Page 1 of 11
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
X QUARTERLY REPORT UNDER 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 ______________.
Commission file number 0-8868
------
PHOENIX LEASING INCOME FUND 1977
- --------------------------------------------------------------------------------
Registrant
California 94-2446904
- ----------------------------- ----------------------------------
State of Jurisdiction I.R.S. Employer Identification No.
2401 Kerner Boulevard, San Rafael, California 94901-5527
- -------------------------------------------------------------------------------
Address of Principal Executive Offices Zip Code
Registrant's telephone number, including area code: (415) 485-4500
--------------
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
preceding requirements for the past 90 days.
Yes __X__ No _____
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Part I. Financial Information
------------------------------
Item 1. Financial Statements
PHOENIX LEASING INCOME FUND 1977
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
ASSETS 1996 1995
------ ------
Cash and cash equivalents $ 364 $ 595
Accounts receivable (net of allowance for
losses on accounts receivable of $0 and $1
at September 30, 1996 and December 31, 1995,
respectively) -- --
Notes receivable (net of allowance for losses
on notes receivable of $92 at September 30,
1996 and December 31, 1995) 707 707
Equipment on operating leases and held for lease
(net of accumulated depreciation of $15 and $31
at September 30, 1996 and December 31, 1995,
respectively) -- --
Investment in joint ventures 45 64
Other assets 5 4
------ ------
Total Assets $1,121 $1,370
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 37 $ 43
------ ------
Total Liabilities 37 43
------ ------
Partners' Capital
General Partners (7) --
Limited Partners, 20,000 units authorized and
issued, 16,521 units outstanding at September 30,
1996 and December 31, 1995 1,090 1,327
Unrealized gains on available-for-sale securities 1 --
------ ------
Total Partners' Capital 1,084 1,327
------ ------
Total Liabilities and Partners' Capital $1,121 $1,370
====== ======
The accompanying notes are an integral part of these statements
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PHOENIX LEASING INCOME FUND 1977
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Rental income $ 1 $ 4 $ 5 $ 36
Equity in earnings from joint
ventures, net 6 10 22 28
Interest income, notes receivable -- 23 -- 141
Other income 6 13 19 25
------ ------ ------ ------
Total Income 13 50 46 230
------ ------ ------ ------
EXPENSES
Management fees to General Partner -- 8 1 34
Liquidation fees to General Partner -- -- 22 22
Provision for losses on receivables -- -- -- 5
Legal expense 18 2 77 3
General and administrative expenses 8 8 26 28
------ ------ ------ ------
Total Expenses 26 18 126 92
------ ------ ------ ------
NET INCOME (LOSS) $ (13) $ 32 $ (80) $ 138
====== ====== ====== ======
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ (.71) $ 1.72 $(4.42) $ 7.21
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ 9.95 $ 9.95
====== ====== ====== ======
ALLOCATION OF NET INCOME (LOSS):
General Partners $ (2) $ 4 $ (7) $ 19
Limited Partners (11) 28 (73) 119
------ ------ ------ ------
$ (13) $ 32 $ (80) $ 138
====== ====== ====== ======
The accompanying notes are an integral part of these statements
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PHOENIX LEASING INCOME FUND 1977
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
------ ------
Operating Activities:
Net income (loss) $ (80) $ 138
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Gain on sale of equipment (1) (1)
Equity in earnings from joint ventures, net (22) (28)
Provision for losses on account receivable -- 7
Provision for early termination, financing leases -- (3)
Decrease in accounts receivable -- 2
Decrease in accounts payable and accrued expenses (6) (46)
Gain on sale of securities (1) --
Decrease (increase) in other assets (1) 7
------ ------
Net cash provided (used) by operating activities (111) 76
------ ------
Investing Activities:
Principal payments, financing leases -- 3
Principal payments, notes receivable -- 498
Proceeds from sale of equipment 1 1
Proceeds from sale of securities 2 --
Distributions from joint ventures 41 61
------ ------
Net cash provided by investing activities 44 563
------ ------
Financing Activities:
Distributions to partners (164) (164)
------ ------
Net cash used by financing activities (164) (164)
------ ------
Increase (decrease) in cash and cash equivalents (231) 475
Cash and cash equivalents, beginning of period 595 415
------ ------
Cash and cash equivalents, end of period $ 364 $ 890
====== ======
The accompanying notes are an integral part of these statements
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PHOENIX LEASING INCOME FUND 1977
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. General.
The accompanying unaudited condensed financial statements have been
prepared by the Partnership in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Although management believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes included in the Partnership's Financial Statement, as filed with the
SEC in the latest annual report on Form 10-K.
Note 2. Reclassification.
Reclassification - Certain 1995 amounts have been reclassified to conform
to the 1996 presentation.
Note 3. Income Taxes.
Federal and state income tax regulations provide that taxes on the income
or loss of the Partnership are reportable by the partners in their individual
income tax returns. Accordingly, no provision for such taxes has been made in
the accompanying financial statements.
Note 4. Notes Receivable.
Impaired Notes Receivable. At September 30, 1996 the recorded investment
in notes that are considered to be impaired under Statement No. 114 was $798,000
for which the related allowance for losses is $92,000. The average recorded
investment in impaired loans during the nine months ended September 30, 1996 was
approximately $798,000.
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1996 1995
---- ----
(Amounts in Thousands)
Beginning balance $ 92 $ 92
Provision for losses - -
Write downs - -
------ ------
Ending balance $ 92 $ 92
====== ======
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Note 5. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income (loss) and distributions per limited partnership unit were
based on the limited partners' share of net income (loss) and distributions, and
the weighted average number of units outstanding of 16,521 for the nine month
periods ended September 30, 1996 and 1995.
Note 6. Investment in Joint Ventures.
Equipment Joint Ventures
The aggregate combined statements of operations of the equipment joint
ventures is presented below:
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Rental income $ 452 $ 763 $1,426 $2,126
Gain on sale of equipment 53 137 257 259
Other income 30 570 103 676
------ ------ ------ ------
Total income 535 1,470 1,786 3,061
------ ------ ------ ------
EXPENSES
Depreciation 81 629 254 858
Lease related operating expenses 166 338 575 904
Management fees to General Partner 28 76 83 144
General and administrative expenses -- 4 5 9
------ ------ ------ ------
Total expenses 275 1,047 917 1,915
------ ------ ------ ------
Net income $ 260 $ 423 $ 869 $1,146
====== ====== ====== ======
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Financing Joint Ventures
The aggregate combined statements of operations of the financing joint
venture is presented below:
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Other income $ 5 $ 6 $ 25 $ 67
------ ------ ------ ------
Total income 5 6 25 67
------ ------ ------ ------
EXPENSES
Management fees to General Partner -- -- -- 4
General and administrative expenses 5 1 6 1
------ ------ ------ ------
Total expenses 5 1 6 5
------ ------ ------ ------
Net income $ -- $ 5 $ 19 $ 62
====== ====== ====== ======
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Page 8 of 11
PHOENIX LEASING INCOME FUND 1977
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Phoenix Leasing Income Fund 1977 (the Partnership) reported a net loss of
$13,000 and $80,000 for the three and nine months ended September 30, 1996, as
compared to net income of $32,000 and $138,000 during the same period in 1995.
The decreased earnings during 1996 is attributable to the decrease in total
revenues combined with an increase in total expenses.
Total revenues decreased by $37,000 and $184,000 for the three and nine
months ended September 30, 1996, as compared to the same periods in 1995. During
the three and nine months ended September 30, 1995, the Partnership received
payment for the settlement of two outstanding notes receivable from cable
television system operators that had been in default and the Partnership had
suspended the accrual of interest income. The amount received in excess of the
net carrying value of the note has been recognized as interest income. There
were no such payments during 1996.
Rental income decreased during the three and nine months ended September 30,
1996, primarily as a result of the majority of the remaining equipment lease
portfolio being off lease. Because the Partnership is in its liquidation stage,
it is not expected that the Partnership will acquire additional equipment. As a
result, revenues from equipment leasing activities are expected to decline as
the portfolio is liquidated and the remaining equipment is re-leased at lower
rental rates. At September 30, 1996, the Partnership owned equipment with an
aggregate original cost, excluding the Partnership's pro rata interest in joint
ventures, of $47,000, as compared to $96,000 at September 30, 1995.
Total expenses increased by $8,000 and $34,000 for the three and nine months
ended September 30, 1996, respectively, compared to the same periods in 1995.
The increase is due to an increase in legal expense, which is primarily the
result of one remaining outstanding note receivable from a cable television
system operator that is in default.
Joint Ventures
The Partnership has made investments in various equipment and financing joint
ventures along with other affiliated partnerships managed by the General Partner
for the purpose of spreading the risk of investing in certain equipment leasing
and financing transactions. These joint ventures are not currently making any
significant additional investments in new equipment leasing or financing
transactions. As a result, the earnings and cash flow from such investments are
anticipated to continue to decline as the portfolios are re-leased at lower
rental rates and eventually liquidated. Earnings from joint ventures decreased
by $4,000 and $6,000 during the three and nine months ended September 30, 1996,
as compared to the same periods in 1995.
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Page 9 of 11
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from rental and note
receipts. The Partnership has contractual obligations from lessees and borrowers
for fixed terms at stated amounts. The Partnership also has investments in
equipment leasing and financing joint ventures in which it receives a share of
the profits. The future liquidity of the Partnership will depend upon the
General Partner's success in collecting contractual amounts owed.
The Partnership reported net cash used by leasing and financing activities of
$111,000 for the nine months ended September 30, 1996, as compared to the net
cash provided by leasing and financing activities of $577,000 for the nine
months ended September 30, 1995. This decrease is due to the majority of the
Partnership's assets having been liquidated. The cash flow was higher during
1995 due to the payoff of a note receivable from a cable television system
operator that had been in default. At September 30, 1996, the Partnership has
one remaining note receivable from a cable television system operator that is in
default and is not currently providing any cash flows to the Partnership.
Distributions from joint ventures declined for the nine months ended
September 30, 1996, as compared to the same period in 1995. Distributions from
joint ventures consisted primarily of cash received from the Partnership's
investments in equipment joint ventures during both years.
The Limited Partners received $164,000 in cash distributions during the nine
months ended September 30, 1996 and 1995. As a result, the cumulative cash
distributions to the Limited Partners are $28,604,000 and $28,121,000 as of
September 30, 1996 and 1995, respectively. The General Partner did not receive
cash distributions, but did receive payment of liquidation fees of $22,000
during the nine months ended September 30, 1996 and 1995. Due to the decrease in
the cash generated by leasing operations, the Partnership is no longer making
quarterly cash distributions to Partners. Distributions are now being made on an
annual basis with the annual distribution date being January 15. The next
distributions to partners will be made on January 15, 1997 and will be
approximately the same amount as the January 1996 distribution.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's on-going
operational expenses.
<PAGE>
Page 10 of 11
PHOENIX LEASING INCOME FUND 1977
September 30, 1996
Part II. Other Information.
------------------
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults Upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Securities Holders. Inapplicable
Item 5. Other Information. Inapplicable
Item 6. Exhibits and Reports on 8-K:
a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None
<PAGE>
Page 11 of 11
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.
PHOENIX LEASING INCOME FUND 1977
--------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
November 12, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ---------------------- Senior Vice President -----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 12, 1996 Senior Vice President, /S/ BRYANT J. TONG
- ---------------------- Financial Operations -----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
November 12, 1996 Senior Vice President /S/ GARY W. MARTINEZ
- --------------------- Phoenix Leasing Incorporated ------------------------
General Partner (Gary W. Martinez)
November 12, 1996 Partnership Controller /S/ MICHAEL K. ULYATT
- --------------------- Phoenix Leasing Incorporated ------------------------
General Partner (Michael K. Ulyatt)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 364
<SECURITIES> 0
<RECEIVABLES> 799
<ALLOWANCES> 92
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15
<DEPRECIATION> 15
<TOTAL-ASSETS> 1,121
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,084
<TOTAL-LIABILITY-AND-EQUITY> 1,121
<SALES> 0
<TOTAL-REVENUES> 46
<CGS> 0
<TOTAL-COSTS> 126
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (80)
<INCOME-TAX> 0
<INCOME-CONTINUING> (80)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (80)
<EPS-PRIMARY> (4.42)
<EPS-DILUTED> 0
</TABLE>
