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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 0-12594
PHOENIX LEASING INCOME FUND VI
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2869603
- ------------------------------- ------------------------------------
(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, 297,165 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 INCOME FUND VI
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 Income Fund VI, a California limited partnership (the
"Partnership"), was organized on October 29, 1981. The Partnership was
registered with the Securities and Exchange Commission with an effective date of
January 1, 1983 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 240,000 units of limited
partnership interest at a price of $250 per unit with an option of increasing
the public offering up to a maximum of 320,000 units. The Partnership sold
320,000 units for a total capitalization of $80,103,000. Of the proceeds
received through the offering, the Partnership has incurred $8,971,000 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 $162,669,000. The average initial firm term of
contractual payments from equipment subject to lease was 28 months, and the
average initial net monthly payment rate as a percentage of the original
purchase price was 3.37%. The average initial firm term of contractual payments
from loans was 74 months.
The Partnership's principal objective is to produce current income and
to build and maintain a balanced portfolio of assets through the acquisition and
financing of various types of assets, 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 principal markets for the types of equipment in which the
Partnership has invested in has been (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 equipment 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 a default, to
obtain possession of the assets.
The Partnership will not incur debt to finance the purchase of
equipment. However, the Partnership can enter into joint venture agreements with
certain other partnerships managed by the General Partner which would finance
the acquisition of equipment through the use of indebtedness which would be
nonrecourse to the Partnership.
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). Generally, the impact of these factors to the
Partnership would be the realization of increased equipment remarketing and
storage costs, as well as lower residuals received from the sale or remarketing
of such equipment.
<PAGE>
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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.
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 $3,949,000.
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 $1,896 48%
Reproduction Equipment 1,526 39
Small Computer Systems 527 13
------ ---
TOTAL $3,949 100%
====== ===
(1) These amounts include the Partnership's pro rata interest in equipment
joint ventures of $1,467,000 and financing joint ventures of $1,896,000
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 11,962
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 $ 310 $ 1,121 $ 1,738 $ 909 $ 2,652
Net Income (Loss) 180 1,007 1,351 (28) (264)
Total Assets 1,109 3,287 5,792 8,679 10,452
Distributions to Partners 2,228 2,228 2,228 2,229 2,229
Net Income (Loss) per Limited Partnership Unit(1) .51 2.88 3.88 (.09) (1.49)
Distributions per Limited Partnership Unit 7.50 7.50 7.50 7.50 7.50
</TABLE>
(1) Net Income (Loss) per Limited Partnership unit is not indicative of per
unit income (loss) due to reinvestments through the Capital Accumulation
Plan.
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 Income Fund VI (the Partnership) reported net income of
$180,000 for the year ended December 31, 1996, compared to net income of
$1,007,000 and $1,351,000 for the years ended December 31, 1995 and 1994,
respectively. The decrease in net income during 1996, compared to 1995, is
primarily attributable to a decrease in total revenues. The decrease in net
income during 1995, compared to 1994, was attributable to decreases in rental
and settlement income, partially offset by an increase in interest income from
notes receivable.
Total revenues decreased by $811,000 for the year ended December 31,
1996 as compared to 1995, and decreased by $617,000 during 1995 as compared to
the previous year. The decrease in revenues for 1996, as compared to 1995, is
attributable to a decline in rental income and the absence of interest income
from notes receivable.
The decline in rental income of $381,000 and $121,000 for the years
ended December 31, 1996 and 1995, as compared to their respective prior year, is
due to the decrease in equipment owned by the Partnership. At December 31, 1996,
the Partnership owned equipment with an aggregate original cost of $587,000 as
compared to $1,045,000 at December 31, 1995. The Partnership is currently in a
liquidation phase, and as a result, the equipment portfolio will continue to
decline as the Partnership continues to liquidate its remaining equipment as it
comes off lease.
The absence of interest income from notes receivable during 1996 is a
result of the Partnership receiving a payoff on its last remaining note
receivable, which was also considered to be impaired, during the year ended
December 31, 1995. In 1995, the Partnership recognized interest income from
notes receivable totaling $331,000. A majority of this interest income was
attributable to the payoff received during the second quarter of 1995. The
Partnership received $1,416,000 as the payoff of which $1,108,000 was applied
towards the outstanding note receivable and $308,000 was recognized as interest
income. In addition, the balance of the general allowance for losses on notes
receivable of $146,000 was reversed and recognized as income.
The payoff from the Partnership's last remaining note receivable also
contributed to the increase in management fees to the General Partner for the
year ended December 31, 1995. Management fees are recognized on the gross
revenues of the Partnership.
The decline in total revenues of $617,000 for the year ended December
31, 1995, as compared to 1994 was primarily due to the absence of settlement
income as compared to settlement income of $754,000 in 1994. The settlement
income recognized during 1994 was composed of cash, common stock, receivables,
assigned rents from a pool of leased equipment, and credits for goods and
services. The settlement income consisted of settlements from two manufacturers
of equipment that the Partnership had entered into contractual agreements for
the purchase of leased equipment.
Inflation affects the Partnership in relation to the current cost of
equipment placed on lease and the residual values realized when the equipment
comes off-lease and is sold. During the last several years inflation has been
low, thereby having very little impact upon the investments of the Partnership.
Joint Ventures
The Partnership has made investments in various equipment and financing
joint ventures along with other affiliated partnerships managed by the General
Partner for the purpose of spreading the risk of investing in certain equipment
leasing and financing transactions. These joint ventures are not currently
making any significant additional investments in new equipment leasing or
financing transactions. As a result, the earnings and cash flow from such
investments are anticipated to continue to decline as the portfolios are
re-leased at lower rental rates and eventually liquidated. Earnings from joint
ventures decreased by $47,000 during 1996 as compared to 1995 and increased by
$26,000 during 1995 as compared to 1994. The decrease in earnings from joint
ventures for year ended December 31, 1996, as compared to 1995, is attributable
to declines in rental income and gain on sale of equipment in several equipment
joint ventures. The increase in earnings during 1995 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 year ended December 31, 1996, the net cash used by leasing
and financing activities was $255,000, as compared to the net cash provided by
leasing and financing activities of $471,000 and $1,013,000 during 1995 and
1994, respectively. The decrease in cash generated for the year ended December
<PAGE>
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31, 1996 is due to the absence of principal payments from notes receivable.
During the year ended December 31, 1995, the Partnership received a payoff of
$1,416,000 from its one remaining outstanding note receivable which contributed
to increasing the net cash provided by leasing and financing activities for that
year. This was partially offset by a decrease in accounts payable due to the
payment of liquidation fees payable to the General Partner.
The distributions from joint ventures continue to be one of the primary
sources of cash generated by the Partnership. Cash distributions from joint
ventures were $352,000, $530,000 and $279,000 for the year ended December 31,
1996, 1995 and 1994, respectively. The decrease in distributions for the year
ended December 31, 1996, as compared to 1995, is attributable to the closure of
four joint ventures during 1995, as well as the decrease in rental receipts for
several other joint ventures.
The increase in distributions from joint ventures for the year ended
December 31, 1995, compared to 1994, was primarily due 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.
The Partnership owned equipment held for lease with a purchase price
of $437,000, $499,000 and $2,702,000, and a net book value of $0, $0 and $0 at
December 31, 1996, 1995 and 1994, respectively. The General Partner is actively
engaged, on behalf of the Partnership, in remarketing and selling the
Partnership's off-lease equipment portfolio.
During the year ended December 31, 1996, the Partnership sold a portion
of its investment in common stock receiving proceeds of $90,000.
The Limited Partners received their annual distributions of $2,228,000
for the years ended December 31, 1996, 1995 and 1994. As a result, the
cumulative cash distributions to the Limited Partners are $75,915,000,
$73,687,000 and $71,459,000 at December 31, 1996, 1995 and 1994, respectively.
The General Partner did not receive distributions during the years ended
December 31, 1996, 1995 and 1994.
The Partnership will reach the end of its term on December 31, 1997, at
which time it will liquidate its remaining assets and make a final distribution
to partners of the excess cash, if any. The Partnership currently does not
anticipate making any further distribution to partners until the termination of
the Partnership.
As the Partnership's asset portfolio continues to decline as a result
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. 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 year.
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 INCOME FUND VI
YEAR ENDED DECEMBER 31, 1996
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Phoenix Leasing Income Fund VI:
We have audited the accompanying balance sheets of Phoenix Leasing Income Fund
VI (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 Income Fund VI
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
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PHOENIX LEASING INCOME FUND VI
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 670 $ 2,708
Accounts receivable (net of allowance for
losses on accounts receivable of $8
and $22 at December 31, 1996 and 1995,
respectively) 7 30
Equipment on operating leases and held for lease
(net of accumulated depreciation of $423 and
$746 at December 31, 1996 and 1995, respectively) -- 4
Investment in joint ventures 276 415
Securities, available-for-sale 149 121
Other assets 7 9
------- -------
Total Assets $ 1,109 $ 3,287
======= =======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable and accrued expenses $ 134 $ 203
Liquidation fees payable to General Partner 1,108 1,268
------- -------
Total Liabilities 1,242 1,471
------- -------
Partners' Capital:
General Partner 421 394
Limited Partners, 320,000 units authorized
and issued, 297,165 units outstanding at
December 31, 1996 and 1995 (615) 1,460
Unrealized gains (losses) on available-for-sale
securities 61 (38)
------- -------
Total Partners' Capital (Deficit) (133) 1,816
------- -------
Total Liabilities and Partners' Capital (Deficit) $ 1,109 $ 3,287
======= =======
The accompanying notes are an integral
part of these statements.
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PHOENIX LEASING INCOME FUND VI
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
INCOME
Rental income $ 22 $ 403 $ 524
Equity in earnings from joint ventures, net 213 260 234
Interest income, notes receivable -- 331 --
Settlement -- -- 754
Other income 75 127 226
------- ------- -------
Total Income 310 1,121 1,738
------- ------- -------
EXPENSES
Depreciation 3 9 92
Lease related operating expenses 5 2 41
Management fees to General Partner 8 116 73
Provision for (recovery of) losses
on receivables 19 (136) (58)
General and administrative expenses 95 123 239
------- ------- -------
Total Expenses 130 114 387
------- ------- -------
NET INCOME $ 180 $ 1,007 $ 1,351
======= ======= =======
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .51 $ 2.88 $ 3.88
======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 27 $ 151 $ 199
Limited Partners 153 856 1,152
------- ------- -------
$ 180 $ 1,007 $ 1,351
======= ======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
<TABLE>
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PHOENIX LEASING INCOME FUND VI
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(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 $ 44 297,165 $ 3,908 $ -- $ 3,952
Distributions to partners ($7.50 per limited
partnership unit) -- -- (2,228) -- (2,228)
Unrealized losses on available-for-sale
securities -- -- -- (30) (30)
Net income 199 -- 1,152 -- 1,351
------- ------- ------- ------- -------
Balance, December 31, 1994 243 297,165 2,832 (30) 3,045
Distributions to partners ($7.50 per limited
partnership unit) -- -- (2,228) -- (2,228)
Change in unrealized losses on available-
for-sale securities -- -- -- (8) (8)
Net income 151 -- 856 -- 1,007
------- ------- ------- ------- -------
Balance, December 31, 1995 394 297,165 1,460 (38) 1,816
Distributions to partners ($7.50 per limited
partnership unit) -- -- (2,228) -- (2,228)
Change in unrealized gains on available-
for-sale securities -- -- -- 99 99
Net income 27 -- 153 -- 180
------- ------- ------- ------- -------
Balance, December 31, 1996 $ 421 297,165 $ (615) $ 61 $ (133)
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral
part of these statements.
<PAGE>
<TABLE>
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PHOENIX LEASING INCOME FUND VI
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
Net income $ 180 $ 1,007 $ 1,351
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation 3 9 92
Gain on sale of equipment (2) (43) (30)
Equity in earnings from joint ventures, net (213) (260) (234)
Provision for (recovery of) losses on accounts receivable 19 10 (19)
Recovery of early termination, financing leases -- -- (39)
Recovery of losses on note receivable -- (146) --
Settlements -- -- (437)
Gain on sale of securities (19) -- (35)
Decrease in accounts receivable 4 8 80
Decrease in accounts payable and
accrued expenses (229) (1,276) (1,980)
Decrease in other assets 2 24 --
------- ------- -------
Net cash used by operating activities (255) (667) (1,251)
------- ------- -------
Investing Activities:
Principal payments, financing leases -- -- 145
Principal payments, notes receivable -- 1,138 93
Proceeds from sale of equipment 3 43 35
Proceeds from sale of securities 90 -- 50
Distributions from joint ventures 352 530 279
Purchase of equipment -- -- (294)
Investment in joint ventures -- -- (22)
Investment in securities -- -- (15)
------- ------- -------
Net cash provided by investing activities 445 1,711 271
------- ------- -------
Financing Activities:
Distributions to partners (2,228) (2,228) (2,228)
------- ------- -------
Net cash used by financing activities (2,228) (2,228) (2,228)
------- ------- -------
Decrease in cash and cash equivalents (2,038) (1,184) (3,208)
Cash and cash equivalents, beginning of period 2,708 3,892 7,100
------- ------- -------
Cash and cash equivalents, end of period $ 670 $ 2,708 $ 3,892
======= ======= =======
</TABLE>
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 14 of 29
PHOENIX LEASING INCOME FUND VI
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note 1. Organization and Partnership Matters.
Phoenix Leasing Income Fund VI, a California limited partnership (the
"Partnership"), was formed on October 29, 1981, 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 January
6, 1983, 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. During 1988, the Capital Accumulation Plan
was discontinued. Limited Partners who elected to participate in the Capital
Accumulation Plan are now receiving cash distributions. However, a few investors
remained in the plan through 1990.
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 508 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 shall receive 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 is 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
liquidation. 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>
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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 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. Any direct costs of
consummating new leases are capitalized as these costs are immaterial.
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.
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.
Portfolio Valuation Methodology. The Partnership uses the portfolio
method of accounting for the net realizable value of the Partnership's equipment
portfolio.
Investment in Joint Ventures. Investments in net assets of the
equipment, financing and foreclosed cable systems joint ventures reflect the
Partnership's equity basis in the ventures. Under the equity method of
accounting, the original investment is recorded at cost and is adjusted
periodically to recognize the Partnership's share of earnings, losses, cash
contributions and cash distributions after the date of acquisition.
Investment in Available-for-Sale Securities. The Partnership has
investments in stock and stock warrants in public companies that have been
determined to be available for sale. 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 include 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 available for sale securities
from one of its investments in equipment joint ventures. The market value of
these securities at the distribution date was $13,000.
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.
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 disclosures 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.
Reclassification. Certain 1995 and 1994 amounts have been reclassified
to conform to the 1996 presentation.
<PAGE>
Page 16 of 29
Note 3. Accounts Receivable.
Accounts receivable consist of the following at December 31:
1996 1995
---- ----
(Amounts in Thousands)
Lease payments $ 15 $ 49
General Partner and affiliates -- 3
---- ----
15 52
Less: allowance for losses on accounts receivable (8) (22)
---- ----
Total $ 7 $ 30
==== ====
Note 4. Note Receivable.
The Partnership's note receivable from a cable television system
operator provided for a monthly payment rate in an amount that was 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 have been 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 being recognized
on its note receivable 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 realizable.
Generally, notes receivable are classified as impaired and the accrual
of interest on such notes is 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 year ended December 31, 1995, the Partnership received a
settlement on its one remaining note receivable which was considered to be
impaired. 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. The
remaining balance in the allowance for losses on notes receivable of $146,000
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 average recorded investment in impaired loans during
the year ended December 31, 1995 was approximately $279,000.
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 $-- $ 146
Recovery of losses -- (146)
Write Downs -- --
--- -----
Ending balance $-- $--
=== =====
Note 5. Equipment on Operating Leases.
Equipment on lease consists primarily of small computer systems subject
to operating leases.
The Partnership's operating leases are for initial lease terms of
approximately 12 to 36 months. During the remaining terms of existing operating
leases the Partnership will not recover all of the undepreciated cost and
related expenses of its rental equipment, and therefore must remarket a portion
of its equipment in future years.
The Partnership has agreements with some of the manufacturers of its
<PAGE>
Page 17 of 29
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. Generally,
these manufacturers provide maintenance of the leased equipment for a fee based
on net monthly rentals.
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.
Minimum rentals (net of executory costs) to be received on
noncancelable operating leases for the years ended December 31 are as follows:
Operating
(Amounts in Thousands)
1997...................................... $ 3
1998 and thereafter....................... -
----
Total $ 3
====
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 Income Fund VI has
investments in the following equipment joint ventures:
Weighted
Joint Venture Percentage Interest
------------- -------------------
PLI Limited Partnership Fund A(2) 30.64%
VMX Joint Venture(1) 28.37
ACRO Joint Venture, Residential(3) 32.84
Leveraged Joint Venture 1985(1) 49.02
Leveraged Joint Venture 1986(2) 31.04
Leveraged Joint Venture 1987-1(1) 43.79
Leveraged Joint Venture 1987-2 17.91
Leveraged Joint Venture 1987-3 25.22
Leveraged Joint Venture 1990-1 11.77
Phoenix Leasing POST Joint Venture I(2) 18.83
Arroyo Joint Venture VIII(1) 40.00
Arroyo Joint Venture XV(2) 30.67
Arroyo Joint Venture XVI(3) 32.14
Arroyo Joint Venture XVII(1) 11.26
Xerox Graphics Joint Venture(1) 16.19
Phoenix Joint Venture 1994-1 12.77
(1) Closed during 1994
(2) Closed during 1995
(3) Closed during 1996
An analysis of the Partnership's investment in equipment joint ventures
is as follows:
<PAGE>
Page 18 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 $ 95 $ 606 $ 227 $ 241 $ 687
======== ======= ======= ======= ========
Year Ended
December 31, 1995 $ 687 $ 0 $ 248 $ 527 $ 408
======== ======= ======= ======= ========
Year Ended
December 31, 1996 $ 408 $ 0 $ 204 $ 340 $ 272
======== ======= ======= ======= ========
</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 $3,922 $3,312
Gain on sale of equipment 850 1,769 1,312
Other income 141 744 309
------ ------ ------
Total Income 3,600 6,435 4,933
------ ------ ------
<PAGE>
Page 19 of 29
EXPENSES
Depreciation 332 1,188 1,257
Lease related operating expenses 1,460 2,961 2,779
Management fee to the General Partner 119 289 239
Interest expense -- -- 1
Other expenses 126 273 43
------ ------ ------
Total Expenses 2,037 4,711 4,319
------ ------ ------
Net Income $1,563 $1,724 $ 614
====== ====== ======
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
$4,000 and $13,000, 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 has invested in financing joint ventures which are
combined for reporting purposes into Phoenix Funding Partnership (PFP). The
Partnership's current investment in PFP 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 uses the equity
method of accounting to account for its investment in the PFP.
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 remaining 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 29.19%
An analysis of the Partnership's investment account in financing 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 $36 $0 $ 7 $38 $5
=== == === === ==
Year Ended
December 31, 1995 $ 5 $0 $12 $15 $2
=== == === === ==
Year Ended
December 31, 1996 $ 2 $0 $ 7 $ 5 $4
=== == === === ==
</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:
<PAGE>
Page 20 of 29
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 18
---- ---- ----
Total Income 76 150 104
---- ---- ----
EXPENSES
Management fee to the General Partner 2 8 19
Other expenses 11 19 44
---- ---- ----
Total Expenses 13 27 63
---- ---- ----
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.
Foreclosed Cable Systems Joint Venture
The Partnership owned an interest in a foreclosed cable systems joint
venture, along with other partnerships managed by the General Partner and its
affiliates. The Partnership foreclosed upon certain assets of a cable television
operator to whom the Partnership, along with other affiliated partnerships
managed by the General Partner, had extended credit. The partnerships' notes
receivables and assets were exchanged for interests (their capital
contribution), on a pro rata basis, in a newly formed joint venture owned by the
partnerships and managed by the General Partner. Title to the cable television
system was held by the joint venture. This investment was accounted for using
the equity method of accounting.
The joint venture owned by the Partnership, along with its percentage
ownership is as follows:
Weighted
Joint Venture Percentage Interest
------------- -------------------
Phoenix Black Rock Cable J.V.(1) .29%
<PAGE>
Page 21 of 29
(1) Cable system sold and joint venture closed during 1996.
An analysis of the Partnership's net investment in a foreclosed cable
system joint venture 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 $ 5 $ 0 $ 0 $ 0 $ 5
===== === ==== ==== =====
Year Ended
December 31, 1995 $ 5 $ 0 $ 0 $ 0 $ 5
===== === ==== ==== =====
Year Ended
December 31, 1996 $ 5 $ 0 $ 2 $ 7 $ 0
===== === ==== ==== =====
</TABLE>
The aggregate financial information of the foreclosed cable system
joint venture 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 -- 1
--- ------
Total Assets $-- $1,739
=== ======
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
------ ------ ------
<PAGE>
Page 22 of 29
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 system joint venture. The foreclosed cable
system joint venture 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 $ 28 $ 36
General Partner and affiliates 2 12
Other 104 155
---- ----
Total $134 $203
==== ====
Note 8. Settlements.
On July 1, 1991, Phoenix Leasing Incorporated, as General Partner to
the Partnership and sixteen other affiliated partnerships, filed suit in the
Superior Court for the County of Marin, Case No. 150016, against Xerox
Corporation, a corporation with which the General Partner had entered into
contractual agreements for the acquisition and administration of leased
equipment. The lawsuit was settled out of court, effective as of October 28,
1994 pursuant to the terms of a Confidential Settlement Agreement and Mutual
Release. The settlement agreement generally provides for compensation payable to
the Partnership and its affiliates in cash and kind, including the assignment by
Xerox of certain goods and services. The agreement further provides for the sale
by Xerox to the Partnership and its affiliates of equipment subject to lease.
The suit has been dismissed with prejudice on the merits.
The Partnership's pro rata share of the Xerox settlement was $482,000,
which consists of cash of $192,000, and assigned monthly rentals and credits for
goods and services valued at $290,000. In addition, the Partnership purchased
additional leased equipment at an aggregate cost of $294,000. 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 $272,000. The final distribution consisted
of cash of $125,000 and common stock valued at $147,000.
<PAGE>
Page 23 of 29
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 $1,109 $1,294 $(185)
Liabilities 1,242 1,216 26
1995
- ----
Assets $3,287 $3,641 $(354)
Liabilities 1,471 1,436 35
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,
equipment storage 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. These 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, $2,000
and $3,000 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 partner's share of net income and distributions, and the weighted
average number of units outstanding of 297,165 for the years ended December 31,
1996, 1995 and 1994. For purposes of allocating income (loss) and distributions
to each individual limited partner, the Partnership allocates net income (loss)
and distributions based upon each respective limited partner's ending capital
account balance. The use of this method accurately reflects each limited
partner's participation in the Partnership including reinvestment through the
Capital Accumulation Plan. As a result, the calculation of net income (loss) and
distributions per limited partnership unit is not indicative of per unit income
(loss) and distributions due to reinvestments through the Capital Accumulation
Plan.
Note 12. 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:
<PAGE>
Page 24 of 29
Carrying
Amount Fair Value
------ ----------
(Amounts in Thousands)
1996
- ----
Assets
Cash and cash equivalents $ 670 $ 670
Securities, available-for-sale 149 149
1995
- ----
Assets
Cash and cash equivalents $2,708 $2,708
Securities, available-for-sale 121 121
<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:
Phoenix Leasing American Business Fund, L.P.
Phoenix Leasing Cash Distribution Fund V, L.P.
Phoenix Income Fund, L.P.
<PAGE>
Page 26 of 29
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 Growth Fund 1982 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>
(A) (B) (C) (D)
<CAPTION>
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 $8(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 508 units .17%
</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 29
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:
Financial Statements for Significant Subsidiaries
Phoenix Joint Venture 1994-1 E21 1-10
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 INCOME FUND VI
(Registrant)
BY: PHOENIX LEASING INCORPORATED,
A CALIFORNIA CORPORATION
GENERAL PARTNER
Date: March 25, 1997 By: /S/ GUS CONSTANTIN
-------------- -------------------
Gus Constantin
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 Officer
/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 INCOME FUND VI
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 $133 $ 0 $ 19 $79 $ 35
Allowance for early termination
of financing leases 58 0 39 19(1) 0
Allowance for losses on note
receivable 146 0 0 0 146
---- --- ---- --- ----
Totals $337 $ 0 $ 58 $98 $181
==== === ==== === ====
Year ended December 31, 1995
Allowance for losses on accounts
receivable $ 35 $10 $ 0 $23 $ 22
Allowance for losses on note
receivable 146 0 146 0 0
---- --- ---- --- ----
Totals $181 $10 $146 $23 $ 22
==== === ==== === ====
Year ended December 31, 1996
Allowance for losses on accounts
receivable $ 22 $19 $ 0 $33 $ 8
==== === ==== === ====
(1) This amount represents the application (reversal) of the allowance for loss from early termination of financing leases.
</TABLE>
Exhibit 21 - Page 1 of 10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Venturers of
Phoenix Joint Venture 1994-1
We have audited the accompanying balance sheets of Phoenix Joint Venture 1994-1
(a California general partnership) as of December 31, 1996 and 1995 and the
related statements of operations, venturers' capital and cash flows for the
years ended December 31, 1996, 1995 and for the period from inception (October
28, 1994) to December 31, 1994. These financial statements and the schedule
referred to below are the responsibility of the Joint Venture's management. Our
responsibility is to express an opinion on these financial statements and the
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 Joint Venture 1994-1 as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the two years then ended and for the period from inception (October
28, 1994) to December 31, 1994, 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. Schedule II 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 audit 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.
ARTHUR ANDERSEN LLP
San Francisco, California
January 17, 1997
<PAGE>
<TABLE>
Exhibit 21 - Page 2 of 10
PHOENIX JOINT VENTURE 1994-1
BALANCE SHEET
(Amounts in Thousands)
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 291 $ 433
Accounts receivable (net of allowance for losses on
accounts receivable of $51 and $191 at December 31,
1996 and 1995, respectively) 230 215
Credits receivable, net 1,079 1,237
Assigned monthly rentals, net 512 691
Equipment on operating leases and held for lease (net of
accumulated depreciation of $1,002 and $849 at December
31, 1996 and 1995, respectively) 521 1,004
Capitalized acquisition fees (net of accumulated amortization
of $29 and $22 at December 31, 1996 and 1995, respectively) 5 17
------ ------
Total Assets $2,638 $3,597
====== ======
LIABILITIES AND VENTURERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 318 $ 399
------ ------
Total Liabilities 318 399
------ ------
Venturers' Capital 2,320 3,198
------ ------
Total Liabilities and Venturers' Capital $2,638 $3,597
====== ======
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
Exhibit 21 - Page 3 of 10
PHOENIX JOINT VENTURE 1994-1
STATEMENT OF OPERATIONS
(Amounts in Thousands)
<CAPTION>
For the period
from inception
(October 28, 1994)
December 31, through
1996 1995 December 31, 1994
---- ---- -----------------
<S> <C> <C> <C>
INCOME
Rental income $ 1,587 $2,767 $389
Gain on sale of equipment 329 417 --
Earned income, assigned monthly rentals 33 81 20
Other income 92 109 17
------- ------ ----
Total Income 2,041 3,374 426
------- ------ ----
EXPENSES
Lease related operating expenses 641 1,179 169
Depreciation 332 955 77
Amortization, acquisition fees 7 21 1
Management fees to General Partner 97 174 20
Provision for (recovery of) losses on receivables (132) 191 --
General and administrative expenses 1 1 --
------- ------ ----
Total Expenses 946 2,521 267
------- ------ ----
NET INCOME $ 1,095 $ 853 $159
======= ====== ====
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
Exhibit 21 - Page 4 of 10
PHOENIX JOINT VENTURE 1994-1
STATEMENT OF VENTURERS' CAPITAL
(Amounts in Thousands)
Balance at inception, October 28, 1994 $ 0
Net income 159
Contributions 4,576
-------
Balance, December 31, 1994 4,735
Net income 853
Distributions (2,390)
-------
Balance, December 31, 1995 3,198
Net income 1,095
Distributions (1,973)
-------
Balance, December 31, 1996 $ 2,320
=======
The accompanying notes are an integral
part of these statements.
<PAGE>
<TABLE>
Exhibit 21 - Page 5 of 10
PHOENIX JOINT VENTURE 1994-1
STATEMENT OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
For the period
from inception
(October 28, 1994)
December 31, through
1996 1995 December 31, 1994
----- ---- -----------------
<S> <C> <C> <C>
Operating Activities:
Net income $ 1,095 $ 853 $ 159
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 332 955 77
Amortization of acquisition fees 7 21 1
Amortization of discount on credits (73) (92) (17)
Gain on sale of equipment (329) (417) --
Provision for (recovery of ) losses on accounts
receivable (132) 191 --
Decrease (increase) in accounts receivable 117 (17) (389)
Decrease in credits receivable 231 278 --
Increase (decrease) in accounts payable and
accrued expenses (81) 103 295
Accrued interest, assigned monthly rentals -- -- (20)
------- ------- -----
Net cash provided by operating activities 1,167 1,875 106
------- ------- -----
Investing Activities:
Principal payments, assigned monthly rentals 179 199 --
Proceeds from sale of equipment 480 681 --
Payment of acquisition fees 5 (38) --
------- ------- -----
Net cash provided by investing activities 664 842 --
------- ------- -----
Financing Activities:
Distributions to Venturers (1,973) (2,390) --
------- ------- -----
Net cash used by financing activities (1,973) (2,390) --
------- ------- -----
Increase (decrease) in cash and cash equivalents (142) 327 106
Cash and cash equivalents, beginning of period 433 106 --
------- ------- -----
Cash and cash equivalents, end of period $ 291 $ 433 $ 106
======= ======= =====
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
Exhibit 21 - Page 6 of 10
PHOENIX JOINT VENTURE 1994-1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note 1. Organization.
Phoenix Joint Venture 1994-1 (the "Joint Venture"), a California
general partnership, was formed on October 28, 1994 for the purpose of investing
in a pool of reproduction equipment and receivables by several Phoenix Leasing
Partnerships (the "Venturers").
Income or loss is allocated to each Venturer based upon their
respective interest in the Joint Venture. Distributions are made in the same
manner.
As compensation for its management services, the Joint Venture pays a
management fee to Phoenix Leasing Incorporated (PLI) based upon the management
fee rate of each respective Venturer of the Joint Venture applied to the
Venturers' respective interest in the Joint Venture's gross revenues for the
quarter, which revenue generally incudes rental and note receipts, proceeds from
the sale of equipment and other income. Any revenues subject to a management fee
at the Joint Venture level will not be subject to a management fee at the
Venturers' level.
As compensation for services performed in connection with the analysis
of equipment available to the Joint Venture, the Managing Venturer receives an
acquisition fee based on the acquisition fee rate of each respective Venturer of
the Joint Venture applied to the Venturer's respective interest in the Joint
Venture's purchase price of equipment acquired by the Joint Venture.
Acquisition fees are amortized over the average expected life of the
assets, principally on a straight-line basis.
Note 2. Summary of Significant Accounting Policies.
Leasing Operations - The Joint Venture's leasing operations consist of
reproduction equipment manufactured by Xerox Corporation. The leases have been
classified as operating leases.
Under the method of accounting for operating leases, the leased
equipment is recorded as an asset at cost and depreciated on a straight-line
basis over the estimated useful life of five 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 and repairs of the leased equipment are charged to
expense as incurred.
The Joint Venture's policy is to review periodically the probability of
recovering its undepreciated cost of equipment. Such reviews address, among
other matters recent and anticipated technological developments affecting
reproduction equipment and competitive factors within the reproduction equipment
marketplace. Although remarketing rental rates are expected to decline in the
future with respect to some of the Joint Venture's rental equipment, such
rentals are expected to exceed projected expenses, including depreciation.
Should subsequent reviews of the equipment portfolio indicate that rentals plus
anticipated sales proceeds will not exceed expenses in any future period, the
Joint Venture will revise its depreciation policy and may accelerate
depreciation as appropriate.
The Joint Venture has also been assigned the monthly rental payments
from a pool of engineering and graphics reprographic equipment owned by Xerox
Corporation. The Joint Venture has recorded these assigned monthly rentals at
the discounted value of the expected cash flows. The excess of the assigned
monthly rentals over the present value of the expected cash flows is recorded as
unearned income. Unearned income is credited to income monthly over the term of
the agreement on a declining basis to provide an approximate level rate of
return on the unrecovered cost of the investment.
Non-Cash Investing Activities. In October 1994, the Venturers formed
the Joint Venture to which they contributed the credits issued by Xerox
Corporation, the equipment purchased and the assigned monthly rentals from Xerox
Corporation as described in Notes 1, 3, 4 and 5 of the financial statements. The
following non-cash activities from this transaction were excluded from the
statement of cash flow.
<PAGE>
Exhibit 21 - Page 7 of 10
Amounts
In Thousands
------------
Credit receivable $1,406
Equipment purchased 2,300
Assigned monthly rentals 870
------
$4,576
======
Cash and Cash Equivalents - Cash and cash equivalents includes deposits
at banks and investments in money market funds.
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. Credits Receivable.
The Joint Venture owns credits issued by Xerox Corporation for the
purchase of products and services from Xerox Corporation and its subsidiaries.
The Credits granted are non-transferrable and are good for a period of seven
years at which time they expire. The credits will be used by Phoenix Leasing
Incorporated and affiliates, who will reimburse the Joint Venture for the fair
market value of the credits used.
The credits receivable consist of the following at December 31,
1996 1995
---- ----
(Amounts in Thousands)
Credits receivable $ 1,171 $ 1,402
Unamortized discount (92) (165)
------- -------
Credits receivable, net $ 1,079 $ 1,237
======= =======
Note 4. Assigned Monthly Rentals.
The Joint Venture has the right to receive payments on a pool of leased
equipment pursuant to the terms of an agreement with Xerox Corporation entered
into on October 28, 1994. Title to this equipment continues to be held by Xerox
Corporation. All of the monthly rental payments received pursuant to this
equipment, net of certain administrative and other costs, are passed along to
the Joint Venture and are applied towards the outstanding assigned monthly
rental balance and income. The end date of this agreement is the earlier of the
Joint Venture's receipt of $1.2 million in aggregate payments, 60 months from
the pool start date or the date on which no equipment remains subject to the
terms of the agreement. As of December 31, 1996 and 1995, the Joint Venture has
received cumulative assigned monthly rentals receipts of $491,000 and $280,000,
respectively, pursuant to this agreement.
Note 5. Equipment on Operating Leases.
Equipment on lease consists of reproduction equipment classified as
operating leases. During the initial terms of the existing operating leases the
Joint Venture will not recover all the undepreciated cost and related expenses
of its rental equipment and therefore must remarket a portion of its equipment
in future years.
Minimum rentals to be received on non-cancelable operating leases for
the years ended December 31, are as follows:
<PAGE>
Exhibit 21 - Page 8 of 10
(Amounts in Thousands)
1997....................................... $ 232
1998....................................... 39
1999 and future............................ 8
------
Total $ 279
======
The Joint Venture has an agreement with Xerox Corporation, whereby
Xerox Corporation provides administration, maintenance and repairs of leased
equipment on behalf of the Joint Venture. The agreement terminates upon the
earlier of (1) the Joint Venture receiving a specified dollar amount; (2) 66
months, or (3) the date on which no equipment remains. As compensation for these
services, Xerox deducts a fee from the monthly rentals and sales proceeds.
Also pursuant to the vendor agreement, Xerox Corporation undertakes to
remarket and refurbish off-lease equipment on a best efforts basis. This
agreement permits the Joint Venture to assume the remarketing function directly
if certain conditions contained in the agreement are not met. For its
remarketing services, Xerox Corporation is paid a remarketing and refurbishing
fee based on a specified percentage of the monthly rentals received by the Joint
Venture. On March 15, 1996, the agreement was amended to reduce the remarketing
and refurbishing fees paid to Xerox.
The Joint Venture also receives contingent rental payments on its
reproduction equipment that is not included in the minimum rentals to be
received. The contingent rentals consist of a monthly rental payment that is
based upon actual machine usage.
Note 6. 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 $312 $368
PLI and affiliates 6 31
---- ----
Total $318 $399
==== ====
Note 7. 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 returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.
The net differences 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 $2,638 $2,930 $(292)
Liabilities 318 316 2
<PAGE>
Exhibit 21 - Page 9 of 10
1995
- ----
Assets $3,597 $4,081 $(484)
Liabilities 399 395 4
Note 8. Related Entities.
The Joint Venture is sponsored and funded by various partnerships
managed by PLI. PLI serves in the capacity of general partner in other
partnerships and managing venturer in other joint ventures, all of which are
engaged in the equipment leasing and financing business.
Note 9. 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.
Credits Receivable, Net
The fair value of credits receivable, net is estimated by the present value of
future cash flow discounted at an approximate fair value rate.
Assigned Monthly Rents, Net
The carrying amount of assigned monthly rents, net is estimated by taking the
present value of the projected cash flow expected to be received on the
portfolio of equipment that was assigned from Xerox pursuant to the agreement.
The estimated fair values of the Joint Venture's financial instruments
at December 31, 1996 and 1995 approximate the carrying amounts reported in the
balance sheet.
<PAGE>
<TABLE>
Exhibit 21 - Page 10 of 10
PHOENIX JOINT VENTURE 1994-1
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 credits receivable $ 320 $ 0 $ 0 $ 0 $ 320
------- ------ ----- ------ -------
Totals $ 320 $ 0 $ 0 $ 0 $ 320
======= ====== ===== ====== =======
Year ended December 31, 1995
Allowance for credits receivable $ 320 $ 0 $ 0 $ 80 $ 240
Allowance for losses on accounts
receivable 0 191 0 0 191
------- ------ ----- ------ -------
Totals $ 320 $ 191 $ 0 $ 80 $ 431
======= ====== ===== ====== =======
Year ended December 31, 1996
Allowance for credits receivable $ 240 $ 0 $ 0 $ 38 $ 202
Allowance for losses on accounts
receivable 191 0 132 8 51
------- ------ ----- ------ -------
Totals $ 431 $ 0 $ 132 $ 46 $ 253
======= ====== ===== ====== =======
</TABLE>
<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> 670
<SECURITIES> 149
<RECEIVABLES> 15
<ALLOWANCES> 8
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 423
<DEPRECIATION> 423
<TOTAL-ASSETS> 1,109
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (133)
<TOTAL-LIABILITY-AND-EQUITY> 1,109
<SALES> 0
<TOTAL-REVENUES> 310
<CGS> 0
<TOTAL-COSTS> 130
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 19
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 180
<INCOME-TAX> 0
<INCOME-CONTINUING> 180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 180
<EPS-PRIMARY> .51
<EPS-DILUTED> 0
</TABLE>
