Page 1 of 35
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995 Commission File Number 0-12593
PHOENIX LEASING INCOME FUND VII
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 68-0001202
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2401 Kerner Boulevard, San Rafael, California 94901-5527
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 485-4500
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Units of
Limited Partnership Interest
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
-----
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of December 31, 1995, 345,974 Units of Limited Partnership interest were
outstanding. No market exists for the Units of Partnership interest and
therefore there exists no aggregate market value at December 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
Page 2 of 35
PHOENIX LEASING INCOME FUND VII
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business...................................................... 3
Item 2. Properties.................................................... 5
Item 3. Legal Proceedings............................................. 5
Item 4. Submission of Matters to a Vote of Security Holders........... 6
PART II
Item 5. Market for the Registrant's Securities and Related
Security Holder Matters....................................... 6
Item 6. Selected Financial Data....................................... 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 7
Item 8. Financial Statements and Supplementary Data................... 9
Item 9. Disagreements on Accounting and Financial Disclosure Matters.. 31
PART III
Item 10. Directors and Executive Officers of the Registrant............ 31
Item 11. Executive Compensation........................................ 32
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................................ 32
Item 13. Certain Relationships and Related Transactions................ 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................... 33
Signatures............................................................. 34
<PAGE>
Page 3 of 35
PART I
Item 1. Business.
General Development of Business.
Phoenix Leasing Income Fund VII, 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
February 2, 1984 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, 1998. 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 Partnership's initial public offering was for 480,000 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 552,000. The Partnership
completed the offering on November 21, 1986, having sold 366,432 units for a
total capitalization of $91,608,000. Of the proceeds received through the
offering, the Partnership has incurred $11,288,000 in organizational and
offering expenses.
Phoenix Cablevision of Oregon, Inc. (the "Subsidiary") is a
wholly-owned subsidiary of the Partnership (hereinafter, both entities are
collectively referred to as the "Consolidated Partnership"). The Subsidiary was
formed under the laws of Nevada on July 22, 1993 to own and operate a cable
television system in the state of Oregon.
Narrative Description of Business.
The Consolidated Partnership conducts its business in two business
segments: Equipment Leasing and Financing Operations, and Cable Television
System Operations. A discussion of these two segments follows.
Equipment Leasing and Financing Operations.
From the initial formation of the Partnership through December 31,
1995, the total investments in equipment leases and financing transactions
(loans), including the Partnership's pro-rata interest in investments made by
joint ventures, approximate $183,707,000. The average initial firm term of
contractual payments from equipment subject to lease was 36.27 months, and the
average initial net monthly payment rate as a percentage of the original
purchase price was 2.99%. The average initial firm term of contractual payments
from loans was 70.99 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 capital equipment including computer peripherals,
terminal systems, small computer systems, communications equipment, IBM-software
compatible mainframes, office systems and telecommunications equipment, and to
lease such equipment and products to third parties pursuant to either Operating
Leases or Full Payout Leases.
The principal markets for the types of equipment in which the
Partnership has invested in are (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.
<PAGE>
Page 4 of 35
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. 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.
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.
Cable Television System Operations.
Phoenix Cablevision of Oregon, Inc. (the Subsidiary), a wholly-owned
subsidiary of the Partnership, owns a cable television system in the state of
Oregon that was acquired through foreclosure on a defaulted note receivable to
the Partnership on October 28, 1993. The net carrying value of this defaulted
note receivable was approximately $544,000. Phoenix Cable Management Inc.
(PCMI), an affiliate of the General Partner, provides day to day management
services in connection with the operation of the system.
The cable television system owned by Phoenix Cablevision of Oregon,
Inc. is located in the counties of Douglas and Jackson in the State of Oregon
and consists of headend equipment in four locations and 66 miles of plant
passing approximately 2,007 homes and has approximately 1,766 cable subscribers.
The Subsidiary's cable television system serves the communities of Prospect,
Butte Falls, Shady Cove, Trail and other nearby areas in Jackson and Douglas
counties. The Subsidiary operates under three non-exclusive franchise agreements
with the cities of Glendale, Butte Falls and Shady Cove. These cable franchise
agreements expire between the years 2000 and 2002.
Cable television systems receive signals transmitted by nearby radio
and television broadcast stations, microwave relay systems and communications
satellites and distribute the signals to subscribers via coaxial cable. The
subscribers pay a monthly fee to the cable television system for such services.
Cable television companies operate under a non-exclusive franchise agreement
granted by each local government authority. As part of the franchise agreement,
the franchisee typically pays a portion of the gross revenues of the system to
the local government.
The Partnership intends to own and operate the cable system until such
time it can be sold. Any excess cash generated from operations of the cable
system will be used for upgrades and improvements to the system in order to
maximize the value of the system.
Competition. The Partnership's cable operations competes with numerous
other companies with far greater financial resources. In addition, cable
television franchises are typically non-exclusive and the Partnership could be
directly competing with other cable television systems. Cable television also
competes with conventional over-the-air broadcast television and direct
broadcast satellite transmission. Future technological developments may also
provide additional competitive factors.
The newly passed Telecommunications Bill allows telephone companies to
enter into the cable television business and vice-versa. Large cable television
systems that have upgraded their systems with fiber and two way capabilities may
find themselves getting a piece of the much larger telephone revenue. For the
smaller rural cable systems, such as those owned by the Partnership or through
investments in joint ventures, it is unlikely that the Partnership will enter
into telephone services nor will the telephone companies try to seek our
customers in the near future. The systems owned by the Partnership are too small
and not dense enough to pay for the large amount of capital expenditures needed
for these services.
A favorable part of the bill is that small cable systems will be
immediately deregulated from most regulations and that the definition of a small
cable operator is under 600,000 subscribers. This will allow small operators to
raise rates if needed, and eliminate the need to provide franchise authorities
with costly rate filings and justifications. The new bill also allows the local
telephone companies to buy out small cable operators in their own region as well
<PAGE>
Page 5 of 35
as to joint venture with small cable operators. During 1995, the General Partner
has observed a renewed market interest in small cable systems. The final impact
of the newly passed Telecommunications Bill will not be known fully until a
technical rewrite is completed and all the legal challenges have been made.
Please see Note 15 in the Partnership's financial statements for
financial information about the Partnership's business segments.
Other.
A brief description of the type of assets in which the Partnership has
invested as of December 31, 1995, together with information concerning the uses
of assets is set forth in Item 2.
Item 2. Properties.
Equipment Leasing and Financing Operations.
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, either directly or
through its investment in joint ventures, are its investments in leases and
loans.
As of December 31, 1995, the Partnership owns equipment and has
outstanding loans to borrowers with an aggregate original cost of $8,867,000.
The equipment and loans have been made to customers located throughout the
United States. The following table summarizes the type of equipment owned or
financed by the Partnership, including its pro rata interest in joint ventures,
at December 31, 1995.
Percentage of
Asset Types Purchase Price(1) Total Assets
----------- ----------------- -------------
(Amounts in Thousands)
Small Computer Systems $2,889 33%
Financing of Solar Systems 2,088 24
Telecommunications 1,542 17
Reproduction Equipment 1,173 13
Computer Mainframes 382 4
Financing Related to Cable TV Systems 382 4
Financing of Security Monitoring
Systems Companies 311 4
Capital Equipment Leased to Emerging
Growth Companies 100 1
------ ----
TOTAL $8,867 100%
====== ====
(1) These amounts include the Partnership's pro rata interest in equipment
joint ventures of $1,429,000, financing joint ventures of $2,088,000, cost
of equipment on financing leases of $277,000 and original cost of
outstanding loans of $693,000 at December 31, 1995.
Cable Television System Operations.
The Subsidiary's principal plants and real property consist of electronic
headend equipment, its plant (cable) and two parcels of land. The Subsidiary's
cable office is located on one parcel and one of the headends is located on the
other. The other three headends are located on land that is leased by the
Subsidiary.
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.
<PAGE>
Page 6 of 35
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.
PART II
Item 5. Market for the Registrant's Securities and Related Security
Holder Matters.
(a) The Registrant's limited partnership interests are not publicly
traded. There is no market for the Registrant's limited
partnership interests and it is unlikely that any will develop.
(b) Approximate Number of Equity Security Investments:
Number of Unit Holders
Title of Class as of December 31, 1995
------------------------- -----------------------
Limited Partners 16,782
Item 6. Selected Financial Data.
Amounts in Thousands Except for Per Unit Amounts
------------------------------------------------
1995(2) 1994(2) 1993(2) 1992 1991
------- ------- ------- ---- ----
Total Income $ 2,708 $ 3,329 $ 3,097 $ 4,580 $ 6,607
Net Income (Loss) 1,364 1,520 (1,167) (1,994) (1,031)
Total Assets 7,427 8,146 12,842 14,860 21,995
Distributions to Partners 1,286 2,594 2,593 4,127 11,340
Net Income (Loss) per Limited
Partnership Unit(1) 3.35 4.20 (3.38) (5.76) (2.98)
Distributions per Limited
Partnership Unit 3.72 7.50 7.49 11.93 32.55
(1) Income (loss) per Limited Partnership Unit is not indicative of per unit
income (loss) due to reinvestments through the Capital Accumulation Plan.
(2) The 1995, 1994 and 1993 amounts reflect the consolidated activity of the
Partnership and its subsidiary.
The above selected financial data should be read in conjunction with
the consolidated financial statements and related notes appearing elsewhere in
this report.
<PAGE>
Page 7 of 35
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Phoenix Leasing Income Fund VII and Subsidiary (the Partnership)
reported net income of $1,364,000 and $1,520,000 during 1995 and 1994,
respectively, as compared to a net loss of $1,167,000 during 1993. The decreased
earnings during 1995, as compared to 1994, is due to the absence of a settlement
during 1995, compared to the settlement of $763,000 during 1994. Partially
offsetting the absence of a settlement during 1995 was an increase of $378,000
in interest income from notes receivable. The increased earnings during 1994, as
compared to the net loss during 1993, is primarily due to a decrease in
liquidation fee expense of $1,374,000 and the receipt of a settlement of
$763,000 during 1994.
Total revenues decreased by $621,000 during 1995, but increased by
$232,000 during 1994, when compared to the same periods in the previous year.
The decrease in total revenues during 1995 is due to the absence of a settlement
during 1995, as compared to the settlement of $763,000 during 1994, and a
combined decrease in rental income and earned income from financing leases of
$358,000. The Partnership reported an increase in interest income of $378,000
during 1995, as compared to 1994, partially offsetting the above mentioned
decreases. During 1995, the Partnership received settlements on two defaulted
notes receivable. The Partnership recognized interest income from the receipt of
a settlement on one of these notes receivable, causing the increase in interest
income from notes receivable during 1995, as compared to 1994. The settlement of
the second note receivable represented only a partial recovery of the
outstanding note receivable balance.
The improvement in total revenues of $232,000 during 1994 is
attributable to a settlement of $763,000 received by the Partnership and an
increase in cable subscriber revenues of $467,000 from a full year of cable
subscriber revenues during 1994 on a cable television system the Partnership
foreclosed upon in October of 1993. Partially offsetting the increases in cable
subscriber revenues and the settlement was a combined decrease in rental income
and earned income from financing leases of $919,000 during 1994, as compared to
1993.
The Partnership holds notes receivable from cable television system
operators and security monitoring companies with a carrying value of
approximately $676,000 of which $143,000 is considered to be impaired at
December 31, 1995. The Partnership has suspended the accrual of interest on
these notes and has provided an allowance for losses on notes. The General
Partner is currently working with the borrowers, other creditors and the
bankruptcy court in order to seek remedies that will maximize the recovery of
the Partnership's investment in these notes.
Total expenses decreased by $451,000 and $2,421,000 during 1995 and
1994, respectively, as compared to the same periods in the previous year. The
decline is attributable to the decrease in depreciation and amortization of
$255,000 and $443,000 during 1995 and 1994, respectively, as compared to the
previous year. In addition, during 1994 the Partnership reported a $1,374,000
decrease in liquidation fee expenses. At the end of 1993, the liquidation fees
had been fully accrued, causing the decrease in liquidation fee expense during
1994.
Because Phoenix Leasing Income Fund VII is in its liquidation stage, it
is not expected that the Partnership will acquire any additional equipment for
its leasing activities. As a result, revenues from leasing activities are
expected to continue to decline as the portfolio is liquidated and the remaining
equipment is re-leased at lower rental rates.
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.
Cable System
Cable subscriber revenues and program services expense increased
slightly during 1995, as compared to 1994. This increase is reflective of an
increase in subscribers from approximately 1,683 at December 31, 1994, to 1,766
at December 31, 1995. Cable subscriber revenues were lower during 1993 due to
the Partnership foreclosing upon the cable television system during 1993. As a
result, cable subscriber revenues for the year ended December 31, 1993 do not
reflect a full year of operations. The Partnership assumed ownership of the
cable television system on October 28, 1993 at which time all of the cable
system's assets and liabilities, including the outstanding senior debt, was
transferred to the Partnership. The debt was paid off in full during the third
quarter of 1994 and as such no interest expense was incurred during 1995.
<PAGE>
Page 8 of 35
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.
The small increase in earnings from joint ventures of $35,000 during
1995, as compared to the same periods in 1994, is the result of a full year of
earnings from a new investment in an equipment joint venture during the fourth
quarter of 1994. The Partnership reported an increase of $20,000 from joint
ventures during 1994, as compared to 1993.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from equipment
leasing and financing activities. The Partnership has contractual obligations
with lessees for fixed lease terms at fixed rental amounts and will also receive
payments on its outstanding notes receivable. The Partnership's future liquidity
is dependent upon its receiving payment of such contractual obligations. As the
initial lease terms expire, the Partnership will continue to renew, remarket or
sell the equipment. The future liquidity in excess of the remaining contractual
obligations will depend upon the General Partner's success in re-leasing and
selling the Partnership's equipment as it comes off lease. The Partnership also
owns a cable television system and has investments in equipment leasing and
foreclosed cable television system joint ventures.
During 1995, the net cash provided by leasing, financing and cable
television activities was $3,148,000, as compared to $1,595,000 and $2,425,000
during 1994 and 1993, respectively. The increase in net cash provided during
1995, compared to 1994, is attributable to the increase in principal payments
from notes receivable and the decrease in payments on accounts payable. The
increase in payments from notes receivable during 1995 is due to the Partnership
receiving settlements on notes receivable from two cable television system
operators that had been in default. The decrease in cash during 1994, as
compared to 1993, was due to an increase in payments of liabilities during 1994.
During 1994, the Partnership paid liquidation fees to the General Partner which
contributed significantly to decreasing the net cash provided for the period.
Distributions from joint ventures were higher during 1995, when
compared to 1994, due to a new investment in an equipment joint venture which
was made during the fourth quarter of 1994. Distributions from joint ventures
decreased during 1994, when compared to 1993, due to cash distributions received
from foreclosed cable joint ventures during 1993 related to the sale of a cable
television system owned by one of the joint ventures.
As of December 31, 1995, the Partnership owned equipment held for lease
with a purchase price of $1,334,000 and a net book value of $7,000, compared to
$4,853,000 and $21,000, respectively, at December 31, 1994. The General Partner
is actively engaged, on behalf of the Partnership, in remarketing and selling
the Partnership's off-lease equipment portfolio.
The Limited Partners received distributions of $1,286,000, $2,594,000
and $2,593,000 during 1995, 1994 and 1993, respectively. As a result, the
cumulative cash distributions to the Limited Partners are $79,981,000,
$78,695,000 and $76,101,000 at December 31, 1995, 1994 and 1993, respectively.
The General Partner did not receive distributions during the years ended
December 31, 1995, 1994 and 1993, respectively.
As the Partnership's asset portfolio continues to decline as a result
of the ongoing liquidation of assets, it is expected that the cash generated
from leasing operations will also decline. Due to the decrease in cash generated
by leasing and financing activities, the Partnership is no longer making
quarterly distributions to partners. Distributions are being made semi-annually
with the next distribution to partners is expected anticipated to be made in
January and July of 1996.
Cash on hand and cash generated from cable television, equipment
leasing and financing operations has been and is anticipated to continue to be
sufficient to meet the Consolidated Partnership's ongoing operational expenses.
<PAGE>
Page 9 of 35
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
YEAR ENDED DECEMBER 31, 1995
<PAGE>
Page 10 of 35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Phoenix Leasing Income Fund VII:
We have audited the accompanying consolidated balance sheets of Phoenix Leasing
Income Fund VII (a California limited partnership) and Subsidiary as of December
31, 1995 and 1994, and the related consolidated statements of operations,
partners' capital and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements and the schedule referred to below
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Phoenix Leasing Income Fund VII
and Subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated 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
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in our audits of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
San Francisco, California, ARTHUR ANDERSEN LLP
January 19, 1996
<PAGE>
Page 11 of 35
PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
December 31,
1995 1994
---- ----
ASSETS
Cash and cash equivalents $ 3,940 $ 1,248
Accounts receivable (net of allowance
for losses on accounts receivable of $58
and $132 at December 31, 1995 and 1994,
respectively) 65 155
Notes receivable (net of allowance for losses
on notes receivable of $359 and $401 at
December 31, 1995 and 1994, respectively) 317 1,867
Equipment on operating leases and held for
lease (net of accumulated depreciation
and obsolescence reserves of $2,694 and
$6,009 at December 31, 1995 and 1994,
respectively) 169 533
Net investment in financing leases (net of
allowance for early terminations of $34
and $71 at December 31, 1995 and 1994,
respectively) -- 550
Property, cable systems and equipment (net
of accumulated depreciation of $238 and
$124 at December 31, 1995 and 1994,
respectively) 912 993
Cable subscriber lists and franchise rights
(net of accumulated amortization of $350
and $189 at December 31, 1995 and 1994,
respectively) 942 1,103
Investment in joint ventures 975 1,339
Other assets 107 358
------- -------
Total Assets $ 7,427 $ 8,146
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,593 $ 2,390
------- -------
Total Liabilities 1,593 2,390
------- -------
Partners' Capital:
General Partner 262 57
Limited Partners, 480,000 units authorized,
366,432 units issued and 345,974 units
outstanding at December 31, 1995 and 1994 5,573 5,700
Unrealized losses on available for sale securities (1) (1)
------- -------
Total Partners' Capital 5,834 5,756
------- -------
Total Liabilities and Partners' Capital $ 7,427 $ 8,146
======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 12 of 35
PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
INCOME
Rental income $ 1,116 $ 1,357 $ 1,924
Earned income, finance leases 37 154 506
Equity in earnings from joint
ventures, net 307 272 252
Interest income, notes receivable 458 80 187
Settlements -- 763 --
Cable subscriber revenue 583 557 90
Other income 207 146 138
------- ------- -------
Total Income 2,708 3,329 3,097
------- ------- -------
EXPENSES
Depreciation and amortization 615 870 1,313
Lease related operating expenses 35 117 89
Program service, cable system 142 122 20
Management fees to General Partner 255 243 318
Liquidation fees to General Partner -- -- 1,374
Interest expense -- 99 24
Provision for losses on receivables (15) (59) 486
General and administrative expenses 360 451 640
------- ------- -------
Total Expenses 1,392 1,843 4,264
------- ------- -------
NET INCOME (LOSS) BEFORE INCOME TAXES 1,316 1,486 (1,167)
Income tax benefit 48 34 --
------- ------- -------
NET INCOME (LOSS) $ 1,364 $ 1,520 $(1,167)
======= ======= =======
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 3.35 $ 4.20 $ (3.38)
======= ======= =======
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 205 $ 68 $ 2
Limited Partners 1,159 1,452 (1,169)
------- ------- -------
$ 1,364 $ 1,520 $(1,167)
======= ======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 13 of 35
PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(Amounts in Thousands Except for Unit Amounts)
General
Partner's Limited Partners' Unrealized Total
Amount Units Amount Losses Amount
--------- ----------------- ---------- ------
Balance, December 31, 1992 $ (13) 345,974 $ 10,604 $ -- $ 10,591
Distributions to partners ($7.49
per limited partnership unit) -- -- (2,593) -- (2,593)
Net income (loss) 2 -- (1,169) -- (1,167)
-------- -------- -------- -------- --------
Balance, December 31, 1993 (11) 345,974 6,842 -- 6,831
Distributions to partners ($7.50
per limited partnership unit) -- -- (2,594) -- (2,594)
Unrealized losses on available-
for-sale securities -- -- -- (1) (1)
Net income 68 -- 1,452 -- 1,520
-------- -------- -------- -------- --------
Balance, December 31, 1994 57 345,974 5,700 (1) 5,756
Distributions to partners ($3.72
per limited partnership unit) -- -- (1,286) -- (1,286)
Net income 205 -- 1,159 -- 1,364
-------- -------- -------- -------- --------
Balance, December 31, 1995 $ 262 345,974 $ 5,573 $ (1) $ 5,834
======== ======== ======== ======== ========
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 14 of 35
PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
Operating Activities:
Net income (loss) $ 1,364 $ 1,520 $(1,167)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization 615 870 1,313
Gain on sale of equipment (77) (85) (243)
Equity in earnings from joint
ventures, net (307) (272) (252)
Gain on sale of marketable securities (28) (5) --
Provision for early termination,
financing leases (37) 28 104
Provision for losses on notes
receivable (27) -- 227
Provision for losses on accounts
receivable 48 (87) 155
Settlements -- (459) --
Decrease in accounts receivable 42 267 51
Decrease in accounts payable and
accrued expenses (797) (1,893) (10)
Decrease (increase) in other assets 243 (34) (4)
------- ------- -------
Net cash provided (used) by operating
activities 1,039 (150) 174
------- ------- -------
Investing Activities:
Principal payments, financing leases 533 1,132 1,895
Principal payments, notes receivable 1,576 613 356
Proceeds from sale of equipment 155 213 575
Proceeds from sale of marketable securities 46 5 --
Distributions from joint ventures 662 230 429
Purchase of equipment -- (459) (103)
Investment in joint ventures -- (44) (13)
Investment in marketable securities -- -- (253)
Property, cable systems and equipment (33) (107) (7)
------- ------- -------
Net cash provided by investing activities 2,939 1,583 2,879
------- ------- -------
Financing Activities:
Payments of principal, notes payable -- (1,720) (24)
Distributions to partners (1,286) (2,594) (2,593)
------- ------- -------
Net cash used by financing activities (1,286) (4,314) (2,617)
------- ------- -------
Increase (decrease) in cash and
cash equivalents 2,692 (2,881) 436
Cash and cash equivalents,
beginning of period 1,248 4,129 3,693
------- ------- -------
Cash and cash equivalents,
end of period $ 3,940 $ 1,248 $ 4,129
======= ======= =======
Supplemental Cash Flow Information:
Cash paid for interest expense $ -- $ 123 $ --
------- ------- -------
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 15 of 35
PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1. Organization and Partnership Matters.
Phoenix Leasing Income Fund VII, 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 February
28, 1984, 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 8.)
On October 28, 1993, the Partnership foreclosed upon a cable television
system in Oregon that was in default on a subordinated loan payable to the
Partnership with a carrying amount of approximately $544,000. As part of the
settlement between the Partnership, the senior lender and the borrower, the
borrower transferred ownership of all of its assets and liabilities to the
Partnership. Included in the outstanding liabilities assumed was outstanding
senior debt in an amount of $1.7 million, which has subsequently been paid off.
Phoenix Cablevision of Oregon, Inc. (the Subsidiary) was formed under
the laws of Nevada on July 22, 1993 to own and operate the foreclosed cable
television system. Phoenix Cablevision of Oregon, Inc. is a wholly-owned
subsidiary of the Partnership (hereinafter, both entities are collectively
referred to as the Consolidated Partnership).
The acquisition of the Subsidiary by the Partnership was accounted for
using the "purchase method" of accounting. The purchase price was allocated in
accordance with the fair market value of the assets (including intangible
assets) and liabilities.
For financial reporting purposes, as more specifically described in the
Partnership Agreement, consolidated 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 consolidated income for any quarter, when added
to consolidated income for all prior accounting periods, does not exceed
consolidated losses for all prior accounting periods, such consolidated income
shall be allocated, before liquidation and redemption fees, 1% to the General
Partner and 99% to the Limited Partners. Consolidated 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
consolidated losses, to the extent of previously allocated Consolidated
Partnership losses. A consolidated 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.
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.
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.
Phoenix Cable Management Inc. (PCMI), an affiliate of the General
Partner, provides day to day management services in connection with the
operation of the Subsidiary. The Subsidiary will pay a management fee equal to
<PAGE>
Page 16 of 35
four and one-half percent of the System's monthly gross revenue for these
services. Management fees paid or due PCMI totalled $26,000 for the year ended
December 31, 1995. Revenues subject to a management fee at the Subsidiary level
are not subject to management fees at the Partnership level.
Note 2. Summary of Significant Accounting Policies.
Principles of Consolidation. The 1995 and 1994 financial statements
include the accounts of the Partnership and its wholly-owned subsidiary, Phoenix
Cablevision of Oregon, Inc., since the date of acquisition, October 28, 1993.
The Partnership has complete authority in, and responsibility for, the overall
management and control of the Subsidiary. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Leasing Operations. The Partnership's leasing operations consist of
both financing and operating leases. The financing method of accounting for
leases records as unearned income at the inception of the lease the excess of
net rentals receivable and estimated residual value at the end of the lease term
over the cost of equipment leased. Unearned income is credited to income monthly
over the term of the lease on a declining basis to provide an approximate level
rate of return on the unrecovered cost of the investment. Initial direct costs
of consummating new leases are capitalized and included in the cost of
equipment.
Under the operating method of accounting for leases, the leased
equipment is recorded as an asset at cost and depreciated using an accelerated
depreciation method over the estimated useful life of six years, except for
equipment leased under vendor agreements, which is depreciated on a
straight-line basis over the estimated useful life, ranging up to six years.
The Partnership's policy is to review periodically the expected
economic life of its rental equipment in order to determine the probability of
recovering its undepreciated cost. Such reviews consider, among other things,
recent and anticipated technological developments affecting computer equipment
and competitive factors within the computer marketplace. Although remarketing
rental rates are expected to decline in the future with respect to some of the
Partnership'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 Partnership will revise its depreciation
policy and may accelerate depreciation as appropriate. As a result of such
review, the Partnership recognized additional depreciation expense of $38,000,
$0 and $0 ($.11, $0 and $0 per limited partnership unit) for the years ended
December 31, 1995, 1994 and 1993, respectively.
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.
Cable Television System Operations. The consolidated statement of
operations includes the operating activity of the Subsidiary for the years ended
December 31, 1995 and 1994 and for the period from the date of acquisition
(October 28, 1993) to December 31, 1993. The Subsidiary's cable operations
consist of a cable system located in the State of Oregon, which currently
provides cable television services to approximately 1,766 subscribers out of
four headend locations.
Property, cable systems and equipment are depreciated using the
straight-line method over the estimated service lives ranging from five to 10
years. Replacements, renewals and improvements are capitalized and maintenance
and repairs are charged to expense as incurred.
Costs assigned to intangible assets are amortized using the
straight-line method over estimated lives of eight years.
Cable television services are billed monthly in advance. Revenue is
deferred and recognized as the services are provided.
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
Consolidated Partnership's equity basis in the ventures. Under the equity method
<PAGE>
Page 17 of 35
of accounting, the original investment is recorded at cost and is adjusted
periodically to recognize the Consolidated Partnership's share of earnings,
losses, cash contributions and cash distributions after the date of acquisition.
Investment in Marketable Securities Available for Sale. The Partnership
has investments in stock in pubic companies that have been determined to be
available for sale that are included in Other Assets in the accompanying balance
sheets. Available-for-sale securities are stated at their fair market value,
with the unrealized gains and losses reported in a separate component of
partners' capital.
Cash and Cash Equivalents. Cash and cash equivalents includes deposits
at banks, investments in money market funds and other highly liquid short-term
investments with original maturities of less than 90 days.
Non Cash Investing Activities. During the year ended December 31, 1995,
the Partnership received a final distribution of marketable securities from one
of its investments in equipment joint ventures. The market value of the
marketable securities at the distribution date was $9,000 and is included in
Other Assets for the year ended December 31, 1995. During the year ended
December 31, 1994, the Partnership contributed equipment and other investments
received through a settlement to a joint venture. The amount of such
contribution was $910,000. Non cash transaction included in Other Assets during
the year ended December 31, 1994 consist of common stock valued at $6,000
received pursuant to a settlement (see Note 10) and an unrealized loss on
marketable securities of $1,000.
Financial Accounting Pronouncements. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity would estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset. Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Partnership does not expect
the adoption of this statement to have a material impact on its financial
position and results of operations. The Partnership plans to adopt Statement No.
121 on January 1, 1996.
On January 1, 1995, the Partnership adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan," and Statement No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures." Statement No. 114 requires that certain
impaired loans be measured based on the present value of expected cash flows
discounted at the loan's effective interest rate; or, alternatively, at the
loan's observable market price or the fair value of the collateral if the loan
is collateral dependent. Prior to 1995, the allowance for losses on notes
receivable was based on the undiscounted cash flows or the fair value of the
collateral dependent loans. At January 1, 1995, the adoption of Statements 114
and 118 had no effect on the Partnership's financial position or results of
operations.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassification. Certain 1994 and 1993 amounts have been reclassified
to conform to the 1995 presentation.
<PAGE>
Page 18 of 35
Note 3. Accounts Receivable.
Accounts receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Lease payments $ 104 $ 228
Property taxes 3 30
Cable system service 13 12
General Partner and affiliates 3 8
Other -- 9
----- -----
123 287
Less: allowance for losses on
accounts receivable (58) (132)
----- -----
Total $ 65 $ 155
===== =====
Note 4. Notes Receivable.
Notes receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Notes receivable from cable television
system operators with interest ranging
from 15% to 21%, per annum, receivable
in installments ranging from 39 to 96
months through January 1996,
collateralized by a security interest
in the cable system assets $ 548 $ 2,095
Notes receivable from security monitoring
companies with interest at 16% per annum,
with payments to be taken out of the
monthly payments received from assigned
contracts, collateralized by all assets of
the borrower. At the end of 48 months, the
remaining balance, if any, is due and payable 128 173
------- -------
676 2,268
Less: allowance for losses on notes receivable (359) (401)
------- -------
Total $ 317 $ 1,867
======= =======
The Partnership's notes receivable from cable television system
operators provide for a monthly payment rate in an amount that is less than the
contractual interest rate. The difference between the payment rate and the
contractual interest rate are added to the principal and therefore deferred
until the maturity date of the note. Upon maturity of the note, the original
principal and deferred interest is due and payable in full. Although the
contractual interest rates may be higher, due to a high degree of uncertainty
relating to the collection of the entire amount of contractual owed interest,
the Partnership limited the amount of interest being recognized on its
performing notes receivable to the amount of the payments received, thereby
deferring the recognition of a portion of the deferred interest until such time
as management believes it will be realized.
Generally, notes receivable are classified as impaired and the accrual
of interest on such notes are discontinued when the contractual payment of
principal or interest has become 90 days past due or management has serious
doubts about further collectibility of the contractual payments. Any payments
received subsequent to the placement of the note receivable on to impaired
status will generally be applied towards the reduction of the outstanding note
receivable balance, which may include previously accrued interest as well as
principal. Once the principal and accrued interest balance has been reduced to
zero, the remaining payments will be applied to interest income.
<PAGE>
Page 19 of 35
At December 31, 1995, the recorded investment in notes that are
considered to be impaired under Statement 114 was $143,000. Included in this
amount is $113,000 of impaired notes for which the related allowance for losses
is $11,000 and $30,000 of impaired notes for which there is no allowance. The
average recorded investment in impaired loans during the year ended December 31,
1995 was approximately $537,000.
During the year ended December 31, 1995, the Partnership received a
settlement on one of its notes receivable from a cable television system
operator which was considered to be impaired under Statement No. 114. The
Partnership received a partial recovery of $27,000 as a settlement which was
applied towards the $41,000 outstanding note receivable balance. The remaining
balance of $14,000 was written-off through its related allowance for loan
losses. The related allowance for loan losses for this note receivable was
provided for in a previous year in an amount equal to the carrying value of the
note. Upon receipt of the settlement of this note receivable, the Partnership
reduced the allowance for loan losses by $27,000 during the year ended December
31, 1995. This reduction in the allowance for loan losses was recognized as
income during the period.
The activity in the allowance for losses on notes receivable during the
years ended December 31, is as follows:
1995 1994
---- ----
(Amounts in Thousands)
Beginning balance $ 401 $ 401
Provision for (recovery of) losses (27) --
Write downs (15) --
----- -----
Ending balance $ 359 $ 401
===== =====
Note 5. Equipment on Operating Leases and Investment in Financing Leases.
Equipment on lease consists primarily of small computer systems and
computer mainframes subject to operating and financing 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
certain of its equipment whereby such manufacturers undertake to remarket
off-lease equipment on a best-efforts basis. These agreements permit the
Partnership to assume the remarketing function directly if certain conditions
contained in the agreements are not met. For their remarketing services, the
manufacturers are paid a percentage of net monthly rentals. Certain
manufacturers are entitled to additional fees after the Partnership has
recovered certain amounts. 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.
The net investment in financing leases consists of the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
Minimum lease payments to be received $ 35 $ 654
Estimated residual value of leased equipment
(unguaranteed) -- 7
Less: unearned income (1) (40)
allowance for early terminations (34) (71)
----- -----
Net investment in financing leases $ -- $ 550
===== =====
<PAGE>
Page 20 of 35
Minimum rentals (net of executory costs) to be received on
noncancelable operating and financing leases for the years ended December 31 are
as follows:
Operating Financing
--------- ---------
(Amounts in Thousands)
1996 ........................................ $244 $35
1997 ........................................ 1 --
1998 ........................................ -- --
1999 ........................................ -- --
2000 ........................................ -- --
Thereafter .................................. -- --
---- ---
Totals ...................................... $245 $35
==== ===
The net book value of equipment held for lease at December 31, 1995 and
1994 amounted to $7,000 and $21,000, respectively.
Note 6. Property, Cable Systems and Equipment.
The cost of property, cable systems and equipment and the related
accumulated depreciation consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Distributions systems $ 868 $ 839
Headend equipment 174 170
Building 63 63
Land 23 23
Automobiles 22 22
------- -------
1,150 1,117
Less: accumulated depreciation (238) (124)
------- -------
Net property, cable systems and equipment $ 912 $ 993
======= =======
Depreciation expense totaled approximately $114,000 and $109,000 for
the years ended December 31, 1995 and December 31, 1994, respectively.
Note 7. Cable Subscriber Lists and Franchise Rights.
Cable subscriber lists and franchise rights include the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
Subscriber lists $ 1,111 $ 1,111
Franchise rights 181 181
------- -------
1,292 1,292
Less: accumulated amortization (350) (189)
------- -------
Net cable subscriber lists and franchise rights $ 942 $ 1,103
======= =======
Amortization expense totaled approximately $161,000 and $162,000 for
the year ended December 31, 1995 and December 31, 1994, respectively.
<PAGE>
Page 21 of 35
Note 8. 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 joint ventures is the acquisition and leasing of
various types of equipment. During the term of the Partnership, Phoenix Leasing
Income Fund VII is participating in the following equipment joint ventures:
Weighted
Joint Venture Percentage Interest
------------- -------------------
Arroyo Joint Venture XIII(1) 30.00%
Arroyo Joint Venture XV(3) 32.47
Arroyo Joint Venture XVI 32.14
Arroyo Joint Venture XVII(2) 1.64
Xerox Graphics Joint Venture(2) 16.79
Equity Joint Venture VII(1) 20.00
PLI Limited Partnership Fund A(3) 19.98
VMX Joint Venture(2) 47.55
Acro Joint Venture, Residential 31.30
Leveraged Joint Venture 1987-2 32.23
Leveraged Joint Venture 1987-3 39.60
Phoenix Leasing POST Joint Venture I(3) 45.00
Phoenix Joint Venture 1994-1 19.89
(1) Closed during 1993
(2) Closed during 1994
(3) Closed during 1995
<TABLE>
An analysis of the Partnership's investment in equipment joint ventures
is as follows:
<CAPTION>
Net Investment Net Investment
at Beginning Equity in at End
Date of Period Contributions Earnings Distributions of Period
- ---- -------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $ 18 $ 13 $ 235 $ 264 $ 2
======== ======= ====== ======== ========
Year Ended
December 31, 1994 $ 2 $ 910 $ 261 $ 179 $ 994
======== ======= ====== ======== ========
Year Ended
December 31, 1995 $ 994 $ 0 $ 289 $ 632 $ 651
======== ======= ====== ======== ========
</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:
<PAGE>
Page 22 of 35
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 545 $ 404
Accounts receivable 1,456 1,877
Operating lease equipment 1,021 2,261
Other assets 691 920
------ ------
Total Assets $3,713 $5,462
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 454 557
Partners' capital 3,259 4,905
------ ------
Total Liabilities and Partners' Capital $3,713 $5,462
====== ======
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Rental income $2,571 $ 996 $1,105
Gain on sale of equipment 553 207 411
Other income 735 296 43
------ ------ ------
Total Income 3,859 1,499 1,559
------ ------ ------
EXPENSES
Depreciation 955 82 7
Lease related operating expenses 1,306 564 805
Management fee to the General Partner 197 59 54
Other expenses 195 27 58
------ ------ ------
Total Expenses 2,653 732 924
------ ------ ------
Net Income $1,206 $ 767 $ 635
====== ====== ======
As of December 31, 1995 and 1994, the Partnership's pro rata interest
in the equipment joint ventures' net book value of off-lease equipment was
$21,000 and $0, 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
<PAGE>
Page 23 of 35
directly by manufacturers to third parties. All loans to manufacturers 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 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 17.38%
<TABLE>
An analysis of the Partnership's investment account in financing joint
ventures is as follows:
<CAPTION>
Net Investment Equity in Net Investment
at Beginning Earnings at End
Date of Period Contributions (Losses) Distributions of Period
- ---- -------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $ 128 $ 0 $ (12) $ 69 $ 47
====== === ====== ====== ======
Year Ended
December 31, 1994 $ 47 $ 0 $ 7 $ 46 $ 8
====== === ====== ====== ======
Year Ended
December 31, 1995 $ 8 $ 0 $ 16 $ 21 $ 3
====== === ====== ====== ======
</TABLE>
The aggregate combined financial information of the financing joint
ventures as of December 31 and for the years then ended is presented as follows:
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $28 $34
Notes receivable, net -- 25
--- ---
Total Assets $28 $59
=== ===
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5 $ 1
Partners' capital 23 58
--- ---
Total Liabilities and Partners' Capital $28 $59
=== ===
<PAGE>
Page 24 of 35
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Interest income $ 73 $ 86 $ 1
Other income 77 18 19
---- ---- -----
Total Income 150 104 20
---- ---- -----
EXPENSES
Management fee to the General Partner 8 19 31
Other expenses 19 44 72
---- ---- -----
Total Expenses 27 63 103
---- ---- -----
Net Income (Loss) $123 $ 41 $ (83)
==== ==== =====
The General Partner earns a management fee of 6% of the Partnership's
respective interest in gross payments received for each financing joint venture.
Revenues subject to a management fee at the joint venture level are not subject
to management fees at the Partnership level.
Foreclosed Cable Systems Joint Ventures
The Partnership owns an interest in foreclosed cable systems joint
ventures, along with other partnerships managed by the General Partner and its
affiliates. The Partnership foreclosed upon nonperforming outstanding notes
receivable to cable television operators to whom the Partnership, along with
other affiliated partnerships managed by the General Partner, had extended
credit. The Partnerships' notes receivables were exchanged for interests (their
capital contribution), on a pro rata basis, in newly formed joint ventures owned
by the partnerships and managed by the General Partner. Title to the cable
television systems is held by the joint ventures. These investments are
accounted for using the equity method of accounting.
The joint ventures owned by the Partnership, along with their
percentage ownership is as follows:
Percentage
Joint Venture Ownership
------------- ---------
Phoenix Pacific Northwest J.V 5.24%
Phoenix Glacier J.V.(1) 6.98
Phoenix Concept Cablevision, Inc. 22.32
(1) cable system sold and joint venture closed during 1993.
<PAGE>
Page 25 of 35
<TABLE>
An analysis of the Partnership's net investment in foreclosed cable
systems joint ventures is as follows:
<CAPTION>
Net Investment Net Investment
at Beginning Equity in at End
Date of Period Contributions Earnings Distributions of Period
- ---- -------------- ------------- --------- ------------- --------------
(Amounts in ThousandS)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $ 107 $ 0 $ 29 $ 96 $ 40
====== ======= ===== ===== ======
Year Ended
December 31, 1994 $ 40 $ 298 $ 4 $ 5 $ 337
====== ======= ===== ===== ======
Year Ended
December 31, 1995 $ 337 $ 0 $ 2 $ 18 $ 321
====== ======= ===== ===== ======
</TABLE>
The aggregate combined financial information of the foreclosed cable
systems joint ventures as of December 31 and for the years then ended is
presented as follows:
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 256 $ 165
Accounts receivable 78 83
Property, plant and equipment 1,625 1,752
Cable subscriber lists and franchise rights 116 145
Deferred income tax 118 142
Other assets 22 18
------ ------
Total Assets $2,215 $2,305
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 265 $ 239
Notes payable -- 11
Partners' capital 1,950 2,055
------ ------
Total Liabilities and Partners' Capital $2,215 $2,305
====== ======
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Subscriber revenue $ 871 $ 454 $270
Gain on sale of cable system -- -- 441
Other income 10 4 4
----- ----- ----
Total Income 881 458 715
----- ----- ----
<PAGE>
Page 26 of 35
EXPENSES
Depreciation and amortization 265 112 67
Program services 277 147 93
General and administrative expenses 245 110 66
Management fees to an affiliate
of the General Partner 39 20 62
Provision for losses on accounts receivable 8 8 2
----- ----- ----
Total Expenses 834 397 290
----- ----- ----
Net Income Before Income Taxes 47 61 425
Income tax expense (39) (18) --
----- ----- ----
Net Income $ 8 $ 43 $425
===== ===== ====
Phoenix Cable Management Inc. (PCMI), an affiliate of the General
Partner, provides day to day management services in connection with the
operation of the foreclosed cable systems joint ventures. The foreclosed cable
systems joint ventures will pay a management fee equal to four and one-half
percent of the System's monthly gross revenue for these services. Revenues
subject to a management fee at the joint venture level will not be subject to
management fees at the Partnership level.
Note 9. Accounts Payable and Accrued Expenses.
Accounts payable and accrued expenses consist of the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
Liquidation fees payable to General Partner $1,173 $1,593
Equipment lease operations 97 423
Security deposits 43 60
General Partner and affiliates 43 46
Other 237 268
------ ------
Total $1,593 $2,390
====== ======
Note 10. 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 $751,000,
which consists of cash of $298,000, and assigned monthly rentals and credits for
goods and services valued at $453,000. In addition, the Partnership purchased
additional leased equipment at an aggregate cost of $457,000. 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.
<PAGE>
Page 27 of 35
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 $12,000. The final distribution consisted
of cash of $6,000 and common stock valued at $6,000.
Note 11. Liquidation Fees.
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 an 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,
1993. The Partnership began to pay the liquidation fees to the General Partner
in 1991.
Note 12. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.
The net difference between the tax basis and the reported amounts of
the Partnership's assets and liabilities is as follows at December 31:
Reported Amounts Tax Basis Net Difference
---------------- --------- --------------
(Amounts in Thousands)
1995
- ----
Assets $7,353 $8,113 $(760)
Liabilities 1,519 1,074 445
1994
- ----
Assets $8,097 $8,657 $(560)
Liabilities 2,341 1,568 773
The Subsidiary is a corporation subject to state and federal tax
regulations. The Subsidiary reports to the taxing authority on the accrual
basis. When income and expenses are recognized in different periods for
financial reporting purposes than for income tax purposes, deferred taxes are
provided for such differences using the liability method. The subsidiary was
formed in July 1993.
The Subsidiary's income tax benefit includes the following components
for the years ended December 31:
1995 1994
---- ----
(Amounts in Thousands)
Current tax benefit $ 4 $15
Deferred tax asset related to future
taxable income, net 44 19
--- ---
Income tax benefit, net $48 $34
=== ===
<PAGE>
Page 28 of 35
The income tax benefit differed from the statutory federal rate because
of the following:
1995 1994
---- ----
(Amounts in Thousands)
Federal income tax benefit, based on statutory
federal income tax rate of 34% $43 $30
State income tax benefit, net of federal provision 5 4
--- ---
Total Income tax benefit $48 $34
=== ===
The Subsidiary's net deferred tax asset as of December 31, resulted
from the following temporary differences:
1995 1994
---- ----
(Amounts in Thousands)
Depreciation and amortization $ 64 $ 37
Bad debt expense 5 2
Interest expense -- (14)
Net operating loss carryforward 24 20
---- ----
Subtotal 93 45
Valuation allowance (10) (11)
---- ----
Deferred tax asset $ 83 $ 34
==== ====
The Partnership has provided a valuation allowance for the deferred tax
asset of $10,000 and $11,000 as of December 31, 1995 and 1994 based on the
General Partner's evaluation of the likelihood that such benefit will ultimately
be realized.
As of December 31, 1995 and 1994, the Subsidiary's net operating loss
carryforward of $61,850 and $52,100, respectively, for federal and state tax
reporting purposes expires December 31, 2010.
Note 13. 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 $5,000,
$24,000 and $24,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Note 14. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income (loss) and distributions per limited partnership unit were
based on the limited partner's share of consolidated net income (loss) and
distributions, and the weighted average number of units outstanding of 345,974
for the years ended December 31, 1995, 1994 and 1993. For purposes of allocating
consolidated income (loss) and distributions to each individual limited partner,
the Partnership allocates consolidated 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 consolidated net income (loss) and distributions per
limited partnership unit is not indicative of per unit consolidated income
(loss) and distributions due to reinvestments through the Capital Accumulation
Plan.
Note 15. Business Segments.
The Consolidated Partnership currently operates in two business
segments: the equipment leasing and financing industry and the cable TV
industry. The operations in the cable TV industry are for the year ended
December 31, 1995 and 1994 and for the period from the date of acquisition
<PAGE>
Page 29 of 35
(October 28, 1993) to December 31, 1993. Information about the Consolidated
Partnership'soperations in these two segments are as follows:
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Total Revenues
Equipment leasing and financing $ 2,238 $ 2,757 $ 3,004
Cable TV operations 470 572 93
------- ------- --------
Total $ 2,708 $ 3,329 $ 3,097
======= ======= ========
Net Income (Loss)
Equipment leasing and financing $ 1,443 $ 1,576 $ (1,140)
Cable TV operations (79) (56) (27)
------- ------- --------
Total $ 1,364 $ 1,520 $ (1,167)
======= ======= ========
Identifiable Assets
Equipment leasing and financing $ 5,270 $ 5,608 $ 10,189
Cable TV operations 2,157 2,538 2,653
------- ------- --------
Total $ 7,427 $ 8,146 $ 12,842
======= ======= ========
Depreciation and Amortization Expense
Equipment leasing and financing $ 340 $ 597 $ 1,270
Cable TV operations 275 273 43
------- ------- --------
Total $ 615 $ 870 $ 1,313
======= ======= ========
Capital Expenditures
Equipment leasing and financing $ -- $ 459 $ 103
Cable TV operations 33 107 7
------- ------- --------
Total $ 33 $ 566 $ 110
======= ======= ========
Note 16. Subsequent Events.
In January 1996, cash distributions of $1,307,000 were made to the Limited
Partners.
Note 17. Fair Value of Financial Instruments.
During the year ended December 31, 1995, the Partnership adopted Statement
of Financial Accounting Standard No. 107, "Disclosures about Fair Value of
Financial Instruments," which requires disclosure of the fair value of financial
instruments for which it is practicable to estimate fair value. The following
methods and assumptions were used to estimate the fair value of each class of
financial instrument which it is practicable to estimate that value.
Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.
Notes Receivable
The fair value of notes receivable is estimated based on the lesser of the
discounted expected future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings, or the estimated
fair value of the underlying collateral. Please refer to footnote 4 for a
description of the Partnership's accounting policies on notes receivable which
contribute to the difference between the carrying amount and the fair value.
Marketable Securities
The fair values of investments in marketable securities are estimated based on
quoted market prices.
The estimated fair values of the Partnership's financial instruments at
December 31, 1995 are as follows:
<PAGE>
Page 30 of 35
Carrying
Amount Fair Value
-------- ----------
(Amounts in Thousands)
Assets
Cash and cash equivalents $3,940 $3,940
Marketable securities 14 14
Notes receivable 317 959
<PAGE>
Page 31 of 35
Item 9. Disagreements on Accounting and Financial Disclosure Matters.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The registrant is a limited partnership and, therefore, has no executive
officers or directors. The general partner of the registrant is Phoenix Leasing
Incorporated, a California corporation. The directors and executive officers of
Phoenix Leasing Incorporated (PLI) are as follows:
GUS CONSTANTIN, age 58, is President, Chief Executive Officer and a
Director of PLI. Mr. Constantin received a B.S. degree in Engineering from the
University of Michigan and a Master's Degree in Management Science from Columbia
University. From 1969 to 1972, he served as Director, Computer and Technical
Equipment of DCL Incorporated (formerly Diebold Computer Leasing Incorporated),
a corporation formerly listed on the American Stock Exchange, and as Vice
President and General Manager of DCL Capital Corporation, a wholly-owned
subsidiary of DCL Incorporated. Mr. Constantin was actively engaged in marketing
manufacturer leasing programs to computer and medical equipment manufacturers
and in directing DCL Incorporated's IBM System/370 marketing activities. Prior
to 1969, Mr. Constantin was employed by IBM as a data processing systems
engineer for four years. Mr. Constantin is an individual general partner in four
active partnerships and is an NASD registered principal. Mr. Constantin is the
founder of PLI and the beneficial owner of all of the common stock of Phoenix
American Incorporated.
PARITOSH K. CHOKSI, age 42, is Senior Vice President, Chief Financial
Officer and Treasurer of PLI. He has been associated with PLI since 1977. Mr.
Choksi oversees the finance, accounting, information services and systems
development departments of the General Partner and its Affiliates and oversees
the structuring, planning and monitoring of the partnerships sponsored by the
General Partner and its Affiliates. Mr. Choksi graduated from the Indian
Institute of Technology, Bombay, India with a degree in Engineering. He holds an
M.B.A. degree from the University of California, Berkeley.
GARY W. MARTINEZ, age 45, is Senior Vice President of PLI. He has been
associated with PLI since 1976. He manages the Asset Management Department,
which is responsible for lease and loan portfolio management. This includes
credit analysis, contract terms, documentation and funding; remittance
application, change processing and maintenance of customer accounts; customer
service, invoicing, collection, settlements and litigation; negotiating lease
renewals, extensions, sales and buyouts; and management information reporting.
From 1973 to 1976, Mr. Martinez was a Loan Officer with Crocker National Bank,
San Francisco. Prior to 1973, he was an Area Manager with Pennsylvania Life
Insurance Company. Mr. Martinez is a graduate of California State University,
Chico.
BRYANT J. TONG, age 41, is Senior Vice President, Financial Operations and
a Director of PLI. He has been with PLI since 1982. Mr. Tong is responsible for
investor services and overall company financial operations. He is also
responsible for the technical and administrative operations of the cash
management, corporate accounting, partnership accounting, accounting systems,
internal controls and tax departments, in addition to Securities and Exchange
Commission and other regulatory agency reporting. Prior to his association with
PLI, Mr. Tong was Controller-Partnership Accounting with the Robert A. McNeil
Corporation for two years and was an auditor with Ernst & Whinney (succeeded by
Ernst & Young) from 1977 through 1980. Mr. Tong holds a B.S. in Accounting from
the University of California, Berkeley, and is a Certified Public Accountant.
CYNTHIA E. PARKS, age 40, is Vice President, General Counsel, Assistant
Secretary and a Director of PLI. Prior to joining PLI in 1984, she was with GATX
Leasing Corporation, and had previously been Corporate Counsel for Stone
Financial Companies, and an Assistant Vice President of the Bank of America,
Bank Amerilease Group. She has a Bachelor's degree from Santa Clara University,
and earned her J.D. from the University of San Francisco School of Law.
HOWARD SOLOVEI, age 34, is Vice President, Finance, Assistant Treasurer
and a Director of PLI. He has been associated with PLI since 1984. Mr. Solovei's
principal activities are in the areas of arranging and managing the company's
banking relationships for its various corporations, partnerships and securitized
asset pools. Mr. Solovei is also involved in corporate financial planning and
various data processing-related projects. Mr. Solovei graduated with a B.S. in
Business from the University of California at Berkeley in 1984.
<PAGE>
Page 32 of 35
Neither the General Partner nor any Executive Officer of the General
Partner has any family relationship with the others.
Phoenix Leasing Incorporated or its affiliates and the executive officers
of the General Partner serve in a similar capacity to the following affiliated
limited partnerships:
Phoenix Leasing American Business Fund, L.P.
Phoenix Leasing Cash Distribution Fund V, L.P.
Phoenix Income Fund, L.P.
Phoenix Leasing Cash Distribution Fund IV
Phoenix High Tech/High Yield Fund
Phoenix Leasing Cash Distribution Fund III
Phoenix Leasing Cash Distribution Fund II
Phoenix Leasing Capital Assurance Fund
Phoenix Leasing Income Fund VI
Phoenix Leasing Growth Fund 1982
Phoenix Leasing Income Fund 1981 and
Phoenix Leasing Income Fund 1977
Item 11. Executive Compensation.
<TABLE>
Set forth is the information relating to all direct remuneration paid
or accrued by the Registrant during the last year to the General Partner.
(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 $ 229(1) $ 0 $ 0
Phoenix Cable
Management, Inc. Manager 26(1) 0 0
-------- ----- -----
$ 255 $ 0 $ 0
======== ===== =====
</TABLE>
(1) consists of management fees.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) No person owns of record, or is known by the Registrant to own
beneficially, more than five percent of any class of voting
securities of the Registrant.
<PAGE>
Page 33 of 35
(b) The General Partner of the Registrant owns the equity securities
of the Registrant set forth in the following table:
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
-------------- ------------------------- ----------------
General Partner Interest Represents a 15% interest in the 100%
Registrant's profits and distributions
Limited Partner Interest 4 units -
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Page No.
--------
(a) 1. Financial Statements:
Report of Independent Public Accountants 10
Consolidated Balance Sheets as of
December 31, 1995 and 1994 11
Consolidated Statements of Operations
for the years ended December 31, 1995, 1994 and 1993 12
Consolidated Statements of Partners' Capital
for the years ended December 31, 1995, 1994 and 1993 13
Consolidated Statements of Cash Flows
for the years ended December 31, 1995, 1994 and 1993 14
Notes to the Consolidated Financial Statements 15-30
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts and Reserves 35
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the year ended December 31, 1995.
(c) Exhibits:
21. Additional Exhibits.
a) Listing of all Subsidiaries of the Registrant:
Phoenix Cablevision of Oregon, Inc., a Nevada corporation and wholly
owned subsidiary
27. Financial Data Schedule.
<PAGE>
Page 34 of 35
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 VII
(Registrant)
BY: PHOENIX LEASING INCORPORATED,
A CALIFORNIA CORPORATION
GENERAL PARTNER
Date: March 28, 1996 By: /S/ GUS CONSTANTIN
-------------- -------------------------
Gus Constantin, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ GUS CONSTANTIN President, Chief Executive Officer and a March 28, 1996
- ---------------------- Director of Phoenix Leasing Incorporated --------------
(Gus Constantin) General Partner
/S/ PARITOSH K. CHOKSI Chief Financial Officer, March 28, 1996
- ---------------------- Senior Vice President --------------
(Paritosh K. Choksi) and Treasurer of
Phoenix Leasing Incorporated
General Partner
/S/ BRYANT J. TONG Senior Vice President, Financial March 28, 1996
- ---------------------- Operations --------------
(Bryant J. Tong) (Principal Accounting Officer)
and a Director of
Phoenix Leasing Incorporated
General Partner
/S/ GARY W. MARTINEZ Senior Vice President of March 28, 1996
- ---------------------- Phoenix Leasing Incorporated --------------
(Gary W. Martinez) General Partner
/S/ HOWARD SOLOVEI Vice President, Finance March 28, 1996
- ---------------------- Assistant Treasurer and a --------------
(Howard Solovei) Director of Phoenix Leasing Incorporated
General Partner
/S/ MICHAEL K. ULYATT Partnership Controller March 28, 1996
- ---------------------- Phoenix Leasing Incorporated --------------
(Michael K. Ulyatt) General Partner
<PAGE>
<TABLE>
Page 35 of 35
PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
SCHEDULE II
(Amounts in Thousands)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Classification Balance at Charged to Charged to Deductions Balance at
Beginning of Expense Revenue End of
Period Period
-------------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for losses on accounts
receivable $ 260 $ 155 $ 0 $ 42 $ 373
Allowance for early termination
of financing leases 31 104 0 6 129
Allowance for losses on notes
receivable 203 227 0 29 401
------- ------- ---- ------- --------
Totals $ 494 $ 486 $ 0 $ 77 $ 903
======= ======= ==== ======= ========
Year ended December 31, 1994
Allowance for losses on accounts
receivable $ 373 $ 6 $ 92 $ 155 $ 132
Allowance for early termination
of financing leases 129 28 0 86 71
Allowance for losses on notes
receivable 401 0 0 0 401
------- ------- ---- ------- --------
Totals $ 903 $ 34 $ 92 $ 241 $ 604
======= ======= ==== ======= ========
Year ended December 31, 1995
Allowance for losses on accounts
receivable $ 132 $ 48 $ 0 $ 122 $ 58
Allowance for early termination
of financing leases 71 0 37 0 34
Allowance for losses on notes
receivable 401 0 27 15 359
------- ------- ---- ------- --------
Totals $ 604 $ 48 $ 64 $ 137 $ 451
======= ======= ==== ======= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,940
<SECURITIES> 0
<RECEIVABLES> 799
<ALLOWANCES> 417
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,013
<DEPRECIATION> 2,932
<TOTAL-ASSETS> 7,427
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,834
<TOTAL-LIABILITY-AND-EQUITY> 7,427
<SALES> 0
<TOTAL-REVENUES> 2,708
<CGS> 0
<TOTAL-COSTS> 1,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (15)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,316
<INCOME-TAX> (48)
<INCOME-CONTINUING> 1,364
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,364
<EPS-PRIMARY> 3.35
<EPS-DILUTED> 0
</TABLE>
