28(a) and is incorporated herein by reference. (b) Reports on Form 8-K Report on Form 8-K was filed on October 3, 1996 describing the remarketing process and terms of sales. 17 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of American Income Partners IV-B Limited Partnership of our report dated March 7, 1997, included in the 1996 Annual Report to the Partners of American Income Partners IV-B Limited Partnership. ERNST & YOUNG LLP Boston, Massachusetts March 7, 1997 18 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 IV-B LIMITED PARTNERSHIP By: AFG Leasing IV Incorporated, a Massachusetts corporation and Managing General Partner of the Registrant By: /s/ Geoffrey A. MacDonald By: /s/ Gary D. Engle ------------------------------- --------------------------------- Geoffrey A. MacDonald Gary D. Engle Chairman, and a member of the President and Chief Executive Executive Committee of Equis and Officer and a member of the President and a Director of the Executive Committee of Equis Managing General Partner (Principal Executive Officer) Date: March 28, 1997 Date: March 28, 1997 ------------------------------ -------------------------------- By: /s/ Gary M. Romano By: /s/ Michael J. Butterfield ------------------------------- --------------------------------- Gary M. Romano Michael J. Butterfield Executive Vice President and Vice President, Finance and Chief Operating Officer of Equis and Treasurer of Equis and Treasurer Clerk of the Managing General Partner of the Managing General Partner (Principal Financial Officer) (Principal Accounting Officer) Date: March 28, 1997 Date: March 28, 1997 ------------------------------ -------------------------------- 19 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. 20 EX-13 2 EX-13 AMERICAN INCOME PARTNERS IV American Income Partners IV-B Limited Partnership Annual Report to the Partners, December 31, 1996 AMERICAN INCOME PARTNERS IV-B 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 3-5 FINANCIAL STATEMENTS: Report of Independent Auditors 6 Statement of Financial Position at December 31, 1995 7 Statement of Changes in Net Assets in Liquidation for the Period October 1, 1996 to December 31, 1996 8 Statement of Operations for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 9 Statement of Changes in Partners' Capital for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 10 Statement of Cash Flows for the Period January 1, 1996 to September 30, 1996 and for the Years Ended December 31, 1995 and 1994 11 Notes to the Financial Statements 12-21 ADDITIONAL FINANCIAL INFORMATION: Schedule of Excess (Deficiency) of Total Cash Generated to Cost of Equipment Disposed 23 Statement of Cash and Distributable Cash from Operations, Sales and Refinancings 24 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 25 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP 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. The discussion of the 1996 results, presented below, incorporates the nine month operating period ended September 30, 1996 and the three month liquidation period ended December 31, 1996. For each of the five years in the period ended December 31, 1996:
SUMMARY OF OPERATIONS 1996 1995 1994 1993 1992 Lease revenue $ 864,299 $ 1,103,850 $ 1,947,354 $ 3,451,518 $ 4,189,899 Net income (loss) $ 615,878 $ 781,201 $ 1,584,993 $ 19,499 $ (830,383) Per Unit: Net income (loss) $ 0.70 $ 0.88 $ 1.80 $ 0.02 $ (0.94) Cash distributions $ 4.33 $ 1.44 $ 2.00 $ 3.50 $ 3.75 FINANCIAL POSITION Total assets -- $ 4,009,008 $ 4,729,160 $ 5,477,334 $10,008,729 Total long-term obligations -- $ 120,313 $ 198,619 $ 354,739 $ 1,789,581 Partners' capital -- $ 3,579,548 $ 4,067,319 $ 4,247,850 $ 7,318,020
2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995 AND THE YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994 Results of Operations and Liquidity and Capital Resources American Income Partners IV-B Limited Partnership (the Partnership) was established in 1988 as a direct-participation equipment leasing program. The Partnership's principal purpose was (i) to acquire and lease a diversified portfolio of capital equipment to third-party lessees and (ii) to distribute the net cash flow realized from the Partnership's business operations to its Partners. The Partnership was capitalized with equity contributions of $21,848,375 from its Recognized Owners and $1,000 from its Managing General Partner. Following its inception, the Partnership acquired a diversified pool of capital equipment at an aggregate cost of $32,106,352, a significant portion of which was financed by third-party banks or other institutional lenders. On September 30, 1996, the Partnership sold substantially all of its assets and thereafter wound up its operations. The Partnership was dissolved on December 31, 1996. Organized as a limited-life entity, the Partnership was anticipated to be dissolved within approximately seven years of its formation. A significant portion of the Partnership's equipment assets, representing 75% of its original equipment portfolio, was sold in the ordinary course of business prior to September 30, 1996. On September 30, 1996, the remainder of the Partnership's equipment portfolio was sold to RSL Finance Limited Partnership II (the Buyer). Accordingly, the financial statements accompanying this discussion were prepared using the liquidation basis of accounting for the period October 1, 1996 through December 31, 1996. The Statement of Changes in Net Assets in Liquidation reflects the liquidation of assets during that period. A comparison of current and prior years' financial results is not presented because it is not considered meaningful due the dissolution of the Partnership and the liquidation of its assets. Prior to its dissolution, the Partnership's principal sources of revenue consisted of rental income from equipment leases and sales proceeds generated from the disposition of its equipment assets. Rental income was used first to extinguish indebtedness and second to pay the Partnership's management fees and operating expenses. Net cash flow from all sources, after satisfaction of debt service, management fees and operating expenses, was used to pay cash distributions to the Partners. Over its lifetime, the Partnership paid aggregate cash distributions of $21,453,332. In accordance with the Partnership's Amended and Restated Agreement and Certificate of Limited Partnership, the Partnership's Recognized Owners were paid 99% of such cash distributions, or $21,238,799 ($24.30 per unit) and the General Partners were paid 1% of such distributions, or $214,533. At December 31, 1996, the Partnership had a contingency reserve balance of $375,274. These funds will be used to satisfy any expenses of the Partnership which may arise after its dissolution date. To the extent that these funds are not utilized for such purposes, they will be paid to the Partners according to their respective allocation percentages, 99%, or $371,521, representing $0.43 per unit, to the Recognized Owners and 1%, or $3,753, to the General Partners. 3 During the second quarter of 1996, the Partnership engaged an investment adviser to solicit potential buyers for the Partnership's remaining equipment assets and associated lease contracts. The remarketing effort was undertaken jointly by 15 individual equipment leasing programs, consisting of the Partnership and 14 affiliated partnerships (the Other Affected Partnerships). Thirteen of the programs, including the Partnership, sold all of their equipment assets (the Liquidated Programs); and two programs sold only their proportionate ownership interests in certain assets owned jointly with one or more of the Liquidated Programs (collectively, the Sale Assets). Substantially all of the Partnership's equipment assets of material value represented partial ownership interests whereby the Partnership owned less than a 100% interest in the equipment it sold. The remaining interests in such assets were owned by one or more of the Other Affected Partnerships. On September 30, 1996, the Partnership and each of the Other Affected Partnerships executed individual purchase and sale agreements with the Buyer for all of the Sale Assets, except for one McDonnell Douglas MD-82 aircraft leased to Northwest Airlines, Inc. (the NWA Aircraft), hereafter the Sales Assets, as Revised. The NWA Aircraft, in which the Partnership owned a proportionate interest of 14.5%, was purchased by the lessee pursuant to a separate negotiation. The Partnership realized $1,332,848 of net sale proceeds for the Sale Assets, as Revised and $1,890,800 for the NWA Aircraft. The latter included early termination rental payments of $235,625 from the lessee. At the date of sale, the Sale Assets, as Revised and the NWA Aircraft had net book values of $1,187,754 and $1,771,276, respectively. In aggregate, the Partnership and the Other Affected Partnerships realized, prior to transaction costs, $32,997,000 for all of the Sale Assets, as Revised and $13,200,000 for the NWA Aircraft. Net proceeds from the NWA Aircraft were allocated to the owners of the NWA Aircraft according to their respective percentage ownership interests. Net proceeds from the Sale Assets, as Revised were allocated to the Partnership and to each of the Other Affected Partnerships based upon an apportionment of the sales price among all equipment comprising the Sale Assets, as Revised according to each asset's estimated re-sale value, as determined by an independent appraiser. For financial reporting purposes, the Partnership recognized a net gain of $28,993 in connection with both sale transactions. In addition, the Partnership recognized a net gain of $49,409 during the nine months ended September 30, 1996 from the sale of other equipment, all of which had been fully depreciated for financial reporting purposes at the date of sale. For the year ended December 31, 1996, the Partnership recognized lease revenue of $864,299. In addition, the Partnership earned interest income from temporary cash investments. Operating expenses consisted principally of administrative charges, professional service costs, such as legal and accounting fees, as well as printing, distribution, and remarketing expenses, including equipment storage and repairs and maintenance costs. Operating costs for 1996 include all identified costs anticipated to be incurred in connection with the Partnership's wind-up and dissolution. On October 10, 1996, the Managing General Partner entered into a Cross Partnership Agreement (the Agreement) with the general partners of certain of the Other Affected Partnerships participating in the sales transactions described above. Pursuant to the Agreement, the Partnership and each of the other partnerships agreed to set aside a contingency reserve for future liabilities. The Agreement provides that obligations of any individual partnership which are not associated with the sales transactions will directly reduce that partnership's reserve balance, whereas costs pertaining to the sales transactions will be allocated against the reserve balances of the Partnership and each of the other partnerships on a proportionate basis. If the reserve balance of the Partnership is depleted to zero, the reserve balances contributed by the other partnerships will be debited on a proportionate basis to cover the deficit. If the reserve balances of any one of the other partnerships is depleted to zero, the reserve balance of the Partnership and any other partnerships having a positive reserve balance shall be debited on a proportionate basis to cover the deficit. Upon termination of 4 the Agreement, any remaining monies will be distributed to the partners of those partnerships with positive reserve balances. At December 31, 1996, the Partnership had a contingency reserve balance of $375,274. To the extent that this contingency reserve is not necessary to satisfy any unforeseen liabilities of the Partnership, it will be remitted to the Partners. The dissolution of the Partnership was recorded at the Office of the Secretary of State of the Commonwealth of Massachusetts on December 31, 1996. The Partnership's business operations were concluded on that date. Immediately following the filing of the Partnership's 1996 Form 10-K, the Managing General Partner of the Partnership will file Form 15, Certification and Notice of Termination of Registration under Section 12(g) of the Securities Exchange Act of 1934 or Suspension of Duty to File Reports Under Sections 13 and 15(d) of the Securities Exchange Act of 1934, with the United States Securities and Exchange Commission. 5 REPORT OF INDEPENDENT AUDITORS To the Partners of American Income Partners IV-B Limited Partnership: We have audited the accompanying statement of financial position of American Income Partners IV-B Limited Partnership as of December 31, 1995, and the related statements of operations, changes in partners' capital and cash flows for each of the two years ended December 31, 1995 and for the period from January 1, 1996 to September 30, 1996. In addition, we have audited the statement of changes in net assets in liquidation for the period from October 1, 1996 to December 31, 1996. 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. As described in Note 1 to the financial statements, the Managing General Partner of American Income Partners IV-B Limited Partnership approved a plan of liquidation on September 30, 1996, and the Partnership commenced liquidation shortly thereafter. As a result, the Partnership has changed its basis of accounting for periods subsequent to September 30, 1996 from the going-concern basis to a liquidation basis. The liquidation was completed and the Partnership was dissolved on December 31, 1996. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Income Partners IV-B Limited Partnership as of December 31, 1995, the results of its operations and its cash flows for each of the two years ended December 31, 1995, and for the period from January 1, 1996 to September 30, 1996, and the changes in its net assets in liquidation for the period from October 1, 1996 to December 31, 1996, in conformity with generally accepted accounting principles applied on the bases described in the preceding paragraph. 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 7, 1997 6 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP STATEMENT OF FINANCIAL POSITION DECEMBER 31, 1995 ASSETS ASSETS: Cash and cash equivalents $ 644,253 Rents receivable, net of allowance for doubtful accounts of $100,000 95,053 Accounts receivable--affiliate 119,651 Equipment at cost, net of accumulated depreciation of $5,827,635 3,150,051 ----------- Total assets $ 4,009,008 =========== LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Notes payable $ 120,313 Accrued interest 1,523 Accrued liabilities 20,000 Accrued liabilities--affiliate 11,761 Cash distributions payable to partners 275,863 ----------- Total liabilities 429,460 ----------- PARTNERS' CAPITAL (DEFICIT): General Partners (156,078) Limited Partnership Interests (873,935 Units, initial purchase price of $25 each) 3,735,626 ----------- Total partners' capital 3,579,548 ----------- Total liabilities and partners' capital $ 4,009,008 =========== The accompanying notes are an integral part of these financial statements. 7 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE PERIOD OCTOBER 1, 1996 TO DECEMBER 31, 1996 INTEREST INCOME $ 8,285 OPERATING EXPENSES--AFFILIATE (16,663) LIQUIDATING DISTRIBUTION (375,274) --------- NET DECREASE IN NET ASSETS IN LIQUIDATION DURING THE PERIOD (383,652) NET ASSETS IN LIQUIDATION, BEGINNING OF PERIOD 383,652 --------- NET ASSETS IN LIQUIDATION, END OF PERIOD $ -- ========= The accompanying notes are an integral part of these financial statements. 8 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP STATEMENT OF OPERATIONS FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 30, 1996 AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 FOR THE PERIOD JANUARY 1, 1996 FOR THE YEARS ENDED TO SEPTEMBER 30, DECEMBER 31, 1996 1995 1994 INCOME: Lease revenue $ 864,299 $1,103,850 $1,947,354 Interest income 29,790 42,118 35,665 Gain on sale of equipment 78,402 134,140 577,408 ---------- ---------- ---------- Total income 972,491 1,280,108 2,560,427 ---------- ---------- ---------- EXPENSES: Depreciation 191,021 358,661 787,866 Interest expense 4,778 11,584 25,619 Equipment management fees--affiliate 43,215 55,193 97,368 Operating expenses--affiliate 109,221 73,469 64,581 ---------- ---------- ---------- Total expenses 348,235 498,907 975,434 ---------- ---------- ---------- NET INCOME $ 624,256 $ 781,201 $1,584,993 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 0.71 $ 0.88 $ 1.80 ========== ========== ========== CASH DISTRIBUTIONS DECLARED PER LIMITED PARTNERSHIP UNIT $ 4.33 $ 1.44 $ 2.00 ========== ========== ========== The accompanying notes are an integral part of these financial statements. 9 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 30, 1996 AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
GENERAL PARTNERS RECOGNIZED OWNERS AMOUNT UNITS AMOUNT TOTAL BALANCE, DECEMBER 31, 1993 $ (149,395) 873,935 $ 4,397,245 $ 4,247,850 Net income--1994 15,850 -- 1,569,143 1,584,993 Cash distributions declared (17,655) -- (1,747,869) (1,765,524) ----------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 1994 (151,200) 873,935 4,218,519 4,067,319 Net income--1995 7,812 -- 773,389 781,201 Cash distributions declared (12,690) -- (1,256,282) (1,268,972) ----------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 1995 (156,078) 873,935 3,735,626 3,579,548 Net income for the period January 1, 1996 to September 30, 1996 6,243 -- 618,013 624,256 Cash distributions declared (38,202) -- (3,781,950) (3,820,152) ----------- ----------- ----------- ----------- BALANCE, SEPTEMBER 30, 1996 $ (188,037) 873,935 $ 571,689 $ 383,652 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 10 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 30, 1996 AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
FOR THE PERIOD JANUARY 1, 1996 FOR THE YEARS ENDED TO SEPTEMBER 30, DECEMBER 31, 1996 1995 1994 CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: Net income $ 624,256 $ 781,201 $ 1,584,993 Adjustments to reconcile net income to cash from operating activities- Depreciation 191,021 358,661 787,866 Gain on sale of equipment (78,402) (134,140) (577,408) Decrease in allowance for doubtful accounts (90,000) -- -- Changes in assets and liabilities- Decrease (increase) in- Rents receivable 185,053 (62,732) 65,594 Due from Buyer (34,592) -- -- Accounts receivable--affiliate (173,386) (9,253) 187,440 Increase (decrease) in- Accrued interest (499) (820) (1,098) Accrued liabilities 36,284 4,500 2,500 Accrued liabilities--affiliate 5,812 8,425 3,336 Deferred rental income -- (662) (85,225) ----------- ----------- ----------- Net cash from operating activities 665,547 945,180 1,967,998 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from equipment sales 49,409 190,463 736,170 ----------- ----------- ----------- Net cash from investing activities 49,409 190,463 736,170 ----------- ----------- ----------- CASH FLOWS USED IN FINANCING ACTIVITIES: Principal payments--notes payable (35,209) (78,306) (348,620) Distributions paid (827,589) (1,434,490) (2,096,560) ----------- ----------- ----------- Net cash used in financing activities (862,798) (1,512,796) (2,445,180) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (147,842) (377,153) 258,988 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 644,253 1,021,406 762,418 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 496,411 $ 644,253 $ 1,021,406 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 5,277 $ 12,404 $ 26,717 =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES: As discussed in Notes 1 and 4, the Partnership entered into a sale transaction to dispose of its equipment portfolio. This transaction was closed on September 30, 1996. The Partnership received net sales proceeds of $1,332,848, a portion of which was subsequently used to repay outstanding principal and interest of $85,104 and $1,024, respectively. The remainder $1,246,720, was deposited into an escrow account and transferred to the Partnership on October 3, 1996. As discussed in Note 1 and 4, the Partnership entered into an additional sale transaction to dispose of its interest in an aircraft leased to Northwest Airlines, Inc. This transaction was settled on September 30, 1996. The net sales proceeds of $1,655,175 were deposited into an escrow account and transferred to the Partnership on October 3, 1996. In 1994, the Partnership capitalized $192,500 of refurbishment costs incurred to upgrade certain equipment all of which was financed by a third-party lender. The accompanying notes are an integral part of these financial statements. 11 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (1) ORGANIZATION AND PARTNERSHIP MATTERS Organization The Partnership was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the Uniform Act) on September 29, 1988, 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 IV Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). On December 29, 1988, the Partnership issued 873,935 units, representing assignments of limited partnership interests (the Units) to 1,331 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. On December 31, 1996, the General Partners of the Partnership caused the Partnership's Amended and Restated Agreement and Certificate of Limited Partnership (the Restated Agreement, as amended) to be canceled by filing a Certificate of Cancellation with the Massachusetts Secretary under the Uniform Act. Accordingly, the Partnership was dissolved on December 31, 1996. The Partnership originally had four General Partners: AFG Leasing IV Incorporated, a Massachusetts corporation established in 1987 and a wholly-owned subsidiary of American Finance Group (AFG), a Massachusetts general partnership, which subsequently became Equis Financial Group Limited Partnership (collectively referred to herein as AFG), Daniel J. Roggemann, Martin F. Laughlin, and Geoffrey A. MacDonald (collectively the General Partners). Messrs. Roggemann and Laughlin subsequently elected to withdraw as Individual General Partners. AFG Leasing IV Incorporated is also the general partner or managing general partner of certain affiliated partnerships sponsored by AFG. Significant operations commenced December 30, 1988 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 were allocated 99% to the Recognized Owners and 1% to the General Partners. Under the terms of a Management Agreement between the Partnership and AF/AIP Programs Limited Partnership and the terms of an identical management agreement between AF/AIP Programs Limited Partnership and AFG (collectively, the Management Agreement), management services were provided by AFG to the Partnership at fees which the Managing General Partner believed to be competitive for similar services (Also see Note 4). 12 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (1) ORGANIZATION AND PARTNERSHIP MATTERS (Continued) Organization (Continued) Equis Financial Group Limited Partnership (Equis) is a Massachusetts partnership formerly known as American Finance Group (AFG). AFG was established in 1988 as a Massachusetts general partnership and succeeded American Finance Group, Inc., a Massachusetts corporation organized in 1980. Equis and its subsidiaries (collectively, the Company) are engaged in various aspects of the equipment leasing business, including Equis' role as Equipment Manager or Advisor to the Partnership and several other Direct-Participation equipment leasing programs sponsored or co-sponsored by AFG (the Other Investment Programs). The Company arranges to broker or originate equipment leases, acts as remarketing agent and asset manager, and provides leasing support services, such as billing, collecting and asset tracking. The general partner of Equis, with a 1% controlling interest, is Equis Corporation, a Massachusetts corporation owned and controlled entirely by Gary D. Engle, its President and Chief Executive Officer. Equis Corporation also owns a controlling 1% general partner interest in Equis' 99% limited partner, GDE Acquisition Limited Partnership (GDE LP). Equis Corporation and GDE LP were established in December 1994 by Mr. Engle for the sole purpose of acquiring the business of AFG. In January 1996, the Company sold certain assets of AFG relating primarily to the business of originating new leases, and the name "American Finance Group," and its acronym to a third party (the Buyer). AFG changed its name to Equis Financial Group Limited Partnership after the sale was concluded. Pursuant to terms of the sale agreements, Equis agreed not to compete with the Buyer's lease origination business for a period of five years; however, Equis is permitted to originate certain equipment leases, principally those involving noninvestment grade lessees and ocean-going vessels, which are not in competition with the Buyer. In addition, the sale agreements specifically reserved to Equis the rights to continue using the name American Finance Group and its acronym in connection with the Partnership and the Other Investment Programs and to continue managing all assets owned by the Partnership and the Other Investment Programs, including the right to satisfy all required equipment acquisitions utilizing either brokers or the Buyer. Geoffrey A. MacDonald, Chairman of Equis Corporation and Gary D. Engle agreed not to compete with the sold business on terms and conditions similar to those for the Company. 13 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (1) ORGANIZATION AND PARTNERSHIP MATTERS (Continued) Basis of Presentation On September 30, 1996, the Partnership sold all of its remaining equipment assets, excluding its interest in an aircraft, for $1,332,848. In October 1996, the Partnership filed Form 8-K, which provided a description of the remarketing process and the terms of sale. The entire remarketing effort was undertaken jointly by 15 individual equipment leasing programs, consisting of the Partnership and 14 affiliated partnerships, each of which individually executed separate purchase and sale agreements with RSL Finance Limited Partnership II (the Buyer) and certain of which entered into a collective purchase and sale agreement with Northwest Airlines, Inc. (NWA), to sell all or a portion of their equipment assets (the Sale Assets). These proceeds were first used to repay the entire outstanding balance due under the notes payable and the associated interest of $85,104 and $1,024, respectively. Certain of these partnerships, including the Partnership, sold their collective interest in a McDonnell Douglas MD-82 aircraft (NWA Aircraft) to NWA. The net consideration for this aircraft was allocated first to remaining lease rental obligations and second to sale proceeds. The Partnership's proportionate share of this consideration was $1,890,800 and $1,655,175 representing net sale proceeds. (See Note 4.) On October 15, 1996, the Partnership paid a cash distribution of $3,268,426 of which $3,235,742 was paid to the Limited Partners and $32,684 was paid to the Managing General Partner. As discussed in Note 4, the Partnership had a contingency reserve of $375,274 at December 31, 1996. The Managing General Partner approved a plan of liquidation on September 30, 1996 and commenced liquidation on October 1, 1996. On December 31, 1996, the Managing General Partner dissolved the Partnership in accordance with the Restated Agreement, as amended. The financial statements presented have been prepared on a going-concern basis through September 30, 1996. Due to the ultimate dissolution of the Partnership requiring liquidation and distribution of its net assets, the Partnership changed its basis of accounting from going-concern to liquidation basis effective October 1, 1996. Liquidation basis requires that statements be prepared based on anticipated liquidating values of assets and liabilities. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of Cash Flows The Partnership considered liquid investment instruments purchased with a maturity of three months or less to be cash equivalents. From time to time, the Partnership invested excess cash with large institutional banks in reverse repurchase agreements with overnight maturities. Under the terms of the 14 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Statement of Cash Flows (Continued) agreements, title to the underlying securities passed to the Partnership. The securities underlying the agreements were book entry securities. Revenue Recognition Rents were payable to the Partnership monthly, quarterly or semi-annually and no significant amounts were calculated on factors other than the passage of time. The leases were accounted for as operating leases and were noncancellable. Rents received prior to their due dates were deferred. The Partnerships' entire equipment portfolio was sold on September 30, 1996. No future rents are due. Revenue from major individual lessees which accounted for 10% or more of lease revenue during each of the past three years is as follows: 1996 1995 1994 Gearbulk Shipowning Ltd. (formerly Kristian Gerhard Jebsen Skipsrederi A/S) $266,843 $403,824 $410,752 Northwest Airlines, Inc. $447,686 $282,750 $351,988 Building Materials Corporation of America $ 99,772 $171,037 $199,542 Fred Meyer, Inc. -- -- $277,195 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 represented asset base price plus acquisition fees and was determined in accordance with the Restated Agreement, as amended, and certain regulatory guidelines. Asset base price was 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 15 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Equipment on Lease (Continued) 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 was intended to allocate the cost of equipment over the period during which it produced economic benefit. The principal period of economic benefit was considered to correspond to each asset's primary lease term, which term generally represented the period of greatest revenue potential for each asset. Accordingly, to the extent that an asset was held on primary lease term, the Partnership depreciated 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 represented estimates of equipment values at the date of primary lease expiration. To the extent that an asset was held beyond its primary lease term, the Partnership continued to depreciate the remaining net book value of the asset on a straight-line basis over the asset's remaining economic life. Accrued Liabilities--Affiliate Unpaid operating expenses paid by AFG on behalf of the Partnership were reported as Accrued Liabilities--Affiliate. (See Note 4.) Allocation of Profits and Losses For financial statement purposes, net income or loss was allocated to each Partner according to their respective ownership percentages (99% to the Recognized Owners and 1% to the General Partners). See Note 5 concerning allocation of income or loss for income tax purposes. Net Income and Cash Distributions Per Unit Net income and cash distributions per Unit were based on 873,935 limited partnership units outstanding during each of the three years in the period ended December 31, 1996, and computed after allocation of the General Partners' 1% share of net income and cash distributions. 16 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. (3) EQUIPMENT At September 30, 1996, the Partnership disposed of its entire equipment portfolio. As equipment was sold to third parties, or otherwise disposed of, the Partnership recognized 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. (4) RELATED PARTY TRANSACTIONS All operating expenses incurred by the Partnership were paid by AFG on behalf of the Partnership and AFG was 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, 1996, which were paid or accrued by the Partnership to AFG or its Affiliates, are as follows: 1996 1995 1994 Equipment management fees $ 43,215 $ 55,193 $ 97,368 Administrative charges 29,329 17,592 12,000 Reimbursable operating expenses due to third parties 96,555 55,877 52,581 -------- -------- -------- Total $169,099 $128,662 $161,949 ======== ======== ======== As provided under the terms of the Management Agreement, AFG was compensated for its services to the Partnership. Such services included all aspects of acquisition, management and sale of equipment. For acquisition services, AFG was compensated by an amount equal to 4.75% of Equipment Base Price paid by the Partnership. For management services, AFG was compensated by an amount equal to the lesser of (i) 5% of gross lease rental revenues earned by the Partnership or (ii) fees which the Managing General Partner reasonably believed to be competitive for similar services for similar equipment. Both of these fees were subject to certain limitations defined in the Management Agreement. As Payout was not achieved, AFG received no compensation for services connected to the sale of equipment under its subordinated remarketing agreement. 17 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (4) RELATED PARTY TRANSACTIONS (Continued) Administrative charges represent amounts owed to AFG, pursuant to Section 10.4 of the Restated Agreement, as amended, for persons employed by AFG who were 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 were 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. All rents and proceeds from the sale of equipment were paid directly to either AFG or to a lender. AFG temporarily deposited collected funds in a separate interest-bearing escrow account prior to remittance to the Partnership. 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 (Recognized Owners), sought to enjoin the Offer and obtain unspecified monetary damages. A settlement of this litigation was approved by the Court on November 15, 1995. The Plaintiffs filed an appeal in this matter. On November 26, 1996, the United States Court of Appeals for the First Circuit handed down a decision affirming the Court's approval of the settlement. 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 Recognized Owners of the Partnership tendered 85,141 units or 9.74% of the total outstanding units of the Partnership to AALP. In September 1996, AALP sold these units to Equis for $368,074. 18 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (4) RELATED PARTY TRANSACTIONS (Continued) The remarketing effort described in Note 1 was undertaken jointly by 15 individual equipment leasing programs, consisting of the Partnership and 14 affiliated partnerships (Other Affected Partnerships). Thirteen of the programs, including the Partnership, sold all of their equipment assets (the Liquidated Programs); and two programs sold only their proportionate ownership interests in certain assets owned jointly with one or more of the Liquidated Programs. Substantially all of the Partnership's equipment assets of material value represented partial ownership interests whereby the Partnership owned less than a 100% interest in the equipment it sold. The remaining interests in such assets were owned by one or more of the Other Affected Partnerships. On September 30, 1996, the Partnership and each of the Other Affected Partnerships executed individual purchase and sale agreements with the Buyer for all of the Sale Assets, except for one McDonnell Douglas MD-82 aircraft leased to Northwest Airlines, Inc., hereafter the Sale Assets, as Revised. The NWA Aircraft, in which the Partnership owned a proportionate interest of 14.5%, was purchased by the lessee pursuant to a separate negotiation. The Partnership realized $1,332,848 of net sale proceeds for the Sale Assets, as Revised and $1,890,800 for the NWA Aircraft. The latter included early termination rental payments of $235,625 from the lessee. At the date of sale, the Sale Assets, as Revised and the NWA Aircraft had net book values of $1,187,754 and $1,771,276, respectively. In aggregate, the Partnership and the Other Affected Partnerships realized, prior to transaction costs, $32,997,000 for all of the Sale Assets, as Revised and $13,200,000 for the NWA Aircraft. Net proceeds from the NWA Aircraft were allocated to the owners of the NWA Aircraft according to their respective percentage ownership interests. Net proceeds from the Sale Assets, as Revised were allocated to the Partnership and to each of the Other Affected Partnerships based upon an apportionment of the sales price among all equipment comprising the Sale Assets, as Revised according to each asset's estimated re-sale value, as determined by an independent appraiser. The Buyer is a limited partnership established to acquire the Sale Assets, as Revised, and has no direct affiliation with the Partnership, the Other Affected Partnerships, the General Partners or AFG. The sole general partner of the Buyer is RSL Holdings, Inc. (RSL). An affiliate of RSL purchased a significant limited partnership interest in a direct-participation equipment leasing program co-sponsored by AFG in 1992. AFG acquired this interest in 1993 for cash and assumption of indebtedness. There have been no other business dealings between the Buyer and AFG and their affiliates. 19 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (4) RELATED PARTY TRANSACTIONS (Continued) On October 10, 1996, the Managing General Partner entered into a Cross Partnership Agreement (the Agreement) with the general partners of certain of the Other Affected Partnerships participating in the sales transactions described above. Pursuant to the Agreement, the Partnership and each of the other partnerships agreed to set aside a contingency reserve for future liabilities. The Agreement provides that obligations of any individual partnership which are not associated with the sales transactions will directly reduce that partnership's reserve balance, whereas costs pertaining to the sales transactions will be allocated against the reserve balances of the Partnership and each of the other partnerships on a proportionate basis. If the reserve balance of the Partnership is depleted to zero, the reserve balances contributed by the other partnerships will be debited on a proportionate basis to cover the deficit. If the reserve balances of any one of the other partnerships is depleted to zero, the reserve balance of the Partnership and any other partnerships having a positive reserve balance shall be debited on a proportionate basis to cover the deficit. Upon termination of the Agreement, any remaining monies will be distributed to the partners of those partnerships with positive reserve balances. At December 31, 1996, the Partnership had a contingency reserve balance of $375,274. To the extent that this contingency reserve is not necessary to satisfy any unforeseen liabilities of the Partnership, it will be remitted to the Partners. (5) INCOME TAXES The Partnership was not a taxable entity for federal income tax purposes. Accordingly, no provision for income taxes was recorded in the accounts of the Partnership. For financial statement purposes, the Partnership allocated 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 differed 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 allocated net income or loss in accordance with such agreement. The following is a reconciliation between net income reported for financial statement and federal income tax reporting purposes for the years ended December 31, 1996, 1995 and 1994: 1996 1995 1994 Net income $ 615,878 $ 781,201 $ 1,584,993 Financial statement depreciation in excess of (less than) tax depreciation 80,293 (264,266) 39,495 Prepaid rental income -- (662) (85,225) Other 1,289,095 47,858 (17,652) ----------- ----------- ----------- Net income for federal income tax reporting purposes $ 1,985,266 $ 564,131 $ 1,521,611 =========== =========== =========== 20 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (5) INCOME TAXES (Continued) The principal component of Other consists of the difference between tax gain on equipment disposals and the financial statement gain on disposals. The following is a reconciliation between partners' capital reported for financial statement and federal income tax reporting purposes for the year ended December 31, 1995. A reconciliation for the year ended December 31, 1996 has not been presented, as partners' capital for financial statement and federal income tax reporting purposes is zero. Partners' capital $ 3,579,548 Add back selling commissions and organization and offering costs 2,562,184 Financial statement distributions in excess of tax distributions 2,759 Cumulative difference between federal income tax and financial statement income (loss) (1,533,800) ----------- Partners' capital for federal income tax reporting purposes $ 4,610,691 =========== Financial statement distributions in excess of tax distributions and cumulative difference between federal income tax and financial statement income (loss) represent timing differences. 21 ADDITIONAL FINANCIAL INFORMATION AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST OF EQUIPMENT DISPOSED FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 The Partnership classified all rents from leasing equipment as lease revenue. Upon expiration of the primary lease terms, equipment was 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, represented 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 during the years ended December 31, 1996, 1995 and 1994. 1996 1995 1994 Rents earned prior to disposal of equipment, net of interest charges $10,737,109 $ 2,000,791 $ 5,840,174 Sale proceeds realized upon disposition of equipment 3,037,432 190,463 736,170 ----------- ----------- ----------- Total cash generated from rents and equipment sale proceeds 13,774,541 2,191,254 6,576,344 Original acquisition cost of equipment disposed 8,977,686 1,800,744 5,354,535 ----------- ----------- ----------- Excess of total cash generated to cost of equipment disposed $ 4,796,855 $ 390,510 $ 1,221,809 =========== =========== =========== 23 AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS, SALES AND REFINANCINGS FOR THE YEAR ENDED DECEMBER 31, 1996
SALES AND OPERATIONS REFINANCINGS TOTAL NET INCOME $ 537,476 $ 78,402 $ 615,878 ADD BACK: Depreciation 191,021 -- 191,021 Decrease in allowance for doubtful accounts (90,000) -- (90,000) Management fees 43,215 -- 43,215 Book value of disposed equipment -- 2,959,030 2,959,030 LESS: Principal reduction of notes payable (120,313) -- (120,313) ----------- ----------- ----------- Cash from operations, sales and refinancings 561,399 3,037,432 3,598,831 LESS: Management fees (43,215) -- (43,215) ----------- ----------- ----------- Distributable cash from operations, sales and refinancings 518,184 3,037,432 3,555,616 OTHER SOURCES AND USES OF CASH: Cash, beginning of year 644,253 -- 644,253 Net change in receivables and accruals 271,420 -- 271,420 LESS: Cash distributions paid (1,058,583) (3,037,432) (4,096,015) Liquidating distribution (375,274) -- (375,274) ----------- ----------- ----------- CASH, END OF YEAR $ -- $ -- $ -- =========== =========== ===========
24 AMERICAN INCOME PARTNERS IV-B 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, 1996 For the year ended December 31, 1996, the Partnership reimbursed the Managing General Partner and its Affiliates for the following costs: Operating expenses $ 122,618 25 EX-27 3 EX-27
5 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 864,299 980,776 0 0 360,120 0 4,778 615,878 0 615,878 0 0 0 615,878 0 0
-----END PRIVACY-ENHANCED MESSAGE-----