<PAGE> Page 1 of 10
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 June 30, 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 _______<PAGE>
<PAGE> Page 2 of 10
Part I. Financial Information
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND II
BALANCE SHEETS
(Amounts in Thousands except for Unit Amounts)
(Unaudited)
[CAPTION] June 30, December 31,
1994 1993
--------- ---------
ASSETS
[S] [C] [C]
Cash and cash equivalents $ 1,645 $ 2,032
Accounts receivable (net of allowance for losses
on accounts receivable of $446 and $453 at June
30, 1994 and December 31, 1993, respectively) - 262
Notes receivable (net of allowance for losses on
notes receivable of $368 at June 30, 1994 and
December 31, 1993) 1,947 1,960
Notes receivable, in-substance foreclosed 730 780
Equipment on operating leases and held for lease
(net of accumulated depreciation of $30,088 and
$34,365 at June 30, 1994 and December 31, 1993,
respectively) 400 641
Net investment in financing leases 793 998
Capitalized acquisition fees (net of accumulated
amortization of $6,702 and $6,681 at June 30,
1994 and December 31, 1993, respectively) 170 191
Other assets 37 58
--------- ---------
Total Assets $ 5,722 $ 6,922
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 956 $ 1,093
Notes payable 22 174
--------- ---------
Total Liabilities 978 1,267
--------- ---------
Partners' Capital
General Partner 73 63
Limited Partners, 400,000 units authorized,
386,308 units issued and 379,583 units
outstanding at June 30, 1994 and December
31, 1993 4,671 5,592
--------- ---------
Total Partners' Capital 4,744 5,655
--------- ---------
Total Liabilities and Partners' Capital $ 5,722 $ 6,922
========= =========
[FN] The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> Page 3 of 10
PHOENIX LEASING CASH DISTRIBUTION FUND II
STATEMENTS OF OPERATIONS
(Amounts in Thousands except for Per Unit Amounts)
(Unaudited)
[CAPTION]
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
[S] -------- -------- -------- --------
INCOME
[C] [C] [C] [C]
Rental income $ 621 $ 1,040 $ 1,141 $ 2,093
Gain on sale of equipment 178 215 569 844
Gain on sale of marketable
securities 102 - 203 -
Interest income, notes receivable 80 74 159 148
Other income 37 30 47 54
-------- -------- -------- --------
Total Income 1,018 1,359 2,119 3,139
-------- -------- -------- --------
EXPENSES
Depreciation 110 574 217 1,361
Amortization of acquisition fees 11 85 21 131
Lease related operating expenses 217 263 501 589
Management fees to General Partner 42 57 85 128
Reimbursed administrative costs
to General Partner 31 34 65 70
Interest expense 1 4 2 13
Provision for losses on receivables - 29 - 58
Legal expense 76 52 143 95
Other expenses 51 92 103 102
-------- -------- -------- --------
Total Expenses 539 1,190 1,137 2,547
-------- -------- -------- --------
NET INCOME $ 479 $ 169 $ 982 $ 592
======== ======== ======== ========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 1.25 $ .44 $ 2.56 $ 1.54
======== ======== ======== ========
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 2.47 $ 2.47 $ 4.99 $ 4.98
======== ======== ======== ========
NET INCOME:
General Partner $ 5 $ 2 $ 10 $ 6
Limited Partners 474 167 972 586
-------- -------- -------- --------
$ 479 $ 169 $ 982 $ 592
======== ======== ======== ========
[FN] The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> Page 4 of 10
PHOENIX LEASING CASH DISTRIBUTION FUND II
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
[CAPTION] Six Months Ended
June 30,
1994 1993
[S] -------- --------
Operating Activities: [C] [C]
Net income $ 982 $ 592
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 217 1,361
Amortization of acquisition fees 21 131
Gain on sale of equipment (569) (844)
Provision for early termination, financing leases - -
Provision for losses on accounts receivable - -
Provision for losses on notes receivable - 58
Gain on sale of marketable securities (203) -
Decrease in accounts receivable 262 319
Decrease in accounts payable and accrued expenses (137) (523)
Decrease in other assets 21 329
--------- ---------
Net cash provided by operating activities 594 1,423
--------- ---------
Investing Activities:
Principal payments, financing leases 203 289
Principal payments, notes receivable 63 56
Proceeds from sale of equipment 605 1,084
Proceeds from sale of marketable securities 245 -
Purchase of equipment (10) (7)
Investment in financing leases - (185)
Investment in marketable securities (42) -
Payment of acquisition fees - (9)
--------- ---------
Net cash provided by investing activities 1,064 1,228
--------- ---------
Financing Activities:
Payments of principal, notes payable (152) (144)
Distributions to partners (1,893) (1,891)
--------- ---------
Net cash used by financing activities (2,045) (2,035)
--------- ---------
Increase (decrease) in cash and cash equivalents (387) 616
Cash and cash equivalents, beginning of period 2,032 1,459
--------- ---------
Cash and cash equivalents, end of period $ 1,645 $ 2,075
========= =========
Supplemental Cash Flow Information:
Cash paid for interest expense $ 3 $ 10
--------- ---------
[FN] The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> Page 5 of 10
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 six months ended June
30, 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.<PAGE>
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Phoenix Leasing Cash Distribution Fund II
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
==============================================================================
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
Description (Amounts in Thousands)
- - ------------------------------------------------------------------------------
Net income $ 479 $ 169 $ 982 $ 592
Rental income 621 1,040 1,141 2,093
Gain on sale of equipment 178 215 569 844
Gain on sale of marketable securities 102 - 203 -
Depreciation expense 110 574 217 1,361
===============================================================================
The Partnership reported net income of $479,000 and $982,000 for the three
and six months ended June 30, 1994, respectively, compared to net income of
$169,000 and $592,000 for the three and six months ended June 30, 1993,
respectively. The increase in net income for both the three and six months
ended June 30, 1994 compared to the same periods in 1993 is primarily
attributable to a decrease in depreciation expense of $464,000 and $1,144,000,
respectively. In addition to the decrease in depreciation expense, the
Partnership also recognized a gain on sale of marketable securities of $102,000
and $203,000 for the three and six months ended June 30, 1994. The decrease
in depreciation expense and the gain on sale of marketable securities are
partially offset by a decline in rental income of $419,000 and $952,000 for the
three and six months ended June 30, 1994 compared to the same periods in 1993.
Total revenues decreased by $341,000 and $1,020,000 for the three and six
months ended June 30, 1994, respectively, compared to the same periods in the
prior year due primarily to the decreases in rental income and gain on sale of
equipment. The decrease in rental income, as well as the decrease in
depreciation expense, is attributable to a reduction in the size of the
equipment portfolio due to equipment sales. At June 30, 1994, the Partnership
owned equipment with an aggregate original cost of $34.7 million, as compared
to $49 million at June 30, 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 has declined as a result of a
larger 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 three and six months ended June
30, 1994, as compared to the same periods in 1993. The Partnership realized a
gain on sale of equipment of $178,000 and $569,000 and received proceeds from
the sale of equipment of $207,000 and $605,000 for the three and six months
ended June 30, 1994 as compared to a gain on sale of equipment of $215,000 and
$844,000 and the receipt of proceeds of $273,000 and $1,084,000 for the three
and six months ended June 30, 1993. The decline in gain and proceeds from sale
of equipment is attributable to a decrease in sales activity. For the six
months ended June 30, 1994, the Partnership sold equipment with an aggregate
original cost of $5.2 million compared to $9.3 million during the same period
in 1993.
The decreases in rental income and gain on sale of equipment for the three
and six months ended June 30, 1994 are partially offset by a gain on sale of
marketable securities of $102,000 and $203,000 for the three and six months
ended June 30, 1994. The Partnership had been granted stock warrants from
several emerging growth companies as part of a lease/finance agreement. During<PAGE>
<PAGE> Page 7 of 10
Phoenix Leasing Cash Distribution Fund II
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
the three and six months ended June 30, 1994, the Partnership sold the stock of
these emerging growth companies and received proceeds of $145,000 and $245,000,
respectively.
Liquidity and Capital Resources
===============================================================================
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
Description (Amounts in Thousands)
- - -------------------------------------------------------------------------------
MAJOR CASH SOURCES:
Net cash from leasing and
financing activities (1) $ 446 $ 562 $ 860 $1,768
Proceeds from sale of equipment 207 273 605 1,084
Proceeds from sale of marketable
securities 145 - 245 -
MAJOR CASH USES:
Payments of principal, notes payable 86 41 152 144
Cost of equipment acquired - 130 10 192
Cash distributions to partners 937 937 1,893 1,891
(1) Includes a per copy charge from the Partnership's reproduction equipment of
$109,000 and $159,000 for the three months ended June 30, 1994 and 1993,
respectively, and $211,000 and $354,000 for the six months ended June 30,
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 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 net cash from leasing and financing operations decreased by $116,000
and $908,000 during the three and six months ended June 30, 1994, respectively,
as compared to the same periods in 1993. This decrease is due to the decline
in rental income which is attributable to the reduction 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 of $86,000 and $152,000 for the three and six months ended June
30, 1994 on its outstanding debt compared to $41,000 and $144,000 for the three
and six months ended June 30, 1993.
During the six months ended June 30, 1994, the Partnership purchased
$10,000 in equipment compared to $192,000 during the same period in 1993. The
aggregate original cost of equipment owned by the Partnership at June 30, 1994
approximates $34.7 million, as compared to $49 million at June 30, 1993. The
$34.7 million of equipment owned at June 30, 1994 is classified as follows: 38%
reproduction equipment, 28% computer peripheral equipment, 26% computer
mainframes, 4% capital equipment leased to emerging growth companies, 3%
telecommunications equipment and 1% small computer systems. The $49 million of<PAGE>
<PAGE> Page 8 of 10
Phoenix Leasing Cash Distribution Fund II
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (Continued)
equipment owned at June 30, 1993 was classified as follows: 56% computer
peripheral equipment, 33% reproduction equipment, 6% capital equipment leased
to emerging growth companies, 3% telecommunications equipment, 1% small
computer systems and 1% computer mainframes.
In addition to acquiring equipment for lease to third parties, the
Partnership has provided financing to cable television system operators and
security monitoring companies. The Partnership maintains a security interest in
the equipment financed. 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 June 30, 1994. 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
$13,389,000 and a net book value of $60,000 at June 30, 1994, as compared to
$18,431,000 and $140,000, respectively at June 30, 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 six months ended June 30, 1994
and 1993 was $1,893,000 and $1,891,000, 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 $1,893,000 and
$1,891,000 for the six months ended June 30, 1994 and 1993, respectively. The
cumulative cash distributions to limited partners are $77,112,000 and
$73,316,000 at June 30, 1994 and 1993, respectively. The General Partner did
not receive distributions for the six months ended June 30, 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 to the cash
distributions.
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 rate 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.<PAGE>
<PAGE> Page 9 of 10
PHOENIX LEASING CASH DISTRIBUTION FUND II
June 30, 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.<PAGE>
<PAGE> Page 10 of 10
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)
August 11, 1994 BY: /S/Paritosh K. Choksi____________
Paritosh K. Choksi
Senior Vice President
Chief Financial Officer
Treasurer
Phoenix Leasing Incorporated
Corporate General Partner
August 11, 1994 BY: /S/Bryant J. Tong________________
Bryant J. Tong
Senior Vice President,
Financial Operations
(Principal Accounting Officer)
Phoenix Leasing Incorporated
Corporate General Partner
August 11, 1994 BY: /S/Gary W. Martinez______________
Gary W. Martinez
Senior Vice President
Phoenix Leasing Incorporated
Corporate General Partner
August 11, 1994 BY: /S/Michael K. Ulyatt_____________
Michael K. Ulyatt
Partnership Controller
Phoenix Leasing Incorporated
Corporate General Partner<PAGE>
