Item 1. Business
CSA Income Fund IV Limited Partnership (the "Partnership") is a limited partnership organized under the provisions of the Massachusetts Uniform Limited Partnership Act. The Partnership is composed of CSA Lease Funds, Inc. (an affiliate of CSA Financial Corp.), the sole General Partner, and as of December 31, 2000, 2,679 Limited Partners owning 506,776 Units of Limited Partnership Interest of $100 each. The capital contributions of the Partners aggregated $50,677,600. The Partnership was formed on December 21, 1989 and commenced operations on April 18, 1990.
During the fourth quarter of year 2000, the General Partner of CSA Income Fund IV Limited Partnership determined that it was in the best interest of the Partnership and the Limited Partners to begin the wind-up of the Partnership in year 2001. The wind-up is currently anticipated to be completed in year 2002.
The Partnership was organized to engage in the business of acquiring income - -producing equipment for investment. The Partnership's principal objectives are:
1. To acquire and lease equipment, primarily through Operating Leases, to generate income during their entire useful life;
2. To provide monthly distributions of cash to the Limited Partners from leasing revenues and from the proceeds of sale or other disposition of Partnership equipment;
3. To reinvest in additional equipment a portion of lease revenues and a substantial portion of Cash From Sales and Refinancing during the first years of the Partnership's operations.
The Partnership was formed primarily for investment purposes and not as a "tax shelter".
The Partnership has no direct employees. The General Partner has full and exclusive discretion in management and control of the Partnership.
Selection of the equipment for purchase and lease is based principally on the General Partner's evaluation of the usefulness of the equipment in commercial or industrial applications and its estimate of the potential demand for the equipment at the end of the initial lease term.
The Partnership's equipment may include:
1. New and reconditioned computer peripheral equipment, computer terminal systems and data processing systems manufactured by companies such as Compaq Computer Corporation, Dell Computer Corporation, EMC Corporation and International Business Machines, Inc. (IBM).
2. New telecommunications and telecomputer equipment consisting primarily of private automated branch exchanges (PBX's), advanced high-speed digital telephone switching devices, voice/data transmission devices and telephone/computer networks as well as telephone handsets and facsimile transmission products.
3. New office equipment consisting primarily of photocopying and graphic processing equipment.
4. New highway transportation equipment and new and reconditioned transportation equipment consisting primarily of tractors, trailers, trucks, intermodal equipment, railroad rolling stock, passenger vehicles and corporate or commercial aircraft.
5. Miscellaneous other types of equipment which meets the investment objectives of the Partnership.
The equipment leasing industry is highly competitive. In initiating its leasing transactions, the Partnership competes with leasing companies, manufacturers that lease their products directly, equipment brokers, dealers and financial institutions, including commercial banks and insurance companies. Many competitors are larger than the Partnership and have access to more favorable financing. Competitive factors in the equipment leasing business primarily involve pricing and other financial arrangements. Marketing capability is also a factor.
As of December 31, 2000, substantially all of the remaining equipment in the Partnership's portfolio was leased under 95 separate leases to 50 lessees. The lessees providing at least 10% of total revenues during 2000 are as follows:
As of December 31, 2000, approximately 12% of the Partnership's equipment portfolio (based on cost) is leased outside the United States. The Partnership's leases and equipment are described more fully in Notes 3 and 4 to the Financial Statements included in Item 8.
Item 2.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the purpose of managing its day-to-day affairs. The General Partner, CSA Lease Funds, Inc. ("CLF"), has exclusive control over all aspects of the business of the Partnership, including provision of any necessary office space. As such, CLF will be compensated through Management fees and reimbursement of General and Administrative costs related to managing the Partnership's business. Excluded from the allowable reimbursement to the General Partner, however, will be any of the following: (1) Expenditures for rent or utilities; and (2) Certain other administrative items.
Item 3.
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of 2000.
PART II
Item 5.
Item 5. Market for the Registrant's Equity Securities and Related Security Holder Matters
a. The Partnership's limited partnership interests are not publicly traded. There is no active market for the Partnership's limited partnership interests and it is unlikely that one will develop. However, partners have received offers to purchase their Limited Partnership units from third parties. In such cases the General Partner has recommended the partner should consult their Financial Advisors. If the partner still has intentions of selling their units, the General Partner, through its affiliate CSA Financial Corp. ("CSA"), would be willing to make an offer. In certain cases, CSA has purchased Partnership units.
b. Approximate Number of Equity Security Holders:
Title of Class Number of Limited Partners Units of Limited Partnership Interests as of 12/31/00 506,776 2,679
Item 6.
Item 6. Selected Financial Data
The following table sets forth selected financial information regarding the Partnership's financial position and operating results. The information should be used in conjunction with the Financial Statements and Notes thereto, and the General Partner's Discussion and Analysis of Financial Condition and Results of Operations, which are included in Items 7 and 8 of this Report.
Item 7.
Item 7. General Partner's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations Rental income for the years ended December 31, 2000, 1999 and 1998 was $9,902,211, $14,903,995, and $16,031,035, respectively. Net income for the years ended December 31, 2000, 1999 and 1998 was $1,048,500, $1,249,602, and $2,670,654, respectively. The decrease in rental income and net income is primarily due to anticipated lease expirations as the partnership approaches wind-up. Net income was also impacted by increased storage and refurbishment costs relating to expired equipment currently being sold from the Partnership's portfolio. This expired equipment includes several large personal computer (PC) leases, which are being remarketed in small lots to obtain maximum sales proceeds. Net income was also affected, in comparison, by a gain on sale of equipment in 2000 of $711,614, as compared to $258,512, and $863,210, for the years ended 1999 and 1998. Depreciation expense for 2000, 1999 and 1998 was $8,056,432, $11,508,608, and $10,967,117, respectively.
Interest income for 2000, 1999 and 1998 was $209,433, $158,617, and $69,999, respectively. Interest expense was $460,138, $1,050,363, and $1,626,363 for the years ended December 31, 2000, 1999, and 1998, respectively.
Liquidity and Capital Resources
During 2000, the Partnership generated $8,736,998 in cash flow from operations and $2,637,214 cash flow from the sale of equipment. The Partnership utilized these funds, proceeds from new equipment financings of $485,038 and cash on hand to reduce outstanding notes payable by $6,386,008, make cash distributions of $4,521,730 and acquire additional equipment of $1,142,310.
Primarily due to year-end lease expirations, the Partnership had approximately $300,000 in current fair market value of equipment off lease and in storage. The General Partner has aggressively remarketed a significant portion of this equipment during the first quarter of year 2001. The remarketing has resulted in sales of approximately fifty percent of the equipment that was in storage on December 31, 2000.
The Partnership's liquidity is determined by cash from operations provided by the leases currently in place. It is expected that this cash flow will be sufficient to service outstanding debt, pay monthly distributions to the partners and meet any other commitments and obligations which may arise in the ordinary course of business.
To date, the Partnership has made cash distributions to the Limited Partners ranging from 72% to 94% of their initial investment, depending on when the Limited Partner entered the Partnership. The objective of the Partnership is to return the Limited Partners' investment through current distributions and provide a return on this investment by continued distributions.
During the fourth quarter of year 2000, The General Partner of CSA Income Fund IV Limited Partnership determined that it was in the best interest of the Partnership and the Limited Partners to begin the wind-up of the Partnership in year 2001. The wind-up is currently anticipated to be completed during year 2002.
During year 2000, CSA Income Fund IV Limited Partnership increased the monthly distribution on August 15th from an annualized rate of 8% to 10%. Future distributions will be based on the Partnership's current cash position, as well as forecasted cash flow projections.
Management reviews the Partnership's projected performance on a periodic basis. Based on an analysis of the remaining assets in the Partnership's portfolio completed as part of the annual audit process, the General Partner presently estimates that the continued cash distributions will return the entire initial investment of the Limited Partners and a return thereon. The General Partner will continue to report on the Limited Partners' return of investment with each cash distribution.
Quarterly Financial Data - unaudited
Summarized unaudited quarterly financial data for the years ended December 31, 2000 and 1999 are as follows:
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
N/A
Item 8.
Item 8. Financial Statements
CSA Income Fund IV Limited Partnership
INDEPENDENT AUDITORS' REPORT
To the Partners of CSA Income Fund IV Limited Partnership
We have audited the accompanying statements of financial position of CSA Income Fund IV Limited Partnership as of December 31, 2000 and 1999, and the related statements of operations, cash flows, and changes in partners' capital (deficit) for the three years then ended. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CSA Income Fund IV Limited Partnership as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the three years then ended in conformity with accounting principles generally accepted in the United States of America.
Sullivan Bille, P.C.
Boston, Massachusetts February 26, 2001
See accompanying notes to financial statements.
See accompanying notes to financial statements.
See accompanying notes to financial statements.
See accompanying notes to financial statements
CSA INCOME FUND IV LIMITED PARTNERSHIP Notes to Financial Statements December 31, 2000 (1) Organization
CSA Income Fund IV Limited Partnership ("the Partnership") was formed under the Massachusetts Uniform Limited Partnership Act on December 21, 1989 with an initial investment of $1,000, from its sole General Partner, CSA Lease Funds, Inc. and the purchase of 10 Limited Partnership Units at $100 each by an initial Limited Partner. The Partnership's primary activity is to invest in equipment to be leased to third parties. On February 22, 1990, the Partnership began its offering of Limited Partnership Units. The Partnership commenced operations on April 18, 1990. As of December 31, 2000, the Partnership has 506,776 units of Limited Partnership interest outstanding representing aggregate capital contributions of $50,677,600.
During the fourth quarter of year 2000, the General Partner of CSA Income Fund IV Limited Partnership determined that it was in the best interest of the Partnership and the Limited Partners to begin the wind-up of the Partnership in year 2001. The wind-up is currently anticipated to be completed in year 2002.
Distributable cash from operations, sales or refinancing and profits or losses for federal income tax purposes are allocated 99% to the Limited Partners and 1% to the General Partner until Payout has occurred, and thereafter, 85% and 15% respectively. Payout is achieved when the aggregate amount of all distributions to the Limited Partners equals the amount of the Limited Partners' original invested capital plus a cumulative 9% annual return (compounded daily) on unreturned invested capital.
In accordance with the Partnership Agreement, the Partnership is liable to the General Partner (or its affiliates) for management fees calculated at 5% of gross rental revenues and to certain reimbursable operating expenses subject to limitations stated in the Partnership Agreement. During 1994, the Limited Partners approved an Amendment to the Partnership Agreement allowing for the payment of Management Fees based on gross rental revenues on Sales Agency leases.
(2) Significant Accounting Policies
The Partnership records are maintained on the accrual basis of accounting.
The Partnership accounts for equipment leases as operating leases; therefore, rental income is reported when earned. Equipment purchases are depreciated on a straight-line basis over the initial term of the lease to estimated realizable value. On a periodic basis, the Partnership conducts a review of the residual value of its equipment as compared to the estimated net realizable values for such equipment upon expiration of the related lease. In connection with this review , there were no residual value depreciation adjustments in 2000, 1999 or 1998.
Deferred income represents prepaid rentals received for active leases that are recognized when earned.
No provision for income taxes has been made as the liability for such taxes is that of the Partners rather than the Partnership. The Partnership's federal tax return is prepared solely to arrive at the Partners' individual taxable income or loss as reported on form K-1. Partnership taxable income in 2000, 1999 and 1998 was $2,102,735, $3,058,315, and $1,271,389, respectively. The differences between Partnership taxable income and book income are primarily due to the difference between tax and book depreciation methods and the related differences in the gain or loss on sales of equipment.
CSA INCOME FUND IV LIMITED PARTNERSHIP Notes to Financial Statements
The Partnership considers short-term investments with original maturities of three months or less to be cash equivalents.
The preparation of financial statements in conformity with generally accepted accounting principles requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting year. Actual results could differ from those estimates.
(3) Rental Equipment
The Partnership purchases equipment subject to existing leases either directly from CSA Financial Corp. or the manufacturer. The purchase price to the Partnership is equal to the lesser of fair market value or cost as adjusted, if necessary, for rents received and carrying costs, plus an acquisition fee of 4% of cost. In accordance with Section 6.4 (b) of the Partnership Agreement, the total of all acquisition fees paid to the General Partner shall not exceed 15% of the total Capital Contributions received by the Partnership. This lifetime acquisition fee limit was met during 1996 and the General Partner is no longer paid acquisition fees on any new Partnership equipment acquisitions. Also, in accordance with Section 8.1 and 8.2 of the Partnership Agreement, during the year 2000, the Partnership reached it's expiration period for new equipment acquisitions which lead to the announced wind-up process.
A summary of changes in rental equipment owned and its related accumulated depreciation is as follows:
CSA INCOME FUND IV LIMITED PARTNERSHIP Notes to Financial Statements
(4) Leases
As of December 31, 2000, substantially all of the Partnership's equipment was leased under 95 separate leases to 50 lessees. Approximately 12% of the Partnership's equipment portfolio (based on cost) has been leased outside the United States. Three lessees represented approximately 57% (33%, 12% and 12%, respectively) of the Partnership's revenues in 2000 as compared to two lessees representing 34% (22% and 12%, respectively) in 1999 and two lessees representing 41% (21% and 20%, respectively) in 1998.
Minimum annual lease rentals scheduled to be received under existing noncancellable operating leases are as follows:
(5) Notes Payable
Notes payable consist of nonrecourse notes due in monthly, quarterly and annual installments, with interest rates that range from 6.85% to 9.03% per annum. Such notes are collateralized by equipment with a cost of $19,735,548. Annual maturities of notes payable at December 31, 2000, are as follows:
CSA INCOME FUND IV LIMITED PARTNERSHIP Notes to Financial Statements
(6) Fair Values of Financial Instruments
The following methods and assumptions were used to estimate the fair value of financial instruments:
Cash and Cash Equivalents The carrying amount of cash and cash equivalents approximates its fair value due to their short maturity.
Notes Payable The fair value of the Partnership's notes payable is based on the market price for the same or similar debt issues or on the current rates offered to the Partnership for debt with the same remaining maturity. The carrying amount of notes payable approximates fair value.
(7) Related Party Transactions
Fees and other expenses paid or accrued to be paid by the Partnership to the General Partner or affiliates of the General Partner for 2000, 1999 and 1998 are as follows:
(8) Net Cash Provided from Operations
The reconciliation of net income to net cash from operations for 2000, 1999 and 1998 is as follows:
(9) Net Gain/(Loss) on Foreign Currency Transactions
Net gain/loss from foreign currency transactions resulted from exchange gains and losses on certain leases which call for the payment of rentals in foreign currency.
(10) Reclassification of Amounts
Certain amounts in the Financial Statement for the years ended December 31, 1999 and 1998 have been reclassified to conform to the current year presentation.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or officers. All management functions are performed by CSA Lease Funds, Inc., the corporate General Partner. The current directors and officers of the corporate General Partner are:
Term of Office: Until a successor is elected.
Item 11.
Item 11. Executive Compensation
(a), (b), (c), (d) and (e): The Officers and Directors of the General Partner receive no current or proposed direct remuneration in such capacities, pursuant to any standard arrangements or otherwise, from the Partnership. In addition, the Partnership has not paid and does not propose to pay any options, warrants or rights to the Officers and Directors of the General Partner. There exists no remuneration plan or arrangement with any Officer or Director of the General Partner resulting from resignation, retirement or any other termination. See Note 7 of the Notes to Financial Statements included in Item 8 of this report for a description of the remuneration paid by the Partnership to the General Partner and its affiliates.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
By virtue of its organization as a limited partnership, the Partnership has outstanding no securities possessing traditional voting rights. However, as provided for in Section 13.2 of the Agreement of Limited Partnership (subject to Section 13.3), a majority in interest of the Limited Partners have voting rights with respect to:
1. Amendment of the Limited Partnership Agreement.
2. Termination of the Partnership.
3. Removal of the General Partner.
4. Approval or disapproval of the sale of substantially all the assets of the Partnership if such sale occurs prior to February 22, 1997.
No person or group is known by the General Partner to own beneficially more than 5% of the Partnership's outstanding Limited Partnership Units as of December 31, 2000.
Item 13.
Item 13. Certain Relationships and Related Transactions
An affiliate of the General Partner also acted as General Partner for CSA Income Fund Limited Partnership III, which Partnership completed the wind-up of its affairs as of September 30, 1999.
PART IV
Item 14.
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) (1) Financial Statements - See accompanying Index to Financial Statements - Item 8.
(2) Financial Statement Schedules - All schedules have been omitted as not required, not applicable or the information required to be shown therein is included in the Financial Statements and related notes.
(3) Exhibits Index
Except as set forth below, all exhibits to Form 10-K, as set forth in item 601 of Regulation S-K are not applicable.
* Included as Exhibit A to Amendment No. 1 to Form S-1, Registration Statement No. 0-19939 filed with the Securities and Exchange Commission on June 23, 1988.
** Included as Exhibit C to Amendment No. 1 to Form S-1 to Registration Statement No. 0-19939 filed with the Securities and Exchange Commission on June 23, 1988.
*** Included with the Exhibit Volume to Form S-1, Registration Statement No. 0-19939 filed with the Securities and Exchange Commission on April 15, 1988.
**** Included with the Exhibit Volume to Amendment No. 1 to Form S-1, Registration Statement No. 0-19939 filed with the Securities and Exchange Commission on June 23, 1988.
***** Included in Consent Statement filed on August 3, 1994.
(b) Reports on Form 8-K: There were no reports filed during the fourth quarter of 2000.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CSA Income Fund IV Limited Partnership (Registrant) By its General Partner, CSA Lease Funds, Inc.
Date:
J. Frank Keohane, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By its General Partner, CSA Lease Funds, Inc.
Date: J. Frank Keohane President & Director Principal Executive Officer
Date: Richard P. Timmons Corporate Controller Principal Accounting and Finance Officer