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 September 30, 1999
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
--- ---
516,642 Units of Limited Partnership Interest were outstanding as of September
30, 1999.
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)
September 30, December 31,
1999 1998
---- ----
ASSETS
Cash and cash equivalents $ 1,187 $ 1,316
Accounts receivable (net of allowance for losses
on accounts receivable of $0 and $57 at
September 30, 1999 and December 31, 1998,
respectively) 1 132
Notes receivable (net of allowance for losses on
notes receivable of $21 at September 30, 1999
and December 31, 1998) 43 43
Cable systems, property and equipment (net of
accumulated depreciation of $0 and $811 at
September 30, 1999 and December 31, 1998,
respectively) -- 2,859
Cable subscriber lists (net of accumulated
amortization of $0 and $570 at September 30,
1999 and December 31, 1998, respectively) -- 946
Investment in joint ventures -- 205
Other assets 37 54
------- -------
Total Assets $ 1,268 $ 5,555
======= =======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 224 $ 593
------- -------
Total Liabilities 224 593
------- -------
Partners' Capital (Deficit)
General Partner 2,072 2,058
Limited Partners, 600,000 units authorized,
528,151 units issued and 516,642 and 516,662
units outstanding at September 30, 1999 and
December 31, 1998, respectively (1,059) 2,888
Accumulated other comprehensive income 31 16
------- -------
Total Partners' Capital (Deficit) 1,044 4,962
------- -------
Total Liabilities and Partners' Capital (Deficit) $ 1,268 $ 5,555
======= =======
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
INCOME
Gain on sale of cable system $ -- $ -- $ 1,960 $ --
Rental income 1 129 82 259
Cable subscriber revenue -- 410 54 1,253
Equity in earnings from joint
ventures, net 40 115 27 135
Gain on sale of securities 7 -- 7 32
Other income 30 82 172 157
------- ------- ------- -------
Total Income 78 736 2,302 1,836
------- ------- ------- -------
EXPENSES
Depreciation and amortization -- 129 -- 368
Cable system operations -- 227 29 683
Lease related operating expenses 2 11 5 25
Management fees to General Partner
and affiliate -- 23 268 66
Reimbursed administrative costs to
General Partner -- 39 48 125
Legal expense 43 57 111 167
General and administrative expenses 13 33 94 124
------- ------- ------- -------
Total Expenses 58 519 555 1,558
------- ------- ------- -------
NET INCOME 20 217 1,747 278
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period (17) -- 22 32
Less: reclassification adjustment
for gains included in net
income (7) -- (7) (32)
------- ------- ------- -------
Other comprehensive income (loss) (24) -- 15 --
------- ------- ------- -------
COMPREHENSIVE INCOME (LOSS) $ (4) $ 217 $ 1,762 $ 278
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .04 $ .41 $ 3.35 $ .53
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ 10.99 $ 2.50
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ -- $ 2 $ 14 $ 3
Limited Partners 20 215 1,733 275
------- ------- ------- -------
$ 20 $ 217 $ 1,747 $ 278
======= ======= ======= =======
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)
Nine Months Ended
September 30,
1999 1998
---- ----
Operating Activities:
- --------------------
Net income $ 1,747 $ 278
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization -- 368
Gain on sale of cable system (1,960) --
Gain on sale of equipment (3) (21)
Gain on sale of securities (7) (32)
Equity in earnings from joint ventures, net (27) (135)
Provision for (recovery of) losses on
accounts receivable (10) 22
Decrease in accounts receivable -- 68
Decrease in accounts payable and accrued expenses (255) (135)
Decrease in other assets 32 1
------- -------
Net cash provided by (used in) operating activities (483) 414
------- -------
Investing Activities:
- --------------------
Principal payments, notes receivable -- 2
Proceeds from sale of cable system 5,811 --
Proceeds from sale of equipment 3 21
Proceeds from sale of securities 7 32
Distributions from joint ventures 232 88
Cable systems, property and equipment (19) (47)
------- -------
Net cash provided by investing activities 6,034 96
------- -------
Financing Activities:
- --------------------
Contribution from General Partner -- 2,072
Distributions to partners (5,680) (1,291)
------- -------
Net cash provided by (used in) financing activities (5,680) 781
------- -------
Increase (decrease) in cash and cash equivalents (129) 1,291
Cash and cash equivalents, beginning of period 1,316 3,072
------- -------
Cash and cash equivalents, end of period $ 1,187 $ 4,363
======= =======
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 consolidated 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.
The Partnership Agreement stipulates the methods by which income will
be allocated to the General Partner and the limited partners. Such allocations
will be made using income or loss calculated under Generally Accepted Accounting
Principles for book purposes, which varies from income or loss calculated for
tax purposes.
The calculation of items of income and loss for book and tax purposes
may result in book basis capital accounts that vary from the tax basis capital
accounts. The requirement to restore any deficit capital balances by the General
Partner will be determined based on the tax basis capital accounts. At
liquidation of the Partnership, the General Partner's remaining book basis
capital accounts will be reduced to zero through the allocation of income or
loss.
In January 1999, Phoenix Concept Cablevision of Indiana, L.L.C. sold
all or substantially all of its assets with a carrying value of $3.8 million for
$5.8 million. Cash, accounts receivables and certain other miscellaneous items,
currently owned by Phoenix Concept Cablevision of Indiana, L.L.C. were excluded
from this sale.
Note 2. Reclassification.
----------------
Reclassification - Certain 1998 amounts have been reclassified to
conform to the 1999 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 September 30, 1999, the Partnership has
investments in notes receivable, before allowance for losses of $64,000. This
amount includes impaired notes receivable, net of specific write downs, of
$64,000. The Partnership has an allowance for losses for $21,000 as of September
30, 1999. The average recorded investment in impaired loans during the nine
months ended September 30, 1999 and 1998 was approximately $50,000 and $43,000,
respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1999 1998
---- ----
(Amounts in Thousands)
Beginning balance $ 21 $ 604
Provision for losses -- --
Write downs -- (583)
----- -----
Ending balance $ 21 $ 21
===== =====
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 516,642 and 516,662 for the nine months
ended September 30, 1999 and 1998, 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:
September 30, December 31,
1999 1998
---- ----
(Amounts in Thousands)
Assets $-- $--
Liabilities -- --
Partners' Capital -- --
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $ 457 $ -- $ 752
Expenses -- 686 -- 840
Net Loss -- (229) -- (88)
6
<PAGE>
Foreclosed Cable Systems Joint Ventures
- ---------------------------------------
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
September 30, December 31,
1999 1998
---- ----
(Amounts in Thousands)
Assets $ -- $750
Liabilities -- 181
Partners' Capital -- 569
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 266 $ 257 $ 397 $ 686
Expenses 19 234 182 747
Net Income (Loss) 247 23 215 (61)
Note 7. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing Incorporated, Phoenix Leasing Associates, II and III LP., Phoenix
Securities Inc. and Phoenix American Incorporated (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of a constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and refiled them in a separate lawsuit
making similar allegations (the "Ash Action"). That complaint was subsequently
transferred to Marin County as well.
Plaintiffs have amended the Berger Action twice. Defendants recently
answered the complaint. Discovery has recently commenced. The Companies intend
to vigorously defend the Complaint.
Defendants have filed a demurrer to the Ash Complaint, which plaintiffs
amended three times. Discovery has not commenced. The Companies intend to
vigorously defend the Complaint.
During the nine months ended September 30, 1999 and September 30, 1998,
the Partnership recorded legal expenses of approximately $103,000 and $110,000,
respectively, in connection with the above litigation as indemnification to the
General Partner.
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 $20,000 and
$1,747,000 for the three and nine months ended September 30, 1999, as compared
to $217,000 and $278,000 for the same period in 1998, respectively. The increase
in net income during the nine months ended September 30, 1999, as compared to
the same period in 1998, is primarily attributable to a gain on sale of cable
system of $1,960,000.
During the nine months ended September 30, 1999, Phoenix Concept
Cablevision of Indiana, L.L.C., a wholly owned subsidiary of Phoenix Leasing
Cash Distribution Fund III, sold the assets of its cable television system for
$5,811,000 in cash proceeds. As a result of this sale, the Partnership
recognized a gain on sale of cable system of $1,960,000. The decreases in cable
subscriber revenue, cable system operations expense and depreciation and
amortization are attributable to the sale. Correspondingly, management fees to
the General Partner and affiliate also increased.
At September 30, 1999, the Partnership owned equipment, excluding the
Partnership's pro rata interest in joint ventures, with an aggregate original
cost of $3,000 compared to $1.4 million at September 30, 1998.
Because the Partnership is in its 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. Phoenix Concept Cablevision of Indiana, L.L.C., which was sold
during the first quarter in 1999, had become the primary activity of the
Partnership. The Partnership reached the end of its term on December 31, 1998;
however, the remaining assets had not yet been liquidated.
Liquidity and Capital Resources
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. The remaining assets of the
Partnership consist primarily of a note receivable from a cable television
system operator and a lease. The General Partner is continuing its efforts in
marketing these assets for sale.
Distributions from joint ventures increased $144,000 for the nine
months ended September 30,1999, as compared to the same period in the previous
year. This increase in distributions is due to the sale of one of the cable
joint ventures that the Partnership had a equity interest in.
The cash distributed to limited partners during the nine months ended
September 30, 1999 and 1998 was $5,680,000 and $1,291,000, respectively. As a
result, the cumulative cash distributions to the limited partners are
$120,326,000 and $111,095,000 as of September 30, 1999 and 1998, respectively.
The General Partner did not receive cash distributions during the nine months
ended September 30, 1999 and 1998.
8
<PAGE>
Impact of the Year 2000 Issue
ReSourcePhoenix.com ("ReSourcePhoenix"), an affiliate of the parent to
the General Partner does all local computer processing for the General Partner.
And as such ResourcePhoenix manages the Year 2000 project on behalf of the
General Partner.
ResourcePhoenix has a Year 2000 project plan in place. The Year 2000
project team has identified risks, and has implemented remediation procedures
for its Year 2000 issues. ReSourcePhoenix has budgeted for the necessary
changes, built contingency plans, and has progressed along the scheduled
timeline. Installation of all remediation changes to critical software and
hardware was completed on November 5, 1999.
Costs incurred by the Partnership will be expensed as incurred and are
not currently anticipated to be material to the Partnership's financial position
or results of operations.
The Partnership's customers consist of lessees and borrowers. The
Partnership does not have knowledge of any exposure to any individual customer
that would materially impact the Partnership should the customer experience a
significant Year 2000 problem, however, cumulative exposure to multiple
individual customers could materially impact the Partnership should multiple
customers experience a significant Year 2000 problem.
9
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND III,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
September 30, 1999
Part II. Other Information.
-----------------
Item 1. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing Incorporated, Phoenix Leasing Associates, II and III LP., Phoenix
Securities Inc. and Phoenix American Incorporated (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of a constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and refiled them in a separate lawsuit
making similar allegations (the "Ash Action"). That complaint was subsequently
transferred to Marin County as well.
Plaintiffs have amended the Berger Action twice. Defendants recently
answered the complaint. Discovery has recently commenced. The Companies intend
to vigorously defend the Complaint.
Defendants have filed a demurrer to the Ash Complaint, which plaintiffs
amended three times. Discovery has not commenced. The Companies intend to
vigorously defend the Complaint.
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
---- ----- ---------
November 10, 1999 Executive Vice President, /S/ GARY W. MARTINEZ
- ----------------- Chief Operating Officer --------------------
and a Director of (Gary W. Martinez)
Phoenix Leasing Incorporated
General Partner
November 10, 1999 Chief Financial Officer, /S/ HOWARD SOLOVEI
- ----------------- Treasurer and a Director of --------------------
Phoenix Leasing Incorporated (Howard Solovei)
General Partner
November 10, 1999 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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,187
<SECURITIES> 31
<RECEIVABLES> 65
<ALLOWANCES> 21
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,268
<CURRENT-LIABILITIES> 224
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,044
<TOTAL-LIABILITY-AND-EQUITY> 1,268
<SALES> 0
<TOTAL-REVENUES> 2,302
<CGS> 0
<TOTAL-COSTS> 555
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,747
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,747
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,747
<EPS-BASIC> 3.35
<EPS-DILUTED> 0
</TABLE>
