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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ----- ACT OF 1934
For the quarterly period ended September 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ----- EXCHANGE ACT OF 1934
For the transition period from ______________ to______________.
Commission file number 0-14444
PHOENIX LEASING CAPITAL ASSURANCE FUND
Registrant
California 68-0032427
State of Jurisdiction I.R.S. Employer Identification No.
2401 Kerner Boulevard, San Rafael, California 94901-5527
- - --------------------------------------------------------------------------------
Address of Principal Executive Offices Zip Code
Registrant's telephone number, including area code: (415) 485-4500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
preceding requirements for the past 90 days.
Yes X No
----- -----
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<TABLE>
Part I. Financial Information
Item 1. Financial Statements
PHOENIX LEASING CAPITAL ASSURANCE FUND
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 294 $ 83
Accounts receivable (net of allowance for losses on accounts receivable of $21
and $49 at September 30, 1995 and December 31, 1994, respectively) 31 53
Notes receivable 24 27
Equipment on operating leases and held for lease (net of accumulated
depreciation of $886 and $1,854 at September 30, 1995, and December 31, 1994,
respectively) - 5
Investment in zero coupon bonds, available for sale 19,444 18,595
Other assets 63 88
-------- --------
Total Assets $ 19,856 $ 18,851
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 170 $ 176
-------- --------
Total Liabilities 170 176
-------- --------
Partners' Capital
General Partner - -
Limited Partners, 320,000 units authorized, 103,121 units issued and 87,714
and 90,200 units outstanding at September 30, 1995 and December 31, 1994,
respectively 19,122 18,446
Unrealized gain on zero coupon bonds (unallocated to partners) 564 229
-------- --------
Total Partners' Capital 19,686 18,675
-------- --------
Total Liabilities and Partners' Capital $ 19,856 $ 18,851
======== ========
The accompanying notes are an integral
part of these statements.
</TABLE>
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<TABLE>
PHOENIX LEASING CAPITAL ASSURANCE FUND
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Rental income $ 51 $ 86 $ 229 $ 368
Accretion of discount, zero coupon bonds 399 390 1,167 1,144
Gain (loss) on sale of zero coupon bonds and
other marketable securities - 7 (27) 11
Other income 9 - 25 8
----- ----- ----- -----
Total Income 459 483 1,394 1,531
----- ----- ----- -----
EXPENSES
Depreciation and amortization - 18 6 70
Lease related operating expenses 6 18 31 42
Management fees to General Partner 1 3 5 13
Provision for losses on receivables 6 - 14 -
General and administrative expenses 20 17 59 75
----- ----- ----- -----
Total Expenses 33 56 115 200
----- ----- ----- -----
NET INCOME $ 426 $ 427 $1,279 $1,331
===== ===== ===== =====
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 4.86 $ 4.51 $14.42 $13.67
===== ===== ===== =====
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ - $ - $ 1.28 $ 1.28
===== ===== ===== =====
ALLOCATION OF NET INCOME:
General Partner $ - $ - $ 6 $ 7
Limited Partners 426 427 1,273 1,324
----- ----- ----- -----
$ 426 $ 427 $1,279 $1,331
===== ===== ====== =====
The accompanying notes are an integral
part of these statements.
</TABLE>
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<TABLE>
PHOENIX LEASING CAPITAL ASSURANCE FUND
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Operating Activities:
Net income $ 1,279 $ 1,331
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 6 70
Gain on sale of equipment (2) (87)
Equity in earnings from joint ventures, net (15) -
Provision for losses on accounts receivable 14 -
Loss (gain) on sale of zero coupon bonds and other securities 27 (11)
Accretion of discount, zero coupon bonds (1,167) (1,144)
Decrease in accounts receivable 8 54
Increase (decrease) in accounts payable and accrued expenses (6) 37
Decrease in other assets 10 10
------- -------
Net cash provided by operating activities 154 260
------- -------
Investing Activities:
Principal payments, financing leases - 42
Principal payments, notes receivable 3 4
Proceeds from sale of equipment 1 99
Proceeds from sale of zero coupon bonds and other marketable securities 626 830
Distributions from joint ventures 30 -
------- -------
Net cash provided by investing activities 660 975
------- -------
Financing Activities:
Redemptions of capital (484) (1,127)
Distributions to partners (119) (130)
------- -------
Net cash used by financing activities (603) (1,257)
------- -------
Increase (decrease) in cash and cash equivalents 211 (22)
Cash and cash equivalents, beginning of period 83 159
------- -------
Cash and cash equivalents, end of period $ 294 $ 137
======= =======
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
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PHOENIX LEASING CAPITAL ASSURANCE FUND
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. General.
The accompanying unaudited condensed financial statements have been
prepared by the Partnership in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Although management believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes included in the Partnership's Financial Statement, as filed with the
SEC in the latest annual report on Form 10-K.
Financial Accounting Pronouncements. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity would estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset. Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Partnership does not expect
the adoption of this statement to have a material impact on its financial
position and results of operations. The Partnership plans to adopt Statement No.
121 on January 1, 1996.
Note 2. Reclassification.
Reclassification - Certain 1994 amounts have been reclassified to
conform to the 1995 presentation.
Note 3. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.
Note 4. Notes Receivable.
Impaired Notes Receivable. On January 1, 1995, the Partnership adopted
Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors
for Impairment of a Loan", and Statement No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures". Statement No. 114
requires that certain impaired loans be measured based on the present value of
expected cash flows discounted at the loan's effective interest rate; or,
alternatively, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. Prior to 1995, the allowance for
losses on notes receivable was based on the undiscounted cash flows or the fair
value of the collateral dependent loans.
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In accordance with Statement No. 114, a loan is classified as
in-substance foreclosure when the Company has taken possession of the collateral
regardless of whether formal foreclosure proceedings take place. Notes
receivable previously classified as in-substance foreclosed cable systems but
for which the Company had not taken possession of the collateral have been
reclassified to notes receivable.
At September 30, 1995, the recorded investment in notes that are
considered to be impaired under Statement No. 114 was $24,000 for which there is
no related allowance. The average recorded investment in impaired loans during
the nine months ended September 30, 1995 was approximately $25,000. Generally,
notes receivable are classified as impaired and the accrual of interest on such
notes are discontinued when the contractual payment of principal or interest has
become 90 days past due or management has serious doubts about further
collectibility of the contractual payments. Any payments received subsequent to
the placement of the note receivable on to impaired status will generally be
applied towards the reduction of the outstanding note receivable balance, which
may include previously accrued interest as well as principal. Once the principal
and accrued interest balance has been reduced to zero, the remaining payments
will be applied to interest income.
Note 5. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income and distributions per limited partnership unit were based on
the limited partners' share of net income and distributions, and the weighted
average number of units outstanding of 88,278 and 96,868 for the nine month
periods ended September 30, 1995 and 1994, respectively.
<PAGE>
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PHOENIX LEASING CAPITAL ASSURANCE FUND
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Phoenix Leasing Capital Assurance Fund (the Partnership) reported net
income of $426,000 on total revenues of $459,000 during the three months ended
September 30, 1995, as compared to net income of $427,000 on total revenues of
$483,000 during the same period in 1994. During the nine months ended September
30, 1995, the Partnership reported net income of $1,279,000 on total revenues of
$1,394,000, as compared to net income of $1,331,000 on total revenues of
$1,531,000 during the same period in 1994.
Total revenues for the three and nine months ended September 30, 1995
decreased by $24,000 and $137,000, respectively, when compared to the same
periods in 1994. The decrease in total revenues for both periods is mainly due
to a decrease in rental income of $35,000 and $139,000 for the three and nine
months ended September 30, 1995, respectively, as compared to the same periods
in 1994. These decreases are related to the overall decrease in the amount of
equipment owned by the Partnership at September 30, 1995, as compared to
September 30, 1994. At September 30, 1995, the Partnership owned equipment with
an aggregate original cost of $1.5 million, as compared to $3.9 million at
September 30, 1994.
The accretion of discount from zero coupon bonds increased by $9,000
and $23,000 for the three and nine months ended September 30, 1995, compared to
the same periods in 1994. The income related to zero coupon bonds will continue
to increase in the future as the Partnership continues to accrete these bonds so
that the carrying value will equal the face value at the maturity date. The
Partnership did not report any sales of zero coupon bonds during the three
months ended September 30, 1995, as compared to a gain of $7,000 from the sale
of zero coupon bonds during the three months ended September 30, 1994. During
the nine months ended September 30, 1995, the Partnership reported a loss on the
sale of zero coupon bonds of $27,000, as compared to a gain on the sale of zero
coupon bonds of $11,000 during the same period in 1994. These bonds were sold in
order to provide sufficient cash for the payment of limited partner redemptions.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from contractual
obligations with lessees for fixed lease terms at fixed rental amounts. As the
initial lease terms expire on the Partnership's short term operating leases, the
Partnership will re-lease or sell the underlying equipment. The future liquidity
of the Partnership will depend upon the General Partner's success in collecting
contractual amounts, as well as re-leasing and selling the equipment upon
expiration of the lease.
The Partnership has also made significant investments in zero coupon
bonds. It is the intention of the Partnership to hold these bonds until maturity
or to the end of the Partnership's term, whichever occurs first. Upon
termination of the Partnership, the Partnership will use the proceeds received
upon maturity or sale of these bonds to make a final distribution to the
partners. The Partnership has, and will continue to sell a portion of these
bonds as cash is needed to pay partner redemptions.
The Partnership reported net cash provided by leasing and financing
activities of $157,000 and $306,000 for the nine months ended September 30, 1995
and 1994, respectively. The decrease in 1995 is primarily the result of a
reduction in rental income, due to an overall decrease in the size of the
Partnership's equipment portfolio. As the cash generated by leasing operations
continues to decline due to the ongoing liquidation of the equipment portfolio,
<PAGE>
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future cash generated by leasing operations is also expected to decline.
The Partnership paid Limited Partner redemptions of $484,000 during the
nine months ended September 30, 1995, as compared to redemptions of $1,127,000
during the same period in 1994. As a result, the Partnership also reported
proceeds from the sale of zero coupon bonds of $626,000 during the nine months
ended September 30, 1995, as compared to proceeds of $830,000 during the same
period in 1994. The bonds were sold in order to generate sufficient cash to pay
redemptions to limited partners.
As of September 30, 1995, the Partnership owned equipment held for
lease with a purchase price of $780,000 and a net book value of $0 compared to
$1,919,000 and $13,000 at September 30, 1994. The General Partner is actively
engaged, on behalf of the Partnership, in remarketing and selling the
Partnership's off-lease equipment portfolio.
The Limited Partners received cash distributions of $113,000 and
$124,000 during the nine months ended September 30, 1995 and 1994, respectively.
As a result, the cumulative cash distributions to the Limited Partners is
$9,937,000 and $9,824,000 at September 30, 1995 and 1994, respectively. The
General Partner received cash distributions of $6,000 for both the nine months
ended September 30, 1995 and 1994.
The next distribution to partners is expected to be made at the
termination of the Partnership. The amount of the distribution will be dependent
upon the amount of cash available for distribution after the redemption or sale
of all the remaining assets, which primarily consists of zero coupon bonds. The
Partnership will reach the end of its term on December 31, 1996.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's continuing
operational expenses.
<PAGE>
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PHOENIX LEASING CAPITAL ASSURANCE FUND
September 30, 1995
Part II. Other Information.
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults Upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Securities Holders.Inapplicable
Item 5. Other Information. Inapplicable
Item 6. Exhibits and Reports on 8-K:
a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None
<PAGE>
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<TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHOENIX LEASING CAPITAL ASSURANCE FUND
(Registrant)
<CAPTION>
Date Title Signature
<S> <C> <C>
November 13, 1995 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- - ----------------- Senior Vice President ----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 13, 1995 Senior Vice President, /S/ BRYANT J. TONG
- - ----------------- Financial Operations ------------------
(Principal Accounting Officer) (Bryant J. Tong)
and a Director of
Phoenix Leasing Incorporated
General Partner
November 13, 1995 Senior Vice President of /S/ GARY W. MARTINEZ
- - ----------------- Phoenix Leasing Incorporated --------------------
General Partner (Gary W. Martinez)
November 13, 1995 Partnership Controller /S/ MICHAEL K. ULYATT
- - ----------------- Phoenix Leasing Incorporated ---------------------
General Partner (Michael K. Ulyatt)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 294
<SECURITIES> 19,444
<RECEIVABLES> 76
<ALLOWANCES> 21
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 886
<DEPRECIATION> 886
<TOTAL-ASSETS> 19,856
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 19,686
<TOTAL-LIABILITY-AND-EQUITY> 19,856
<SALES> 0
<TOTAL-REVENUES> 1,394
<CGS> 0
<TOTAL-COSTS> 115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,279
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,279
<EPS-PRIMARY> 14.42
<EPS-DILUTED> 0
</TABLE>
