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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 June 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 0-15287
-------
PHOENIX LEASING CASH DISTRIBUTION FUND II
- --------------------------------------------------------------------------------
Registrant
California 68-0032426
- ------------------------------- ----------------------------------
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 CASH DISTRIBUTION FUND II AND SUBSIDIARY
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
June 30, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $2,452 $1,951
Accounts receivable (net of allowance for
losses on accounts receivable of $68
and $67 at June 30, 1996 and December 31,
1995, respectively) 130 110
Notes receivable (net of allowance for losses
on notes receivable of $358 at June 30, 1996
and December 31, 1995, respectively) 1,388 1,390
Equipment on operating leases and held for lease
(net of accumulated depreciation of $3,998 and
$5,061 at June 30, 1996 and December 31, 1995,
respectively) 67 99
Net investment in financing leases 95 248
Investment in joint ventures 811 995
Cable systems, property and equipment (net of
accumulated depreciation of $725 and $640 at
June 30, 1996 and December 31, 1995,
respectively) 946 997
Deferred income tax asset 115 118
Other assets 241 242
------ ------
Total Assets $6,245 $6,150
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 572 $ 584
Minority interest in subsidiary 536 541
------ ------
Total Liabilities 1,108 1,125
------ ------
Partners' Capital
General Partner 107 104
Limited Partners, 400,000 units authorized,
386,308 units issued and 379,583 units
outstanding at June 30, 1996 and
December 31, 1995 4,985 4,895
Unrealized gains on available-for-sale
securities 45 26
------ ------
Total Partners' Capital 5,137 5,025
------ ------
Total Liabilities and Partners' Capital $6,245 $6,150
====== ======
The accompanying notes are an integral
part of these statements.
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PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Rental income $ 147 $ 211 $ 292 $ 458
Gain (loss) on sale of equipment 20 (20) 47 167
Equity in earnings from joint ventures 120 133 195 223
Cable subscriber revenue 149 143 283 289
Interest income, notes receivable -- 77 54 154
Other income 37 10 64 11
------- ------- ------- -------
Total Income 473 554 935 1,302
------- ------- ------- -------
EXPENSES
Depreciation and amortization 67 95 138 198
Lease related operating expenses 39 74 81 182
Program services, cable systems 48 39 93 90
Management fees to General Partner
and affiliate 16 23 32 50
Reimbursed administrative costs to
General Partner 34 39 67 79
Legal expense 21 50 46 77
General and administrative expenses 67 81 151 141
------- ------- ------- -------
Total Expenses 292 401 608 817
------- ------- ------- -------
NET INCOME BEFORE MINORITY
INTEREST AND INCOME TAXES $ 181 $ 153 $ 327 $ 485
Minority interest in losses
(earnings) of subsidiary (1) (11) 5 (4)
Income tax benefit (expense) (3) 8 -- (8)
------- ------- ------- -------
NET INCOME $ 177 $ 150 $ 332 $ 473
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .47 $ .39 $ .87 $ 1.23
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ .62 $ .63 $ 1.25
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 2 $ 2 $ 4 $ 5
Limited Partners 175 148 328 468
------- ------- ------- -------
$ 177 $ 150 $ 332 $ 473
======= ======= ======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
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PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1996 1995
---- ----
Operating Activities:
Net income $ 332 $ 473
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 138 198
Gain on sale of equipment (47) (167)
Equity in earnings from joint ventures (195) (223)
Provision for losses on accounts receivable 3 3
Decrease (increase) in deferred income
tax asset 3 (4)
Minority interest in earnings (losses) of
subsidiary (5) 4
Decrease (increase) in accounts receivable (23) 57
Decrease in accounts payable and accrued
expenses (12) (80)
Decrease (increase) in other assets (2) 24
------- -------
Net cash provided by operating activities 192 285
------- -------
Investing Activities:
Principal payments, financing leases 153 159
Principal payments, notes receivable 2 28
Proceeds from sale of equipment 47 260
Distribution from joint ventures 379 288
Purchase of equipment -- (32)
Cable systems, property and equipment (33) (63)
Payment of acquisition fees -- (1)
------- -------
Net cash provided by investing activities 548 639
------- -------
Financing Activities:
Payments of principal, notes payable -- (9)
Distributions to minority partners -- (31)
Distributions to partners (239) (473)
------- -------
Net cash used by financing activities (239) (513)
------- -------
Decrease in cash and cash equivalents 501 411
Cash and cash equivalents, beginning of period 1,951 200
------- -------
Cash and cash equivalents, end of period $ 2,452 $ 611
======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
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PHOENIX LEASING CASH DISTRIBUTION FUND II AND SUBSIDIARY
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. Notes Receivable.
Impaired Notes Receivable. At June 30, 1996, the recorded investment in
notes that are considered to be impaired under Statement No. 114 was $1,746,000
for which the related allowance for losses is $358,000. The average recorded
investment in impaired loans during the six months ended June 30, 1996 was
approximately $890,000.
The activity in the allowance for losses on notes receivable during the
six months ended June 30, is as follows:
1996 1995
---- ----
(Amounts in Thousands)
Beginning balance $358 $368
Provision for losses -- --
Write downs -- --
---- ----
Ending balance $358 $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 six month periods ended
June 30, 1996 and 1995. 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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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
(Amounts in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Rental income $ 665 $1,132 $1,270 $1,955
Gain on sale of equipment 295 289 543 805
Other income 34 50 74 106
------ ------ ------ ------
Total income 994 1,471 1,887 2,866
------ ------ ------ ------
EXPENSES
Depreciation 84 112 173 458
Lease related operating expenses 400 758 843 1,416
Management fees to General Partner 36 64 68 128
General and administrative expenses 2 3 4 6
------ ------ ------ ------
Total expenses 522 937 1,088 2,008
------ ------ ------ ------
Net income $ 472 $ 534 $ 799 $ 858
====== ====== ====== ======
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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 net income of $177,000 and $332,000 for the three and six months ended
June 30, 1996, respectively, compared to net income of $150,000 and $473,000 for
the three and six months ended June 30, 1995, respectively.
Total revenues decreased by $81,000 and $367,000 for the three and six
months ended June 30, 1996, respectively, as compared to the same periods in
1995. The decrease in total revenues during both periods was primarily the
result of decreases in rental income and interest income from notes receivable.
The decrease in rental income is attributable to a reduction in the size of the
equipment portfolio due to the ongoing sale of equipment. At June 30, 1996, the
Partnership owned equipment with an aggregate original cost of $6 million, as
compared to $9.8 million at June 30, 1995. 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.
Other factors contributing to the reduction in total revenues is a
decrease in interest income from notes receivable for the three and six months
ended June 30, 1996, and a decrease in gain on sale of equipment for the six
months ended June 30, 1996, as compared to the same periods in 1995. The
decreased gain on sale of equipment during the six months ended June 30, 1996 is
due to a decrease in the sales proceeds received combined with a decrease in the
amount of equipment sold.
Total expenses decreased by $110,000 and $209,000 during the three and six
months ended June 30, 1996, respectively, as compared to the same periods in
1995. The largest decrease came from depreciation and lease related operating
expenses. Lease related operating expenses 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. Depreciation decreased as the result of an
increasing portion of the Partnership's equipment lease portfolio reaching the
end of its depreciable life.
Joint Ventures:
The Partnership reported a small decrease in earnings from joint ventures
of $13,000 and $28,000 during the three and six months ended June 30, 1996,
respectively, as compared to the same periods in 1995. The decrease in earnings
is reflective of a decrease in rental income from one joint venture, a result of
the ongoing liquidation of the joint venture's equipment portfolio.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from leasing and
financing operations. The Partnership has contractual obligations with lessees
and borrowers for fixed terms at fixed payment amounts. The liquidity of the
Partnership is dependent upon its success in collecting these contractual
payments owed the Partnership. 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.
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 maximize 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 Partnership reported net cash generated by leasing and financing
activities of $347,000 during the six months ended June 30, 1996, as compared to
$472,000 during the six months ended June 30, 1995. 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. Proceeds from the sale of equipment
decreased by $213,000 during the six months ended June 30, 1996, as compared to
the same period in 1995, due to a decrease in the amount of equipment sold.
<PAGE>
Page 8 of 10
The Partnership owned equipment held for lease with an original cost of
$1,469,000 and a net book value of $0 at June 30, 1996, as compared to
$2,458,000 and $1,000, respectively at June 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 distributions of $239,000 and $473,000 for
the six months ended June 30, 1996 and 1995, respectively. The cumulative cash
distributions to limited partners are $80,203,000 and $79,488,000 at June 30,
1996 and 1995, respectively. The General Partner did not receive distributions
for the six months ended June 30, 1996 and 1995. 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 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 declined during the
six months ended June 30, 1996, as compared to the same period in 1995. The
Partnership made its last quarterly distribution on January 15, 1996. Future
distributions to partners will be made on an annual basis with the next
distribution scheduled to be made on January 15, 1997.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's ongoing
operations expenses.
<PAGE>
Page 9 of 10
PHOENIX LEASING CASH DISTRIBUTION FUND II
June 30, 1996
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: None
(27) Financial Data Schedule
b) Reports on 8-K: None
<PAGE>
Page 10 of 10
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 CASH DISTRIBUTION FUND II
-----------------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
August 13, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ---------------------- Senior Vice President ----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
August 13, 1996 Senior Vice President, /S/ BRYANT J. TONG
- ---------------------- Financial Operations ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
August 13, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,452
<SECURITIES> 0
<RECEIVABLES> 1,944
<ALLOWANCES> 426
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,736
<DEPRECIATION> 4,723
<TOTAL-ASSETS> 6,245
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,137
<TOTAL-LIABILITY-AND-EQUITY> 6,245
<SALES> 0
<TOTAL-REVENUES> 935
<CGS> 0
<TOTAL-COSTS> 608
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 327
<INCOME-TAX> 0
<INCOME-CONTINUING> 332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 332
<EPS-PRIMARY> .87
<EPS-DILUTED> 0
</TABLE>
