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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, 1996 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, 1996, 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, 1996.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
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PHOENIX LEASING GROWTH FUND 1982
1996 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............ 8
Item 9. Disagreements on Accounting and Financial Disclosure
Matters................................................ 25
PART III
Item 10. Directors and Executive Officers of the Registrant..... 25
Item 11. Executive Compensation................................. 26
Item 12. Security Ownership of Certain Beneficial Owners
and Management......................................... 26
Item 13. Certain Relationships and Related Transactions......... 26
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................ 27
Signatures........................................................... 28
<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,
1996, 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, 1996, 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, 1996, the Partnership owns equipment and has
outstanding loans to borrowers with an aggregate original cost of $3,084,000.
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, 1996.
Percentage of
Asset Types Purchase Price(1) Total Assets
----------- ----------------- ------------
(Amounts in Thousands)
Financing of Solar Systems $2,351 76%
Reproduction 476 16
Telecommunications 250 8
Small Computer Systems 7 --
------ ----
TOTAL $3,084 100%
====== ====
(1) These amounts include the Partnership's pro rata interest in equipment
joint ventures of $476,000 and financing joint ventures of $2,351,000
at December 31, 1996.
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, 1996
---------------------------------- -----------------------
Limited Partners 3,516
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Amounts in Thousands Except for Per Unit Amounts)
<S> <C> <C> <C> <C> <C>
Total Income $ 266 $ 475 $ 877 $ 606 $ 522
Net Income (Loss) 201 437 763 301 (757)
Total Assets 829 1,453 2,637 3,171 4,351
Distributions to Partners 807 1,222 1,211 1,211 1,213
Net Income (Loss) per Limited
Partnership Unit 4.95 10.73 18.73 7.39 (18.75)
Distributions per Limited Partnership Unit 20.01 30.31 30.02 30.02 30.05
</TABLE>
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 net income
of $201,000 for the year ended December 31, 1996, as compared to net income of
$437,000 and $763,000 during 1995 and 1994, respectively. The decline in net
income experienced in 1996, as compared to 1995, is attributable to a decrease
in rental income of $160,000 and an increase in provision for losses on
receivables of $61,000. The decline in net income for the year ended December
31, 1995 was due to the absence of a settlement compared to a settlement of
$337,000 during 1994.
Total revenues decreased by $209,000 and $402,000 for the year ended
December 31, 1996 and 1995, respectively, as compared to the prior year. The
decrease in earnings for 1996 and 1995, compared to the prior year, is primarily
attributable to a decrease in rental income of $160,000 and $51,000,
respectively. The decline in rental income is reflective of a 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, 1996, the
partnership owned equipment, excluding its investment in equipment joint
ventures, with an aggregate original cost of $257,000 compared to $737,000 at
December 31, 1995 and $1,706,000 at December 31, 1994.
The absence of interest income from notes receivable during 1996 is a
result of the Partnership receiving payoffs from its two remaining notes
receivable, both considered to be impaired, during the year ended December 31,
1995. Prior to the payoff, the Partnership had not been recognizing interest
income on these notes due to their impaired status. As a result of the payoff of
these two notes, the Partnership recognized $21,000 in interest income from
notes receivable and reversed $69,000 of the provision for losses on notes
receivable in 1995.
Total revenues for the year ended December 31, 1994 were higher than
usual mainly due to the receipt of 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 increasing total revenues during 1994 was the 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 an outstanding
note payable and accrued interest of $84,000.
Total expenses increased by $27,000 during 1996, as compared to 1995,
but decreased by $76,000 during 1995, compared to 1994. The increase in total
expenses for 1996, as compared to 1995, is primarily due to the increase in
provision for losses on receivables of $61,000 for the year ended December 31,
1996, compared to 1995. During 1995, the Partnership reversed $69,000 in
provision for losses on notes receivable, as previously discussed. Such a
transaction did not occur during 1996. In part, the increase in provision for
losses on receivables experienced during 1996, is offset by decreases in most
other expense items.
The decline in total expenses experienced during 1995, compared to
1994, was due to the absence of depreciation expense. The absence of
depreciation expense for the year ended December 31, 1995, as compared to
$33,000 in 1994, was due to the remaining equipment portfolio having been fully
depreciated. Most other expense items also experienced a decrease during the
year ended December 31, 1995, compared to 1994.
Inflation affects the Partnership in relation to the current cost of
equipment placed on a 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 decline as the portfolios are re-leased at lower
rental rates and eventually liquidated.
<PAGE>
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Earnings from joint ventures decreased by $5,000 for the year ended
December 31, 1996, compared to 1995, and increased by $74,000 for the year ended
December 31, 1995, as compared to the same period in the previous year. The
decrease in earnings for 1996 is due to a decline in revenues from several
equipment joint ventures as a result of a majority of the equipment joint
ventures being in the liquidation stage. The increase in earnings from joint
ventures during 1995 was primarily attributable to two equipment joint ventures.
The increase in earnings from one equipment joint venture during 1995 was due to
a decline in depreciation expense and lease related operating expenses. The
increase in earnings from the second equipment joint venture during 1995 was 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 the year ended
December 31, 1994.
Liquidity and Capital Resources
The Partnership reported net cash used by leasing and financing
activities of $58,000, $47,000 for the year ended December 31, 1996 and 1995,
respectively, compared to net cash provided of $454,000 for the year ended
December 31, 1994. The increase in net cash used for the year ended December 31,
1996 is attributable to the absence of principal payments from notes receivable
and the payment of liquidation fees to the General Partner. During 1995, the
Partnership received payoffs from the Partnership's remaining notes receivable.
The payment of liquidation fees to the General Partner during 1995 exceeded the
payoffs received from the notes receivable. The Partnership did not make a
payment of liquidation fees in 1994.
Cash distributions from joint ventures increased by $36,000 and
$129,000 for the years ended December 31, 1996 and 1995, respectively, compared
to the previous year. The increase in cash distributions in 1996 is due to the
increase in cash available for distribution from the Partnership's only
foreclosed cable system joint venture as a result of the sale of its cable
television system during the first quarter of 1996. The increase during 1995 was
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.
During the year ended December 31, 1996, the Partnership sold a portion
of its investment in common stock receiving proceeds of $49,000.
As of December 31, 1996, the Partnership owned equipment held for lease
with a purchase price of $257,000 and a net book value of $0, as compared to
$662,000 and $0, respectively, at December 31, 1995 and $699,000 and $0,
respectively, at December 31, 1994. 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 $807,000 ,
$1,222,000 and $1,211,000 during the year ended December 31, 1996, 1995 and
1994, respectively. As a result, the cumulative cash distributions to the
limited partners are $38,467,000, $37,660,000 and $36,438,000 as of December 31,
1996, 1995 and 1994, respectively. The General Partner did not receive cash
distributions for the years ended December 31, 1996, 1995 and 1994.
Distributions to partners are being made annually on January 15. The
distribution amount distributed on January 15, 1997 was lower than the January
15, 1996 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 is currently in its liquidation stage and
currently has no obligation, commitments or plans to purchase more equipment.
It's the General Partner's intention to continue the Partnership's payments of
liquidation fees only to the extent of cash available for such payments after
taking into consideration the Partnership's cash requirements to cover its
operating costs over the next years.
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Actual results could differ from those anticipated by some of the statements
made above. Limited Partners are cautioned that such forward-looking statements
involve risks and uncertainties including without limitation the following: (i)
the Partnership's plans are subject to change at any time at the discretion of
the General Partner of the Partnership, (ii) future technological developments
in the industry in which the Partnership operates, (iii) competitive pressure on
pricing or services, (iv) substantial customer defaults or cancellations, (v)
changes in business conditions and the general economy, (vi) changes in
government regulations affecting the Partnership's core businesses and (vii) the
ability of the Partnership to sell its remaining assets.
<PAGE>
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHOENIX LEASING GROWTH FUND 1982
YEAR ENDED DECEMBER 31, 1996
<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, 1996 and 1995, and
the related statements of operations, partners' capital, and cash flows for each
of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its operations, and
its cash flows for each of the three years in the period ended December 31,
1996, 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 17, 1997
<PAGE>
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<TABLE>
PHOENIX LEASING GROWTH FUND 1982
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
<CAPTION>
December 31,
1996 1995
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 658 $ 1,078
Accounts receivable (net of allowance for losses on accounts
receivable of $0 at December 31, 1996 and 1995) 1 27
Equipment on operating leases and held for lease (net of
accumulated depreciation and obsolescence reserves of
$114 and $578 at December 31, 1996 and 1995, respectively) -- --
Investment in joint ventures 99 283
Securities, available-for-sale 67 60
Other assets 4 5
------- -------
Total Assets $ 829 $ 1,453
======= =======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable and accrued expenses $ 71 $ 68
Liquidation fees payable to General Partner 1,816 1,881
------- -------
Total Liabilities 1,887 1,949
------- -------
Partners' Capital (Deficit):
General Partner (408) (410)
Limited Partners, 44,000 units authorized, 41,798
units issued and 40,343 units outstanding at
December 31, 1996 and 1995 (671) (63)
Unrealized gains (losses) on available-for-sale securities 21 (23)
------- -------
Total Partners' Capital (Deficit) (1,058) (496)
------- -------
Total Liabilities and Partners' Capital (Deficit) $ 829 $ 1,453
======= =======
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,
1996 1995 1994
---- ---- ----
INCOME
Rental income $ 5 $ 165 $ 216
Gain on sale of equipment -- 12 92
Equity in earnings from joint ventures, net 212 217 143
Interest income, notes receivable -- 21 6
Settlements -- -- 337
Other income 49 60 83
----- ------ ------
Total Income 266 475 877
----- ------ ------
EXPENSES
Depreciation -- -- 33
Lease related operating expenses -- 9 8
Management fees to General Partner 5 25 30
Provision for (recovery of) losses on
receivables 2 (59) (31)
General and administrative expenses 58 63 74
----- ------ ------
Total Expenses 65 38 114
----- ------ ------
NET INCOME $ 201 $ 437 $ 763
===== ====== ======
NET INCOME PER LIMITED PARTNERSHIP UNIT $4.95 $10.73 $18.73
===== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 2 $ 4 $ 8
Limited Partners 199 433 755
----- ------ ------
$ 201 $ 437 $ 763
===== ====== ======
The accompanying notes are an integral
part of these statements.
<PAGE>
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<TABLE>
PHOENIX LEASING GROWTH FUND 1982
STATEMENTS OF PARTNERS' CAPITAL
(Amounts in Thousands Except for Unit Amounts)
<CAPTION>
General Unrealized
Partner's Limited Partners' Gains Total
Amount Units Amount (Losses) Amount
------ ----- ------ -------- ------
<S> <C> <C> <C> <C> <C>
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) 40,343 726 (14) 298
Distributions to partners ($30.31 per
limited partnership unit) -- -- (1,222) -- (1,222)
Net income 4 -- 433 -- 437
Change in unrealized losses on marketable
securities available-for-sale -- -- -- (9) (9)
------- ------- ------- ------- -------
Balance, December 31, 1995 (410) 40,343 (63) (23) (496)
Distributions to partners ($20.01 per
limited partnership unit) -- -- (807) -- (807)
Net income 2 -- 199 -- 201
Change in unrealized gains on
available-for-sale securities -- -- -- 44 44
------- ------- ------- ------- -------
Balance, December 31, 1996 $ (408) 40,343 $ (671) $ 21 $(1,058)
======= ======= ======= ======= =======
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
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PHOENIX LEASING GROWTH FUND 1982
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
Operating Activities:
Net income $ 201 $ 437 $ 763
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation -- -- 33
Gain on sale of equipment -- (12) (92)
Gain on sale of securities (12) -- --
Equity in earnings from joint ventures, net (212) (217) (143)
Provision for (recovery of) early termination,
financing leases -- (1) (1)
Provision for (recovery of) losses on notes
receivable -- (69) --
Provision for (recovery of) losses on accounts
receivable 2 11 (30)
Settlements -- -- (195)
Decrease (increase) in accounts receivable 24 (4) 19
Increase (decrease) in accounts payable and
accrued expenses (62) (390) 44
Decrease in other assets 1 13 --
------- ------- -------
Net cash provided (used) by operating activities (58) (232) 398
------- ------- -------
Investing Activities:
Principal payments, financing leases -- 1 52
Principal payments, notes receivable -- 184 4
Proceeds from sale of equipment -- 12 15
Proceeds from available-for-sale securities 49 -- --
Distributions from joint ventures 396 360 231
Purchase of equipment -- -- (124)
Investment in joint ventures -- -- (29)
------- ------- -------
Net cash provided by investing activities 445 557 149
------- ------- -------
Financing Activities:
Payments of principal, notes payable -- -- (32)
Distributions to partners (807) (1,222) (1,211)
------- ------- -------
Net cash used by financing activities (807) (1,222) (1,243)
------- ------- -------
Decrease in cash and cash equivalents (420) (897) (696)
Cash and cash equivalents, beginning of period 1,078 1,975 2,671
------- ------- -------
Cash and cash equivalents, end of period $ 658 $ 1,078 $ 1,975
======= ======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 14 of 29
PHOENIX LEASING GROWTH FUND 1982
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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. It's the General Partner's intention to continue the Partnership's
payments of liquidation fees only to the extent of cash available for such
payments after taking into consideration the Partnership's cash requirements to
cover its operating costs over the remaining life of the partnership.
<PAGE>
Page 15 of 29
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.
Credit and Collateral. The Partnership's activities have been
concentrated in the equipment leasing and financing industry. A credit
evaluation is performed by the General Partner for all leases and loans made,
with the collateral requirements determined on a case-by-case basis. The
Partnership's loans are generally secured by the equipment or assets financed
and, in some cases, other collateral of the borrower. In the event of default,
the Partnership has the right to foreclose upon the collateral used to secure
such loans.
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 Available-for-Sale Securities. The Partnership has
investments in stock in public companies that have been determined to be
available for sale that are 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. At January 1, 1996, the adoption
of Statement No. 121 did not materially impact the Partnership's financial
position or results of operations.
Reclassification. Certain 1995 and 1994 amounts have been reclassified
to conform to the 1996 presentation.
<PAGE>
Page 16 of 29
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Note 3. Accounts Receivable.
Accounts Receivable consist of the following at December 31:
1996 1995
---- ----
(Amounts in Thousands)
Lease payments $ 1 $21
Property tax -- 6
--- ---
Total $ 1 $27
=== ===
Note 4. Notes Receivable.
The Partnership's notes receivable from cable television system
operators provided 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 was 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 believed it would be realized.
Generally, notes receivable were classified as impaired and the accrual
of interest on such notes were discontinued when the contractual payment of
principal or interest had become 90 days past due or management had serious
doubts about further collectibility of the contractual payments. Any payments
received subsequent to the placement of the note receivable on to impaired
status would generally be applied towards the reduction of the outstanding note
receivable balance, which may have included previously accrued interest as well
as principal. Once the principal and accrued interest balance was reduced to
zero, the remaining payments were applied to interest income. The average
recorded investment in impaired loans during the year ended December 31, 1996
and 1995 was approximately $0 and $84,000, respectively.
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. 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.
<PAGE>
Page 17 of 29
The activity in the allowance for losses on notes receivable during the
years ended December 31, is as follows:
1996 1995
---- ----
(Amounts in Thousands)
Beginning balance $-- $ 100
Provision for (recovery of) losses -- (69)
Write downs -- (31)
--- -----
Ending balance $-- $--
=== =====
Note 5. Equipment on Operating Leases and Held for Lease.
Equipment on lease consists primarily of computer peripheral equipment
and small computer systems subject to operating leases. At December 31, 1996,
the Partnership's remaining equipment was being held for lease. The net book
value of equipment held for lease at December 31, 1996 and 1995 amounted to $0.
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.
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. Phoenix Leasing Growth Fund 1982 has
participated in the following equipment joint ventures:
Weighted
Joint Venture Percentage Interest
------------- -------------------
Arroyo Joint Venture VIII(1) 40.00%
Arroyo Joint Venture XVI(3) 35.72
Arroyo Joint Venture XVII(1) 28.35
PLI Limited Partnership Fund A(2) 25.24
ACRO Joint Venture, Residential(3) 30.90
Leveraged Joint Venture 1986(2) 23.44
Leveraged Joint Venture 1987-1(1) 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(1) 16.67
Phoenix Joint Venture 1994-1 5.37
(1) Closed during 1994
(2) Closed during 1995
(3) Closed during 1996
<PAGE>
Page 18 of 29
An analysis of the Partnership's investment in equipment joint ventures
is as follows:
<TABLE>
<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, 1994 $ 89 $ 276 $124 $169 $320
==== ======= ==== ==== ====
Year Ended
December 31, 1995 $320 $ -- $191 $342 $169
==== ======= ==== ==== ====
Year Ended
December 31, 1996 $169 $ -- $131 $207 $ 93
==== ======= ==== ==== ====
</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,
1996 1995
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 432 $ 644
Accounts receivable 1,443 1,776
Operating lease equipment 525 1,021
Other assets 512 691
------ ------
Total Assets $2,912 $4,132
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 786 $ 973
Partners' capital 2,126 3,159
------ ------
Total Liabilities and Partners' Capital $2,912 $4,132
====== ======
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
(Amounts in Thousands)
Rental income $2,609 $3,923 $3,293
Gain on sale of equipment 850 1,769 1,312
Other income 141 742 259
------ ------ ------
Total Income 3,600 6,434 4,864
------ ------ ------
<PAGE>
Page 19 of 29
EXPENSES
Depreciation $ 332 1,188 1,257
Lease related operating expenses 1,460 2,961 2,778
Management fee to the General Partner 119 289 235
Interest expense -- -- 1
Other expenses 126 272 88
------ ------ ------
Total Expenses 2,037 4,710 4,359
------ ------ ------
Net Income $1,563 $1,724 $ 505
====== ====== ======
As of December 31, 1996 and 1995, the Partnership's pro rata interest
in the equipment joint ventures' net book value of off-lease equipment was
$2,000 and $6,000, 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 20 of 29
<TABLE>
<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, 1994 $46 $- $ 8 $45 $9
=== == === === ==
Year Ended
December 31, 1995 $ 9 $- $17 $21 $5
=== == === === ==
Year Ended
December 31, 1996 $ 5 $- $ 9 $ 8 $6
=== == === === ==
</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,
1996 1995
---- ----
(Amounts in Thousands)
Cash and cash equivalents $38 $28
--- ---
Total Assets $38 $28
=== ===
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 4 $ 5
Partners' capital 34 23
--- ---
Total Liabilities and Partners' Capital $38 $28
=== ===
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
(Amounts in Thousands)
Interest income $ 46 $ 73 $ 86
Other income 30 77 17
---- ---- ----
Total Income 76 150 103
---- ---- ----
EXPENSES
Management fee to the General Partner 2 8 19
Other expenses 11 19 43
---- ---- ----
Total Expenses 13 27 62
---- ---- ----
Net Income $ 63 $123 $ 41
==== ==== ====
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.
<PAGE>
Page 21 of 29
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.(1) 6.65%
(1) Cable system sold and joint venture closed during 1996.
An analysis of the Partnership's net investment in foreclosed cable
systems joint ventures at December 31, is as follows:
<TABLE>
<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, 1994 $114 $-- $11 $ 17 $108
==== ==== === ==== ====
Year Ended
December 31, 1995 $108 $-- $ 9 $ 8 $109
==== ==== === ==== ====
Year Ended
December 31, 1996 $109 $-- $72 $181 $--
==== ==== === ==== ====
</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:
BALANCE SHEETS
ASSETS
December 31,
1996 1995
---- ----
(Amounts in Thousands)
Cash and cash equivalents $-- $ 258
Accounts receivable -- 31
Property, plant and equipment -- 1,449
Other assets -- 1
---- ------
Total Assets $-- $1,739
==== ======
<PAGE>
Page 22 of 29
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $-- $ 90
Partners' capital -- 1,649
---- ------
Total Liabilities and Partners' Capital $-- $1,739
==== ======
STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
(Amounts in Thousands)
Subscriber revenue $ 50 $ 680 $ 658
Gain on sale of cable system 1,185 -- --
Other income 9 8 3
------ ------ ------
Total Income 1,244 688 661
------ ------ ------
EXPENSES
Depreciation and amortization 13 154 150
Program services 12 181 154
General and administrative expenses 19 185 155
Management fees to an affiliate of the
General Partner 121 31 29
Provision for losses on accounts receivable -- 7 7
------ ------ ------
Total Expenses 165 558 495
------ ------ ------
Net Income $1,079 $ 130 $ 166
====== ====== ======
Phoenix Cable Management Inc. (PCMI), an affiliate of the General
Partner, provided day to day management services in connection with the
operation of the foreclosed cable systems joint ventures. The foreclosed cable
systems joint ventures paid 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 were not subject to management fees at
the Partnership level.
Note 7. Accounts Payable and Accrued Expenses.
Accounts payable and accrued expenses consist of the following at
December 31:
1996 1995
---- ----
(Amounts in Thousands)
Equipment lease operations $-- $ 2
General Partner and affiliates 1 --
Other 70 66
--- ---
Total $71 $68
=== ===
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
<PAGE>
Page 23 of 29
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 are as follows at December 31:
Reported Amounts Tax Basis Net Difference
---------------- --------- --------------
(Amounts in Thousands)
1996
- ----
Assets $ 829 $ 837 $ (8)
Liabilities 1,887 1,214 673
1995
- ----
Assets $1,453 $1,488 $ (35)
Liabilities 1,949 1,211 738
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 $0, $1,000 and $1,000
for the years ended December 31, 1996, 1995 and 1994, 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,
1996, 1995 and 1994. For purposes of allocating income (loss) and distributions
<PAGE>
Page 24 of 29
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 1997, cash distributions of $404,000 were made to the
Limited Partners.
Note 13. Fair Value of Financial Instruments.
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument for 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.
Securities, Available-for-Sale
The fair values of investments in available-for-sale securities are estimated
based on quoted market prices.
The estimated fair values of the Partnership's financial instruments
are as follows at December 31,:
Carrying
Amount Fair Value
------ ----------
(Amounts in Thousands)
1996
- ----
Assets
Cash and cash equivalents $ 658 $ 658
Securities, available-for-sale 67 67
1995
- ----
Assets
Cash and cash equivalents $1,078 $1,078
Securities, available-for-sale 60 60
<PAGE>
Page 25 of 29
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 59, 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 43, is Senior Vice President, Chief Financial
Officer, Treasurer and a Director 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 46, is Senior Vice President and a Director 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 42, 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 41, is Vice President, General Counsel, and
Assistant Secretary 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.
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:
<PAGE>
Page 26 of 29
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 Income Fund VII
Phoenix Leasing Income Fund VI and
Phoenix Leasing Income Fund 1977
Item 11. Executive Compensation.
Set forth is the information relating to all direct remuneration paid
or accrued by the Registrant during the last year to the General Partner.
<TABLE>
<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>
Phoenix Leasing
Incorporated General Partner $5(1) $0 $0
= = =
(1) consists of management fees.
</TABLE>
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:
<TABLE>
<CAPTION>
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
-------------- ------------------------- ----------------
<S> <C> <C>
General Partner Interest Represents a 15% Interest in the 100%
Registrant's Profits and Distributions
Limited Partner Interest 63 units .16%
</TABLE>
Item 13. Certain Relationships and Related Transactions.
None.
<PAGE>
Page 27 of 29
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 9
Balance Sheets as of December 31, 1996 and 1995. 10
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994. 11
Statements of Partners' Capital for the Years Ended
December 31, 1996, 1995 and 1994. 12
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994. 13
Notes to the Financial Statements 14-24
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts and Reserves
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 quarter ended December 31,
1996.
(c) Exhibits
21. Additional Exhibits:
a) Balance Sheets of Phoenix Leasing Incorporated E21 1-12
b) Financial Statements for Significant Subsidiaries
Phoenix Black Rock Cable J.V. E21 13-19
27. Financial Data Schedule.
<PAGE>
Page 28 of 29
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 25, 1997 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 25, 1997
- ----------------------- Director of Phoenix Leasing Incorporated --------------
(Gus Constantin) General Partner
/S/ PARITOSH K. CHOKSI Chief Financial Officer, March 25 1997
- ----------------------- Senior Vice President, --------------
(Paritosh K. Choksi) Treasurer and a Director of
Phoenix Leasing Incorporated
General Partner
/S/ BRYANT J. TONG Senior Vice President, March 25, 1997
- ----------------------- Financial Operations of --------------
(Bryant J. Tong) (Principal Accounting Officer)
Phoenix Leasing Incorporated
General Partner
/S/ GARY W. MARTINEZ Senior Vice President and a Director of March 25, 1997
- ----------------------- Phoenix Leasing Incorporated --------------
(Gary W. Martinez) General Partner
/S/ MICHAEL K. ULYATT Partnership Controller March 25, 1997
- ----------------------- of Phoenix Leasing Incorporated --------------
(Michael K. Ulyatt) Corporate General Partner
<PAGE>
<TABLE>
Page 29 of 29
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, 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
==== === === === ====
Year ended December 31, 1996
Allowance for losses on accounts
receivable $ 0 $ 2 $ 0 $ 2 $ 0
---- --- --- --- ----
Totals $ 0 $ 2 $ 0 $ 2 $ 0
==== === === === ====
</TABLE>
Exhibit 21 - Page 1 of 19
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,
1996 and 1995. These consolidated balance sheets are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated balance sheets 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 consolidated balance sheets. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
balance sheet 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, 1996 and 1995, in
conformity with generally accepted accounting principles.
San Francisco, California, ARTHUR ANDERSON LLP
September 4, 1996
<TABLE>
<PAGE>
Exhibit 21 - Page 2 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
June 30,
1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents $ 3,767,098 $ 4,100,325
Investments in marketable securities 1,287,323 7,298,771
Trade accounts receivable, net of allowance for doubtful accounts
of $31,246 and $237,458 at June 30, 1996 and 1995, respectively 989,030 913,437
Receivables from Phoenix Leasing Partnerships and other affiliates 3,955,935 3,975,262
Notes receivable from related party 8,767,694 5,574,452
Equipment inventory 2,240,448 --
Equipment subject to lease 17,792,847 17,044,686
Investments in Phoenix Leasing Partnerships 1,773,887 1,577,419
Property and equipment, net of accumulated depreciation of $11,398,438
and $10,457,763 at June 30, 1996 and 1995, respectively 6,933,608 7,669,302
Other assets 3,011,229 2,366,983
----------- -----------
TOTAL ASSETS $50,519,099 $50,520,637
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Short-term lines of credit $ 1,750,000 $ --
Warehouse lines of credit 16,930,044 17,644,012
Payables to affiliates 2,155,626 5,832,765
Accounts payable and accrued expenses 3,205,932 2,829,490
Deferred revenue 328,676 1,059,736
Long-term debt 620,899 229,390
Deficit in investments in Phoenix Leasing Partnerships 761,214 1,164,445
----------- -----------
TOTAL LIABILITIES 25,752,391 28,759,838
----------- -----------
Minority Interests in Consolidated Subsidiaries 27,615 37,639
----------- -----------
Commitments and Contingencies (Note 14)
SHAREHOLDER'S EQUITY:
Common stock, without par value, 30,000,000 shares
authorized, 5,433,600 issued and outstanding at
June 30, 1996 and 1995, respectively 20,369 20,369
Additional capital 11,466,920 5,508,800
Retained earnings 13,251,804 16,193,991
----------- -----------
TOTAL SHAREHOLDER'S EQUITY 24,739,093 21,723,160
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY $50,519,099 $50,520,637
=========== ===========
</TABLE>
<PAGE>
Exhibit 21 - Page 3 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
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.
Four of the consolidated subsidiaries are California limited
partnerships (the Partnerships) which are general partners of four of the
Phoenix Leasing Partnerships. As of June 30, 1996, the Company held a 50%
general partner ownership interest in two of the Partnerships and a 62.5%
interest in one and a 70% interest in the fourth. 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,
1996, the Company is the corporate general partner in 13 actively operating
limited partnerships and manager of 9 actively operating joint ventures, all of
which own and lease equipment. Eight of the partnership agreements provide for
payment of management fees based on partnership revenues and acquisition fees
when the partnerships' assets are acquired. Five of the limited partnership
agreements provide for payment of management fees and liquidation fees (see
discussion later in this footnote). Most of the joint venture agreements provide
for 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.
<PAGE>
Exhibit 21 - Page 4 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 1. Summary of Significant Accounting Policies (continued):
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. The Company received and
recognized $1,062,046 and $3,221,000 in liquidation fees from these partnerships
during the years ended June 30, 1996 and 1995, 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, are stated at cost and consist primarily of United States government
obligations. Interest is recognized when earned.
k. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
Exhibit 21 - Page 5 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 1. Summary of significant Accounting Policies (continued):
l. Reclassification - Certain 1995 balances have been reclassified to
conform to the 1996 presentation.
Note 2. Receivables from Phoenix Leasing Partnerships and Other Affiliates:
Receivables from Phoenix Leasing Partnerships and other affiliates
consist of the following for the years ended June 30:
1996 1995
---- ----
Management fees $ 416,149 $ 330,158
Acquisition fees 74,099 102,994
Other receivables from Phoenix Leasing Partnerships 3,458,687 3,535,110
Other receivables from corporate affiliates 7,000 7,000
---------- ----------
$3,955,935 $3,975,262
========== ==========
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, remarking 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.
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 for the
years ended June 30 are as follows:
1996 1995
---- ----
Balance, beginning of year $ 412,974 $(1,120,980)
Additional investments 830,085 688,615
Equity in earnings 2,093,488 2,412,056
Cash distributions (2,323.874) (1,566,717)
----------- -----------
Balance, end of year $ 1,012,673 $ 412,974
=========== ===========
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 require 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
<PAGE>
Exhibit 21 - Page 6 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 3. Investments in Phoenix Leasing Partnerships (continued):
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, 1996 and
1995.
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, 1996 and for the
twelve months then ended:
Assets $182,995,000
Liabilities 29,989,000
Partners' Capital 153,006,000
Revenue 46,353,000
Net Income 18,826,000
Note 4. Equipment Subject to Lease:
Equipment subject to lease includes the Company's investments in
leveraged leases, investments in financing leases, operating leases and notes
receivable.
Equipment subject to lease consists of the following at June 30:
1996 1995
---- ----
Equipment on lease, net of accumulated
depreciation of $258,102 $ 92,008 $ --
Leverage leases 1,589,772 1,696,703
Equipment held for resale 305,840 --
Investment in financing leases 12,036,604 13,284,177
Operating leases 207,793 --
Notes receivable 3,560,830 2,063,806
----------- -----------
$17,792,847 $17,044,686
=========== ===========
Leverage Leases:
The Company's net investment in leveraged leases is composed of the
following elements at June 30:
<PAGE>
Exhibit 21 - Page 7 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 4. Equipment Subject to Lease (continued):
1996 1995
---- ----
Rental receivable (net of principal and interest
on the nonrecourse debt) $ -- $ --
Estimated residual value of leased assets 2,498,233 2,759,783
Less: Unearned and deferred income (908,461) (1,063,080)
-----------
Investment in leveraged leases 1,589,772 1,696,703
Less: Deferred taxes arising from leveraged leases (2,651,124) (2,960,190)
-----------
Net investment in leveraged leases $(1,061,352) $(1,263,487)
=========== ===========
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 at June 30:
1996 1995
---- ----
Minimum lease payments to be received $ 16,089,868 $ 17,731,628
Less: unearned income (4,053,263) (4,447,451)
------------ ------------
Net investment in financing leases $ 12,036,605 $ 13,284,177
============ ============
Minimum rentals to be received on noncancellable financing leases for
the years ended June 30, are as follows:
1997 $ 4,161,068
1998 4,171,699
1999 4,248,885
2000 2,367,834
2001 1,080,674
Thereafter 59,708
--------------
Total $ 16,089,868
===========
Notes Receivable:
Notes receivable for the years ended June 30, are as follows:
1996 1995
---- ----
Notes receivable from emerging growth and
other companies with stated interest ranging
from 10% to 22.6% per annum receivable in
installments ranging from 36 to 85 months
collateralized by the equipment financed $3,560,830 $2,063,806
========== ==========
<PAGE>
Exhibit 21 - Page 8 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 5. Sale of Leased Assets and Notes Receivable:
The Company acquires leased or financed equipment with the intent to
subsequently sell those assets to a trust which issues lease backed
certificates. As of June 30, 1996, the Company has acquired $15,805,227 is such
leased or financed equipment which is included in equipment subject to lease.
The Company uses proceeds from its two warehouse lines of credit to purchase or
finance this equipment. During the holding period the Company recognizes the
revenues generated from these leases or notes and the interest expense related
to the drawdowns from the warehouse lines of credit.
On November 29, 1995, the Company entered into an agreement to sell
certain assets and notes receivables with a net carrying value of $27,337,402 to
a trust for the purpose of the trust issuing lease backed certificates in
exchange for cash proceeds. The Company recognized a gain on this transaction of
$459,632. The leased backed certificates are recourse only to the assets used to
collateralize the obligation. Under the terms of the agreement, the Company will
continue to acquire and sell additional assets to the trust over the twelve
month period beginning November 30, 1995 and ending November 28, 1996. During
the period November 30, 1995 through June 30, 1996, the Company sold additional
assets to the trust for $4,807,746. These assets had a net carrying value of
$4,225,596, resulting in a gain of $582,150.
Note 6. Property and Equipment:
Major classes of property and equipment at June 30 are as follows:
1996 1995
---- ----
Land $ 1,077,830 $ 1,077,830
Buildings 7,352,608 7,345,648
Office furniture, fixtures and equipment 8,573,547 8,259,319
Other 843,450 766,975
------------ ------------
17,847,435 17,449,772
Less accumulated depreciation and amortization (11,398,438) (10,457,763)
Inventory held for resale 484,611 677,293
------------ ------------
Net Property and Equipment $ 6,933,608 $ 7,669,302
------------ ------------
PAI owns its 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 $248,325 and $206,798
in interest payments related to the IDB during the year ended June 30, 1996 and
1995, respectively.
As of June 30, 1996, a portion of the Company's headquarters has been
leased to third parties. The remaining lease term is for less than one year and
the minimum lease payments receivable are as follows:
1997 $370,093
========
<PAGE>
Exhibit 21 - Page 9 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 7. Investments in Marketable Securities:
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115 - Accounting for Certain Investments
in Debt and Equity Securities (SFAS 115). The Company adopted this statement on
July 1, 1994. This pronouncement prescribes specific accounting treatment for
investments based on their classification as either held-to-maturity securities
(HTM), available-for-sale securities (AFS) or trading securities, as defined in
the statement.
As of June 30, 1996, all securities held by the Company are classified
as AFS and are reported at their amortized cost of $1,287,323, which
approximates fair value. This value includes Class C Equipment Investment Trust
Certificates (Class C Shares) valued at $1,248,843 and equities valued at
$38,479. As of June 30, 1995, all securities are classified as HTM and are
reported at amortized cost of $7,298,771, which approximated fair value. Gross
unrealized gains and gross unrealized losses on such securities as of June 30,
1996 and 1995 were immaterial.
As of June 30, 1996, none of the securities held by the Company had
specified contractual maturities. Contractual maturities of securities held as
of June 30, 1995, are as follows:
1995
----
Held-To-Maturity Securities
Due in one year or less $4,202,115
Due after one through five years 3,096,656
----------
Total $7,298,771
==========
During fiscal year 1996, the Company sold $3,000,000 in face value of
U.S. Treasury Notes, which were classified as HTM as of June 30, 1995. As a
result of the sale, the Company changed the classification of all of its U.S.
Treasury Notes from HTM to AFS in accordance with SFAS No. 115. The sale
resulted in an immaterial gain, and proceeds were used for general corporate
purposes.
Note 8. Fair Value of Financial Instruments:
Marketable Securities
The carrying amounts of marketable securities reported in the balance
sheets approximate their fair values.
Leases, Notes Receivable, and Debt
The fair values of the Company's leases, notes receivable, and debt are
estimated based on the market prices of similar instruments or on the current
market interest rates for instruments with similar terms, maturities, and risks.
The estimated fair values of the Company's leases, notes receivable, and debt
approximate the carrying amounts reported in the balance sheets.
Note 9. 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 10 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 9. Short-Term and Warehouse Lines of Credit (continued):
As of June 30, 1996, the Company, through PAI, had access to one
short-term line of credit totaling $2.5 million. of which $750,000 was available
for borrowing at June 30, 1996. 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 $37.5 million, which are used to provide interim financing for
the acquisition of equipment and the financing of notes receivable. As of June
30, 1996, $16.9 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:
1996 1995
---- ----
Balance at June 30 $18,680,044 $17,644,012
Maximum amount outstanding 32,111,837 17,644,012
Average amount outstanding 13,828,284 2,522,340
Weighted average interest rate during the period 7.56% 7.9%
Note 10. Long-Term Debt:
Long-term debt consists of the following at June 30:
1996 1995
---- ----
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
payments of $122,151 $154,238 $160,944
Note payable to a bank, collateralized
by the assets of Phoenix Leasing Liquidation
Corporation, a subsidiary of the Company,
with a variable rate of interest tied to the
bank's prime rate payable in 30 consecutive
monthly installments 466,661 --
<PAGE>
Exhibit 21 - Page 11 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 10. Long-Term Debt (continued):
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
-------- --------
Total long-term debt $620,899 $229,390
======== ========
The aggregate long-term debt maturities for the fiscal years ended June
30, are as follows:
1997 $ 440,034
1998 40,039
1999 6,706
2000 6,706
2001 5,588
2002 and thereafter 121,826
-------------
Total. $ 620,899
============
Note 11. 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 for the years ended June 30, 1996 and 1995,
respectively.
Note 12. Leased Facilities:
The Company leases office and warehouse space in various parts of the
country and had annual rental expense of approximately $417,000 and $402,000 for
the years ended June 30, 1996 and 1995, respectively.
Note 13. Transactions with Related Parties:
The Company provides an interest bearing line of credit totaling
$8,000,000 to PAI's controlling shareholder which is secured by common stock of
Phoenix Precision Graphics, Inc. (an unaffiliated Nevada corporation). As of
June 30, 1996 and 1995, $6,646,209 and $4,837,814 of this line of credit has
been drawn down and is included in notes receivable from related party. As of
June 30, 1996 and 1995, Phoenix Precision Graphics is in a start-up mode and has
cumulative losses of $9,120,711 and $5,959,708, respectively.
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, 1996 and 1995,
$2,121,484 and $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 an affiliate of $556,453 and
$678,947 for the years ended June 30, 1996 and 1995, respectively. This
management fee is included in Portfolio management fees.
The Company paid an affiliate an asset management fee of $305,770 and
$1,026,714 for the years ended June 30, 1996 and 1995, respectively. These asset
management fees are included in equipment lease operations, maintenance,
remarking and administrative fees.
<PAGE>
Exhibit 21 - Page 12 of 19
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
Note 14. 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, 1996 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.
<PAGE>
Exhibit 21 - Page 13 of 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Venturers of
Phoenix Black Rock Cable J. V.
We have audited the accompanying balance sheet of Phoenix Black Rock Cable J. V.
(a California general partnership) as of December 31, 1996 and the related
statements of operations, venturers' capital and cash flows for the year then
ended. These financial statements are the responsibility of the Joint Venture's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides 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 Black Rock Cable J. V.
as of December 31, 1996, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
San Francisco, California
January 17, 1997
<PAGE>
Exhibit 21 - Page 14 of 19
PHOENIX BLACK ROCK CABLE J. V.
BALANCE SHEET
ASSETS
December 31,
1996
----
Total Assets $ --
======
LIABILITIES AND VENTURERS' CAPITAL
Total Liabilities $ --
------
Venturers' Capital: --
Total Liabilities and Venturers' Capital $ --
======
<PAGE>
Exhibit 21 - Page 15 of 19
PHOENIX BLACK ROCK CABLE J. V.
STATEMENT OF OPERATIONS
For the Year
Ended
December 31,
1996
------------
INCOME
Gain on sale of cable system $1,184,850
Cable subscriber revenue 50,457
Interest income 8,674
----------
Total Income 1,243,981
EXPENSES
Depreciation and amortization 12,968
Program service 11,850
Management fees 120,756
General and administrative expenses 19,178
----------
Total Expenses 164,752
----------
NET INCOME $1,079,229
==========
<PAGE>
<TABLE>
Exhibit 21 - Page 16 of 19
PHOENIX BLACK ROCK CABLE J. V.
STATEMENTS OF VENTURERS' CAPITAL
<CAPTION>
Capital Retained Cash
Contributions Earnings Distributions Total
------------- -------- ------------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $1,994,650 $ 404,151 $ (750,000) $ 1,648,801
Cash distributions -- -- (2,728,030) (2,728,030)
Net income -- 1,079,229 -- 1,079,229
---------- ---------- ----------- -----------
Balance, December 31, 1996 $1,994,650 $1,483,380 $(3,478,030) $ --
========== ========== =========== ===========
</TABLE>
<PAGE>
Exhibit 21 - Page 17 of 19
PHOENIX BLACK ROCK CABLE J. V.
STATEMENT OF CASH FLOW
For the Year
Ended
December 31,
1996
----
OPERATING ACTIVITIES:
Net income $ 1,079,229
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 12,968
Gain on sale of cable system (1,184,850)
Decrease in other assets 620
Decrease in accounts receivable 617
Decrease in subscriber prepayments and deposits (116)
Decrease in accounts payable and accrued expenses (22,401)
-----------
Net cash used in operating activities (113,933)
-----------
INVESTING ACTIVITIES:
Purchase of cable systems and equipment (607)
Proceeds from sale of cable systems 2,588,503
-----------
Net cash provided by investing activities 2,587,896
-----------
FINANCING ACTIVITIES:
Payments to affiliates (3,793)
Cash distribution to venturers (2,728,030)
-----------
Net cash used in financing activities (2,731,823)
-----------
Decrease in cash and cash equivalents (257,860)
Cash and cash equivalents, beginning of period 257,860
-----------
Cash and cash equivalents, end of period $ --
===========
<PAGE>
Exhibit 21 - Page 18 of 19
PHOENIX BLACK ROCK CABLE J. V.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note 1. Organization.
Phoenix Black Rock Cable J. V. (the "Joint Venture") was formed under
the laws of California on January 10, 1992 by several affiliated Limited
Partnerships (the "Venturers") managed by Phoenix Leasing Incorporated to own
and operate the Black Rock Cable Television System located in the States of
Nevada and California that was acquired through foreclosure on a defaulted note
receivable.
Income or loss is allocated to each Venturer based upon their
respective interest in the Joint Venture. Distributions are made in the same
manner.
The cable television system is located in the counties of Clark and Nye
in the State of Nevada and in the county of Inyo in the State of California. The
cable television system consists of headend equipment in five locations and 156
miles of plant passing, approximately 2,900 homes and approximately 1,820 cable
subscribers. The cable television system serves the communities of Parumph,
Beatty and Blue Diamond in Nevada and Cow Creek and Grapevine in California. It
operates under one non-exclusive franchise agreement with the county of Nye in
Nevada and a National Park Service Permit for Death Valley, California.
Phoenix Cable Management Inc. (PCMI) provides day to day management
services in connection with the operation of the cable system. The cable system
pays a management fee equal to four and one-half percent of the System's monthly
gross revenue for these services.
Note 2. Summary of Significant Accounting Policies.
Property, Cable Systems and Equipment
Depreciation of property, cable systems and equipment was provided
using the straight-line method over the following estimated service lives:
Distribution systems 13 years
Headend equipment 13 years
Equipment and tools 13 years
Vehicles and other 5 years
Replacements, renewals and improvements were capitalized, and
maintenance and repairs were charged to expense as incurred.
Intangible Assets
Costs assigned to intangible assets were amortized using the
straight-line method over the following estimated useful lives:
Franchise rights 10 years
Subscriber lists 8 years
Revenue Recognition
Services were billed monthly in advance. Revenue was deferred and
recognized as the services were provided.
<PAGE>
Exhibit 21 - Page 19 of 19
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 3. Sale of Cable System.
On January 17, 1996, Phoenix Black Rock Cable J. V. sold its cable
television system receiving net proceeds of $2,588,503 resulting in a net gain
of $1,184,850. At the time of the sale of the system, the cable system had
approximately 1,820 subscribers.
Note 4. Accounts Receivable.
The activity of the allowance for doubtful accounts receivable is as
follows:
December 31,
1996
----
Beginning balance $ 6,464
Recovery of losses (6,464)
-------
Ending balance $ --
=======
Note 5. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Joint Venture are reportable by the Venturers on their
individual income tax return. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.
Note 6. Related Entities.
The Joint Venture is sponsored and funded by various partnerships
managed by Phoenix Leasing Incorporated (PLI). PLI serves in the capacity of the
general partner and managing venturer in other joint ventures.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 658
<SECURITIES> 67
<RECEIVABLES> 1
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 114
<DEPRECIATION> 114
<TOTAL-ASSETS> 829
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,058)
<TOTAL-LIABILITY-AND-EQUITY> 829
<SALES> 0
<TOTAL-REVENUES> 266
<CGS> 0
<TOTAL-COSTS> 65
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 201
<INCOME-TAX> 0
<INCOME-CONTINUING> 201
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201
<EPS-PRIMARY> 4.95
<EPS-DILUTED> 0
</TABLE>
