Page 1 of 11
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 0-16615
-------
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 March 31,
1997.
Transitional small business disclosure format:
Yes ___ No _X_
<PAGE>
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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)
March 31, December 31,
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 4,228 $ 15,591
Accounts receivable (net of allowance for losses
on accounts receivable of $59 and $56 at
March 31, 1997 and December 31, 1996, respectively) 231 89
Notes receivable (net of allowance for losses on
notes receivable of $604 at March 31, 1997 and
December 31, 1996) 54 58
Equipment on operating leases and held for lease (net
of accumulated depreciation of $12,203 and $12,885
at March 31, 1997 and December 31, 1996, respectively) -- 1
Cable systems, property and equipment (net of
accumulated depreciation of $308 and $239 at March 31,
1997 and December 31, 1996, respectively) 3,196 3,215
Cable subscriber lists (net of accumulated amortization
of $238 and $189 at March 31,1997 and December 31,
1996, respectively) 1,277 1,464
Investment in joint ventures 526 547
Capitalized acquisition fees (net of accumulated
amortization of $8,265 at March 31, 1997 and
December 31, 1996) 11 11
Other assets 26 15
------- --------
Total Assets $ 9,549 $ 20,991
======= ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 2,718 $ 2,847
Minority interest in subsidiary 9 9
------- --------
Total Liabilities 2,727 2,856
------- --------
Partners' Capital
General Partner (23) (25)
Limited Partners, 600,000 units authorized, 528,151
units issued and 516,716 units outstanding at
March 31, 1997 and December 31, 1996 6,845 18,160
------- --------
Total Partners' Capital 6,822 18,135
------- --------
Total Liabilities and Partners' Capital $ 9,549 $ 20,991
======= ========
The accompanying notes are an integral part of these statements.
<PAGE>
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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
March 31,
1997 1996
---- ----
INCOME
Rental income $ 152 $ 414
Gain on sale of cable system -- 1,212
Interest income, notes receivable 3 49
Cable subscriber revenue 415 666
Gain on sale of securities 151 24
Other income 70 128
------ -------
Total Income 791 2,493
------ -------
EXPENSES
Depreciation and amortization 102 764
Lease related operating expenses 13 48
Program service, cable system 126 183
Management fees to General Partner and affiliate 30 182
Reimbursed administrative costs to General Partner 45 45
Provision for (recovery of) losses on receivables 4 (2,109)
Legal expense 25 122
General and administrative expenses 135 183
------ -------
Total Expenses 480 (582)
------ -------
NET INCOME BEFORE MINORITY INTEREST 311 3,075
Minority interest in earnings of subsidiary -- (209)
------ -------
NET INCOME $ 311 $ 2,866
====== =======
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .60 $ 5.49
====== =======
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $22.50 $ 3.78
====== =======
ALLOCATION OF NET INCOME:
General Partner $ 2 $ 29
Limited Partners 309 2,837
------ -------
$ 311 $ 2,866
====== =======
The accompanying notes are an integral part of these statements.
<PAGE>
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PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
1997 1996
---- ----
Operating Activities:
Net income $ 311 $ 2,866
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 102 764
Gain on sale of cable system -- (1,212)
Gain on sale of equipment (20) (8)
Equity in earnings from joint ventures, net (12) (55)
Recovery of losses on notes receivable -- (2,035)
Recovery of early termination, financing leases -- (81)
Provision for losses on accounts receivable 4 7
Gain on sale of securities (151) (24)
Increase in accounts receivable (7) (208)
Increase (decrease) in accounts payable and
accrued expenses (113) 240
Increase in other assets (11) (1)
Minority interest in earnings of subsidiary -- 209
Other -- 217
-------- -------
Net cash provided by operating activities 103 679
-------- -------
Investing Activities:
Principal payments, notes receivable 4 367
Proceeds from sale of cable system -- 2,583
Proceeds from sale of equipment 21 26
Proceeds from sale of securities 151 24
Distributions from joint ventures 33 33
Cable systems, property and equipment (51) (59)
-------- -------
Net cash provided by investing activities 158 2,974
-------- -------
Financing Activities:
Payments of principal, notes payable -- (200)
Distributions to partners (11,624) (1,954)
Distributions to minority partners -- (485)
-------- -------
Net cash used by financing activities (11,624) (2,639)
-------- -------
Increase (decrease) in cash and cash equivalents (11,363) 1,014
Cash and cash equivalents, beginning of period 15,591 3,619
-------- -------
Cash and cash equivalents, end of period $ 4,228 $ 4,633
======== =======
Supplemental Cash Flow Information:
Cash paid for interest expense $ -- $ 6
The accompanying notes are an integral part of these statements.
<PAGE>
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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 three months ended March 31, 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 March 31, 1997, the recorded investment
in notes that are considered to be impaired was $658,000 for which the related
allowance for losses was $604,000. The average recorded investment in impaired
loans during the three months ended March 31, 1997 was approximately $658,000.
At March 31, 1996, the recorded investment in notes that are considered
to be impaired was $2,596,000 for which the related allowance for losses was
$1,584,000. The average recorded investment in impaired loans during the three
months ended March 31, 1996 was approximately $2,596,000.
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 $ 604 $ 3,880
Provision for losses -- (2,035)
Write downs -- --
------ -------
Ending balance $ 604 $ 1,845
====== =======
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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 516,716 for the three months ended March
31, 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:
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 $ 893
Expenses 321 566
Net Income 235 327
Foreclosed Cable Systems Joint Ventures
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
March 31, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 2,198 $ 2,203
Liabilities 412 377
Partners' Capital 1,786 1,826
<PAGE>
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Three Months Ended
March 31,
1997 1996
---- ----
(Amounts in Thousands)
Revenue $ 245 $ 247
Expenses 277 276
Net Loss (32) (29)
<PAGE>
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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 $311,000
for the three months ended March 31, 1997, as compared to net income of
$2,866,000 for the same period in 1996. The $2,555,000 decrease in net income
during the three months ended March 31, 1997, as compared to the same period in
1996, is primarily attributable to the absence of a gain on sale of cable
system, as compared to $1,212,000 during the same period in 1996 and an increase
in provision for losses on receivables of $2,113,000.
During the three months ended March 31, 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 $1,240,000.
During the three months ended March 31, 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 $2,109,000 during the three
months ended March 31, 1996. This reduction in the allowance for loan losses was
recognized as income during the period.
Total revenues decreased by $1,702,000 during the three months ended
March 31, 1997, when compared to the same period in 1996. This decrease is
primarily the result of an absence of a gain on the sale of a cable system, as
previously discussed, and decreases in rental income of $262,000 and cable
subscriber revenue of $251,000 for the three months ended March 31, 1997,
compared to 1996. Rental income declined primarily as the result of a decrease
in the amount of equipment owned by the Partnership. At March 31, 1997, the
Partnership owned equipment, excluding the Partnership's pro rata interest in
joint ventures, with an aggregate original cost of $13 million, as compared to
$18.9 million at March 31, 1996.
The decline in cable subscriber revenue of $251,000 for the three
months ended March 31, 1997, compared to the same period 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.
Total expenses increased by $1,062,000 for the three months ended March
31, 1997, as compared to the same period in 1996. The increase in total expenses
for the period is primarily due to an adjustment to the provision for losses on
receivables of $2,113,000 during 1996, as previously discussed. The Partnership
reported a decrease in depreciation and amortization of $662,000 for the three
months ended March 31, 1997, compared to the prior year. The decrease in
depreciation and amortization expense is a result of the Partnership's equipment
being fully depreciated.
<PAGE>
Page 9 of 11
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 $103,000 during the
three months ended March 31, 1997, as compared to $679,000 during the same
period in 1996. This decrease is primarily due to a decline in rental income and
cable subscriber revenue.
During the three months ended March 31, 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 three months ended March 31, 1997, the Partnership reported
a decrease in principal payments from notes receivable of $363,000, compared to
the same period in 1996. This decrease is reflective of the decline in notes
receivable, as reported on the balance sheet at March 31, 1997.
As of March 31, 1997, the Partnership owned equipment held for lease
with an aggregate original cost of $2,565,000 and a net book value of $0,
compared to $3,615,000 and $10,000, respectively, as of March 31, 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 three months
ended March 31, 1997 and 1996 was $11,624,000 and $1,954,000, respectively. As a
result, the cumulative cash distributions to the limited partners are
$109,803,000 and $98,179,000 as of March 31, 1997 and 1996, respectively. The
General Partner did not receive cash distributions during the three months ended
March 31, 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 first annual distribution was
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 distributed the excess cash provided by these events on 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 10 of 11
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP
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 III,
-------------------------------------------
A CALIFORNIA LIMITED PARTNERSHIP
--------------------------------
(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> 4,228
<SECURITIES> 0
<RECEIVABLES> 948
<ALLOWANCES> 663
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,707
<DEPRECIATION> 12,511
<TOTAL-ASSETS> 9,549
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,822
<TOTAL-LIABILITY-AND-EQUITY> 9,549
<SALES> 0
<TOTAL-REVENUES> 791
<CGS> 0
<TOTAL-COSTS> 480
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 311
<INCOME-TAX> 0
<INCOME-CONTINUING> 311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 311
<EPS-PRIMARY> .60
<EPS-DILUTED> 0
</TABLE>