Page 1 of 9
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, 1996
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
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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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Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX LEASING CAPITAL ASSURANCE FUND
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 1,240 $ 312
Accounts receivable (net of allowance for
losses on accounts receivable of $10 and
$18 at September 30, 1996 and December 31,
1995, respectively) 27 29
Notes receivable 23 23
Equipment on operating leases and held for lease
(net of accumulated depreciation of $305 and
$833 at September 30, 1996, and December 31,
1995, respectively) -- --
Investment in zero coupon bonds and other
securities, available for sale 19,694 19,824
Other assets 42 56
------- -------
Total Assets $21,026 $20,244
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 119 $ 131
------- -------
Total Liabilities 119 131
------- -------
Partners' Capital
General Partner -- --
Limited Partners, 320,000 units authorized,
103,121 units issued and 87,388 and 87,714
units outstanding at September 30, 1996
and December 31, 1995, respectively 20,830 19,577
Unrealized gain on zero coupon bonds
(unallocated to partners) 77 536
------- -------
Total Partners' Capital 20,907 20,113
------- -------
Total Liabilities and Partners' Capital $21,026 $20,244
======= =======
The accompanying notes are an integral part of
these statements.
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PHOENIX LEASING CAPITAL ASSURANCE FUND
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Rental income $ 35 $ 51 $ 124 $ 229
Accretion of discount, zero coupon bonds 404 399 1,229 1,167
Other income 25 9 46 25
------ ------ ------ ------
Total Income 464 459 1,399 1,421
------ ------ ------ ------
EXPENSES
Depreciation and amortization -- -- -- 6
Lease related operating expenses 4 6 16 31
Management fees to General Partner 1 1 3 5
Provision for losses on receivables 9 6 9 14
Legal expense 3 10 14 16
Loss on sale of zero coupon bonds -- -- -- 27
General and administrative expenses 9 10 39 43
------ ------ ------ ------
Total Expenses 26 33 81 142
------ ------ ------ ------
NET INCOME $ 438 $ 426 $1,318 $1,279
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 5.01 $ 4.86 $15.07 $14.42
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ -- $ 1.28
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ -- $ -- $ -- $ 6
Limited Partners 438 426 1,318 1,273
------ ------ ------ ------
$ 438 $ 426 $1,318 $1,279
====== ====== ====== ======
The accompanying notes are an integral part of
these statements.
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PHOENIX LEASING CAPITAL ASSURANCE FUND
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
---- ----
Operating Activities:
Net income $ 1,318 $ 1,279
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization -- 6
Gain on sale of equipment (1) (2)
Equity in earnings from joint ventures, net (11) (15)
Provision for losses on accounts receivable 9 14
Loss on sale of zero coupon bonds -- 27
Accretion of discount, zero coupon bonds (1,229) (1,167)
Decrease (increase) in accounts receivable (7) 8
Decrease in accounts payable and accrued expenses (12) (6)
Decrease (increase) in other assets (1) 10
------- -------
Net cash provided by operating activities 66 154
------- -------
Investing Activities:
Principal payments, notes receivable -- 3
Proceeds from sale of equipment 1 1
Proceeds from sale or maturity of zero coupon bonds 1,900 626
Investment in securities, available for sale (1,000) --
Distributions from joint ventures 26 30
------- -------
Net cash provided by investing activities 927 660
------- -------
Financing Activities:
Redemptions of capital (65) (484)
Distributions to partners -- (119)
------- -------
Net cash used by financing activities (65) (603)
------- -------
Increase in cash and cash equivalents 928 211
Cash and cash equivalents, beginning of period 312 83
------- -------
Cash and cash equivalents, end of period $ 1,240 $ 294
======= =======
The accompanying notes are an integral part of
these statements.
<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.
Note 2. Reclassification.
Reclassification - Certain 1995 amounts have been reclassified to
conform to the 1996 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. At September 30, 1996, the recorded
investment in notes that are considered to be impaired under Statement No. 114
was $23,000 for which there is no related allowance. The average recorded
investment in impaired loans during the nine months ended September 30, 1996 was
approximately $23,000.
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 87,454 and 88,278 for the nine month
periods ended September 30, 1996 and 1995, 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 $438,000 during the three months ended September 30, 1996, as compared
to net income of $426,000 during the same period in 1995. Net income for the
nine months ended September 30, 1996 was $1,318,000, as compared to net income
of $1,279,000 during the same period in 1995.
Total revenues increased by $5,000 during the three months ended
September 30, 1996, when compared to the same period in 1995. During the nine
months ended September 30, 1996, total revenues decreased by $22,000, when
compared to the same period in 1995. During the three and nine months ended
September 30, 1996, the Partnership recognized an increase in income from the
accretion of its zero coupon bonds. The income from these zero coupon bonds is
expected to increase over their life so that the carrying value will equal the
face value at the maturity date. The Partnership did not recognize any gains or
losses from the early liquidation of zero coupon bonds during 1996, as compared
to a loss from the sale of zero coupon bonds of $27,000 during 1995.
Rental income continues to decline due to a decrease in the amount of
equipment owned by the Partnership. The Partnership is currently in its
liquidation stage, as a result it is not expected to acquire any additional
equipment for lease. At September 30, 1996, the Partnership owned equipment with
an aggregate original cost of $529,000, as compared to $1.5 million at September
30, 1995.
Total expenses decreased by $7,000 and $61,000 during the three and nine
months ended September 30, 1996, as compared to the same periods in 1995. This
is primarily due to decreases in most expense items.
Liquidity and Capital Resources
The Partnership's primary source of liquidity is its investments in zero
coupon bonds. 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.
As another source of liquidity, the Partnership has entered into
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 reported net cash provided by leasing and financing
activities of $66,000 and $157,000 for the nine months ended September 30, 1996
and 1995, respectively. The decrease in 1996 is primarily the result of a
decrease in rental income.
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Page 7 of 9
The Partnership paid limited partner redemptions of $65,000 during the
nine months ended September 30, 1996, as compared to redemptions of $484,000
during the same period in 1995. As a result, the Partnership also reported
proceeds from the maturity of zero coupon bonds of $1,900,000 during the nine
months ended September 30, 1996, as compared to proceeds from the sale of zero
coupon bonds of $626,000 during the same period in 1995. During 1995, the
Partnership sold some of its zero coupon bonds in order to generate sufficient
cash to pay redemptions to limited partners. The Partnership reinvested a
portion of the proceeds from the maturity of zero coupon bonds in short term
government agency bonds during the nine months ended September 30, 1996.
As of September 30, 1996, the Partnership owned equipment held for lease
with a purchase price of $87,000 and a net book value of $0, compared to
$780,000 and $0 at September 30, 1995. 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 $0 and $113,000
during the nine months ended September 30, 1996 and 1995, respectively. As a
result, the cumulative cash distributions to the limited partners is $9,937,000
at both September 30, 1996 and 1995. The General Partner received cash
distributions of $0 and $6,000 for the nine months ended September 30, 1996 and
1995, respectively.
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's term will expire on December 31, 1996. The General
Partner is in the process of evaluating the remaining assets of the Partnership
in order to liquidate them through public auction. Once the assets have been
liquidated, the Partnership will make a final distribution to the partners. The
General Partner plans to complete the liquidation of the Partnership by December
31, 1996.
Cash generated from leasing, financing and investing activities has been
and is anticipated to continue to be sufficient to meet the Partnership's
continuing operational expenses.
<PAGE>
Page 8 of 9
PHOENIX LEASING CAPITAL ASSURANCE FUND
September 30, 1996
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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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)
Date Title Signature
---- ----- ---------
November 12, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ----------------- Senior Vice President ----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 12, 1996 Senior Vice President, /S/ BRYANT J. TONG
- ----------------- Financial Operations ----------------------
(Principal Accounting Officer)(Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
November 12, 1996 Senior Vice President of /S/ GARY W. MARTINEZ
- ----------------- Phoenix Leasing Incorporated ----------------------
General Partner (Gary W. Martinez)
November 12, 1996 Partnership Controller /S/ MICHAEL K. ULYATT
- ----------------- Phoenix Leasing Incorporated ----------------------
General Partner (Michael K. Ulyatt)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,240
<SECURITIES> 19,694
<RECEIVABLES> 60
<ALLOWANCES> 10
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 305
<DEPRECIATION> 305
<TOTAL-ASSETS> 21,026
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,907
<TOTAL-LIABILITY-AND-EQUITY> 21,026
<SALES> 0
<TOTAL-REVENUES> 1,399
<CGS> 0
<TOTAL-COSTS> 81
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,318
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,318
<EPS-PRIMARY> 15.07
<EPS-DILUTED> 0
</TABLE>
