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, 1998
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
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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,
1998.
Transitional small business disclosure format:
Yes No X
----- -----
Page 1 of 11
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
March 31, December 31,
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 1,995 $ 3,072
Accounts receivable (net of allowance for
losses on accounts receivable of $76 and
$73 at March 31, 1998 and December 31,
1997, respectively) 136 192
Notes receivable (net of allowance for losses
on notes receivable of $604 at March 31,
1998 and December 31, 1997) 44 45
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$4,180 and $10,017 at March 31, 1998 and
December 31, 1997, respectively) -- --
Cable systems, property and equipment (net of
accumulated depreciation of $593 and $521
at March 31, 1998 and December 31, 1997,
respectively) 3,031 3,086
Cable subscriber lists (net of accumulated
amortization of $428 and $380 at March 31,
1998 and December 31, 1997, respectively) 1,088 1,135
Investment in joint ventures 314 310
Other assets 39 48
------- -------
Total Assets $ 6,647 $ 7,888
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 620 $ 608
------- -------
Total Liabilities 620 608
------- -------
Partners' Capital
General Partner (18) (18)
Limited Partners, 600,000 units authorized,
528,151 units issued and 516,662 units
outstanding at March 31, 1998 and December
31, 1997 6,045 7,298
------- -------
Total Partners' Capital 6,027 7,280
------- -------
Total Liabilities and Partners' Capital $ 6,647 $ 7,888
======= =======
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
INCOME
Cable subscriber revenue $ 420 $ 415
Rental income 70 152
Equity in earnings from joint ventures, net 11 12
Gain on sale of securities -- 151
Other income 31 61
------ ----
Total Income 532 791
------ ----
EXPENSES
Depreciation and amortization 119 102
Cable system operations 231 229
Lease related operating expenses 9 13
Management fees to General Partner and affiliate 22 30
Reimbursed administrative costs to General Partner 31 45
Legal expense 41 25
General and administrative expenses 41 36
------ ------
Total Expenses 494 480
------ ------
NET INCOME $ 38 $ 311
====== ======
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .07 $ .60
====== ======
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 2.50 $22.50
====== ======
ALLOCATION OF NET INCOME:
General Partner $ -- $ 2
Limited Partners 38 309
------ ------
$ 38 $ 311
====== ======
The accompanying notes are an integral part of these statements.
3
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
Operating Activities:
Net income $ 38 $ 311
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 119 102
Gain on sale of equipment (4) (20)
Equity in earnings from joint ventures, net (11) (12)
Provision for losses on accounts receivable 4 4
Gain on sale of securities -- (151)
Decrease (increase) in accounts receivable 52 (7)
Increase (decrease) in accounts payable and
accrued expenses 12 (113)
Decrease (increase) in other assets 9 (11)
-------- --------
Net cash provided by operating activities 219 103
-------- --------
Investing Activities:
Principal payments, notes receivable 1 4
Proceeds from sale of equipment 4 21
Proceeds from sale of securities -- 151
Distributions from joint ventures 7 33
Cable systems, property and equipment (17) (51)
-------- --------
Net cash provided (used) by investing activities (5) 158
-------- --------
Financing Activities:
Distributions to partners (1,291) (11,624)
-------- --------
Net cash used by financing activities (1,291) (11,624)
-------- --------
Decrease in cash and cash equivalents (1,077) (11,363)
Cash and cash equivalents, beginning of period 3,072 15,591
-------- --------
Cash and cash equivalents, end of period $ 1,995 $ 4,228
======== ========
The accompanying notes are an integral part of these statements.
4
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP 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.
Phoenix Concept Cablevision of Indiana, L.L.C. , a wholly owned
subsidiary of the Partnership, has entered into an Asset Purchase Agreement
dated March 20, 1998 to sell all or substantially all of its assets with a net
carrying value of $4.1 million at March 31, 1998 for approximately $6 million.
The sale will occur on or before June 30, 1998. Cash and cash equivalents, bank
deposits or similar cash items, subscriber deposits and other miscellaneous
items will be excluded from the sale.
Note 2. Reclassification.
Reclassification - Certain 1997 amounts have been reclassified to
conform to the 1998 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, 1998, the recorded investment
in notes that are considered to be impaired was $648,000 for which the related
allowance for losses was $604,000. The average recorded investment in impaired
loans during the three months ended March 31, 1998 and 1997 was approximately
$648,000 and $658,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
1998 1997
---- ----
(Amounts in Thousands)
Beginning balance $ 604 $ 604
Provision for losses - -
Write downs - -
--------- ---------
Ending balance $ 604 $ 604
========= =========
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 516,662 and 516,716 for the three months
ended March 31, 1998 and 1997, respectively. 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,
1998 1997
---- ----
(Amounts in Thousands)
Assets $ 1,096 $ 1,055
Liabilities 413 409
Partners' Capital 683 646
Three Months Ended
March 31,
1998 1997
---- ----
(Amounts in Thousands)
Revenue $ 135 $ 556
Expenses 80 321
Net Income 55 235
6
<PAGE>
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,
1998 1997
---- ----
(Amounts in Thousands)
Assets $ 2,043 $ 2,071
Liabilities 507 519
Partners' Capital 1,536 1,552
Three Months Ended
March 31,
1998 1997
---- ----
(Amounts in Thousands)
Revenue $ 253 $ 245
Expenses 269 277
Net Loss (16) (32)
7
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
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 Subsidiary (the Partnership) reported net income of $38,000 for
the three months ended March 31, 1998, as compared to net income of $311,000 for
the same period in 1997. The $273,000 decrease in net income during the three
months ended March 31, 1998, as compared to the same period in 1997, is
primarily attributable to the absence of a gain on sale of securities, as
compared to $151,000 during the same period in 1997, as well as an $82,000
decrease in rental income.
The gain on sale of securities of $151,000 for the three months ended
March 31, 1997 was attributable to the exercise and sale of stock warrants held
by the Partnership. The Partnership has been granted stock warrants as part of
its lease or financing agreements with certain emerging growth companies. The
Partnership did not exercise and sell any stock warrants during the three months
ended March 31, 1998.
Rental income decreased during the three months ended March 31, 1998,
compared to the same period in 1997. This decrease is the result of a reduction
in the amount of equipment owned by the Partnership. At March 31, 1998, the
Partnership owned equipment, excluding the Partnership's pro rata interest in
joint ventures, with an aggregate original cost of $4.8 million, as compared to
$13 million at March 31, 1997.
Because the Partnership is in it's liquidation stage, it is not
expected that the Partnership will acquire any additional equipment for its
leasing activities or provide any further financing. As a result, revenues from
leasing and financing activities are expected to continue to decline as the
portfolio is liquidated. The Partnership will reach the end of its term on
December 31, 1998. The Subsidiary's cable operations has become the primary
activity of the Partnership. Net income from cable operations were $53,000 for
the three months ended March 31, 1998.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from cable
subscriber revenues. As another source of liquidity, the Partnership has entered
into contractual obligations with lessees and borrowers for fixed payment terms,
has investments in foreclosed cable system joint ventures and investments in
leasing joint ventures.
The net cash generated by operating activities was $220,000 during the
three months ended March 31, 1998, as compared to $107,000 during the same
period in 1997. The increase in net cash generated by operating activities is a
result of an increase in accounts payable and accrued expenses.
As previously discussed, the Partnership exercised and sold stock
warrants during the three months ended March 31, 1997. As a result, the
Partnership received proceeds from the sale of these securities of $151,000.
As of March 31, 1998, the Partnership owned equipment held for lease
8
<PAGE>
with an aggregate original cost of $2,803,000 and a net book value of $0,
compared to $2,565,000 and $0, respectively, as of March 31, 1997. 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 the three months ended
March 31, 1998 and 1997 was $1,292,000 and $11,624,000, respectively. As a
result, the cumulative cash distributions to the limited partners are
$111,096,000 and $109,803,000 as of March 31, 1998 and 1997, respectively. The
General Partner did not receive cash distributions during the three months ended
March 31, 1998 and 1997. 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 will not be making any further
distributions until its termination at which time a final distribution of excess
cash, if any, will be distributed.
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 included the excess cash
provided by these events in the January 15, 1997 distribution.
As the Partnership's asset portfolio continues to decline as a result
of the on-going liquidation of assets, it is expected that the cash generated
from operations will also decline. 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. The Partnership will be fully
liquidated by its termination date of December 31, 1998.
9
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP
March 31, 1998
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
10
<PAGE>
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, 1998 Executive Vice President, /S/ GARY W. MARTINEZ
- -------------- Chief Operating Officer --------------------
and a Director of (Gary W. Martinez)
Phoenix Leasing Incorporated
General Partner
May 13, 1998 Chief Financial Officer, /S/ HOWARD SOLOVEI
- -------------- Treasurer and a Director of --------------------
Phoenix Leasing Incorporated (Howard Solovei)
General Partner
May 13, 1998 Senior Vice President, /S/ BRYANT J. TONG
- -------------- Financial Operations --------------------
(Principal Accounting Officer) (Bryant J. Tong)
and a Director of
Phoenix Leasing Incorporated
General Partner
11
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,995
<SECURITIES> 0
<RECEIVABLES> 860
<ALLOWANCES> 680
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,804
<DEPRECIATION> 4,773
<TOTAL-ASSETS> 6,647
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,027
<TOTAL-LIABILITY-AND-EQUITY> 6,647
<SALES> 0
<TOTAL-REVENUES> 532
<CGS> 0
<TOTAL-COSTS> 494
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 38
<INCOME-TAX> 0
<INCOME-CONTINUING> 38
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38
<EPS-PRIMARY> .07
<EPS-DILUTED> 0
</TABLE>
