Page 1 of 12
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 June 30, 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 0-16615
-------
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
Registrant
California 68-0062480
- -------------------------------- ----------------------------------
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 _____
516,716 Units of Limited Partnership Interest were outstanding as of June 30,
1997.
Transitional small business disclosure format:
Yes _____ No __X__
<PAGE>
Page 2 of 12
Part I. Financial Information
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
June 30, December 31,
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 4,489 $ 15,591
Accounts receivable (net of allowance
for losses on accounts receivable of
$63 and $56 at June 30, 1997 and
December 31, 1996, respectively) 219 89
Notes receivable (net of allowance for
losses on notes receivable of $604 at
June 30, 1997 and December 31, 1996) 50 58
Equipment on operating leases and held
for lease (net of accumulated depreciation
of $11,632 and $12,885 at June 30, 1997
and December 31, 1996, respectively) -- 1
Cable systems, property and equipment (net of
accumulated depreciation of $378 and $239 at
June 30, 1997 and December 31, 1996, respectively) 3,164 3,215
Cable subscriber lists (net of accumulated
amortization of $286 and $189 at June 30,
1997 and December 31, 1996, respectively) 1,230 1,464
Investment in joint ventures 524 547
Capitalized acquisition fees (net of accumulated
amortization of $8,266 and $8,265 at June 30,
1997 and December 31, 1996) 11 11
Other assets 32 15
-------- --------
Total Assets $ 9,719 $ 20,991
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 2,728 $ 2,847
Minority interest in subsidiary 1 9
-------- --------
Total Liabilities 2,729 2,856
-------- --------
Partners' Capital
General Partner (22) (25)
Limited Partners, 600,000 units authorized,
528,151 units issued and 516,716 units
outstanding at June 30, 1997 and December 31, 1996 7,012 18,160
-------- --------
Total Partners' Capital 6,990 18,135
-------- --------
Total Liabilities and Partners' Capital $ 9,719 $ 20,991
======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
Page 3 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
INCOME
Rental income $ 76 $ 175 $ 203 $ 588
Gain (adjustment to gain) on
sale of cable system -- (35) -- 1,178
Cable subscriber revenue 436 1,066 852 1,732
Equity in earnings from joint
ventures, net 35 73 47 128
Gain on sale of securities -- -- 150 24
Other income 81 122 208 245
---- ------- ------ -------
Total Income 628 1,401 1,460 3,895
---- ------- ------ -------
EXPENSES
Depreciation and amortization 118 410 219 1,174
Lease related operating expenses 8 24 22 72
Program service, cable system 133 328 266 511
Management fees to General Partner and
affiliate 23 64 53 246
Reimbursed administrative costs
to General Partner 29 42 74 87
Provision for (recovery of) losses on
receivables 4 11 9 (2,099)
Legal expense 13 78 38 200
General and administrative expenses 139 278 307 463
---- ------- ------ -------
Total Expenses 467 1,235 988 654
---- ------- ------ -------
NET INCOME BEFORE MINORITY INTEREST 161 166 472 3,241
Minority interest in losses (earnings)
of subsidiary 8 5 8 (203)
---- ------- ------ -------
NET INCOME $169 $ 171 $ 480 $ 3,038
==== ======= ====== =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $.32 $ .33 $ .92 $ 5.82
==== ======= ====== =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $-- $ -- $22.50 $ 3.78
==== ======= ====== =======
ALLOCATION OF NET INCOME:
General Partner $ 1 $ 1 $ 3 $ 31
Limited Partners 168 170 477 3,007
---- ------- ------ -------
$169 $ 171 $ 480 $ 3,038
==== ======= ====== =======
The accompanying notes are an integral part of these statements.
<PAGE>
Page 4 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1997 1996
---- ----
Operating Activities:
Net income $ 480 $ 3,038
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 219 1,174
Gain on sale of cable system -- (1,178)
Gain on sale of equipment (23) (36)
Equity in earnings from joint
ventures, net (47) (128)
Recovery of losses on notes receivable -- (2,035)
Provision for losses on accounts receivable 9 17
Recovery of early termination,
financing leases -- (81)
Gain on sale of securities (150) (24)
Increase in accounts receivable -- (131)
Increase (decrease) in accounts payable
and accrued expenses (103) 170
Increase in other assets (17) (2)
Minority interest in earnings (losses)
of subsidiary (8) 203
Other -- 218
-------- --------
Net cash provided by operating activities 360 1,205
-------- --------
Investing Activities:
Principal payments, notes receivable 8 566
Proceeds from sale of cable system -- 2,586
Proceeds from sale of equipment 24 57
Proceeds from sale of securities 150 24
Distributions from joint ventures 70 114
Cable systems, property and equipment (89) (124)
-------- --------
Net cash provided by investing activities 163 3,223
-------- --------
Financing Activities:
Payments of principal, notes payable -- (729)
Distributions to partners (11,625) (1,954)
Distributions to minority partners -- (505)
-------- --------
Net cash used by financing activities (11,625) (3,188)
-------- --------
Increase (decrease) in cash and
cash equivalents (11,102) 1,240
Cash and cash equivalents, beginning
of period 15,591 3,619
-------- --------
Cash and cash equivalents, end of period $ 4,489 $ 4,859
======== ========
Supplemental Cash Flow Information:
Cash paid for interest expense $ -- $ 26
The accompanying notes are an integral part of these statements.
<PAGE>
Page 5 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
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.
Non-Cash Investing Activities. The Partnership foreclosed upon two
cable television systems during the six months ended June 30, 1996, as discussed
in Note 2 in the consolidated financial statements.
Note 2. Reclassification.
Reclassification - Certain 1996 amounts have been reclassified to
conform to the 1997 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. Notes Receivable.
Impaired Notes Receivable. At June 30, 1997, the recorded investment in
notes that are considered to be impaired was $654,000 for which the related
allowance for losses was $604,000. The average recorded investment in impaired
loans during the six months ended June 30, 1997 was approximately $656,000.
At June 30, 1996, the recorded investment in notes that are considered
to be impaired was $2,396,000 for which the related allowance for losses was
$1,584,000. The average recorded investment in impaired loans during the six
months ended June 30, 1996 was approximately $2,496,000.
The activity in the allowance for losses on notes receivable during the
six months ended June 30, is as follows:
1997 1996
---- ----
(Amounts in Thousands)
Beginning balance $ 604 $ 3,880
Provision for losses - (2,035)
Write downs - -
--------- ---------
Ending balance $ 604 $ 1,845
========= =========
<PAGE>
Page 6 of 12
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 516,716 for the six months ended June 30,
1997 and 1996. For purposes of allocating net income (loss) and distributions to
each individual limited partner, the Partnership allocates net income (loss) and
distributions based upon each respective limited partner's net capital
contributions.
Note 6. Investment in Joint Ventures.
Equipment Joint Ventures
The aggregate combined financial information of the equipment joint
ventures is presented as follows:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 2,545 $ 2,851
Liabilities 814 733
Partners' Capital 1,731 2,118
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 636 $ 994 $ 1,192 $ 1,887
Expenses 348 522 669 1,088
Net Income 288 472 523 799
Foreclosed Cable Systems Joint Ventures
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 2,245 $ 2,203
Liabilities 472 377
Partners' Capital 1,773 1,826
<PAGE>
Page 7 of 12
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 260 $ 278 $ 505 $ 524
Expenses 274 268 551 543
Net Income (Loss) (14) 10 (46) (19)
<PAGE>
Page 8 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Phoenix Leasing Cash Distribution Fund III, a California limited
partnership and Subsidiaries (the Partnership) reported net income of $169,000
and $480,000 for the three and six months ended June 30, 1997, respectively, as
compared to net income of $171,000 and $3,038,000 for the same periods in 1996.
Net income for the three months ended June 30, 1997 compared to the same period
in 1996 remained relatively the same; however, net income decreased by
$2,558,000 for the six months ended June 30, 1997, as compared to the same
period in 1996. The decrease in net income experienced during the six months
ended June 30, 1997 is primarily attributable to the absence of a gain on sale
of cable system, as compared to the gain of $1,178,000 reported during the same
period in 1996 and an increase in provision for losses on receivables of
$2,108,000.
During the six months ended June 30, 1996, Phoenix Black Rock Cable
J.V., a wholly owned subsidiary of Phoenix Leasing Cash Distribution Fund III,
sold the assets of its cable television system for $2.6 million in cash. As a
result of this sale, the Partnership recognized a gain on sale of $1,178,000.
During the six months ended June 30, 1996, the Partnership entered into
agreements with two cable television system operators to transfer all of the
assets of the cable television systems in satisfaction of defaulted notes
receivable from these cable television system operators. The assets of these
cable television systems were transferred to newly formed limited liability
companies, Phoenix Concept Cablevision of Indiana, L.L.C. and Phoenix Grassroots
Cable Systems, L.L.C. On August 30, 1996, the Partnership subsequently sold the
assets of Phoenix Grassroots Cable Systems, L.L.C.
Upon the transfer of these two cable television systems, the
Partnership reduced its allowance for loan losses by $2,035,000 during the six
months ended June 30, 1996. This reduction in the allowance for loan losses was
recognized as income during the period.
Total revenues decreased by $775,000 and $2,477,000 during the three
and six months ended June 30, 1997, respectively, when compared to the same
periods in 1996. The decline in total revenues for the three months ended June
30, 1997, compared to 1996, is primarily the result of a reduction in cable
subscriber revenues. In addition to the reduction in cable subscriber revenues,
the absence of a gain on sale of cable system and the decline in rental income
contributed to the decrease in total revenues for the six months ended June 30,
1997, compared to the same period in 1996.
The decline in cable subscriber revenue of $630,000 and $880,000 for
the three and six months ended June 30, 1997, respectively, compared to the same
periods in 1996, is attributable to the sale of the assets of the cable system
owned by Phoenix Black Rock Cable J.V. and Phoenix Grassroots Cable Systems,
L.L.C. As a result of the sale of the assets, Phoenix Black Rock Cable J.V. and
Phoenix Grassroots Cable System, L.L.C. ceased operations.
Rental income decreased by $99,000 and $385,000 for the three and six
months ended June 30, 1997, respectively, compared to the same periods in 1996,
primarily as the result of a decrease in the amount of equipment owned by the
Partnership. At June 30, 1997, the Partnership owned equipment, excluding the
Partnership's pro rata interest in joint ventures, with an aggregate original
<PAGE>
Page 9 of 12
cost of $12.4 million, as compared to $16.4 million at June 30, 1996.
Total expenses decreased by $770,000 for the three months ended June
30, 1997, as compared to the same period in 1996 but increased by $292,000 for
the six months ended June 30, 1997, as compared to the same period in 1996.
During the three and six months ended June 30, 1997, the Partnership experienced
decreases in depreciation and amortization, program service and general and
administrative expenses. These factors contributed to the decrease in total
expenses for the three months ended June 30, 1997, as compared to the prior
year. However, the increase in provision for losses on receivables, as
previously discussed, more than offset these factors for the six months ended
June 30, 1997, compared to the same period in 1996.
The decreases in depreciation and amortization of $292,000 and
$955,000, program service of $195,000 and $252,000 and general and
administrative expenses of $141,000 and $191,000 for the three and six months
ended June 30, 1997, respectively, compared to the same periods in the prior
year, are all a result of the sale of assets in several Subsidiaries of the
Partnership. As a result of the sale of assets, these Subsidiaries ceased
operations. The decrease in depreciation and amortization expense for the three
and six months ended June 30, 1997 is also a result of the Partnership's
equipment being fully depreciated.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from cable
subscriber revenues and from its contractual obligations with lessees and
borrowers for fixed payment terms. As the initial lease terms of the leases
expire, the Partnership will continue to renew, remarket or sell the equipment.
The future liquidity of the Partnership will depend upon the General Partner's
success in collecting contractual amounts and releasing and selling the
Partnership's equipment as it comes off lease. As another source of liquidity,
the Partnership owns cable television systems, has investments in foreclosed
cable system joint ventures and investments in leasing joint ventures.
The net cash generated by operating activities was $360,000 during the
six months ended June 30, 1997, as compared to $1,205,000 during the same period
in 1996. This decrease is primarily due to a decline in rental income and cable
subscriber revenue.
During the six months ended June 30, 1996, the Partnership received
proceeds of $2.6 million for the sale of a cable system owned by Phoenix Black
Rock Cable J.V., a majority owned subsidiary of the Partnership. This cable
system was sold on January 17, 1996.
During the six months ended June 30, 1997, the Partnership reported a
decrease in principal payments from notes receivable of $558,000, compared to
the same period in 1996. This decrease is reflective of the decline in notes
receivable, as reported on the balance sheet at June 30, 1997.
The Partnership received proceeds from the sale of securities of
$150,000 for the six months ended June 30, 1997, compared to $24,000 for the
same period in 1996. The securities sold during both 1996 and 1997 consisted of
common stock received through the exercise of stock warrants granted to the
Partnership as part of a financing agreement with several emerging growth
companies.
As of June 30, 1997, the Partnership owned equipment held for lease
with an aggregate original cost of $3,196,000 and a net book value of $0,
compared to $3,653,000 and $1,000, respectively, as of June 30, 1996. The
General Partner is actively engaged, on behalf of the Partnership, in
remarketing and selling the Partnership's off-lease portfolio.
The cash distributed to limited partners during both the six months
ended June 30, 1997 and 1996 was $11,625,000 and $1,954,000, respectively. As a
<PAGE>
Page 10 of 12
result, the cumulative cash distributions to the limited partners are
$109,804,000 and $98,179,000 as of June 30, 1997 and 1996, respectively. The
General Partner did not receive cash distributions during the six months ended
June 30, 1997 and 1996. The General Partner has elected not to receive payment,
at this time, for its share of the cash available for distribution due to its
negative capital account.
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 Partnership leasing operations will also decline. As the cash
generated by operations continues to decline, the rate of cash distributions
made to limited partners will also decline. The Partnership currently
distributes on an annual basis with the first annual distribution being made on
January 15, 1997. As a result of the sale of certain cable television systems
and the settlement of an impaired note receivable during 1996, the Partnership
included the excess cash provided by these events in the January 15, 1997
distribution.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's continuing
operational expenses and to provide for distributions to partners.
<PAGE>
Page 11 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP
June 30, 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:
One report, dated June 16, 1997, on Form 8-K was filed during
the quarter ending June 30, 1997, pursuant to Item 4 and Item 7 of that form. No
financial statements were filed as part of that report.
<PAGE>
Page 12 of 12
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 III,
-------------------------------------------
A CALIFORNIA LIMITED PARTNERSHIP
-------------------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
August 13, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- --------------- and a Director of ----------------------
Phoenix Leasing Incorporated (Gary W. Martinez)
General Partner
August 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
August 13, 1997 Senior Vice President, /S/ BRYANT J. TONG
- --------------- Financial Operations of ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
August 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,489
<SECURITIES> 0
<RECEIVABLES> 936
<ALLOWANCES> 667
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,174
<DEPRECIATION> 12,010
<TOTAL-ASSETS> 9,719
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,990
<TOTAL-LIABILITY-AND-EQUITY> 9,719
<SALES> 0
<TOTAL-REVENUES> 1,460
<CGS> 0
<TOTAL-COSTS> 988
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 480
<INCOME-TAX> 0
<INCOME-CONTINUING> 480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 480
<EPS-PRIMARY> .92
<EPS-DILUTED> 0
</TABLE>
