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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 March 31, 1994
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 0-15287
PHOENIX_LEASING_CASH_DISTRIBUTION_FUND_II
Registrant
_____California______ ______68-0032426______
State of Jurisdiction IRS Employer I.D. No.
2401_Kerner_Boulevard,_San_Rafael,_California___94901
Address of Principal Executive Offices Zip Code
_____(415)_485-4500_______
Registrant's Telephone No.
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
PHOENIX LEASING CASH DISTRIBUTION FUND II
BALANCE SHEETS
(Amounts in Thousands except for Unit Amounts)
(Unaudited)
March 31, December 31,
1994 1993
--------- ---------
ASSETS
Cash and cash equivalents $ 1,912 $ 2,032
Accounts receivable (net of allowance for losses on
accounts receivable of $454 and $453 at March 31,
1994 and December 31, 1993, respectively) 49 262
Notes receivable (net of allowance for losses on
notes receivable of $368 at March 31, 1994 and
December 31, 1993) 1,954 1,960
Equipment on operating leases and held for lease
(net of accumulated depreciation of $31,169 and
$34,365 at March 31, 1994 and December 31, 1993,
respectively) 536 641
Net investment in financing leases 896 998
Capitalized acquisition fees (net of accumulated
amortization of $6,691 and $6,681 at March 31,
1994 and December 31, 1993, respectively) 181 191
Notes receivable, in-substance foreclosed 755 780
Other assets 98 58
--------- ---------
Total Assets $ 6,381 $ 6,922
========= =========
LIABILITIES_AND_PARTNERS'_CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,071 $ 1,093
Notes payable 108 174
--------- ---------
Total Liabilities 1,179 1,267
--------- ---------
Partners' Capital
General Partner 68 63
Limited Partners, 400,000 units authorized,
386,308 units issued and 379,583 units
outstanding at March 31, 1994 and December
31, 1993 5,134 5,592
--------- ---------
Total Partners' Capital 5,202 5,655
--------- ---------
Total Liabilities and Partners' Capital $ 6,381 $ 6,922
========= =========
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING CASH DISTRIBUTION FUND II
STATEMENTS OF OPERATIONS
(Amounts in Thousands except for Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
1994 1993
-------- --------
INCOME
Rental income $ 520 $ 1,053
Gain on sale of equipment 391 630
Interest income, notes receivable 80 74
Gain on sale of marketable securities 100 -
Other income 10 61
-------- --------
Total Income 1,101 1,818
-------- --------
EXPENSES
Depreciation 108 787
Amortization of acquisition fees 10 46
Lease related operating expenses 285 326
Management fees to General Partner 42 72
Reimbursed administrative costs
to General Partner 34 36
Interest expense 1 9
Provision for losses on receivables - 29
Legal expense 67 43
Other expenses 51 47
-------- --------
Total Expenses 598 1,395
-------- --------
NET INCOME $ 503 $ 423
======== ========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 1 $ 1
======== ========
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 3 $ 3
======== ========
ALLOCATION OF NET INCOME:
General Partner $ 5 $ 4
Limited Partners 498 419
-------- --------
$ 503 $ 423
======== ========
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING CASH DISTRIBUTION FUND II
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
1994 1993
-------- --------
Operating_Activities:
Net income $ 503 $ 423
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 108 787
Amortization of acquisition fees 10 46
Gain on sale of equipment (391) (630)
Gain on sale of marketable securities (100) -
Provision for losses on notes receivable - 29
Decrease in accounts receivable 213 427
Decrease in accounts payable and accrued expenses (22) (179)
Decrease (increase) in other assets (40) 152
--------- ---------
Net cash provided by operating activities 281 1,055
--------- ---------
Investing_Activities:
Principal payments, financing leases 102 143
Principal payments, notes receivable 31 8
Proceeds from sale of equipment 398 811
Proceeds from sale of marketable securities 100 -
Purchase of equipment (10) (62)
Payment of acquisition fees - (5)
--------- ---------
Net cash provided by investing activities 621 895
--------- ---------
Financing_Activities:
Payments of principal, notes payable (66) (103)
Distributions to partners (956) (954)
--------- ---------
Net cash used by financing activities (1,022) (1,057)
--------- ---------
Increase (decrease) in cash and cash equivalents (120) 893
Cash and cash equivalents, beginning of period 2,032 1,459
--------- ---------
Cash and cash equivalents, end of period $ 1,912 $ 2,352
========= =========
Supplemental_Cash_Flow_Information:
Cash paid for interest expense $ 1 $ 8
--------- ---------
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING CASH DISTRIBUTION FUND II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note_1. 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 state-
ments 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 1993 amounts have been reclassified to
conform to the 1994 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.__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 379,583 for the three months
ended March 31, 1994 and 1993. For purposes of allocating income (loss) and
distributions to each individual limited partner, the Partnership allocates net
income (loss) and distributions based upon each respective limited partner's
ending capital account balance.
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Phoenix Leasing Cash Distribution Fund II
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
==============================================================================
Three Months Ended
March 31,
1994 1993
Description (Amounts in Thousands)
- ------------------------------------------------------------------------------
Net income $ 503 $ 423
Rental income 520 1,053
Gain on sale of equipment 391 630
Gain on sale of marketable securities 100 -
Depreciation expense 108 787
===============================================================================
The Partnership reported net income of $503,000 for the three months ended
March 31, 1994 as compared to net income of $423,000 for the same period in
1993. The increase in net income is attributable to a $679,000 decrease in
depreciation expense which in part is offset by a decrease in rental income of
$533,000.
Total revenues decreased by $717,000 for the three months ended March 31,
1994 compared to the same period in 1993. The decline is a result of a
reduction in rental income. Rental income, as well as depreciation expense,
decreased as a result of a reduction in the size of the equipment portfolio due
to equipment sales. At March 31, 1994, the Partnership owned equipment with an
aggregate original cost of $36.3 million, as compared to $51.6 million at March
31, 1993. As the Partnership continues to sell equipment upon expiration of
the lease terms, it is anticipated that the equipment portfolio and rental
income will continue to decrease. In addition to sales of equipment,
depreciation expense also declined due to a large portion of the equipment
portfolio having been fully depreciated.
Another factor contributing to the reduction in total revenues is the
decrease in gain on sale of equipment for the quarter ended March 31, 1994
compared to 1993. The Partnership realized a gain on sale of equipment of
$391,000 and received proceeds from the sale of equipment of $398,000 for the
three months ended March 31, 1994 compared to a $630,000 gain on sale of
equipment and $811,000 in proceeds from the sale of equipment during the same
period in 1993. The decline in gain and proceeds from sale of equipment is
attributable to a decrease in sales activity. For the three months ended March
31, 1994, the Partnership sold equipment with an aggregate original cost of
$3.7 million compared to $6.7 million during the same period in 1993.
The decreases in rental income and gain on sale of equipment for the three
months ended March 31, 1994 is partially offset by a gain on sale of marketable
securities of $100,000. The Partnership had been granted stock warrants from
several emerging growth companies as part of a lease/finance agreement. During
the first quarter of 1994, the Partnership sold the stock of these emerging
growth companies and received proceeds of $100,000.
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Phoenix Leasing Cash Distribution Fund II
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Liquidity and Capital Resources
==============================================================================
Three Months Ended
March 31,
1994 1993
Description (Amounts in Thousands)
- ------------------------------------------------------------------------------
MAJOR CASH SOURCES:
Net cash provided by leasing and financing
activities (1) $ 414 $1,206
Proceeds from sale of equipment 398 811
Proceeds from sale of marketable securities 100 -
MAJOR CASH USES:
Payments of principal, notes payable 66 103
Cash distributions to partners 956 954
(1) Includes a per copy charge from the Partnership's reproduction equipment of
$102,000 and $195,000 during 1994 and 1993, respectively.
===============================================================================
The Partnership's primary source of liquidity comes from leasing and
financing operations. The Partnership has contractual obligations with a well
diversified group of lessees for fixed lease terms at fixed rental amounts and
will also receive payments on its outstanding notes receivable. As the 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 net cash from leasing and financing activities decreased by $792,000
during the three months ended March 31, 1994 as compared to the same period in
1993. This decrease is attributable to the decrease in the amount of equipment
owned by the Partnership.
The Partnership's debt continues to decrease as the Partnership pays its
monthly installments of principal and interest. The Partnership made payments
of principal on its outstanding debt of $66,000 and $103,000 during the three
months ended March 31, 1994 and 1993, respectively.
During the three months ended March 31, 1994, the Partnership purchased
$10,000 in equipment compared to $62,000 during the same period in 1993. The
aggregate original cost of equipment owned by the Partnership at March 31, 1994
approximates $36.3 million as compared to $51.6 million at March 31, 1993. The
$36.3 million of equipment owned at March 31, 1994 is classified as follows:
38% reproduction equipment, 28% computer peripheral equipment, 25% computer
mainframes, 4% capital equipment leased to emerging growth companies, 4%
telecommunications equipment and 1% small computer systems. The $51.6 million
of equipment owned at March 31, 1993 was classified as follows: 57% computer
peripheral equipment, 32% reproduction equipment, 6% capital equipment leased
to emerging growth companies, 3% telecommunications equipment, 1% small
computer systems and 1% computer mainframes.
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Phoenix Leasing Cash Distribution Fund II
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Liquidity and Capital Resources (Continued)
In addition to acquiring equipment for lease to third parties, the
Partnership has provided financing to cable television system operators,
emerging growth companies, security monitoring companies and other businesses.
The Partnership maintains a security interest in the equipment financed, the
receivables due under any lease or rental agreement related to such equipment
and in the cable television systems assets. Such security interest will give
the Partnership the right, upon default to obtain possession of the assets.
The aggregate original amount of outstanding financing provided by the
Partnership approximates $4.2 million at March 31, 1994 and 1993. The $4.2
million of financing is classified as follows: 99% financing to cable
television systems and 1% financing to security monitoring companies.
The Partnership owned equipment held for lease with an original cost of
$14,008,000 and a net book value of $60,000 at March 31, 1994, as compared to
$16,126,000 and $229,000 at March 31, 1993. The General Partner is actively
engaged, on behalf of the Partnership, in remarketing and selling the
Partnership's off-lease equipment portfolio.
The cash distributed to partners for the three months ended March 31, 1994
and 1993 is $956,000 and $954,000, respectively. In accordance with the
Limited Partnership Agreement, the limited partners are entitled to 95% of the
cash available for distribution and the General Partner is entitled to 5%. As
a result, the limited partners received distributions of $956,000 and $954,000
for the three months ended March 31, 1994 and 1993, respectively. The
cumulative cash distributions to limited partners are $76,176,000 and
$72,380,000 at March 31, 1994 and 1993, respectively. The General Partner did
not receive distributions for the three months ended March 31, 1994 and 1993.
While the General Partner is entitled to receive 5% of the cash distributions,
it has voluntarily elected not to receive payment for its share of the cash
available for distribution.
The Partnership's asset portfolio continues to decline as a result of the
ongoing liquidation of assets, and therefore it is expected that the cash
generated from operations will also continue to decline. If the cash generated
by Partnership operations continue to decline, the rate of cash distributions
made to limited partners will also decline. It is anticipated that the
Partnership will make distributions to partners during 1994 at approximately
the same as those made during 1993.
The Partnership has been adversely impacted by several factors that have
caused them to achieve returns and recovery of investment in lower than
anticipated amounts. The factors impacting the Partnership have been, the
economic recession in the United States, the rate of obsolescence of computer
equipment, the market demand and remarketability for equipment owned by the
Partnership, aggressive manufacturer sales practices and a general
unavailability of debt to companies. All of these factors have resulted in the
decline in revenues and the reduced distributions to partners.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's on-going
operational expenses.
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PHOENIX LEASING CASH DISTRIBUTION FUND II
March 31, 1994
Part_II._Other_Information
Item 1. Legal_Proceedings
Please see Item 3 of the Partnership's annual report for the year
ended December 31, 1993 filed on Form 10-K.
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: None
b) Reports on 8-K: None.
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SIGNATURES
Pursuant to the requirements 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_CASH_DISTRIBUTION_FUND_II
(Registrant)
_May_12,_1994_______ BY: /S/Paritosh_K._Choksi_____________
Paritosh K. Choksi
Senior Vice President
Chief Financial Officer
Treasurer
Phoenix Leasing Incorporated
Corporate General Partner
_May_12,_1994_______ BY: /S/Bryant_J._Tong_________________
Bryant J. Tong
Senior Vice President,
Financial Operations
(Principal Accounting Officer)
Phoenix Leasing Incorporated
Corporate General Partner
_May_12,_1994_______ BY: /S/Gary_W._Martinez_______________
Gary W. Martinez
Senior Vice President
Phoenix Leasing Incorporated
Corporate General Partner
_May_12,_1994_______ BY: /S/Michael_K._Ulyatt______________
Michael K. Ulyatt
Partnership Controller
Phoenix Leasing Incorporated
Corporate General Partner
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