-----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, Tu8EJUD3giOwE+ctKJrXnozyHZKKFy6d8f6jZFnSPRy1T+60hN6IhPjKdoyo4F9l bN2kLo/m2vr6nyei+f/+8g== 0000927016-96-001662.txt : 19961113 0000927016-96-001662.hdr.sgml : 19961113 ACCESSION NUMBER: 0000927016-96-001662 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INCOME PARTNERS V A LTD PARTNERSHIP CENTRAL INDEX KEY: 0000847557 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 043057303 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18365 FILM NUMBER: 96659333 BUSINESS ADDRESS: STREET 1: 98 NORTH WASHINGTON ST. CITY: BOSTON STATE: MA ZIP: 02114 BUSINESS PHONE: 6178545800 MAIL ADDRESS: STREET 1: 98 NORTH WASHINGTON STREET CITY: BOSTON STATE: MA ZIP: 02114 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ----------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------------- ---------------------- --------------------- For Quarter Ended September 30, 1996 Commission File No. 0-18364 American Income Partners V-A Limited Partnership ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter)
Massachusetts 04-3057303 - -------------------------------------------- -------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 98 North Washington Street, Boston, MA 02114 - -------------------------------------------- -------------- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800 -------------------------- - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court 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 No ----- ----- AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP FORM 10-Q INDEX
Page ---- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Statement of Financial Position at September 30, 1996 and December 31, 1995 3 Statement of Operations for the three and nine months ended September 30, 1996 and 1995 4 Statement of Cash Flows for the nine months ended September 30, 1996 and 1995 5 Notes to the Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-13 PART II. OTHER INFORMATION: Items 1 - 6 14
2 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP STATEMENT OF FINANCIAL POSITION September 30, 1996 and December 31, 1995 (Unaudited)
September 30, December 31, 1996 1995 -------------- ------------- ASSETS - ------ Cash and cash equivalents $ 3,091,283 $ 1,832,111 Rents receivable, net of allowance for doubtful accounts of $5,000 251,280 179,945 Accounts receivable - affiliate 220,335 134,441 Other receivable 3,104,537 -- Equipment at cost, net of accumulated depreciation of $10,447,534 and $22,974,327 at September 30, 1996 and December 31, 1995, respectively 2,041,689 7,833,576 ----------- ----------- Total assets $ 8,709,124 $ 9,980,073 =========== =========== LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- Notes payable $ 261,911 $ 2,231,365 Accrued interest 2,393 31,667 Accrued liabilities 60,142 20,000 Accrued liabilities - affiliate 14,167 9,546 Deferred rental income 9,456 8,363 Cash distributions payable to partners 4,810,514 726,664 ----------- ----------- Total liabilities 5,158,583 3,027,605 ----------- ----------- Partners' capital (deficit): General Partner (1,353,443) (1,183,347) Limited Partnership Interests (1,380,661 Units; initial purchase price of $25 each) 4,903,984 8,135,815 ----------- ----------- Total partners' capital 3,550,541 6,952,468 ----------- ----------- Total liabilities and partners' capital $ 8,709,124 $ 9,980,073 =========== ===========
The accompanying notes are an integral part of these financial statements. 3 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP STATEMENT OF OPERATIONS for the three and nine months ended September 30, 1996 and 1995 (Unaudited)
Three Months Nine Months Ended September 30, Ended September 30, 1996 1995 1996 1995 ----------- ---------- ----------- ----------- Income: Lease revenue $1,498,156 $ 936,285 $3,339,961 $3,033,805 Interest income 47,715 30,875 95,728 102,022 Gain on sale of equipment 762,202 98,931 953,129 446,587 ---------- ---------- ---------- ---------- Total income 2,308,073 1,066,091 4,388,818 3,582,414 ---------- ---------- ---------- ---------- Expenses: Depreciation 307,124 754,372 1,357,866 2,433,827 Interest expense 4,825 63,123 69,165 271,885 Equipment management fees - affiliate 73,527 43,473 168,920 144,100 Operating expenses - affiliate 14,613 26,205 294,284 97,175 ---------- ---------- ---------- ---------- Total expenses 400,089 887,173 1,890,235 2,946,987 ---------- ---------- ---------- ---------- Net income $1,907,984 $ 178,918 $2,498,583 $ 635,427 ========== ========== ========== ========== Net income per limited partnership unit $ 1.31 $ 0.12 $ 1.72 $ 0.44 ========== ========== ========== ========== Cash distributions declared per limited partnership unit $ 3.31 $ 0.50 $ 4.06 $ 1.50 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 4 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS for the nine months ended September 30, 1996 and 1995 (Unaudited)
1996 1995 ------------ ------------ Cash flows from (used in) operating activities: Net income $ 2,498,583 $ 635,427 Adjustments to reconcile net income to net cash from operating activities: Depreciation 1,357,866 2,433,827 Gain on sale of equipment (953,129) (446,587) Changes in assets and liabilities Decrease (increase) in: rents receivable (71,335) 192,039 accounts receivable - affiliate (85,894) 119,835 Increase (decrease) in: accrued interest (29,274) (31,371) accrued liabilities 40,142 3,350 accrued liabilities - affiliate 4,621 (19,641) deferred rental income 1,093 8,378 ----------- ----------- Net cash from operating activities 2,762,673 2,895,257 ----------- ----------- Cash flows from (used in) investing activities: Purchase of equipment (245,280) -- Proceeds from equipment sales 2,527,893 716,977 ----------- ----------- Net cash from investing activities 2,282,613 716,977 ----------- ----------- Cash flows used in financing activities: Principal payments - notes payable (1,969,454) (1,828,467) Distributions paid (1,816,660) (2,179,991) ----------- ----------- Net cash used in financing activities (3,786,114) (4,008,458) ----------- ----------- Net increase (decrease) in cash and cash equivalents 1,259,172 (396,224) Cash and cash equivalents at beginning of period 1,832,111 2,571,287 ----------- ----------- Cash and cash equivalents at end of period $ 3,091,283 $ 2,175,063 =========== =========== Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 98,439 $ 303,256 =========== ===========
Supplemental disclosure of non-cash investing activity: The Partnership entered into a sale transaction to dispose of its interests in a vessel and certain railroad equipment. This transaction closed on September 30, 1996. The Partnership received net sale proceeds of $3,104,537, a portion of which was used to repay the outstanding principal balance of notes payable associated with the vessel of $65,690. The remainder, $3,038,847, was deposited into an escrow account and transferred to the Partnership on October 3, 1996. See Note 4 for additional discussion on this transaction. The accompanying notes are an integral part of these financial statements. 5 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP Notes to the Financial Statements September 30, 1996 (Unaudited) NOTE 1 - BASIS OF PRESENTATION - ------------------------------ The financial statements presented herein are prepared in conformity with generally accepted accounting principles and the instructions for preparing Form 10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange Commission and are unaudited. As such, these financial statements do not include all information and footnote disclosures required under generally accepted accounting principles for complete financial statements and, accordingly, the accompanying financial statements should be read in conjunction with the footnotes presented in the 1995 Annual Report. Except as disclosed herein, there has been no material change to the information presented in the footnotes to the 1995 Annual Report. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary to present fairly the financial position at September 30, 1996 and December 31, 1995 and results of operations for the three and nine month periods ended September 30, 1996 and 1995 have been made and are reflected. NOTE 2 - CASH - ------------- At September 30, 1996, the Partnership had $2,905,000 invested in reverse repurchase agreements secured by U.S. Treasury Bills or interests in U.S. Government securities. NOTE 3 - 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 $1,905,021 are due as follows: For the year ending September 30, 1997 $ 895,361 1998 808,688 1999 200,972 ---------- Total $1,905,021 ==========
6 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) NOTE 4 - EQUIPMENT - ------------------ The following is a summary of equipment owned by the Partnership at September 30, 1996. In the opinion of American Finance Group ("AFG"), the acquisition cost of the equipment did not exceed its fair market value.
Lease Term Equipment Equipment Type (Months) at Cost - ----------------------- ----------- ----------- Aircraft 10-72 $ 4,596,188 Vessels 57 3,666,680 Materials handling 6-60 1,470,945 Tractors and heavy duty trucks 1-84 1,220,030 Computers and peripherals 3-48 579,954 Construction and mining 6-60 334,140 Retail store fixtures 48-60 247,961 Communications 12-60 226,017 Research and test 60 108,304 Photocopying 12-36 28,415 Furniture and fixtures 60 10,589 ------------ Total equipment cost 12,489,223 Accumulated depreciation (10,447,534) ------------ Equipment, net of accumulated depreciation $ 2,041,689 ============
On September 30, 1996, the Partnership sold (i) a 23% ownership interest, representing its entire ownership interest, in a cargo vessel leased by KGJS/Gearbulk Holding Limited (the "Vessel"), having an original cost to the Partnership of $1,829,796 and a net book value at September 30, 1996 of $782,887 and (ii) a 50% ownership interest, representing its entire ownership interest, in 22 locomotives leased by Union Pacific Railroad Company (the "Locomotives"), having an original cost to the Partnership of $4,692,023 and a net book value at September 30, 1996 of $2,584,785. The Partnership received net sale proceeds of $3,104,537, a portion of which was used to repay the outstanding principal balance of notes payable associated with the Vessel of $65,690. The remainder, $3,038,847, was deposited into an escrow account and transferred to the Partnership on October 3, 1996. At September 30, 1996, the net sale proceeds were reported as Other Receivable on the Statement of Financial Position. The Partnership sold its interests in the Vessel and Locomotives prior to the expiration of the related lease terms. These sales were effected in connection with a joint remarketing effort involving 15 individual equipment leasing programs sponsored by AFG, consisting of the Partnership and 14 affiliates. In October 1996, the Partnership filed Form 8-K with the Securities and Exchange Commission which provided a description of the remarketing process and the terms of sale. At September 30, 1996, the Partnership's equipment portfolio included equipment having a proportionate original cost of $8,747,286, representing approximately 70% of total equipment cost. The summary above includes equipment held for sale or re-lease with a cost and net book value of approximately $3,572,000 and $405,000, respectively, at September 30, 1996. This equipment includes the Partnership's proportionate interest in a Boeing 727-251 Advanced aircraft (the "Aircraft"), formerly leased to Northwest Airlines, Inc., having a cost and net book value of approximately $2,421,000 and $399,000, respectively, at September 30, 1996. This aircraft was returned upon expiration of its lease term on 7 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) November 30, 1995 and is currently undergoing heavy maintenance expected to cost the Partnership approximately $144,000, all of which was incurred or accrued during the nine months ended September 30, 1996. The Partnership entered into a new 28-month lease agreement with Transmeridian Airlines to re-lease the Aircraft at a base rent to the Partnership of $16,016 per month, effective upon completion of the heavy maintenance. NOTE 5 - 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 nine month periods ended September 30, 1996 and 1995, which were paid or accrued by the Partnership to AFG or its Affiliates, are as follows:
1996 1995 -------- -------- Equipment management fees $168,920 $144,100 Administrative charges 15,750 15,750 Reimbursable operating expenses due to third parties 278,534 81,425 -------- -------- Total $463,204 $241,275 ======== ========
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 September 30, 1996, the Partnership was owed $220,335 by AFG for such funds and the interest thereon. These funds were remitted to the Partnership in October 1996. NOTE 6 - NOTES PAYABLE - ---------------------- Notes payable at September 30, 1996 consisted of installment notes of $261,911 payable to banks and institutional lenders. All of the installment notes are non-recourse,with two notes bearing fluctuating interest rates based on the London Inter-Bank Offered Rate plus a margin (5.43% at September 30, 1996), and one note having an interest rate of 10%. The installment notes are collateralized by the equipment and assignment of the related lease payments and will be fully amortized by noncancellable rents. The carrying amount of notes payable approximates fair value at September 30, 1996. The annual maturities of the installment notes payable are as follows: For the year ending September 30, 1997 $218,794 1998 43,117 -------- Total $261,911 ========
8 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP FORM 10-Q PART I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations. - -------------- Three and nine months ended September 30, 1996 compared to the three and nine - ----------------------------------------------------------------------------- months endedm September 30, 1995: - --------------------------------- Overview - -------- As an equipment leasing 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 will progress through various stages. Initially, all equipment will generate rental revenues under primary term lease agreements. During the life of the Partnership, these agreements will expire on an intermittent basis and equipment held pursuant to the related leases will be renewed, re-leased or sold, depending on prevailing market conditions and the assessment of such conditions by AFG to obtain the most advantageous economic benefit. Over time, a greater portion of the Partnership's original equipment portfolio will become available for remarketing and cash generated from operations and from sales or refinancings will begin to fluctuate. Ultimately, all equipment will be sold and the Partnership will be dissolved. The Partnership's operations commenced in 1989. Results of Operations - --------------------- For the three and nine months ended September 30, 1996, the Partnership recognized lease revenue of $1,498,156 and $3,339,961 respectively, compared to $936,285 and $3,033,805 for the same periods in 1995. Lease revenue increased during the three and nine months ended September 30, 1996 due to the receipt of $846,649 of lease termination rents received in connection with the sale of the Partnership's interest in two Boeing 727-Advanced aircraft in July 1996 (see discussion below). In future periods, the level of lease revenue will decline due to the expiration of the Partnership's primary lease term agreements and equipment sales. 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. For the three and nine months ended September 30, 1996, the Partnership sold equipment having a net book value of $1,246,497 and $1,311,629, respectively, to existing lessees and third parties. These sales resulted in net gains for financial statement purposes of $762,202 and $953,129, respectively. These equipment sales included the sale of the Partnership's interest in two Boeing 727-Advanced jet aircraft with an original cost and net book value of $7,622,493, and $1,188,593, respectively, which the Partnership sold to the existing lessee in July 1996. In connection with these sales, the Partnership realized sale proceeds of $1,959,671, which resulted in a net gain, for financial statement purposes, of $771,078. This equipment was sold prior to the expiration of the related lease term. The Partnership realized lease termination rents equal to $846,649, relating to these aircraft. In addition, equipment sales included the Partnership's interest in a vessel with an original cost and net book value of $1,829,796 and $782,887, respectively which the Partnership sold to a third party in September 1996. In 9 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP FORM 10-Q PART I. FINANCIAL INFORMATION connection with this sale, the Partnership realized net sale proceeds of $603,243 which resulted in a net loss, for financial statement purposes, of 179,644. This equipment was sold prior to the expiration of the related lease term. The Partnership also sold its interest in certain railroad equipment with an original cost and net book value of $4,692,023 and $2,584,785, respectively, to a third party. The Partnership realized net sale proceeds of $2,501,294, which resulted in a net loss, for financial statement purposes, of $83,491. This equipment was sold prior to the expiration of the related lease term. These sales were effected in connection with a joint remarketing effort involving 15 individual leasing programs sponsored by AFG, consisting of the Partnership and 14 affiliates. See Note 4 to the financial statements for additional discussion of the vessel and railroad equipment transactions. For the three and nine months ended September 30, 1995, the Partnership sold equipment having a net book value of $88,068 and $270,390, respectively, to existing lessees and third parties. These sales resulted in net gains, for financial statement purposes, of $98,931 and $446,587, 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 revenue 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 for the three and nine months ended September 30, 1996 was $307,124 and $1,357,866 respectively, compared to $754,372 and $2,433,827 for the same periods in 1995. 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. Interest expense was $4,825 and $69,165, or less than 1% and 2.1% of lease revenue for the three and nine months ended September 30, 1996, respectively, compared to $63,123 and $271,885, or 6.7% and 9% of lease revenue for the same periods in 1995. Interest expense in future periods 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 4.9% and 5.1% of lease revenue during the three and nine months ended September 30, 1996, respectively, compared to 4.6% and 4.8% of lease revenue during the same periods in 1995. 10 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP FORM 10-Q PART I. FINANCIAL INFORMATION Management fees during the nine months ended September 30, 1996 include $6,065, resulting from an underaccrual in 1995. Management fees are based on 5% of gross lease revenue generated by operating leases and 2% of gross lease revenue generated by full payout leases. 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 1% and 8.8% of lease revenue for the three and nine months ended September 30, 1996, respectively, compared to 2.8% and 3.2% of lease revenue for the same periods in 1995. The overall increase in operating expenses from 1995 to 1996 was due primarily to heavy maintenance and airframe overhaul costs incurred or accrued in connection with certain of the Partnership's Boeing 727 aircraft. During the three months ended September 30, 1996, the Partnership received $78,818 from the former lessee of these aircraft representing a partial reimbursement of such costs. The Partnership entered into a new 28-month lease agreement with Transmeridian Airlines to re-lease one of the aircraft at a base rent to the Partnership of $16,016 per month, effective upon completion of the heavy maintenance. 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 $2,762,673 and $2,895,257 for the nine months ended September 30, 1996 and 1995, respectively. Future renewal, re- lease and equipment sale activities will cause a decline in the Partnership's lease revenue and corresponding sources of operating cash. Overall, expenses associated with rental activities, such as management fees, and net cash flow from operating activities will also decline as the Partnership experiences a higher frequency of remarketing events. 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 the nine months ended September 30, 1996, the Partnership expended $245,280 to replace certain aircraft engines to facilitate the re-lease of an aircraft, in which the Partnership has an ownership interest, to Transmeridian Airlines (see discussion below). There were no equipment acquisitions during the same period in 1995. During the nine months ended September 30, 1996, the Partnership realized $2,527,893 in equipment sale proceeds compared to $716,977 for the same period in 1995. Future inflows of cash from asset disposals will vary in timing and amount and will be 11 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP FORM 10-Q PART I. FINANCIAL INFORMATION 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. On November 30, 1995, upon the expiration of its lease term, Northwest Airlines, Inc., returned a Boeing 727-251 Advanced aircraft (the "Aircraft") in which the Partnership has a 22.4% ownership interest with a cost and net book value to the Partnership of approximately $2,421,000 and $399,000, respectively, at September 30, 1996. The Aircraft is currently undergoing heavy maintenance expected to cost the Partnership approximately $144,000, all of which was incurred or accrued during the nine months ended September 30, 1996. The Partnership has entered into a new agreement to re-lease this aircraft (see Results of Operations). The Partnership obtained long-term financing in connection with certain equipment leases. The repayments of principal related to such indebtedness are reported as a component of financing activities. 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 increased during the nine months ended September 30, 1996 due to the repayment of principal indebtedness of $1,378,279 related to certain railroad equipment sold on September 30, 1996. See Note 4 to the financial statements for additional discussion of this transaction. In future periods, the amount of cash used to repay debt obligations will decline as the principal balance of notes payable is reduced through the collection and application of rents. Cash distributions to the General Partner 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 nine months ended September 30, 1996, the Partnership declared total cash distributions of Distributable Cash From Operations and Distributable Cash From Sales and Refinancings of $5,900,510. In accordance with the Amended and Restated Agreement and Certificate of Limited Partnership, the Recognized Owners were allocated 95% of these distributions, or $5,605,485, and the General Partner was allocated 5%, or $295,025. The third quarter 1996 cash distribution was paid on October 15, 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. Further, the Partnership's future cash distributions will be adversely affected by the bankruptcy of Midway Airlines, Inc., as the Partnership will be unable to realize any future residual value for these aircraft. Notwithstanding such adverse impact, the overall investment results to be achieved by the Partnership will be dependent upon the collective performance results of all of the Partnership's equipment leases. 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 General Partner anticipates that cash proceeds resulting from these sources will satisfy the Partnership's future expense obligations. However, the amount of cash for distribution in future periods will fluctuate. Equipment lease expirations and asset disposals will 12 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP FORM 10-Q PART I. FINANCIAL INFORMATION 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. 13 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP FORM 10-Q PART II. OTHER INFORMATION Item 1. Legal Proceedings Response: None Item 2. Changes in Securities Response: None Item 3. Defaults upon Senior Securities Response: None Item 4. Submission of Matters to a Vote of Security Holders Response: None Item 5. Other Information Response: None Item 6(a). Exhibits Response: None Item 6(b). Reports on Form 8-K Response: None 14 SIGNATURE PAGE 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 V-A LIMITED PARTNERSHIP By: AFG Leasing IV Incorporated, a Massachusetts corporation and the General Partner of the Registrant. By: /s/ Michael J. Butterfield --------------------------- Michael J. Butterfield Treasurer of AFG Leasing IV Incorporated (Duly Authorized Officer and Principal Accounting Officer) Date: November 13, 1996 ----------------- By: /s/ Gary M. Romano ------------------- Gary M. Romano Clerk of AFG Leasing IV Incorporated (Duly Authorized Officer and Principal Financial Officer) Date: November 13, 1996 ----------------- 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 3,091,283 0 3,581,152 5,000 0 6,667,435 12,489,223 10,447,534 8,709,124 4,896,672 261,911 0 0 0 3,550,541 8,709,124 3,339,961 4,388,818 0 0 1,821,070 0 69,165 2,498,583 0 2,498,583 0 0 0 2,498,583 0 0
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