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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the quarterly period ended March 31, 1997
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 ___
379,583 Units of Limited Partnership Interest were outstanding as of March 31,
1997.
Transitional small business disclosure format:
Yes ___ No _X_
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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,
1997 1996
---- ----
ASSETS
Cash and cash equivalents $2,961 $3,077
Accounts receivable (net of allowance for
losses on accounts receivable of $19 and
$18 at March 31, 1997 and December 31,
1996, respectively) 98 137
Notes receivable (net of allowance for losses
on notes receivable of $358 at March 31, 1997
and December 31, 1996) 1,208 1,263
Equipment on operating leases and held for lease
(net of accumulated depreciation of $2,996 and
$3,674 at March 31, 1997 and December 31, 1996,
respectively) 30 81
Investment in joint ventures 637 703
Cable systems, property and equipment (net of
accumulated depreciation of $852 and $808 at
March 31, 1997 and December 31, 1996, respectively) 895 895
Deferred income tax asset 115 115
Other assets 202 242
------ ------
Total Assets $6,146 $6,513
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 643 $ 558
Minority interest in subsidiary 443 447
------ ------
Total Liabilities 1,086 1,005
------ ------
Partners' Capital
General Partner 111 111
Limited Partners, 400,000 units authorized,
386,308 units issued and 379,583 units
outstanding at March 31, 1997 and
December 31, 1996 4,917 5,328
Unrealized gains on available-for-sale securities 32 69
------ ------
Total Partners' Capital 5,060 5,508
------ ------
Total Liabilities and Partners' Capital $6,146 $6,513
====== ======
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,
1997 1996
---- ----
INCOME
Rental income $ 140 $ 146
Gain on sale of equipment 33 27
Equity in earnings from joint ventures 64 75
Cable subscriber revenue 144 133
Interest income, notes receivable 12 54
Other income 38 26
----- -----
Total Income 431 461
----- -----
EXPENSES
Depreciation and amortization 106 71
Lease related operating expenses 69 42
Program services, cable systems 50 45
Management fees to General Partner and affiliate 15 17
Reimbursed administrative costs to General Partner 40 33
Provision for losses on receivables 1 1
Legal expense 24 24
General and administrative expenses 67 78
----- -----
Total Expenses 372 311
----- -----
NET INCOME BEFORE MINORITY
INTEREST AND INCOME TAXES $ 59 $ 150
Minority interest in losses of subsidiary 4 6
Income tax expense of subsidiary -- (1)
----- -----
NET INCOME $ 63 $ 155
===== -----
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .16 $ .40
===== =====
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $1.25 $ .63
===== =====
ALLOCATION OF NET INCOME:
General Partner $ 1 $ 2
Limited Partners 62 153
----- -----
$ 63 $ 155
===== =====
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,
1997 1996
---- ----
Operating Activities:
Net income $ 63 $ 155
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 106 71
Gain on sale of equipment (33) (27)
Equity in earnings from joint ventures (64) (75)
Provision for losses on accounts receivable 1 1
Increase in deferred income tax asset -- (4)
Minority interest in losses of subsidiary (4) (6)
Decrease in accounts receivable 38 14
Increase (decrease) in accounts payable
and accrued expenses 85 (3)
Increase in other assets (8) (1)
------- -------
Net cash provided by operating activities 184 125
------- -------
Investing Activities:
Principal payments, financing leases -- 77
Principal payments, notes receivable 55 1
Proceeds from sale of equipment 34 26
Distribution from joint ventures 130 192
Cable systems, property and equipment (45) (16)
------- -------
Net cash provided by investing activities 174 280
------- -------
Financing Activities:
Distributions to partners (474) (239)
------- -------
Net cash used by financing activities (474) (239)
------- -------
Increase (decrease) in cash and cash equivalents (116) 166
Cash and cash equivalents, beginning of period 3,077 1,951
------- -------
Cash and cash equivalents, end of period $ 2,961 $ 2,117
======= =======
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 CONSOLIDATED 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 1996 amounts have been reclassified to
conform to the 1997 presentation.
Note 3. Notes Receivable.
Impaired Notes Receivable. At March 31, 1997 and 1996, the recorded
investment in notes that are considered to be impaired was $1,567,000 and
$35,000, respectively, for which the related allowance for losses was $23,000.
The average recorded investment in impaired loans during the three months ended
March 31, 1997 and 1996 was approximately $1,567,000 and $35,000, respectively.
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
1997 1996
---- ----
(Amounts in Thousands)
Beginning balance $358 $358
Provision for losses -- --
Write downs -- --
---- ----
Ending balance $358 $358
==== ====
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.
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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 month periods ended
March 31, 1997 and 1996. 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 Venture
The aggregate combined financial information of the equipment joint
venture is presented below:
March 31, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $2,632 $2,851
Liabilities 716 733
Partners' Capital 1,916 2,118
Three Months Ended
March 31,
1997 1996
---- ----
(Amounts in Thousands)
Revenue $556 $892
Expenses 321 565
Net Income 235 327
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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 $63,000 for the three months ended March 31,
1997, as compared to net income of $155,000 during the same period in 1996.
Total revenues decreased by $30,000 during the three months ended March
31, 1997, as compared to the same period in 1996. The primary factors
contributing to the decrease in revenues was a decrease in interest income from
notes receivable of $42,000 offset by an increase in cable subscriber revenue of
$11,000.
The decrease interest income from notes receivable of $42,000 is due to
the Partnership suspending the accrual of interest income on a defaulted note
receivable from a cable television system operator during the three months ended
March 31, 1996.
In addition, the Partnership reported smaller decreases in all other
income categories except for other income. The small increase in other income
was attributable to increases in interest income earned on cash and cash
equivalents, a result of the Partnership maintaining a higher average cash
balance during the three months ended March 31, 1997, as compared to the same
period in 1996.
Total expenses increased by $61,000 during the three months ended March
31, 1997, as compared to the same period in 1996. The increase in total expenses
is attributable to an increase in depreciation and amortization expense of
$35,000 and an increase in lease related operating expenses of $27,000.
Lease related operating expenses increased due a $46,000 increase in
remarketing costs. However, maintenance, administrative and residual sharing
expenses incurred by the Partnership's decreased as a result of the decrease in
the revenues received from this equipment.
The increase in depreciation and amortization expense is primarily due to
additional depreciation of $42,000 booked during the period ended March 31,
1997. Normal monthly depreciation decreased by $7,000 due to a reduction in the
size of the equipment portfolio due to the ongoing sale of equipment. The
Partnership is currently in its liquidation stage and is not expected to acquire
any additional equipment. The Partnership will reach the end of its term on
December 31, 1997.
Cable Television System:
Cable subscriber revenues increased approximately $11,000 during the
three months ended March 31, 1997, as compared to the same period in 1996. The
increase during the period ended March 31, 1997, is due to a special promotion
offered to its subscribers for the month of March 1996.
Joint Ventures:
The Partnership reported a decrease in earnings from joint ventures of
$11,000 during the three months ended March 31, 1997, as compared to the same
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period in 1996. The decrease in earnings is reflective of a decrease in earnings
from one joint venture due to a decrease in rental revenues. The decrease in
rental revenues was caused by a decrease in the amount of equipment owned by the
joint venture due to the ongoing sale of equipment.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from equipment
leasing and financing operations. The Partnership has contractual obligations
with lessees for fixed terms at fixed payment amounts and will also receive
payments on its outstanding notes receivable. 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 cable television system operations are currently being
marketed for sale.
The Partnership reported net cash generated by leasing, financing and
cable television operations of $239,000 during the three months ended March 31,
1997, as compared to $203,000 during the same period in 1996. The net cash
generated by equipment leasing and financing activities increased slightly as a
result of the early termination of some financing leases. Rental income
continues to decline which is attributable to the reduction in the amount of
equipment owned by the Partnership.
The Partnership owned equipment held for lease with an original cost of
$1,217,000 and a net book value of $0 at March 31, 1997, as compared to
$1,581,000 and $0, respectively at March 31, 1996. 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 was $474,000 and $239,000 for the three
months ended March 31, 1997 and 1996. 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 $474,000 and $239,000 for the three months
ended March 31, 1997 and 1996. The cumulative cash distributions to limited
partners are $80,677,000 and $80,203,000 at March 31, 1997 and 1996,
respectively. The General Partner did not receive payment for its share of cash
distributions for the three months ended March 31, 1997 and 1996. While the
General Partner is entitled to receive 5% of the cash distributions, it has
voluntarily elected not to receive payment at this time 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 decline. As the cash generated by
Partnership operations continues to decline, the rate of cash distributions made
to limited partners will also decline. The Partnership made its last quarterly
distribution to partners in January of 1997. The Partnership will reach the end
of its term on December 31, 1997, at which time it will sell any remaining
assets at public auction and make a final distribution to partners of the excess
cash, if any. The General Partner is actively marketing for sale the
Partnership's net assets and it is expected, based on current estimates of fair
market value, that the net carrying value of those assets will ultimately be
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recovered. However, the amounts the Partnership will ultimately realize from the
disposition of assets could differ from the net carrying value at March 31,
1997.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's ongoing
operational expenses.
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PHOENIX LEASING CASH DISTRIBUTION FUND II
March 31, 1997
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 CASH DISTRIBUTION FUND II
-----------------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
May 13, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ------------- Senior Vice President, ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
May 13, 1997 Senior Vice President, /S/ BRYANT J. TONG
- ------------- Financial Operations of ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
May 13, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- ------------- and a Director of ----------------------
Phoenix Leasing Incorporated (Gary W. Martinez)
General Partner
May 13, 1997 Partnership Controller of /S/ MICHAEL K. ULYATT
- ------------- Phoenix Leasing Incorporated ---------------------
General Partner (Michael K. Ulyatt)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,961
<SECURITIES> 0
<RECEIVABLES> 1,683
<ALLOWANCES> 377
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,773
<DEPRECIATION> 3,848
<TOTAL-ASSETS> 6,146
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,060
<TOTAL-LIABILITY-AND-EQUITY> 6,146
<SALES> 0
<TOTAL-REVENUES> 431
<CGS> 0
<TOTAL-COSTS> 372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 63
<INCOME-TAX> 0
<INCOME-CONTINUING> 63
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
