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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ----- ACT OF 1934
For the quarterly period ended September 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ----- EXCHANGE ACT OF 1934
For the transition period from ________ to________.
Commission File Number 0-12594
PHOENIX LEASING INCOME FUND VI
Registrant
California 94-2869603
State of Jurisdiction I.R.S. Employer Identification No.
2401 Kerner Boulevard, San Rafael, California 94901-5527
- - --------------------------------------------------------------------------------
Address of Principal Executive Offices Zip Code
Registrant's telephone number, including area code: (415) 485-4500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
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<TABLE>
Part I. Financial Information
Item 1. Financial Statements
PHOENIX LEASING INCOME FUND VI
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $2,515 $3,892
Accounts receivable (net of allowance for losses on accounts receivable of $24
and $35 at September 30, 1995 and December 31, 1994, respectively) 31 48
Notes receivable (net of allowance for losses on notes receivable of $0 and $147
at September 30, 1995 and December 31, 1994, respectively) -- 992
Equipment on operating leases and held for lease (net of accumulated
depreciation of $2,392 and $3,337 at September 30, 1995 and December 31,
1994, respectively) 6 13
Investment in joint ventures 519 697
Other assets 116 150
------ ------
Total Assets $3,187 $5,792
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $1,489 $2,747
------ ------
Total Liabilities 1,489 2,747
------ ------
Partners' Capital
General Partner 370 238
Limited Partners, 320,000 units authorized and issued, 297,165 units
outstanding at September 30, 1995 and December 31, 1994 1,328 2,807
------ ------
Total Partners' Capital 1,698 3,045
------ ------
Total Liabilities and Partners' Capital $3,187 $5,792
====== ======
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
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<TABLE>
PHOENIX LEASING INCOME FUND VI
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Rental income $ 34 $ 80 $ 346 $ 438
Equity in earnings from joint ventures, net 86 35 229 149
Interest income, notes receivable -- 14 308 15
Gain on sale of marketable securities -- -- -- 36
Other income 36 34 90 126
----- ----- ----- -----
Total Income 156 163 973 764
----- ----- ----- -----
EXPENSES
Depreciation 2 15 7 83
Lease related operating expenses 1 11 1 21
Management fees to General Partner 4 13 110 45
Provision for losses on receivables 3 (13) (137) (39)
General and administrative expenses 20 39 94 223
----- ----- ----- -----
Total Expenses 30 65 75 333
----- ----- ----- -----
NET INCOME $ 126 $ 98 $ 898 $ 431
===== ===== ===== =====
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .36 $ .30 $2.57 $1.25
===== ===== ===== =====
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $-- $-- $7.50 $7.50
===== ===== ===== =====
ALLOCATION OF NET INCOME:
General Partner $ 19 $ 15 $ 135 $ 61
Limited Partners 107 83 763 370
----- ----- ----- -----
$ 126 $ 98 $ 898 $ 431
===== ===== ===== =====
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
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<TABLE>
PHOENIX LEASING INCOME FUND VI
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Operating Activities:
Net income $ 898 $ 431
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation 7 83
Gain on sale of equipment (42) (21)
Equity in earnings from joint ventures, net (229) (149)
Provision for losses on accounts receivable 10 --
Provision for early termination, financing leases -- (39)
Provision for losses on notes receivable (147) --
Gain on sale of marketable securities -- (36)
Decrease in accounts receivable 7 23
Decrease in accounts payable and accrued expenses (1,258) (1,950)
Decrease in other assets 30 30
------- -------
Net cash used by operating activities (724) (1,628)
------- -------
Investing Activities:
Principal payments, financing leases -- 144
Principal payments, notes receivable 1,139 70
Proceeds from sale of equipment 42 26
Proceeds from sale of marketable securities -- 50
Distributions from joint ventures 394 215
Investment in joint ventures -- (21)
Investment in marketable securities -- (14)
------- -------
Net cash provided by investing activities 1,575 470
------- -------
Financing Activities:
Distributions to partners (2,228) (2,229)
------- -------
Net cash used by financing activities (2,228) (2,229)
------- -------
Decrease in cash and cash equivalents (1,377) (3,387)
Cash and cash equivalents, beginning of period 3,892 7,100
------- -------
Cash and cash equivalents, end of period $ 2,515 $ 3,713
======= =======
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
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PHOENIX LEASING INCOME FUND VI
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. General.
The accompanying unaudited condensed financial statements have been
prepared by the Partnership in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Although management believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes included in the Partnership's Financial Statement, as filed with the
SEC in the latest annual report on Form 10-K.
Financial Accounting Pronouncements. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity would estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset. Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Partnership does not expect
the adoption of this statement to have a material impact on its financial
position and results of operations. The Partnership plans to adopt Statement No.
121 on January 1, 1996.
Non Cash Investing Activities. During the quarter ended June 30, 1995,
the Partnership received a final distribution of common stock from one of its
investments in equipment joint ventures. The market value of the stock at the
distribution date was $13,000.
Note 2. Reclassification.
Reclassification - Certain 1994 amounts have been reclassified to
conform to the 1995 presentation.
Note 3. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.
<PAGE>
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Note 4. Notes Receivable.
Impaired Notes Receivable. On January 1, 1995, the Partnership adopted
Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors
for Impairment of a Loan", and Statement No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures". Statement No. 114
requires that certain impaired loans be measured based on the present value of
expected cash flows discounted at the loan's effective interest rate; or,
alternatively, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. Prior to 1995, the allowance for
losses on notes receivable was based on the undiscounted cash flows or the fair
value of the collateral dependent loans.
In accordance with Statement No. 114, a loan is classified as
in-substance foreclosure when the Company has taken possession of the collateral
regardless of whether formal foreclosure proceedings take place. Notes
receivable previously classified as in-substance foreclosed cable systems but
for which the Company had not taken possession of the collateral have been
reclassified to notes receivable.
The average recorded investment in impaired loans during the nine
months ended September 30, 1995 was approximately $372,000. Generally, notes
receivable are classified as impaired and the accrual of interest on such notes
are discontinued when the contractual payment of principal or interest has
become 90 days past due or management has serious doubts about further
collectibility of the contractual payments. Any payments received subsequent to
the placement of the note receivable on to impaired status will generally be
applied towards the reduction of the outstanding note receivable balance, which
may include previously accrued interest as well as principal. Once the principal
and accrued interest balance has been reduced to zero, the remaining payments
will be applied to interest income.
During the quarter ended September 30, 1995, the Partnership received a
settlement on its one remaining note receivable which was considered to be
impaired under Statement No. 114. The Partnership received $1,416,000 as a
settlement for this note receivable of which $1,108,000 was applied towards the
outstanding note receivable balance and the remaining $308,000 applied to
interest income. There was no related allowance for this note receivable. The
remaining balance in the allowance for losses on notes receivable of $147,000
was no longer necessary due to the payment of this note receivable. As a result,
the remaining allowance for loan losses was reduced to zero through the
recognition of income.
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1995 1994
---- ----
(Amounts in Thousands)
Beginning balance $ 147 $ 147
Provision for losses (147) --
Write downs -- --
----- -----
Ending balance $-- $ 147
===== =====
Note 5. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income and distributions per limited partnership unit were based on
the limited partner's share of net income and distributions, and the weighted
average number of units outstanding of 297,165 for the nine month periods ended
September 30, 1995 and 1994. For purposes of allocating income (loss) and
distributions to each individual limited partner, the Partnership allocates net
<PAGE>
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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 6. Investment in Joint Ventures.
Equipment Joint Ventures
The aggregate combined statements of operations of the equipment joint
ventures is presented below:
<TABLE>
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Rental income $1,064 $ 558 $3,200 $2,314
Gain on sale of equipment 397 246 1,273 1,034
Other income 572 113 683 198
------ ------ ------ ------
Total income 2,033 917 5,156 3,546
------ ------ ------ ------
EXPENSES
Depreciation 629 283 1,089 918
Lease related operating expenses 710 489 2,241 2,043
Management fees to General Partner 94 43 220 170
General and administrative expenses 3 41 13 136
------ ------ ------ ------
Total expenses 1,436 856 3,563 3,267
------ ------ ------ ------
Net income $ 597 $ 61 $1,593 $ 279
====== ====== ====== ======
</TABLE>
<PAGE>
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Financing Joint Ventures
The aggregate combined statements of operations of the financing joint
ventures is presented below:
<TABLE>
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Interest income - notes receivable $ 14 $ 49 $ 62 $ 49
Other income 7 2 74 12
---- ---- ---- ----
Total income 21 51 136 61
---- ---- ---- ----
EXPENSES
Management fees to General Partner 2 5 7 17
General and administrative expenses 3 8 15 28
---- ---- ---- ----
Total expenses 5 13 22 45
---- ---- ---- ----
Net income $ 16 $ 38 $114 $ 16
==== ==== ==== ====
</TABLE>
Foreclosed Cable Systems Joint Venture
The statements of operations of the foreclosed cable systems joint
venture is presented below:
<TABLE>
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Subscriber revenue $166 $162 $509 $488
Other income 3 2 9 6
---- ---- ---- ----
Total income 169 164 518 494
---- ---- ---- ----
EXPENSES
Depreciation and amortization 39 38 115 112
Program services 48 40 135 123
Management fees to an affiliate of the
General Partner 8 7 23 22
General and administrative expenses 42 39 144 115
Provision for losses on accounts receivable 2 2 5 5
---- ---- ---- ----
Total expenses 139 126 422 377
---- ---- ---- ----
Net income before taxes 30 38 96 117
Income tax benefit 1 13 11 23
---- ---- ---- ----
Net income $ 31 $ 51 $107 $140
==== ==== ==== ====
</TABLE>
<PAGE>
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PHOENIX LEASING INCOME FUND VI
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The Partnership reported an increase in net income of $28,000 and
$467,000 during the three and nine months ended September 30, 1995,
respectively, compared to the same periods in 1994. The increase in net income
during the three months ended September 30, 1995, compared to the same period in
1994, is attributable to an overall decline in expenses. The increase in net
income during the nine months ended September 30, 1995 is primarily attributable
to an increase in interest income from notes receivable, as well as the
recognition of a portion of the allowance for loan losses as income.
Total revenues decreased by $7,000 during the three months ended
September 30, 1995, but increased by $209,000 during the nine months ended
September 30, 1995, when compared to the same periods in 1994. The decrease in
total revenues during the three months ended September 30, 1995 was primarily
attributable to the absence of interest income from notes receivable and a
decline in rental income. The absence of interest income during the three months
ended September 30, 1995 is the direct result of the Partnership's remaining
notes receivable having been paid off in the second quarter of 1995.
The increase in total revenues for the nine months ended September 30,
1995, compared to the prior year, is attributable to the recognition of interest
income from a note receivable. The Partnership recognized interest income from a
note receivable of $308,000 during the nine months ended September 30, 1995,
compared to $15,000 for the same period in the prior year. During the second
quarter of 1995, the Partnership received a settlement from its one remaining
note receivable which had been classified as impaired. The amount received as
the settlement was first applied towards the outstanding note receivable balance
and the remainder in excess of the carrying amount of the note was recognized as
interest income. The Partnership also reported an increase in earnings from
joint ventures, as well as a decrease in rental income.
Due to the settlement of the Partnership's last remaining note
receivable, the balance of the general allowance for losses on notes receivable
was no longer necessary. As a result, the remaining balance of $147,000 was
recognized as income which decreased total expenses for both the nine months
ended September 30, 1995, compared to the same period in the prior year.
The decrease in rental income during the three and nine months ended
September 30, 1995, is attributable to a reduction in the size of the equipment
portfolio as a result of sales. The Partnership owned equipment subject to both
operating and financing leases, excluding its pro rata interest in equipment
joint ventures, with an aggregate original cost $2.8 million at September 30,
1995 compared to $7.1 million at September 30, 1994.
Total expenses decreased by $35,000 and $258,000 for the three and nine
months ended September 30, 1995, respectively as compared to the same periods in
the preceding year. The decrease during the nine months ended September 30, 1995
is due to a $147,000 decrease in the provision for losses on notes receivable.
The Partnership experienced decreases in most other expense categories during
the three and nine months ended September 30, 1995, when compared to the same
period in 1994.
Management fees to the General Partner increased by $65,000 for the
nine months ended September 30, 1995, respectively, due to the payoff of an
outstanding note receivable.
<PAGE>
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Because the Partnership is in its liquidation stage, it is not expected
that the Partnership will acquire any additional equipment. As a result, lease
related revenues and expenses are expected to continue to decline as the
portfolio is liquidated and the remaining equipment is re-leased at lower rental
rates. The Partnership will reach the end of it term on December 31, 1997.
Joint Ventures
The Partnership has made investments in various equipment and financing
joint ventures along with other affiliated partnerships managed by the General
Partner for the purpose of spreading the risk of investing in certain equipment
leasing and financing transactions. These joint ventures are not currently
making any significant additional investments in new equipment leasing or
financing transactions. As a result, the earnings and cash flow from such
investments are anticipated to continue to decline as the portfolios are
re-leased at lower rental rates and eventually liquidated.
Earnings from joint ventures increased by $51,000 and $80,000 during
the three and nine months ended September 30, 1995, respectively, compared to
the same periods in 1994. The increase was due to the earnings from an
investment in a new joint venture that was formed upon the receipt of a legal
settlement during October of 1994.
Liquidity and Capital Resources
During the nine months ended September 30, 1995, the net cash provided
by leasing and financing activities was $415,000, as compared to the net cash
used by leasing and financing activities of $1,414,000 during 1994. The increase
in cash generated for the nine months ended September 30, 1995 is due to the
payoff of an outstanding note receivable. The decrease in accounts payable at
September 30, 1995, when compared to December 31, 1994, is due to the payment of
liquidation fees payable to the General Partner.
The distributions from joint ventures continues to be one of the
primary sources of cash generated by the Partnership. Cash distributions from
joint ventures increased by $179,000 for the nine months ended September 30,
1995, compared to the same period in 1994. The increase is primarily
attributable to a new investment made in a new joint venture during October 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.
As of September 30, 1995, the Partnership owned equipment held for
lease with a purchase price of $2,096,000 and a net book value of $0, as
compared to $5,171,000 and $2,000 at September 30, 1994, respectively. 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 their annual distributions of $2,228,000
and $2,229,000 during the nine months ended September 30, 1995 and 1994,
respectively. As a result, the cumulative cash distributions to the Limited
Partners are $73,687,000 and $71,459,000 at September 30, 1995 and 1994,
respectively. The General Partner did not receive distributions during the nine
months ended September 30, 1995 and 1994.
Distributions are made on an annual basis with a distribution date of
January 15. The distribution made in January of 1995 was at approximately the
same rate as January of 1994. The distribution to be made in January of 1996 is
projected to be the same as the distribution made in January of 1995.
As the Partnership's asset portfolio continues to decline as a result
<PAGE>
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of the on-going liquidation of assets, it is expected that the cash generated
from operations will also decline. Cash generated from leasing and financing
operations has been and is anticipated to continue to be sufficient to meet the
Partnership's on-going operational expenses.
<PAGE>
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PHOENIX LEASING INCOME FUND VI
September 30, 1995
Part II. Other Information.
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults Upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Securities Holders.Inapplicable
Item 5. Other Information. Inapplicable
Item 6. Exhibits and Reports on 8-K:
a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None
<PAGE>
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<TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHOENIX LEASING INCOME FUND VI
(Registrant)
<CAPTION>
Date Title Signature
<S> <C> <C>
November 13, 1995 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- - ----------------- Senior Vice President ----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 13, 1995 Senior Vice President, /S/ BRYANT J. TONG
- - ----------------- Financial Operations ------------------
(Principal Accounting Officer) (Bryant J. Tong)
and a Director of
Phoenix Leasing Incorporated
General Partner
November 13, 1995 Senior Vice President of /S/ GARY W. MARTINEZ
- - ----------------- Phoenix Leasing Incorporated --------------------
General Partner (Gary W. Martinez)
November 13, 1995 Partnership Controller /S/ MICHAEL K. ULYATT
- - ----------------- Phoenix Leasing Incorporated ---------------------
General Partner (Michael K. Ulyatt)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,515
<SECURITIES> 0
<RECEIVABLES> 55
<ALLOWANCES> 24
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,398
<DEPRECIATION> 2,392
<TOTAL-ASSETS> 3,187
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,698
<TOTAL-LIABILITY-AND-EQUITY> 3,187
<SALES> 0
<TOTAL-REVENUES> 973
<CGS> 0
<TOTAL-COSTS> 75
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (137)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 898
<INCOME-TAX> 0
<INCOME-CONTINUING> 898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 898
<EPS-PRIMARY> 2.57
<EPS-DILUTED> 0
</TABLE>
