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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995 Commission File Number 0-11170
PHOENIX LEASING GROWTH FUND 1982
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2735710
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
-------
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
--- ---
As of December 31, 1995, 40,343 Units of Limited Partnership interest were
outstanding. No market exists for the Units of Partnership interest and
therefore there exists no aggregate market value at December 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
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PHOENIX LEASING GROWTH FUND 1982
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business....................................................... 3
Item 2. Properties..................................................... 4
Item 3. Legal Proceedings.............................................. 4
Item 4. Submission of Matters to a Vote of Security Holders............ 4
PART II
Item 5. Market for the Registrant's Securities and Related Security
Holder Matters................................................. 5
Item 6. Selected Financial Data........................................ 5
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 6
Item 8. Financial Statements and Supplementary Data.................... 9
Item 9. Disagreements on Accounting and Financial Disclosure Matters... 28
PART III
Item 10. Directors and Executive Officers of the Registrant............. 28
Item 11. Executive Compensation......................................... 29
Item 12. Security Ownership of Certain Beneficial Owners and Management. 29
Item 13. Certain Relationships and Related Transactions................. 30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 30
Signatures.............................................................. 31
<PAGE>
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PART I
Item 1. Business.
Summary of Business Activities.
Phoenix Leasing Growth Fund 1982, a California limited partnership (the
"Partnership"), was organized on September 11, 1980. The Partnership was
registered with the Securities and Exchange Commission with an effective date of
February 1, 1982 and shall continue to operate until its termination date unless
dissolved sooner due to the sale of substantially all of the assets of the
Partnership or a vote of the Limited Partners. The Partnership will terminate on
December 31, 1997. The General Partner is Phoenix Leasing Incorporated, a
California corporation. The General Partner or its affiliates also is or has
been a general partner in several other limited partnerships formed to invest in
capital equipment and other assets.
The initial public offering was for 44,000 units of limited partnership
interest at a price of $1,000 per unit. The Partnership sold 41,798 units for a
total capitalization of $41,798,000. Of the proceeds received through the
offering, the Partnership has incurred $4,856,000 in organizational and offering
expenses.
From the initial formation of the Partnership through December 31,
1995, the total investments in equipment leases and financing transactions
(loans), including the Partnership's pro rata interest in investments made by
joint ventures, approximate $103,077,000. The average initial firm term of
contractual payments from equipment subject to lease was 30.90 months, and the
average initial net monthly payment rate as a percentage of the original
purchase price was 3.11%. The average initial firm term of contractual payments
from loans was 66.3 months.
The Partnership's principal objective is to produce current income and
to build and maintain a balanced portfolio of assets through the investment and
financing in various types of capital equipment including computer peripherals,
terminal systems, small computer systems, communications equipment, IBM-software
compatible mainframes, office systems and telecommunications equipment and to
lease such equipment and products to third parties pursuant to either Operating
Leases or Full Payout Leases. The Partnership has incurred debt to finance the
purchase of equipment, but the aggregate amount of outstanding debt for all
equipment will not exceed, at any time, the aggregate amount of net proceeds of
this offering.
The principal markets for the types of equipment in which the
Partnership has invested in have been and will be (1) major corporations and
other large organizations seeking to reduce the cost of their peripheral
equipment and large computer systems, (2) major corporations with numerous
operating locations seeking to improve the timeliness and responsiveness of
their data processing systems, and (3) small organizations interested in
improving the efficiency of their overall operations by moving from manually
operated to small computer-based management systems.
In addition to acquiring equipment for lease to third parties, the
Partnership either directly or through the investment in joint ventures, has
provided limited financing to certain emerging growth companies, cable
television system operators, manufacturers and their lessees with respect to
equipment leased directly by such manufacturers to third parties. The
Partnership maintains a security interest in the assets financed and in the
receivables due under any lease or rental agreement relating to such assets.
Such security interests will give the Partnership the right, upon default, to
obtain possession of the assets.
Competition. The equipment leasing industry is highly competitive.
Leases are offered on a wide variety of equipment ranging from construction
equipment to entire manufacturing facilities. The equipment leasing industry
offers to users an alternative to the purchase of nearly every type of
equipment. The General Partner intends to concentrate the Partnership's
activities, however, in markets in which the General Partner has expertise. The
computer equipment industry is extremely competitive. Competitive factors
include pricing, technological innovation and methods of financing (including
use of various short-term and long-term financing plans, as well as the outright
purchase of equipment).
There is strong competition in non-computer related equipment markets
in which the Partnership will engage as well. There is, however, no single
dominant company or factor in those other markets.
<PAGE>
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Other.
A brief description of the type of assets in which the Partnership has
invested as of December 31, 1995, together with information concerning the uses
of assets is set forth in Item 2.
Item 2. Properties.
The Partnership is engaged in the equipment leasing and financing
industry and as such, does not own or operate any principal plants, mines or
real property. The primary assets held by the Partnership are its investments in
leases and loans either directly or through its investment in joint ventures.
As of December 31, 1995, the Partnership owns equipment and has
outstanding loans to borrowers with an aggregate original cost of $3,799,000.
The equipment and loans have been made to customers located throughout the
United States. The following table summarizes the type of equipment owned or
financed by the Partnership, including its pro rata interest in joint ventures,
at December 31, 1995.
Percentage of
Asset Types Purchase Price(1) Total Assets
----------------- -------------
(Amounts in Thousands)
Financing of Solar Systems $ 2,354 62%
Reproduction 645 17
Small Computer Systems 486 13
Telecommunications 251 7
Computer Peripherals 51 1
Solar Equipment 12 -
--------- -----
TOTAL $ 3,799 100%
========= =====
(1) These amounts include the Partnership's pro rata interest in equipment
joint ventures of $708,000 and financing joint ventures of $2,354,000 at
December 31, 1995.
Item 3. Legal Proceedings.
The Partnership is not a party to any pending legal proceedings which
would have a material adverse impact on its financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of Limited Partners, through the
solicitation of proxies or otherwise, during the year covered by this report.
<PAGE>
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PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters.
(a) The Registrant's limited partnership interests are not publicly
traded. There is no market for the Registrant's limited
partnership interests and it is unlikely that any will develop.
(b) Approximate number of equity security investments:
Number of Unit Holders
Title of Class as of December 31, 1995
---------------------------------- -----------------------
Limited Partners 3,521
Item 6. Selected Financial Data.
Amounts in Thousands Except for Per Unit Amounts
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total Income $ 475 $ 877 $ 606 $ 522 $1,503
Net Income (Loss) 437 763 301 (757) (325)
Total Assets 1,453 2,637 3,171 4,351 6,780
Distributions to Partners 1,222 1,211 1,211 1,213 916
Net Income (Loss) per Limited
Partnership Unit 10.73 18.73 7.39 (18.75) (8.18)
Distributions per Limited
Partnership Unit 30.31 30.02 30.02 30.05 22.70
The above selected financial data should be read in conjunction with
the financial statements and related notes appearing elsewhere in this report.
<PAGE>
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Phoenix Leasing Growth Fund 1982 (the Partnership) reported a net
income of $437,000 for the year ended December 31, 1995, as compared to net
income of $763,000 and $301,000 during 1994 and 1993, respectively. During 1994,
the Partnership received a settlement of $337,000 which contributed to increased
earnings recognized for the year. There were no such events during 1995.
Total revenues decreased by $402,000 for the year ended December 31,
1995, as compared to 1994 but increased by $271,000 for 1994, as compared to
1993. The increase in total revenues experienced in 1994 was attributable to
settlements from two manufacturers of equipment with whom the Partnership had
entered into contractual agreements for the purchase of leased equipment. The
combined settlements totaled $337,000 which was composed of cash, common stock,
receivables, assigned rents from a pool of leased equipment, and credits for
goods and services.
Another factor which contributed to the increase in total revenues
during 1994 was the increase in gain on sale of equipment. The gain on sale of
equipment during 1994 was attributable to the sale of equipment back to the
original manufacturer, in which the Partnership was released from all
obligations to such manufacturer including the outstanding note payable and
accrued interest of $84,000. The release of this obligation was included in gain
on the sale of equipment during 1994.
Total revenues were higher than usual during 1994 mainly due to the
receipt of two settlements. Such an event did not occur during 1995 and as a
result total revenues were lower in 1995 than the prior year. Another factor
contributing to the decline in total revenues for the year ended December 31,
1995, as compared to 1994, is a decrease in rental income. Rental income
decreased by $51,000 during 1995, compared to 1994, and decreased by $190,000
during 1994, compared to 1993. The decrease in rental income for both years is
due to the reduction in the size of the equipment portfolio as a result of the
ongoing liquidation of equipment. Because the Partnership is in its liquidation
stage, it is not expected to acquire any additional equipment. As a result,
rental revenues are expected to continue to decline as the portfolio is
liquidated and the remaining equipment is re-leased at lower rental rates. At
December 31, 1995, the Partnership owned equipment, excluding its investment in
equipment joint ventures, with an aggregate original cost of $737,000, as
compared to $1,706,000 at December 31, 1994 and $3,568,000 at December 31, 1993.
The increase in earnings from joint ventures experienced for both 1995
and 1994 compared to their respective prior year will be further discussed under
"Joint Ventures". In addition to the increase in earnings from joint ventures
during 1995, as compared to 1994, the Partnership also recognized an increase in
interest income from notes receivable. The primary factor contributing to the
increase of interest income from notes receivable for the year ended December
31, 1995, compared to the same period in the prior year, is due to the payoff of
the Partnership's two remaining notes receivable from cable television system
operators. The Partnership's outstanding notes receivable had been in default
and the Partnership had suspended the recognition of interest income on these
notes. One note was paid off during the second quarter of 1995, which resulted
in the reversal of a provision for losses on notes receivable of $52,000 as the
Partnership received proceeds for a note that had been fully provided for. The
second note was paid off in the third quarter of 1995 and resulted in the
recognition of interest income. The Partnership had suspended the accrual of
interest income on this note in a prior period. Upon receipt of the payoff, the
proceeds were first applied to the net carrying amount of this note, with the
excess being recognized as interest income. The payoff of this last remaining
note receivable resulted in the Partnership reversing its remaining allowance
for losses on notes receivable of $7,000.
Total expenses decreased by $76,000 and $191,000 during the year ended
December 31, 1995 and 1994, respectively. The decrease for both years was
attributable to decreases in depreciation expense and provision for losses on
receivables. The absence of depreciation expense for the year ended December 31,
1995, as compared to $33,000 in 1994, is due to the remaining equipment
portfolio having been fully depreciated. The decline in depreciation expense of
$21,000 during 1994, as compared to 1993, was due to the reduction in the size
of the equipment portfolio as a result of sales and an increasing portion of the
equipment being fully depreciated.
During the year ended December 31, 1995, the Partnership reversed
$59,000 of allowance for losses on notes receivable on several of its defaulted
notes receivables in which it received a payoff, as previously discussed. In
contrast, the Partnership reversed $31,000 of allowance for losses on accounts
receivable during 1994.
<PAGE>
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Inflation affects the Partnership in relation to the current cost of
equipment placed on lease and the residual values realized when the equipment
comes off-lease and is sold. During the last several years inflation has been
low, thereby having very little impact upon the Partnership.
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 increased by $74,000 and $136,000 for the
year ended December 31, 1995 and 1994, respectively, as compared to the same
periods in the previous year. The increase in earnings from joint ventures
during 1995 is primarily attributable to two equipment joint ventures. The
increase in earnings from one equipment joint venture during 1995 is due to a
decline in depreciation expense and lease related operating expenses. The
increase in earnings from the second equipment joint venture during 1995 is due
to this joint venture having been formed in October of 1994. As a result, there
were no comparable earnings from this joint venture during year ended December
31, 1994.
The increase in earnings from joint ventures experienced during the
year ended December 31, 1994, as compared to 1993, was attributable to the
overall decline in expenses, primarily depreciation and lease related operating
expenses, which exceeded the decline in revenues in the equipment joint
ventures. The overall decline in revenues and expenses experienced by the
equipment joint ventures was a result of a majority of the equipment joint
ventures being in the liquidation stage. Another factor contributing to the
increased earnings during 1994 was due to the recognition of settlement income
in one of the equipment joint ventures.
Liquidity and Capital Resources
The Partnership reported net cash used by leasing and financing
activities of $58,000 for the year ended December 31, 1995, compared to net cash
provided by leasing and financing activities of $454,000 and $278,000 for the
same period in 1994 and 1993, respectively. The decrease for the year ended
December 31, 1995, compared to the same period in the prior year, is the result
of a payment of liquidation fees payable to the General Partner. These payments
more than exceeded the increase in principal payments received which was a
result of two payoffs of notes receivable. The increase in net cash provided
during 1994, compared to 1993, was attributable to the receipt of the cash
portion of several settlements totaling $143,000.
Cash distributions from joint ventures increased by $140,000 for the
year ended December 31, 1995, compared to the same period in 1994 but decreased
by $503,000 for the year ended December 31, 1994, compared to 1993. The increase
during 1995 is primarily attributable to a new investment made in a newly formed
equipment joint venture during the fourth quarter of 1994. In addition, one
equipment joint venture experienced an increase in cash available as a result of
a decline in lease related operating expenses.
The decrease in cash distributions during the year ended December 31,
1994, as compared to 1993, was a result of a reduction in the amount of cash
available for distribution in one of the equipment joint ventures.
No equipment purchases were made during the years ended December 31,
1995 and 1993 but the Partnership did make an equipment purchase with an
aggregate original cost of $124,000 during 1994. The purchase made during 1994
was subsequently contributed to an equipment joint venture.
As of December 31, 1995, the Partnership owned equipment held for lease
with a purchase price of $662,000 and a net book value of $0 compared to
$699,000 and $0 at December 31, 1994, and $1,710,000 and $18,000 at December 31,
1993. The General Partner is actively engaged, on behalf of the Partnership, in
remarketing and selling the Partnership's off-lease equipment portfolio.
The limited partners received cash distributions of $1,222,000,
$1,211,000 and $1,211,000 during the year ended December 31, 1995, 1994 and
1993, respectively. As a result, the cumulative cash distributions to the
limited partners are $37,660,000, $36,438,000 and $35,227,000 as of December 31,
1995, 1994 and 1993, respectively. The General Partner did not receive cash
distributions for the year ended December 31, 1995, 1994 and 1993.
<PAGE>
Page 8 of 32
Distributions to partners are being made annually on January 15. The
distribution made on January 15, 1995, 1994 and 1993 were all made at
approximately the same rate. The distribution to partners on January 15, 1996
was made at a lower rate than the 1995 distribution.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's continuing
operational expenses.
The Partnership has no obligation, commitments or plans to purchase
more equipment. The Partnership is currently in its liquidation stage.
<PAGE>
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHOENIX LEASING GROWTH FUND 1982
YEAR ENDED DECEMBER 31, 1995
<PAGE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Phoenix Leasing Growth Fund 1982:
We have audited the accompanying balance sheets of Phoenix Leasing Growth Fund
1982 (a California limited partnership) as of December 31, 1995 and 1994, and
the related statements of operations, partners' capital, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements and the schedule referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Phoenix Leasing Growth Fund
1982 as of December 31, 1995 and 1994, and the results of its operations, and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14,
subsection (a) 2 is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of the basic financial
statements. This schedule 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.
San Francisco, California, ARTHUR ANDERSEN LLP
January 19, 1996
<PAGE>
<TABLE>
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PHOENIX LEASING GROWTH FUND 1982
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
<CAPTION>
December 31,
1995 1994
------- -------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,078 $ 1,975
Accounts receivable (net of allowance for losses on
accounts receivable of $0 and $6 at December 31, 1995
and 1994, respectively) 27 34
Notes receivable (net of allowance for losses on notes
receivable of $0 and $100 at December 31, 1995 and
1994, respectively) -- 115
Equipment on operating leases and held for lease (net of
accumulated depreciation and obsolescence reserves of
$578 and $1,013 at December 31, 1995 and 1994, respectively) -- --
Investment in joint ventures 283 437
Other assets 65 76
------- -------
Total Assets $ 1,453 $ 2,637
======= =======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable and accrued expenses $ 1,949 $ 2,339
------- -------
Total Liabilities 1,949 2,339
------- -------
Partners' Capital (Deficit):
General Partner (410) (414)
Limited Partners, 44,000 units authorized,
41,798 units issued and 40,343 units outstanding
at December 31, 1995 and 1994 (63) 726
Unrealized losses on marketable securities
available-for-sale (23) (14)
------- -------
Total Partners' Capital (Deficit) (496) 298
------- -------
Total Liabilities and Partners' Capital (Deficit) $ 1,453 $ 2,637
======= =======
The accompanying notes are an
integral part of these statements.
</TABLE>
<PAGE>
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PHOENIX LEASING GROWTH FUND 1982
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
For the Years Ended December 31,
1995 1994 1993
----- ----- -----
INCOME
Rental income $ 165 $ 216 $ 406
Gain on sale of equipment 12 92 30
Equity in earnings from joint ventures, net 217 143 7
Interest income, notes receivable 21 6 85
Settlements -- 337 --
Other income 60 83 78
------ ------ -----
Total Income 475 877 606
------ ------ -----
EXPENSES
Depreciation -- 33 54
Lease related operating expenses 9 8 87
Management fees to General Partner 25 30 45
Provision for losses on receivables (59) (31) 25
General and administrative expenses 63 74 94
------ ------ -----
Total Expenses 38 114 305
------ ------ -----
NET INCOME $ 437 $ 763 $ 301
====== ====== =====
NET INCOME PER LIMITED PARTNERSHIP UNIT $10.73 $18.73 $7.39
====== ====== =====
ALLOCATION OF NET INCOME:
General Partner $ 4 $ 8 $ 3
Limited Partners 433 755 298
----- ----- -----
$ 437 $ 763 $ 301
===== ===== =====
The accompanying notes are an
integral part of these statements.
<PAGE>
<TABLE>
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PHOENIX LEASING GROWTH FUND 1982
STATEMENTS OF PARTNERS' CAPITAL
(Amounts in Thousands Except for Unit Amounts)
<CAPTION>
General
Partner's Limited Partners' Unrealized Total
Amount Units Amount Losses Amount
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $(425) 40,343 $ 2,095 $ -- $ 1,670
Distributions to partners ($30.02 per
limited partnership unit) -- -- (1,211) -- (1,211)
Net income 3 -- 298 -- 301
----- ------ ------- ------- -------
Balance, December 31, 1993 (422) 40,343 1,182 -- 760
Distributions to partners ($30.02 per
limited partnership unit) -- -- (1,211) -- (1,211)
Adjustment to unrealized losses on
available-for-sale securities -- -- -- (14) (14)
Net income 8 -- 755 -- 763
----- ------ ------- ------- -------
Balance, December 31, 1994 (414) 40 726 (14) 298
Distributions to partners ($30.31 per
limited partnership unit) -- -- (1,222) -- (1,222)
Net income 4 -- 433 -- 437
Unrealized losses on marketable
securities available-for-sale -- -- -- (9) (9)
----- ------ ------- ------- -------
Balance, December 31, 1995 $(410) 40,343 $ (63) $ (23) $ (496)
===== ====== ======= ======= =======
The accompanying notes are an integral
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Page 14 of 32
PHOENIX LEASING GROWTH FUND 1982
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
Net income $ 437 $ 763 $ 301
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation -- 33 54
Gain on sale of equipment (12) (92) (30)
Gain on sale of securities (11) -- --
Equity in earnings from joint ventures, net (217) (143) (7)
Provision for early termination, financing leases (1) (1) 1
Provision for losses on notes receivable (69) -- 24
Provision for losses on accounts receivable 11 (30) --
Settlements -- (195) --
Decrease (increase) in accounts receivable (4) 19 12
Increase (decrease) in accounts payable and
accrued expenses (390) 44 (218)
Decrease (increase) in other assets 13 -- (2)
------- ------- -------
Net cash provided (used) by operating activities (243) 398 135
------- ------- -------
Investing Activities:
Principal payments, financing leases 1 52 54
Principal payments, notes receivable 184 4 89
Proceeds from sale of equipment 12 15 46
Distributions from joint ventures 371 231 734
Purchase of equipment -- (124) --
Investment in joint ventures -- (29) (3)
------- ------- -------
Net cash provided by investing activities 568 149 920
------- ------- -------
Financing Activities:
Payments of principal, notes payable -- (32) (52)
Distributions to partners (1,222) (1,211) (1,211)
------- ------- -------
Net cash used by financing activities (1,222) (1,243) (1,263)
------- ------- -------
Decrease in cash and cash equivalents (897) (696) (208)
Cash and cash equivalents, beginning of period 1,975 2,671 2,879
------- ------- -------
Cash and cash equivalents, end of period $ 1,078 $ 1,975 $ 2,671
======= ======= =======
The accompanying notes are an intregral
part of these statements.
</TABLE>
<PAGE>
Page 15 of 32
PHOENIX LEASING GROWTH FUND 1982
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1. Organization and Partnership Matters.
Phoenix Leasing Growth Fund 1982, a California limited partnership (the
"Partnership"), was formed on September 11, 1980, to invest in capital equipment
of various types and to lease such equipment to third parties on either a
long-term or short-term basis. Minimum investment requirements were met April
28, 1982, at which time the Partnership commenced operations.
The Partnership has also made investments in joint ventures with
affiliated partnerships managed by the General Partner for the purpose of
spreading the risks of financing or acquiring certain capital equipment leased
to third parties (see Note 6).
For financial reporting purposes, as more specifically described in the
Partnership Agreement, income in any quarter will be allocated, before
liquidation and redemption fees, 15% to Phoenix Leasing Incorporated (the
"General Partner") and 85% to the Limited Partners subject to the following
limitations. To the extent that income for any quarter, when added to income for
all prior accounting periods, does not exceed losses for all prior accounting
periods, such income shall be allocated, before liquidation and redemption fees,
1% to the General Partner and 99% to the Limited Partners. Income shall be
allocated, before liquidation and redemption fees, 1% to the General Partner and
99% to the Limited Partners in any quarter subsequent to a quarter in which the
General Partner was allocated, before liquidation and redemption fees, 1% of
losses, to the extent of previously allocated Partnership losses. A loss in any
quarter shall be allocated, before liquidation and redemption fees, 1% to the
General Partner and 99% to the Limited Partners.
As an alternative to receiving cash distributions, Limited Partners may
have participated in the Capital Accumulation Plan, whereby the Limited
Partners' cash distributions were reinvested and accumulated in the respective
Limited Partner's capital account. Effective January 1, 1988, the Capital
Accumulation Plan was discontinued. Limited Partners who elected to participate
in the Capital Accumulation Plan are now receiving cash distributions.
In the event the General Partner has a deficit balance in its capital
account at the time of partnership liquidation, it will be required to
contribute the amount of such deficit to the Partnership. The General Partner
has acquired 63 units of Limited Partnership interest.
As compensation for management services, the General Partner receives a
fee, payable quarterly, in an amount equal to 6% of the Partnership's gross
revenues for the quarter from which such payment is being made, which revenues
shall include rental and note receipts, maintenance fees, proceeds from the sale
of equipment and other income.
In consideration for the services and activities performed by the
General Partner in connection with the disposition of the Partnership's
equipment, the General Partner receives liquidation fees equal to 15% of the
"Net Capital Contribution" of the Limited Partners with respect to all
Partnership interests other than those interests which have been previously
redeemed and accordingly were subject to the 15% redemption fee.
For financial reporting purposes, the Partnership began to recognize
the liquidation fee in the second year of operations when the General Partner
began its activities of liquidating portions of the equipment portfolio. The
original firm terms of the initial leases (generally 24 months) began to expire
at this point in time. The present value of the liquidation fee was recognized
using the interest method and accreted to the face amount over a period of
approximately eight years in order to properly match the liquidation fee expense
with the activities of the General Partner in connection with ongoing portfolio
liquidations. The liquidation fees have been fully accrued as of December 31,
1992. The Partnership began to pay the liquidation fees to the General Partner
in 1990.
<PAGE>
Page 16 of 32
Note 2. Summary of Significant Accounting Policies.
Leasing Operations. The Partnership's leasing operations consisted of
both financing and operating leases. The financing method of accounting for
leases records as unearned income at the inception of the lease, the excess of
net rentals receivable and estimated residual value at the end of the lease term
over the cost of equipment leased. Unearned income is credited to income monthly
over the term of the lease on a declining basis to provide an approximate level
rate of return on the unrecovered cost of the investment. Initial direct costs
of consummating new leases are capitalized and included in the cost of the
equipment.
Under the operating method of accounting for leases, the leased
equipment is recorded as an asset at cost and depreciated on a straight-line
basis over the estimated useful life, ranging up to seven years.
Rental income for the year is determined on the basis of rental
payments due for the period under the terms of the lease. Maintenance, repairs
and minor renewals of the leased equipment are charged to expense.
Portfolio Valuation Methodology. The Partnership uses the portfolio
method of accounting for the net realizable value of the Partnership's equipment
portfolio.
Investment in Joint Ventures. Investments in net assets of the
equipment, financing and foreclosed cable systems joint ventures reflect the
Partnership's equity basis in the ventures. Under the equity method of
accounting, the original investment is recorded at cost and is adjusted
periodically to recognize the Partnership's share of earnings, losses, cash
contributions and cash distributions after the date of acquisition.
Investment in Marketable Securities Available for Sale. The Partnership
has investments in stock in public companies that have been determined to be
available for sale that are included in Other Assets on the accompanying Balance
Sheets. Available-for-sale securities are stated at their fair market value,
with the unrealized gains and losses reported in a separate component of
partners' capital.
Cash and Cash Equivalents. Cash and cash equivalents includes deposits
at banks, investments in money market funds and other highly liquid short-term
investments with original maturities of less than 90 days.
Non Cash Investing Activities. During the year ended December 31, 1995,
the Partnership received a final distribution of marketable securities from one
of its investments in joint ventures. The market value of the marketable
securites at the distribution date was $11,000. During the year ended December
31, 1994, the Partnership contributed equipment and other investments received
through a settlement to a joint venture. The amount of such contribution was
$247,000. Non cash transactions included in Other Assets during the year ended
December 31, 1994 consist of common stock valued at $72,000 received pursuant to
a settlement (see Note 8) and an unrealized loss on marketable securities of
$14,000.
Financial Accounting Pronouncements. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity would estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset. Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Partnership does not expect
the adoption of this statement to have a material impact on its financial
position and results of operations. The Partnership plans to adopt Statement No.
121 on January 1, 1996.
On January 1, 1995, the Partnership adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan," and Statement No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures." Statement No. 114 requires that certain
impaired loans be measured based on the present value of expected cash flows
discounted at the loan's effective interest rate; or, alternatively, at the
loan's observable market price or the fair value of the collateral if the loan
is collateral dependent. Prior to 1995, the allowance for losses on notes
receivable was based on the undiscounted cash flows or the fair value of the
<PAGE>
Page 17 of 32
collateral dependent loans. At January 1, 1995, the adoption of Statements 114
and 118 had no effect on the Partnership's financial position or results of
operations.
Reclassification. Certain 1994 and 1993 amounts have been reclassified
to conform to the 1995 presentation.
Use of Estimates. The preparation of financialstatements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Note 3. Accounts Receivable.
Accounts Receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Lease payments $21 $ 35
Property tax 6 3
Other -- 2
--- ----
27 40
Less: allowance for losses
on accounts receivable -- (6)
--- ----
Total $27 $ 34
=== ====
Note 4. Notes Receivable.
Notes receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Notes receivable from cable television
system operators with interest ranging from
16% to 21% per annum, receivable in
installments ranging from 23 to 32 months
through December 1995, collateralized by a
security interest in the cable systems
assets. These notes have a graduated repayment
schedule followed by a balloon payment. $ - $ 215
Less: allowance for losses on notes receivable - (100)
----- -----
Total $ - $ 115
===== =====
The Partnership's notes receivable from cable television system
operators provide for a monthly payment rate in an amount that is less than the
contractual interest rate. The difference between the payment rate and the
contractual interest rate was added to the principal and therefore deferred
until the maturity date of the note. Upon maturity of the note, the original
principal and deferred interest is due and payable in full. Although the
contractual interest rates may be higher, due to a high degree of uncertainty
relating to the collection of the entire amount of contractually owed interest,
the Partnership limited the amount of interest recognized on the Partnership's
performing notes receivable to cable television system operators to the amount
of the payments received, thereby deferring the recognition of a portion of the
deferred interest until such time as management believes it will be realized.
Generally, notes receivable are classified as impaired and the accrual
of interest on such notes are discontinued when the contractual payment of
principal or interest has become 90 days past due or management has serious
doubts about further collectibility of the contractual payments. Any payments
received subsequent to the placement of the note receivable on to impaired
status will generally be applied towards the reduction of the outstanding note
receivable balance, which may include previously accrued interest as well as
principal. Once the principal and accrued interest balance has been reduced to
zero, the remaining payments will be applied to interest income. The average
<PAGE>
Page 18 of 32
recorded investment in impaired loans during the year ended December 31, 1995
was approximately $84,000.
During the quarter ended June 30, 1995, the Partnership received a
settlement on one of its remaining notes receivable from a cable television
system operator which was considered to be impaired under Statement No. 114. The
Partnership received a partial recovery of $56,000 as a settlement which was
applied towards the $87,000 outstanding note receivable balance. The remaining
balance of $31,000 was written-off through its related allowance for loan
losses. The related allowance for loan losses for this note receivable was
provided for in a previous year in an amount equal to the carrying value of the
note. Upon receipt of the settlement of this note receivable, the Partnership
reduced the allowance for loan losses by $53,000 during the quarter ended June
30, 1995. This reduction in the allowance for loan losses was recognized as
income during the period.
The Partnership received a settlement on its one remaining note
receivable during the quarter ended September 30, 1995. This note receivable was
from a cable television operator which was impaired. The Partnership received
$141,000 as a settlement for this note receivable of which $120,000 was applied
towards the outstanding note receivable balance and the remaining $21,000
applied towards interest income. There was an allowance for losses on notes
receivable of $16,000 for this note receivable. Due to the receipt of a
settlement which exceeded the net carrying value of the note receivable, this
allowance was recognized as income.
The activity in the allowance for losses on notes receivable during the
years ended December 31, is as follows:
1995 1994
---- ----
(Amounts in Thousands)
Beginning balance $ 100 $ 100
Provision for (recovery of) losses (69) -
Write downs (31) -
----- -----
Ending balance $ - $ 100
===== =====
Note 5. Equipment on Operating Leases and Investment in Financing Leases.
Equipment on lease consists primarily of computer peripheral equipment
and small computer systems subject to operating and financing leases.
The Partnership has entered into direct lease arrangements with certain
lessees. Generally, it is the responsibility of the lessee to provide
maintenance on leased equipment. The General Partner administers the equipment
portfolio of leases acquired through the direct leasing program. Administration
includes the collection of rents from the lessees and remarketing of the
equipment.
The Partnership has agreements with some of the manufacturers of its
equipment whereby such manufacturers undertake to remarket off-lease equipment
on a best efforts basis. These agreements permit the Partnership to assume the
remarketing function directly if certain conditions contained in the agreements
are not met. For their remarketing services, the manufacturers are paid a
percentage of net monthly rentals. Certain manufacturers are entitled to
additional fees after the Partnership has recovered certain amounts.
The net investment in financing leases consists of the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
Minimum lease payments to be received $ - $ 1
Less: unearned income - -
allowance for loss from early terminations - (1)
---- ----
Net investment in financing leases $ - $ -
==== ====
<PAGE>
Page 19 of 32
Minimum rentals to be received on noncancellable operating and
financing leases for the years ended December 31 are as follows:
Operating
(Amounts in Thousands)
1996 ................................... $ 4
1997 ................................... -
1998 ................................... -
1999 ................................... -
2000 ................................... -
Thereafter ............................. -
----
Total .................................. $ 4
====
The net book value of equipment held for lease at December 31, 1995 and
1994 amounted to $0.
Note 6. Investment in Joint Ventures.
Equipment Joint Ventures
The Partnership owns a limited or general partnership interest in
equipment joint ventures. These investments are accounted for using the equity
method of accounting. The other partners of the ventures are entities organized
and managed by the General Partner.
The purpose of the equipment joint ventures is the acquisition and
leasing of various types of equipment. During the term of the Partnership,
Phoenix Leasing Growth Fund 1982 has participated in the following equipment
joint ventures:
Weighted
Joint Venture Percentage Interest
------------- -------------------
Arroyo Joint Venture VIII(2) 40.00%
Arroyo Joint Venture XVI 35.72
Arroyo Joint Venture XVII(2) 28.35
PLI Limited Partnership Fund A(3) 25.24
Equity Joint Venture VII(1) 20.00
ACRO Joint Venture, Residential 30.90
Leveraged Joint Venture 1986(3) 23.44
Leveraged Joint Venture 1987-1(2) 19.75
Leveraged Joint Venture 1987-2 17.91
Leveraged Joint Venture 1987-3 9.73
Leveraged Joint Venture 1990-1 15.88
Xerox Graphics Joint Venture(2) 16.67
Phoenix Joint Venture 1994-1 5.37
(1) Closed during 1993
(2) Closed during 1994
(3) Closed during 1995
<PAGE>
Page 20 of 32
<TABLE>
An analysis of the Partnership's investment in equipment joint ventures
is as follows:
<CAPTION>
Net Investment Equity in Net Investment
at Beginning Earnings at End
Date of Period Contributions (Losses) Distributions of Period
-------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $678 $ 3 $ 12 $604 $ 89
==== ======== ==== ==== ====
Year Ended
December 31, 1994 $ 89 $ 276 $124 $169 $320
==== ======== ==== ==== ====
Year Ended
December 31, 1995 $320 $ -- $191 $342 $169
==== ======== ==== ==== ====
</TABLE>
The aggregate combined financial information of the equipment joint
ventures as of December 31 and for the years then ended is presented as follows:
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 644 $ 459
Accounts receivable 1,776 2,222
Operating lease equipment 1,021 2,535
Other assets 691 919
------ ------
Total Assets $4,132 $6,135
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 973 $1,133
Partners' capital 3,159 5,002
------ ------
Total Liabilities and Partners' Capital $4,132 $6,135
====== ======
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Rental income $3,923 $3,293 $5,087
Gain on sale of equipment 1,769 1,312 1,613
Other income 742 259 48
------ ------ ------
Total Income 6,434 4,864 6,748
------ ------ ------
<PAGE>
Page 21 of 32
EXPENSES
Depreciation 1,188 1,257 1,873
Lease related operating expenses 2,961 2,778 4,500
Management fee to the General Partner 289 235 356
Interest expense -- 1 --
Other expenses 272 88 147
------ ------ -------
Total Expenses 4,710 4,359 6,876
------ ------ -------
Net Income (Loss) $1,724 $ 505 $ (128)
====== ====== =======
As of December 31, 1995 and 1994, the Partnership's pro rata interest
in the equipment joint ventures' net book value of off-lease equipment was
$6,000 and $18,000, respectively.
The General Partner earns a management fee of 6% of the Partnership's
respective interest in gross revenues of each equipment joint venture. Revenues
subject to management fees at the joint venture level are not subject to
management fees at the Partnership level.
Financing Joint Ventures
The Partnership owns a limited partnership interest in financing joint
ventures which are combined for reporting purposes into Phoenix Funding
Partnership (PFP). The Partnership's current investment in PFP's consists of two
financing joint ventures. The purpose of the financing joint ventures is to
provide, on a limited basis, financing to manufacturers and their lessees for
equipment leased directly by manufacturers to third parties. All loans to
manufacturers are interest bearing and are secured by equipment. The Partnership
accounts for its investment in the PFP using the equity method of accounting.
PFP periodically reviews the probability of recovering the outstanding
note balances. Such reviews address, among other things, current cash receipts,
costs of collection efforts, the current economic situation and potential
uncollectible receivables. If the review indicates that future cash receipts,
net of anticipated future expenses, does not exceed the outstanding note
balances, PFP provides a reserve for any anticipated loan loss as appropriate.
Due to a high degree of uncertainty relating to the collection of the
entire amount of contractually owed principal and interest over the lives of the
notes receivable, the PFP loan portfolios apply all cash receipts (principal and
interest) to the outstanding note balances. Under this method, interest income
will not be recognized until the outstanding note balances are recovered.
The following information summarizes the Partnership's respective
interest in the original loan proceeds of the funding partnership.
Weighted
Joint Venture Percentage Interest
------------- -------------------
Phoenix Funding Partnership 14.33%
An analysis of the Partnership's investment account in financing joint
ventures is as follows:
<PAGE>
Page 22 of 32
<TABLE>
<CAPTION>
Net Investment Equity in Net Investment
at Beginning Earnings at End
Date of Period Contributions (Losses) Distributions of Period
-------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $134 $- $(14) $74 $46
==== === ==== === ===
Year Ended
December 31, 1994 $ 46 $- $ 8 $45 $ 9
==== === ==== === ===
Year Ended
December 31, 1995 $ 9 $- $ 17 $21 $ 5
==== === ==== === ===
</TABLE>
The aggregate combined financial information of the financing joint
ventures as of December 31 and for the years then ended is presented as follows:
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $28 $34
Notes receivable, net -- 25
--- ---
Total Assets $28 $59
=== ===
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5 $ 1
Partners' capital 23 58
--- ---
Total Liabilities and Partners' Capital $28 $59
=== ===
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Interest income $ 73 $ 86 $--
Other income 77 17 18
---- ---- --
Total Income 150 103 18
---- ---- --
<PAGE>
Page 23 of 32
EXPENSES
Management fee to the General Partner 8 19 30
Other expenses 19 43 72
---- --- -----
Total Expenses 27 62 102
---- --- -----
Net Income (Loss) $123 $41 $ (84)
==== === =====
The General Partner earns a management fee of 6% of the Partnership's
respective interest in gross payments received for each financing joint venture.
Revenues subject to a management fee at the joint venture level are not subject
to management fees at the Partnership level.
Foreclosed Cable Systems Joint Ventures
The Partnership owns an interest in foreclosed cable systems joint
ventures, along with other partnerships managed by the General Partner and its
affiliates. The Partnership foreclosed upon nonperforming outstanding notes
receivable to cable television operators to whom the Partnership, along with
other affiliated partnerships managed by the General Partner, had extended
credit. The partnerships' notes receivables were exchanged for interests (their
capital contribution), on a pro rata basis, in newly formed joint ventures owned
by the partnerships and managed by the General Partner. Title to the cable
television systems is held by the joint ventures. These investments are
accounted for using the equity method of accounting.
The foreclosed cable systems joint ventures owned by the Partnership,
along with their percentage ownership is as follows:
Percentage
Joint Venture Ownership
------------- ----------
Phoenix Black Rock Cable J.V. 6.65%
<TABLE>
An analysis of the Partnership's net investment in foreclosed cable
systems joint ventures at December 31, is as follows:
<CAPTION>
Net Investment Net Investment
at Beginning Equity in at End
Date of Period Contributions Earnings Distributions of Period
-------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $161 $-- $ 9 $56 $114
==== ==== === === ====
Year Ended
December 31, 1994 $114 $-- $11 $17 $108
==== ==== === === ====
Year Ended
December 31, 1995 $108 $-- $ 9 $ 8 $109
==== ==== === === ====
</TABLE>
The aggregate combined financial information of the foreclosed cable
systems joint ventures as of December 31 and for the years then ended is
presented as follows:
<PAGE>
Page 24 of 32
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 258 $ 148
Accounts receivable 31 48
Property, plant and equipment 1,449 1,555
Other assets 1 --
------ ------
Total Assets $1,739 $1,751
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 90 $ 102
Partners' capital 1,649 1,649
------ ------
Total Liabilities and Partners' Capital $1,739 $1,751
====== ======
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Subscriber revenue $676 $654 $641
Gain on sale of cable system -- -- 35
Other income 12 7 10
---- ---- ----
Total Income 688 661 686
---- ---- ----
EXPENSES
Depreciation and amortization 154 150 147
Program services 181 154 169
General and administrative expenses 185 155 186
Management fees to an affiliate of the
General Partner 31 29 29
Provision for losses on accounts
receivable 7 7 7
---- ---- ----
Total Expenses 558 495 538
---- ---- ----
Net Income Before Income Taxes 130 166 148
Income tax benefit 11 27 21
---- ---- ----
Net Income $141 $193 $169
==== ==== ====
Phoenix Cable Management Inc. (PCMI), an affiliate of the General
Partner, provides day to day management services in connection with the
operation of the foreclosed cable systems joint ventures. The foreclosed cable
systems joint ventures will pay a management fee equal to four and one-half
percent of the System's monthly gross revenue for these services. Revenues
subject to a management fee at the joint venture level will not be subject to
management fees at the Partnership level.
<PAGE>
Page 25 of 32
Note 7. Accounts Payable and Accrued Expenses.
Accounts payable and accrued expenses consist of the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
Liquidation fees payable to General Partner $1,881 $2,081
Equipment lease operations 2 118
General Partner and affiliates -- 9
Other 66 131
------ ------
Total $1,949 $2,339
====== ======
Note 8. Settlements.
On July 1, 1991, Phoenix Leasing Incorporated, as General Partner to
the Partnership and sixteen other affiliated partnerships, filed suit in the
Superior Court for the County of Marin, Case No. 150016, against Xerox
Corporation, a corporation with which the General Partner had entered into
contractual agreements for the acquisition and administration of leased
equipment. The lawsuit was settled out of court, effective as of October 28,
1994 pursuant to the terms of a Confidential Settlement Agreement and Mutual
Release. The settlement agreement generally provides for compensation payable to
the Partnership and its affiliates in cash and kind, including the assignment by
Xerox of certain goods and services. The agreement further provides for the sale
by Xerox to the Partnership and its affiliates of equipment subject to lease.
The suit has been dismissed with prejudice on the merits.
The Partnership's pro rata share of the Xerox settlement was $203,000,
which consists of cash of $80,000, and assigned monthly rentals and credits for
goods and services valued at $123,000. In addition, the Partnership purchased
additional leased equipment at an aggregate cost of $124,000. The Partnership,
along with sixteen other affiliated partnerships managed by the General Partner,
contributed its share of the assigned monthly rentals, credits for goods and
services and purchased equipment leases to a joint venture, in exchange for an
interest in the joint venture.
Storage Technology Corporation (STC), a major manufacturer of equipment
purchased by the Partnership, filed for protection from creditors under Chapter
11 of the Federal Bankruptcy Code on October 14, 1984. On June 18, 1987, STC's
plan of reorganization was approved and the Partnership received a settlement.
On August 31, 1994, the United States Bankruptcy Court for the District
of Colorado ordered a final distribution from the Disputed Claims Reserve which
was provided for in the Debtors' Joint Plan of Reorganization. On December 23,
1994, the Partnership received its pro rata share of the final distribution from
the Disputed Claims Reserve valued at $134,000. The final distribution consisted
of cash of $62,000 and common stock valued at $72,000.
Note 9. 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.
The net difference between the tax basis and the reported amounts of
the Partnership's assets and liabilities is as follows at December 31:
<PAGE>
Page 26 of 32
Reported Amounts Tax Basis Net Difference
---------------- --------- --------------
(Amounts in Thousands)
1995
Assets $1,453 $1,488 $ (35)
Liabilities 1,949 1,211 738
1994
Assets $2,637 $2,814 $(177)
Liabilities 2,339 1,402 937
Note 10. Related Entities.
The General Partner serves in the capacity of general partner in other
partnerships, all of which are engaged in the equipment leasing and financing
business.
The General Partner incurs certain expenses, such as data processing
and equipment remarketing costs, for which it is reimbursed by the Partnership.
Equipment remarketing costs are incurred as the General Partner remarkets
certain equipment on behalf of the Partnership. The expenses incurred by the
General Partner are reimbursed at the lower of the actual costs or an amount
equal to 90% of the fair market value for such services. The equipment
remarketing costs reimbursed to the General Partner were $1,000, $1,000 and
$2,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Note 11. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income and distributions per limited partnership unit were based on
the limited partners' share of net income and distributions, and the weighted
average number of units outstanding of 40,343 for the years ended December 31,
1995, 1994 and 1993. For purposes of allocating income (loss) and distributions
to each individual limited partner, the Partnership allocates net income (loss)
and distributions based upon each respective limited partner's ending capital
account balance. The use of this method accurately reflects each limited
partner's participation in the Partnership including reinvestment through the
Capital Accumulation Plan. As a result, the calculation of net income (loss) and
distributions per limited partnership unit is not indicative of per unit income
(loss) and distributions due to reinvestments through the Capital Accumulation
Plan.
Note 12. Subsequent Events.
In January 1996, cash distributions of $807,000 were made to the
Limited Partners.
Note 13. Fair Value of Financial Instruments.
During the year ended December 31, 1995, the Partnership adopted
Statement of Financial Accounting Standard No. 107, "Disclosures about Fair
Value of Financial Instruments," which requires disclosure of the fair value of
financial instruments for which it is practicable to estimate fair value. The
following methods and assumptions were used to estimate the fair value of each
class of financial instrument which it is practicable to estimate that value.
Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.
Marketable Securities
The fair values of investments in marketable securities are estimated based on
quoted market prices.
<PAGE>
Page 27 of 32
The estimated fair values of the Partnership's financial instruments at
December 31, 1995 are as follows:
Carrying
Amount Fair Value
-------- ----------
(Amounts in Thousands)
Assets
Cash and cash equivalents $1,078 $1,078
Marketable securities 60 60
<PAGE>
Page 28 of 32
Item 9. Disagreements on Accounting and Financial Disclosure Matters.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The registrant is a limited partnership and, therefore, has no
executive officers or directors. The general partner of the registrant is
Phoenix Leasing Incorporated, a California corporation. The directors and
executive officers of Phoenix Leasing Incorporated (PLI) are as follows:
GUS CONSTANTIN, age 58, is President, Chief Executive Officer and a
Director of PLI. Mr. Constantin received a B.S. degree in Engineering from the
University of Michigan and a Master's Degree in Management Science from Columbia
University. From 1969 to 1972, he served as Director, Computer and Technical
Equipment of DCL Incorporated (formerly Diebold Computer Leasing Incorporated),
a corporation formerly listed on the American Stock Exchange, and as Vice
President and General Manager of DCL Capital Corporation, a wholly-owned
subsidiary of DCL Incorporated. Mr. Constantin was actively engaged in marketing
manufacturer leasing programs to computer and medical equipment manufacturers
and in directing DCL Incorporated's IBM System/370 marketing activities. Prior
to 1969, Mr. Constantin was employed by IBM as a data processing systems
engineer for four years. Mr. Constantin is an individual general partner in four
active partnerships and is an NASD registered principal. Mr. Constantin is the
founder of PLI and the beneficial owner of all of the common stock of Phoenix
American Incorporated.
PARITOSH K. CHOKSI, age 42, is Senior Vice President, Chief Financial
Officer and Treasurer of PLI. He has been associated with PLI since 1977. Mr.
Choksi oversees the finance, accounting, information services and systems
development departments of the General Partner and its Affiliates and oversees
the structuring, planning and monitoring of the partnerships sponsored by the
General Partner and its Affiliates. Mr. Choksi graduated from the Indian
Institute of Technology, Bombay, India with a degree in Engineering. He holds an
M.B.A. degree from the University of California, Berkeley.
GARY W. MARTINEZ, age 45, is Senior Vice President of PLI. He has been
associated with PLI since 1976. He manages the Asset Management Department,
which is responsible for lease and loan portfolio management. This includes
credit analysis, contract terms, documentation and funding; remittance
application, change processing and maintenance of customer accounts; customer
service, invoicing, collection, settlements and litigation; negotiating lease
renewals, extensions, sales and buyouts; and management information reporting.
From 1973 to 1976, Mr. Martinez was a Loan Officer with Crocker National Bank,
San Francisco. Prior to 1973, he was an Area Manager with Pennsylvania Life
Insurance Company. Mr. Martinez is a graduate of California State University,
Chico.
BRYANT J. TONG, age 41, is Senior Vice President, Financial Operations
of PLI. He has been with PLI since 1982. Mr. Tong is responsible for investor
services and overall company financial operations. He is also responsible for
the technical and administrative operations of the cash management, corporate
accounting, partnership accounting, accounting systems, internal controls and
tax departments, in addition to Securities and Exchange Commission and other
regulatory agency reporting. Prior to his association with PLI, Mr. Tong was
Controller-Partnership Accounting with the Robert A. McNeil Corporation for two
years and was an auditor with Ernst & Whinney (succeeded by Ernst & Young) from
1977 through 1980. Mr. Tong holds a B.S. in Accounting from the University of
California, Berkeley, and is a Certified Public Accountant.
CYNTHIA E. PARKS, age 40, is Vice President, General Counsel,
Assistant Secretary and a Director of PLI. Prior to joining PLI in 1984, she was
with GATX Leasing Corporation, and had previously been Corporate Counsel for
Stone Financial Companies, and an Assistant Vice President of the Bank of
America, Bank Amerilease Group. She has a bachelor's degree from Santa Clara
University, and earned her J.D. from the University of San Francisco School of
Law.
HOWARD SOLOVEI, age 34, is Vice President, Finance, Assistant Treasurer
and a Director of PLI. He has been associated with PLI since 1984. Mr. Solovei's
principal activities are in the areas of arranging and managing the company's
banking relationships for its various corporations, partnerships and securitized
asset pools. Mr. Solovei is also involved in corporate financial planning and
<PAGE>
Page 29 of 32
various data processing-related projects. Mr. Solovei graduated with a B.S. in
Business from the University of California at Berkeley in 1984.
Neither the General Partner nor any Executive Officer of the General
Partner has any family relationship with the others.
Phoenix Leasing Incorporated or its affiliates and the executive
officers of the General Partner serve in a similar capacity to the following
affiliated limited partnerships:
Phoenix Leasing American Business Fund, L.P.
Phoenix Leasing Cash Distribution Fund V, L.P.
Phoenix Income Fund, L.P.
Phoenix High Tech/High Yield Fund
Phoenix Leasing Cash Distribution Fund IV
Phoenix Leasing Cash Distribution Fund III
Phoenix Leasing Cash Distribution Fund II
Phoenix Leasing Capital Assurance Fund
Phoenix Leasing Income Fund VII
Phoenix Leasing Income Fund VI
Phoenix Leasing Income Fund 1981 and
Phoenix Leasing Income Fund 1977
Item 11. Executive Compensation.
<TABLE>
Set forth is the information relating to all direct remuneration paid
or accrued by the Registrant during the last year to the General Partner.
<CAPTION>
(A) (B) (C) (D)
Cash and cash- Aggregate of
Name of Individual Capacities in equivalent forms contingent forms
or persons in group which served of remuneration of remuneration
- ------------------- ------------ -------------------------------------------------- ----------------
(C1) (C2)
Securities or property
Salaries, fees, directors' insurance benefits or
fees, commissions, and reimbursement, personal
bonuses benefits
-------------------------- -----------------------
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Phoenix Leasing
Incorporated General Partner $25(1) $0 $0
=== == ==
</TABLE>
(1) consists of management fees.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) No person owns of record, or is known by the Registrant to own
beneficially, more than five percent of any class of voting
securities of the Registrant.
(b) The General Partner of the Registrant owns the equity securities
of the Registrant set forth in the following table:
<PAGE>
Page 30 of 32
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
-------------- ------------------------- ----------------
General Partner Interest Represents a 15% Interest in the 100%
Registrant's Profits and Distributions
Limited Partner Interest 63 units .16%
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Page No.
(a) 1. Financial Statements:
Report of Independent Public Accountants 10
Balance Sheets as of December 31, 1995 and 1994. 11
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993. 12
Statements of Partners' Capital for the Years
Ended December 31, 1995, 1994 and 1993. 13
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993. 14
Notes to the Financial Statements 15-27
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
and Reserves 32
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the year ended December 31, 1995.
(c) Exhibits
21. Additional Exhibits:
Balance Sheets of Phoenix Leasing Incorporated E21 1-9
27. Financial Data Schedule.
<PAGE>
Page 31 of 32
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 GROWTH FUND 1982
(Registrant)
BY: PHOENIX LEASING INCORPORATED,
A CALIFORNIA CORPORATION
GENERAL PARTNER
Date: March 28, 1996 By: /S/ GUS CONSTANTIN
-------------- -------------------------
Gus Constantin, 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.
Signature Title Date
/S/ GUS CONSTANTIN President, Chief Executive Officer and a March 28, 1996
- ---------------------- Director of Phoenix Leasing Incorporated --------------
(Gus Constantin) General Partner
/S/ PARITOSH K. CHOKSI Chief Financial Officer, March 28, 1996
- ---------------------- Senior Vice President --------------
(Paritosh K. Choksi) and Treasurer of
Phoenix Leasing Incorporated
General Partner
/S/ BRYANT J. TONG Senior Vice President, Financial March 28, 1996
- ---------------------- Operations of --------------
(Bryant J. Tong) (Principal Accounting Officer)
Phoenix Leasing Incorporated
General Partner
/S/ GARY W. MARTINEZ Senior Vice President of March 28, 1996
- ---------------------- Phoenix Leasing Incorporated --------------
(Gary W. Martinez) General Partner
/S/ HOWARD SOLOVEI Vice President, Finance March 28, 1996
- ---------------------- Assistant Treasurer and a --------------
(Howard Solovei) Director of Phoenix Leasing Incorporated
General Partner
/S/ MICHAEL K. ULYATT Partnership Controller March 28, 1996
- ---------------------- Phoenix Leasing Incorporated --------------
(Michael K. Ulyatt) Corporate General Partner
<PAGE>
<TABLE>
Page 32 of 32
PHOENIX LEASING GROWTH FUND 1982
SCHEDULE II
(Amounts in Thousands)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Classification Balance at Charged to Charged to Deductions Balance at
Beginning of Expense Revenue End of
Period Period
- ------------------------------ ----------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for losses on accounts
receivable $ 55 $ 0 $ 0 $ 7 $ 48
Allowance for early termination
of financing leases 1 1 0 0 2
Allowance for losses on notes
receivable 76 24 0 0 100
------ ----- ---- ----- ------
Totals $ 132 $ 25 $ 0 $ 7 $ 150
====== ===== ==== ===== ======
Year ended December 31, 1994
Allowance for losses on accounts
receivable $ 48 $ 0 $ 30 $ 12 $ 6
Allowance for early termination
of financing leases 2 0 1 0 1
Allowance for losses on notes
receivable 100 0 0 0 100
------ ----- ---- ----- ------
Totals $ 150 $ 0 $ 31 $ 12 $ 107
====== ===== ==== ===== ======
Year ended December 31, 1995
Allowance for losses on accounts
receivable $ 6 $ 11 $ 0 $ 17 $ 0
Allowance for early termination
of financing leases 1 0 1 0 0
Allowance for losses on notes
receivable 100 0 69 31 0
------ ----- ---- ----- ------
Totals $ 107 $ 11 $ 70 $ 48 $ 0
====== ===== ==== ===== ======
</TABLE>
<PAGE>
Exhibit 21 - Page 1 of 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Phoenix Leasing Incorporated:
We have audited the accompanying consolidated balance sheets of Phoenix Leasing
Incorporated (a California corporation) and subsidiaries as of June 30, 1995 and
1994. These financial statements are the responsibility of the Company'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 consolidated balance sheets are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheets. 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 consolidated balance sheets referred to above present
fairly, in all material respects, the financial position of Phoenix Leasing
Incorporated and subsidiaries as of June 30, 1995 and 1994, in conformity with
generally accepted accounting principles.
San Francisco, California ARTHUR ANDERSEN LLP
September 8, 1995
<PAGE>
<TABLE>
Exhibit 21 - Page 2 of 9
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30,
1995 1994
--------------- --------------
<S> <C> <C>
Cash and cash equivalents $ 4,100,325 $ 5,880,532
Investments in marketable securities, at cost 7,298,771 2,923
Trade accounts receivable, net of allowance for doubtful
accounts of $237,458 and $167,837 at June 30, 1995
and 1994, respectively 913,437 748,958
Receivables from Phoenix Leasing Partnerships and other
affiliates 3,975,262 5,806,921
Notes receivable from related party 5,574,452 5,714,493
Equipment subject to lease 17,044,686 2,118,116
Investments in Phoenix Leasing Partnerships 1,577,419 685,130
Property and equipment, net of accumulated depreciation
and amortization of $10,457,763 and $9,698,164 at
June 30, 1995 and 1994, respectively 7,669,302 7,771,869
Other assets 2,366,983 1,722,230
--------------- --------------
Total Assets $ 50,520,637 $ 30,451,172
=============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Short-term lines of credit $ - $ 750,000
Warehouse line of credit 17,644,012 -
Payables to affiliates 5,832,765 2,812,408
Accounts payable and accrued expenses 2,829,490 2,261,982
Deferred revenue 1,059,736 869,638
Long-term debt 229,390 421,756
Deficit in investments in Phoenix Leasing Partnerships 1,164,445 1,806,110
--------------- --------------
Total Liabilities 28,759,838 8,921,894
--------------- --------------
Minority Interests in Consolidated Subsidiaries 37,639 161,072
--------------- --------------
Commitments and Contingencies (Note 12)
Shareholder's Equity:
Common stock, no par value, 30,000,000 shares
authorized, 5,433,600 shares issued and
outstanding at June 30, 1995 and 1994, respectively 20,369 20,369
Additional capital 5,508,800 5,508,800
Retained earnings 16,193,991 15,839,037
--------------- --------------
Total Shareholder's Equity 21,723,160 21,368,206
--------------- --------------
Total Liabilities and Shareholder's Equity $ 50,520,637 $ 30,451,172
=============== ==============
The accompanying notes are an integral
part of these financial statements.
</TABLE>
<PAGE>
Exhibit 21 - Page 3 of 9
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
Note 1. Summary of Significant Accounting Policies:
a. Organization - Phoenix Leasing Incorporated and subsidiaries (the
Company), a wholly owned subsidiary of Phoenix American Incorporated (PAI), is
engaged in the organization and management of partnerships which specialize in
the purchase and lease of primarily high-technology and data processing
equipment. The partnerships purchase equipment directly from equipment vendors
for lease to financial, commercial and industrial businesses and governmental
agencies. The partnerships also finance transactions in the areas of
microcomputers and emerging growth companies. The Company has also engaged in
similar leasing activities for its own account. The Company also provides
ongoing equipment maintenance services for end-users of high-technology data
processing equipment and graphic plotters.
b. Principles of Consolidation - The consolidated financial statements
include the accounts of Phoenix Leasing Incorporated and its wholly- or
majority-owned subsidiaries and subsidiaries over which the Company exerts
control. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Except as otherwise explained below, minority interests in the net assets
and net income or loss of majority-owned subsidiaries are allocated on the basis
of the proportionate ownership interests of the minority owners.
Three of the consolidated subsidiaries are California limited partnerships
(the Partnerships) which are general partners of three of the Phoenix Leasing
Partnerships. As of June 30, 1995, the Company held a 50% general partner
ownership interest in two of the Partnerships and a 62.5% interest in the third.
Under the terms of the partnership agreements, profits and losses attributable
to acquisition fees paid to the Partnerships from Phoenix Leasing Partnerships
are allocated to the limited partner (the minority owner in the Partnerships) in
proportion to the limited partner's ownership interest. All remaining profits
and losses are allocated to the Company. Distributions to the partners are made
in accordance with the terms of the partnership agreement. The limited partner
of each of the Partnerships is Lease Management Associates, Inc., a Nevada
corporation controlled by an officer of the Company, who is the owner of PAI.
c. Management, Acquisition and Incentive Fee Income - As of June 30, 1995,
the Company is the corporate general partner in 17 actively operating limited
partnerships and manager of 13 actively operating joint ventures, all of which
own and lease equipment. Nine of the partnership agreements provide for payment
of management fees based on partnership revenues and acquisition fees when the
partnerships' assets are acquired. Seven of the limited partnership agreements
provide for payment of management fees and liquidation fees (see discussion
later in this footnote). One of the partnership agreements provides for a fee to
be paid to the Company based on a percentage of the equity proceeds received by
the partnership and a percentage of net income. Most of the joint venture
agreements provide for a payment of management fees based on joint venture
revenues.
These partnerships and the joint ventures are collectively referred to as
the "Phoenix Leasing Partnerships."
d. Investments - Investments in Phoenix Leasing Partnerships reflect the
Company's equity basis in the Phoenix Leasing Partnerships. Under the equity
method of accounting the original investment is recorded at cost and is adjusted
periodically to recognize the Company's share of earnings, losses and
distributions after the date of acquisition. The Company has adopted the equity
method of accounting on the basis of its control and significant influence over
the Phoenix Leasing Partnerships.
e. Liquidation Fee Income - The Company earns liquidation fees not to
exceed 15% of the net contributed capital from seven of the partnerships in
consideration for the services and activities performed in connection with the
disposition of the partnerships' assets. Management of the Company concluded
that the total liquidation fees to be earned over the life of these partnerships
may not be fully realizable. Accordingly, the Company recognizes liquidation fee
income when the fees are paid by the partnerships.
<PAGE>
Exhibit 21 - Page 4 of 9
The Company received and recognized $3,221,000 and $3,929,000 in liquidation
fees from these partnerships during the years ended June 30, 1995 and 1994,
respectively.
In three other partnerships, cash distributions received in excess of the
allocated cumulative net profits represent a liquidation fee which cannot
exceed, in the aggregate, 7.792% of the net contributed capital.
f. Lease Accounting - The Company's leasing operations consist of both
financing and operating leases. The finance method of accounting for leases
records as unearned income, at the inception of the lease, the excess of net
rentals receivable and estimated residual value over the cost of the leased
equipment. Unearned income is amortized monthly over the term of the lease on a
declining basis to provide an approximate level rate of return on the
unrecovered cost of the investment. Initial direct costs of originating new
leases are capitalized and amortized over the initial lease term.
Under the operating method of accounting for leases, the leased equipment
is recorded as an asset, at cost, and is depreciated on a straight-line basis
over its estimated useful life, ranging up to six years. Rental income
represents the rental payments due during the period under the terms of the
lease.
The Company is the lessor in leveraged lease agreements under which
computer equipment having an estimated useful life of 5 years was leased for
periods from 4-5 years. The Company is the equity participant and equipment
owner. A portion of the purchase price was furnished by third-party financing in
the form of long-term debt that provides no recourse to the Company and is
secured by a first lien on the financed equipment.
g. Property and Equipment - Property and equipment which the Company holds
for its own use are recorded at cost and depreciated on a straight-line basis
over estimated useful lives ranging up to 45 years.
h. Income Taxes - The Company is included in consolidated and combined tax
returns filed by PAI.
i. Deferred Revenue - Deferred revenue is the result of selling maintenance
contracts which provide service over a specific period of time. Deferred revenue
is amortized on a straight-line basis over the service period not to exceed 5
years.
j. Investments in Marketable Securities - Investments in marketable
securities, which will be held to maturity, are stated at cost and consist
primarily of United States government obligations. Interest is recognized when
earned.
k. Reclassification - Certain 1994 balances have been reclassified to
conform to the 1995 presentation.
Note 2. Receivables from Phoenix Leasing Partnerships and Other Affiliates:
Receivables from Phoenix Leasing Partnerships and other affiliates consist
of the following:
June 30,
1995 1994
----------- ----------
Management fees ................................... $ 330,158 $ 846,027
Acquisition fees .................................. 102,994 514,685
Other receivables from Phoenix Leasing Partnerships 3,535,110 3,828,069
Receivable from PAI ............................... -- 483,800
Other receivables from corporate affiliates ....... 7,000 134,340
---------- ----------
$3,975,262 $5,806,921
========== ==========
Note 3. Investments in Phoenix Leasing Partnerships:
The Company records its investments in Phoenix Leasing Partnerships under
the equity method of accounting. The ownership interest percentages vary,
ranging from .5% up to 25%. As general partner, the Company has complete
authority in, and responsibility for, the overall management and control of each
partnership, which includes responsibility for supervising partnership
acquisition, leasing, remarketing and sale of equipment. Distributions of cash
from the partnerships are made at the discretion of the general partner;
historically, a significant portion of the partnerships' earnings has been
distributed annually.
<PAGE>
Exhibit 21 - Page 5 of 9
A shareholder of PAI and officers of the Company also have general and
limited partner interests in several of the partnerships.
The activity in the investments in Phoenix Leasing Partnerships is as
follows:
Year Ended June 30,
1995 1994
----------- -----------
Balance, beginning of year ............. $(1,120,980) $ (945,797)
Additional investments ............... 688,615 --
Equity in earnings ................... 2,412,056 1,213,974
Cash distributions ................... (1,566,717) (1,389,157)
----------- -----------
Balance, end of year ................... $ 412,974 $(1,120,980)
=========== ===========
The Company's total investments in Phoenix Leasing Partnerships are
comprised of investments in certain partnerships which are subject to
fluctuations due to partnerships' performances and timing of cash distributions.
At times the investment in those partnerships will be a deficit.
Certain of the partnership agreements requires the Company to restore any
deficit in its capital account to zero at the dissolution of the partnership.
This deficit is a result of cash distributions received and losses allocated to
the Company. The Company has determined that in certain partnerships it will be
unlikely that the deficit investment will reverse and as a result during the
year ended June 30, 1993 the Company elected to make capital contributions prior
to partnership dissolution totaling $2,028,733. As of April 1, 1992, the Company
elected to forgo any future cash distributions from, and will not record its
share of future earnings generated from the operations of, one of these
partnerships. The Company has deferred any future cash distributions from two
other partnerships. The Company believes that it would be likely that any future
cash distributions received from these partnerships would have to be paid back
at the dissolution of the partnerships. The Company will continue to record fee
income earned from the management of, and acquisition of equipment for these
partnerships.
The aggregate positive investment and aggregate deficit investment balances
are presented separately on the balance sheets as of June 30, 1995 and 1994.
The partnerships own and lease equipment. All debt of the partnerships is
secured by the equipment and is without recourse to the general partners. The
unaudited financial statements of the partnerships reflect the following
combined, summarized financial information as of June 30, 1995 and for the
twelve months then ended:
Assets .......................................... $215,090,000
Liabilities ..................................... 39,956,000
Partners' Capital ............................... 175,134,000
Revenue ......................................... 62,093,000
Net Income ...................................... 18,280,000
Note 4. Equipment Subject to Lease:
Equipment subject to lease includes the Company's investments in leveraged
leases, investments in financing leases and notes receivable.
Equipment subject to lease consists of the following at June 30:
1995 1994
---- ----
Leverage leases ........................ $ 1,696,703 $1,990,343
Investment in financing leases ......... 13,284,177 --
Notes receivable ....................... 2,063,806 127,773
----------- ----------
$17,044,686 $2,118,116
=========== ==========
<PAGE>
Exhibit 21 - 6 of 9
Leverage Leases:
The Company's net investment in leveraged leases is composed of the
following elements:
June 30, June 30,
1995 1994
-------- --------
Rental receivable (net of principal and interest on the
nonrecourse debt) .................................... $ -- $ --
Estimated residual value of leased assets ............. 2,759,783 3,268,772
Less: Unearned and deferred income .................... (1,063,080) (1,278,429)
----------- ----------
Investment in leveraged leases ........................ 1,696,703 1,990,343
Less: Deferred taxes arising from leveraged leases .... (2,960,190) (2,773,840)
----------- ----------
Net investment in leveraged leases .................... $(1,263,487) $ (783,497)
=========== ==========
Investment in Financing Leases:
The Company has entered into direct lease arrangements with companies
engaged in the development of technologies and other growth industry businesses
operating in different industries located throughout the United States.
Generally, it is the responsibility of the lessee to provide maintenance on
leased equipment.
The Company's net investment in financing leases consists of the following:
June 30,
1995
Minimum lease payments to be received ................. $ 17,731,628
Less: unearned income ................................. (4,447,451)
------------
Net investment in financing leases .................... $ 13,284,177
============
Minimum rentals to be received on noncancellable financing leases for the
years ended June 30, are as follows:
1996 .............................................. $ 4,478,150
1997 .............................................. 4,502,090
1998 .............................................. 4,422,824
1999 .............................................. 2,829,532
2000 .............................................. 1,475,565
2001 and thereafter ............................... 23,467
-----------
Total ......................................... $17,731,628
===========
Notes Receivable:
Notes receivable for the years ended June 30, are as follows:
1995 1994
---- ----
Notes receivable from emerging growth
and other companies with stated interest
ranging from 10% to 18% per annum receivable
in installments ranging from 36 to 60 months,
collateralized by the equipment financed....... $2,063,806 $ 127,773
========== =========
Note 5. Property and Equipment:
Major classes of property and equipment are as follows:
<PAGE>
Exhibit 21 - Page 7 of 9
June 30,
1995 1994
------------ -----------
Land .............................. $ 1,077,830 $ 1,077,830
Buildings ......................... 7,345,648 7,336,424
Office furniture, fixtures
and equipment .................... 8,259,319 7,968,786
Other ............................. 766,975 534,303
------------ -----------
17,449,772 16,917,343
Less accumulated depreciation
and amortization ................. (10,457,763) (9,698,164)
Inventory held for resale ......... 677,293 552,690
------------ -----------
Net Property and Equipment ........ $ 7,669,302 $ 7,771,869
============ ===========
PAI owns its own headquarters building in San Rafael, California. The
Company paid $7,749,476 to purchase the land and construct the building. The
cost of construction was paid for with a combination of $2,749,476 in cash from
the Company's operations and a $5,000,000 advance from PAI. The $5,000,000
advance is included as a reduction in receivable from Phoenix Leasing
Partnerships and other affiliates. PAI has pledged the market value of the
building as security for a $5,000,000 Industrial Revenue Bond ("IDB") which PAI
has with the City of San Rafael, California. The principal of the IDB is payable
in a lump sum payment on October 1, 2004. The Company paid $206,798 and $156,129
in interest payments related to the IDB during the year ended June 30, 1995 and
1994, respectively.
As of June 30, 1995, a portion of the Company's headquarters has been
leased to third parties. The remaining lease term is for 2 years and the minimum
lease payments receivable are as follows:
1996 .................................................. $537,882
1997 .................................................. 362,901
--------
Total ............................................ $900,783
========
Note 6. Investments in Marketable Securities:
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 115 - Accounting for Certain
Investments in Debt and Equity Securities. The Company adopted this statement on
July 1, 1994. This pronouncement prescribes specific accounting treatment for
securities based on their classification as either held-to-maturity securities,
trading securities or available-for-sale securities, as defined in the
statement. All of the Company's investments meet the definition of
held-to-maturity securities and, accordingly, are reported at amortized costs.
The Company holds $7,000,000 face value U.S. Treasury Notes with the
contractual maturities of these debt securities as of June 30, 1995 as follows:
Amortized Estimated
Costs Fair Value
Due in one year or less ................ $4,202,115 $4,214,051
Due in one through five years .......... 3,096,656 3,142,908
---------- ----------
Total debt securities .................. $7,298,771 $7,356,959
========== ==========
Note 7. Short-Term and Warehouse Lines of Credit:
To provide interim financing for equipment and working capital needs, the
Company executes lines of credit which consist of short-term notes with banks
with interest rates equal to the prime rate or the banks' index rate. All lines
of credit are renewable annually at the banks' option.
<PAGE>
Exhibit 21 - Page 8 of 9
As of June 30, 1995, the Company, through PAI, had access to one short-term
line of credit totaling $2.5 million all of which was available for borrowing at
June 30, 1995. Draw downs under this credit line are secured by the Company's
receivable from Phoenix Leasing Partnerships.
In addition, the Company has two secured short-term warehouse lines of
credit totaling $35 million, which are used to provide interim financing for the
acquisition of equipment and the financing of notes receivable. As of June 30,
1995, $17.6 million of these lines have been drawn down. The draw downs under
these lines are collateralized by investments in financing leases and notes
receivable included in equipment subject to lease. The interest rate is tied to
the IBOR (Eurodollar) rate. The initial commitment period for these lines of
credit is 18 months and may be extended to 36 months at the discretion of the
bank. Principal payments are based on the lesser of the aggregate payments
received by the Company on its leases and notes receivable or the aggregate
principal and interest amount outstanding on the payment date of the credit
line.
In connection with the Company's lines of credit, various financial ratios
and other covenants must be maintained. The Company has guaranteed its right,
title and interest in certain of its assets and the future receipts from these
assets in order to secure payment and performance of these credit lines.
Additional information relating to the Company's short-term bank lines
follows:
1995 1994
----------- ----------
Balance at June 30 ............................... $17,644,012 $ 750,000
Maximum amount outstanding ....................... 17,644,012 2,500,000
Average amount outstanding ....................... 2,522,340 1,457,413
Weighted average interest rate during the period.. 7.9% 6.2%
Note 8. Long-Term Debt:
Long-term debt consists of the following:
June 30,
1995 1994
---- ----
Mortgage payable at varying interest rates
with an initial rate of 8.75% secured by a
first deed of trust on real property with a
cost of $250,000. Note is amortized over 83
months with monthly payments of $559 with
a final payment of $122,151................... $ 160,944 $ 167,650
Note payable at 9.75% secured by computer
equipment with a cost of $668,994. Note is
amortized over 46 months with monthly
payments of $16,887........................... 68,446 254,106
---------- ----------
Total long-term debt............................ $ 229,390 $ 421,756
========== ==========
The aggregate long-term debt maturities for the fiscal years ended June 30,
are as follows:
1996 ......................................... $ 74,920
1997 ......................................... 6,706
1998 ......................................... 6,706
1999 ......................................... 6,706
2000 ......................................... 6,706
2001 and thereafter .......................... 127,646
--------
Total .................................... $229,390
========
<PAGE>
Exhibit 21 - Page 9 of 9
Note 9. Profit Sharing Plan:
The Company has a profit sharing plan covering substantially all employees
who meet certain age and service requirements. Contributions to the plan by the
Company are made at the discretion of the board of directors. The profit sharing
expense was $600,000 and $500,000 for the years ended June 30, 1995 and 1994,
respectively.
Note 10. Leased Facilities:
The Company leases office and warehouse space in various parts of the
country and had annual rental expense of approximately $402,000 and $424,000 for
the years ended June 30, 1995 and 1994, respectively.
Note 11. Transactions with Related Parties:
The Company provides an interest bearing line of credit totaling $6,000,000
to PAI's controlling shareholder which is secured by common stock of Phoenix
Precision Graphics, Inc. (an unaffiliated Nevada corporation). As of June 30,
1995 and 1994, $4,837,814 and $2,002,346 of this line of credit has been drawn
down and is included in notes receivable from related party. As of June 30, 1995
and 1994, Phoenix Precision Graphics is in a start-up mode and has cumulative
losses of $5,959,708 and $3,129,240, respectively.
The Company provided an interest bearing line of credit totaling $1,000,000
to PAI's controlling shareholder which was secured by common stock of Phoenix
Communications Incorporated and Phoenix Communications - LD, Inc. (unaffiliated
Nevada corporations). As of June 30, 1994, $858,133 of this line of credit had
been drawn down and is included in notes receivable from related party. This
note was paid in full on October 17, 1994.
The Company provided two interest bearing lines of credit each totaling
$5,000,000 to PAI's controlling shareholder which were secured by common stock
of Phoenix Fiberlink Incorporated and Phoenix Fiberlink II, Inc. (unaffiliated
Nevada corporations). As of June 30, 1994, $2,854,014 of these lines of credit
had been drawn down and are included in notes receivable from related party.
These notes were paid in full on October 17, 1994.
The Company provides an interest bearing line of credit to PAI's
controlling shareholder, which is secured by common stock of Phoenix Fiberlink
Inc. (an unaffiliated Nevada Corporation). As of June 30, 1995, $736,638 of this
line of credit has been drawn down and is included in notes receivable from
related party.
The Company earned a management fee from affiliates of $678,947 and
$325,624 for the years ended June 30, 1995 and 1994, respectively. This
management fee is included in Fees from Phoenix Leasing Partnerships and
affiliates.
The Company paid an affiliate an asset management fee of $1,026,714 and
$815,563 for the years ended June 30, 1995 and 1994, respectively. These asset
management fees are included in equipment lease operations, maintenance,
remarketing and administrative fees.
Note 12. Commitments and Contingencies:
The Company has entered into agreements which contain specific purchase
commitments. The Company may satisfy these commitments by purchasing equipment
for its own account or by assigning equipment purchases to its affiliated
partnerships. At June 30, 1995 the Company anticipates being able to satisfy its
future obligations under the agreements and intends to assign most of the
purchases under the agreements to its affiliated partnerships.
The Company enters into commitments to purchase and sell high-technology
equipment on behalf of a corporate affiliate. The Company is reimbursed for
these services.
The Company is party to legal actions which arise as part of the normal
course of its business. The Company believes, after consultation with counsel,
that it has meritorious defenses in these actions, and that the liability, if
any, will not have a material adverse effect on the financial position of the
Company.
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<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,078
<SECURITIES> 0
<RECEIVABLES> 27
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 578
<DEPRECIATION> 578
<TOTAL-ASSETS> 1,453
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (496)
<TOTAL-LIABILITY-AND-EQUITY> 1,453
<SALES> 0
<TOTAL-REVENUES> 475
<CGS> 0
<TOTAL-COSTS> 38
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (59)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 437
<INCOME-TAX> 0
<INCOME-CONTINUING> 437
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 437
<EPS-PRIMARY> 10.73
<EPS-DILUTED> 0
</TABLE>
