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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, 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 0-15287
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
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands except for Unit Amounts)
(Unaudited)
March 31, December 31,
1995 1994
--------- ---------
ASSETS
Cash and cash equivalents $ 418 $ 200
Accounts receivable (net of allowance for losses
on accounts receivable of $83 at March 31, 1995
and December 31, 1994, respectively) 193 209
Notes receivable (net of allowance for losses on
notes receivable of $368 March 31, 1995 and
December 31, 1994) 2,030 2,039
Equipment on operating leases and held for lease
(net of accumulated depreciation of $8,191 and
$13,441 at March 31, 1995 and December 31, 1994,
respectively) 285 292
Net investment in financing leases 480 564
Investment in joint ventures 1,454 1,488
Cable systems, property and equipment(net of accum-
umlated depreciation of $517 and $469 at March
31, 1995 and December 31, 1994, respectively) 1,080 1,085
Deferred income tax asset 126 142
Other assets 295 319
--------- ---------
Total Assets $ 6,361 $ 6,338
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 962 $ 985
Minority interest in subsidiary 531 569
--------- ---------
Total Liabilities 1,493 1,554
--------- ---------
Partners' Capital
General Partner 95 92
Limited Partners, 400,000 units authorized,
386,308 units issued and 379,583
units outstanding at March 31, 1995 and
December 31, 1994 4,773 4,692
--------- ---------
Total Partners' Capital 4,868 4,784
--------- ---------
Total Liabilities and Partners' Capital $ 6,361 $ 6,338
========= =========
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands except for Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
1995 1994
-------- --------
INCOME
Rental income $ 248 $ 520
Gain on sale of equipment 187 391
Equity in earnings (losses) from joint ventures 90 (1)
Gain on sale of marketable securities - 100
Cable subscriber revenue 146 -
Interest income, notes receivable 77 80
Other income 1 11
-------- --------
Total Income 749 1,101
-------- --------
EXPENSES
Depreciation and amortization 103 118
Lease related operating expenses 108 285
Program services, cable systems 50 -
Management fees to General Partner and affiliate 27 42
Reimbursed administrative costs to General Partner 38 34
Legal expense 28 67
General and administrative expenses 77 52
-------- --------
Total Expenses 431 598
-------- --------
NET INCOME BEFORE MINORITY INTEREST AND INCOME TAXES $ 318 $ 503
-------- --------
Minority interest in losses of subsidiary 6 -
Income tax expense (1) -
-------- --------
NET INCOME $ 323 $ 503
======== ========
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .84 $ 1.31
======== ========
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ .63 $ 2.52
======== ========
ALLOCATION OF NET INCOME:
General Partner $ 3 $ 5
Limited Partners 320 498
-------- --------
$ 323 $ 503
======== ========
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
-------- --------
Operating Activities:
Net income $ 323 $ 503
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 103 118
Gain on sale of equipment (187) (391)
Equity in losses (earnings) from joint ventures (90) 1
Minority interest in losses of subsidiary (6) -
Provision for losses on accounts receivable 1 -
Gain on sale of securities - (100)
Decrease in accounts receivable 15 213
Decrease in accounts payable and accrued expenses (13) (22)
Decrease in deferred income tax asset 16 -
Decrease in other assets 12 12
--------- ---------
Net cash provided by operating activities 174 334
--------- ---------
Investing Activities:
Principal payments, financing leases 84 102
Principal payments, notes receivable 9 31
Proceeds from sale of equipment 172 398
Proceeds from sale of securities - 100
Purchase of equipment (20) (10)
Investment in joint ventures - (11)
Investment in securities - (42)
Distributions from joint ventures 124 -
Cable systems, property and equipment (44) -
Payment of acquisition fees (1) -
--------- ---------
Net cash provided by investing activities 324 568
--------- ---------
Financing Activities:
Payments of principal, notes payable (10) (66)
Distribution to minority partners (31) -
Distributions to partners (239) (956)
--------- ---------
Net cash used by financing activities (280) (1,022)
--------- ---------
Increase (decrease) in cash and cash equivalents 218 (120)
Cash and cash equivalents, beginning of period 200 2,032
--------- ---------
Cash and cash equivalents, end of period $ 418 $ 1,912
========= =========
Supplemental Cash Flow Information:
Cash paid for interest expense $ - $ 1
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. General:
The accompanying unaudited condensed consolidated 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 1994 amounts have been reclassified to conform to the
1995 presentation.
Note 3. 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 for collateral dependent loans.
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 March 31, 1995, the recorded investment in notes that are considered to be
impaired under Statement No. 114 was $108,000 for which the related allowance
for losses is $29,000. 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.
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PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The activity in the allowance for losses on notes receivable during the three
months ended March 31, is as follows:
1995 1994
------------ ------------
(Amounts in Thousands)
Beginning balance $ 368 $ 368
Provision for losses - -
Write downs - -
------------ ------------
Ending balance $ 368 $ 368
============ ============
Note 4. 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.
Phoenix Concept Cablevision, Inc. (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 tax purposes,
deferred taxes are provided for such differences using the liability method.
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 379,583 for the three months ended March
31, 1995 and 1994. 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.
Note 6. Investment in Joint Ventures
Equipment Joint Ventures
The aggregate combined statements of operations of the equipment joint ventures
is presented below:
COMBINED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
1995 1994
-------- --------
(Amounts in Thousands)
INCOME
Rental income $ 823 $ 654
Gain on sale of equipment 516 431
Other income 55 -
-------- --------
Total Income 1,394 1,085
-------- --------
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PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Note 6. Investment in Joint Ventures (Continued)
Equipment Joint Ventures (Continued)
COMBINED STATEMENTS OF OPERATIONS (Continued)
Three Months Ended
March 31,
1995 1994
-------- --------
(Amounts in Thousands)
EXPENSES
Depreciation 345 329
Lease related operating expenses 658 677
Management fees to General Partner 64 61
Other expenses 3 19
-------- --------
Total Expenses 1,070 1,086
-------- --------
Net Income (Loss) $ 324 $ (1)
======== ========
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Phoenix Leasing Cash Distribution Fund II and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Phoenix Leasing Cash Distribution Fund II and Subsidiary (the Partnership)
reported consolidated net income of $323,000 during the three months ended March
31, 1995, compared to net income of $503,000 during the same period in 1994.
Total revenues decreased by $352,000 during the three months ended March 31,
1995, as compared to the same period in 1994. This decrease is due primarily to
the decreases in rental income of $272,000 and a decreased gain on sale of
equipment of $204,000 during the three months ended March 31, 1995, as compared
to the same period in 1994. The decrease in rental income is attributable to a
reduction in the size of the equipment portfolio due to ongoing equipment sales.
At March 31, 1995, the Partnership owned equipment (excluding its pro rata
interest in joint ventures) with an aggregate original cost of $11.3 million, as
compared to $35.4 million at March 31, 1994. 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 from leasing activities also has
declined as a result of a larger portion of the equipment portfolio having been
fully depreciated. Depreciation expense from leasing activities increased by
$65,000 for the three months ended March 31, 1995 compared to 1994, resulting in
a net decrease in depreciation and amortization of $15,000.
Another factor contributing to the reduction in total revenues is the
decrease in gain on sale of equipment for the three months ended March 31, 1995,
as compared to the same period in 1994. The decline in gain and proceeds from
sale of equipment is attributable to a decrease in the market value of equipment
sold. For the three months ended March 31, 1995, the Partnership received sales
proceeds of $172,000 from equipment with an aggregate original cost of $5.4
million, as compared to sales proceeds of $398,000 on equipment with an
aggregate original cost of $3.7 million sold during the three months ended March
31, 1994.
Total expenses decreased by $167,000 during the three months ended March 31,
1995, as compared to the same period in 1994. The decrease in total expenses was
primarily attributable to the decrease in lease related operating expenses.
Lease related operating expense decreased due to decreases in maintenance,
administrative and residual sharing expenses on the Partnership's equipment
leased pursuant to a purchase agreement with the manufacturer of the equipment.
These expenses decreased as a result of the decrease in the revenues received
from this equipment.
Cable Television System:
- -------------------------
The increase in cable subscriber revenue during the three months ended March
31, 1995, is attributable to the acquisition of a cable television system on
September 14, 1994. As a result, there were no cable subscriber revenue during
the three months ended March 31, 1994. The acquisition of this cable television
system was also responsible for the increases in program services expense and
general and administrative expenses.
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Phoenix Leasing Cash Distribution Fund II and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources
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 capital improvements to the cable system in order
to maximize the value of the system. It is expected that the cable television
system will generate a positive cash flow from operations.
The Partnership's primary source of liquidity comes from leasing and
financing operations either directly or through its investments in joint
ventures. The Partnership has contractual obligations with lessees and borrowers
for fixed lease terms at fixed rental amounts and will also receive payments on
its outstanding notes receivable. As the initial lease terms of the
Partnership's short term operating leases 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.
As another source of liquidity, the Partnership owns a majority interest in
a cable television company that it acquired ownership through foreclosure on a
defaulted note receivable. This cable television company is expected to generate
a positive cash flow, which will first be used for capital improvements and
upgrades to the system in order to optimize the value to be received upon the
eventual sale of the system. Any excess cash from operations or the sale of the
system will then be distributed to the Partnership in accordance with its
ownership interest.
The net cash generated by operating activities was $174,000 during the three
months ended March 31, 1995, as compared to $334,000 during the three months
ended March 31, 1994. This decrease is primarily due to the decline in rental
income which is attributable to the reduction in the amount of equipment owned
by the Partnership.
The aggregate original cost of equipment owned by the Partnership (including
its pro rata interest in joint ventures) at March 31, 1995 approximates $13.3
million, as compared to $36.3 million at March 31, 1994. The Partnership is
currently in the liquidation stage and as a result, does not have plans to
continue to make any significant new investments in equipment leasing or
financing transactions in the future.
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 aggregate original amount of outstanding
financing provided by the Partnership approximates $3.6 million at March 31,
1995, as compared to $4.2 million at March 31, 1994.
The Partnership owns equipment held for lease with an original cost of
$3,279,000 and a net book value of $8,000 at March 31, 1995, as compared to
$14,008,000 and $60,000, respectively at March 31, 1994. The General Partner is
actively engaged, on behalf of the Partnership, in remarketing and selling the
Partnership's off-lease equipment portfolio.
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 $239,000 and $956,000 for the three months ended March 31, 1995
and 1994, respectively. The cumulative cash distributions to limited
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Page 10 of 12
Phoenix Leasing Cash Distribution Fund II and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (Continued)
partners are $79,254,000 and $76,176,000 at March 31, 1995 and 1994,
respectively. The General Partner did not receive distributions for the three
months ended March 31, 1995 and 1994. 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. Distributions to partners declined
during the three months ended March 31, 1995, as compared to the same period in
1994. The Partnership anticipates making distributions for the remainder of 1995
at approximately the same rate as the first quarter of 1995.
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, 1995
Part II. Other Information
Item 1. Changes in Securities Inapplicable.
Item 2. Defaults Upon Senior Securities Inapplicable.
Item 3. Submission of Matters to a Vote of Securities Holders Inapplicable.
Item 4. Other Information Inapplicable.
Item 5. Exhibits and Reports on 8-K
a) Exhibits:
(27) Financial Data Schedule
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 11, 1995 BY: /S/Paritosh K. Choksi
- ------------- -------------------------
Paritosh K. Choksi
Senior Vice President
Chief Financial Officer
Treasurer
Phoenix Leasing Incorporated
Corporate General Partner
May 11, 1995 BY: /S/Bryant J. Tong
- ------------- -------------------------
Bryant J. Tong
Senior Vice President,
Financial Operations
(Principal Accounting Officer)
and a Director of
Phoenix Leasing Incorporated
Corporate General Partner
May 11, 1995 BY: /S/Gary W. Martinez
- ------------- -------------------------
Gary W. Martinez
Senior Vice President
Phoenix Leasing Incorporated
Corporate General Partner
May 11, 1995 BY: /S/Michael K. Ulyatt
- ------------- -------------------------
Michael K. Ulyatt
Partnership Controller
Phoenix Leasing Incorporated
Corporate General Partner
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 418
<SECURITIES> 0
<RECEIVABLES> 2,674
<ALLOWANCES> 451
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,073
<DEPRECIATION> 8,708
<TOTAL-ASSETS> 6,361
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4,868
<TOTAL-LIABILITY-AND-EQUITY> 6,361
<SALES> 0
<TOTAL-REVENUES> 749
<CGS> 0
<TOTAL-COSTS> 431
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 318
<INCOME-TAX> 1
<INCOME-CONTINUING> 323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 323
<EPS-PRIMARY> .84
<EPS-DILUTED> 0
</TABLE>
