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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ----- ACT OF 1934
For the quarterly period ended September 30, 1995
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 0-17989
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
Registrant
California 68-0166383
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
----- -----
<PAGE>
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<TABLE>
Part I. Financial Information
Item 1. Financial Statements
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 727 $ 755
Accounts receivable (net of allowance for losses on accounts receivable of $0
and $1 at September 30, 1995 and December 31, 1994, respectively) 10 21
Notes receivable (net of allowance for losses on notes receivable $111 and $202
at September 30, 1995 and December 31, 1994, respectively) 1,187 1,685
Equipment on operating leases and held for lease (net of accumulated
depreciation of $129 and $145 at September 30, 1995 and December 31, 1994,
respectively) -- 4
Net investment in financing leases 366 541
Investment in joint ventures 266 181
Capitalized acquisition fees (net of accumulated amortization of $234 and $214
at September 30, 1995 and December 31, 1994, respectively) 62 81
Other assets 1 3
------ ------
Total Assets $2,619 $3,271
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 49 $ 73
------ ------
Total Liabilities 49 73
------ ------
Partners' Capital
General Partner -- --
Limited Partners, 25,000 units authorized, 7,526 units issued
and outstanding at September 30, 1995 and December 31, 1994 2,570 3,198
------ ------
Total Partners' Capital 2,570 3,198
------ ------
Total Liabilities and Partners' Capital $2,619 $3,271
====== ======
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
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<TABLE>
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Rental income $ 2 $ 19 $ 9 $ 19
Earned income, financing leases 18 29 60 92
Interest income, notes receivable 71 12 71 137
Gain on sale of marketable securities -- -- -- 64
Other income 6 14 22 42
----- ----- ----- -----
Total Income 97 74 162 354
----- ----- ----- -----
EXPENSES
Depreciation and amortization 13 4 24 58
Lease related operating expenses -- 5 -- 6
Management fees to General Partner 18 -- 26 16
Reimbursed administrative costs to General Partner 3 5 13 16
Provision for losses on receivables 5 (3) (32) 12
Legal expense 25 10 62 24
General and administrative expenses 7 7 24 31
----- ----- ----- -----
Total Expenses 71 28 117 163
----- ----- ----- -----
NET INCOME $ 26 $ 46 $ 45 $ 191
===== ===== ===== =====
NET INCOME PER LIMITED
PARTNERSHIP UNIT $3.25 $5.59 $5.12 $24.14
===== ===== ===== =====
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $18.53 $51.13 $88.54 $127.53
===== ===== ===== =====
ALLOCATION OF NET INCOME:
General Partner $ 2 $ 4 $ 7 $ 10
Limited Partners 24 42 38 181
----- ----- ----- -----
$ 26 $ 46 $ 45 $ 191
===== ===== ===== =====
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
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<TABLE>
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Operating Activities:
Net income $ 45 $ 191
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 24 58
Gain on sale of equipment (4) (3)
Equity in earnings from joint ventures, net (2) (9)
Provision for losses on notes receivable (37) 22
Provision for losses on accounts receivable 5 (10)
Gain on sale of marketable securities -- (64)
Decrease in accounts receivable 6 15
Decrease in accounts payable and accrued expenses (24) (4)
Decrease in other assets 2 3
------- -------
Net cash provided by operating activities 15 199
------- -------
Investing Activities:
Principal payments, financing leases 172 224
Principal payments, notes receivable 441 71
Proceeds from sale of equipment 6 3
Proceeds from sale of marketable securities -- 64
Distributions from joint ventures 11 23
------- -------
Net cash provided by investing activities 630 385
------- -------
Financing Activities:
Distributions to partners (673) (969)
------- -------
Net cash used by financing activities (673) (969)
------- -------
Decrease in cash and cash equivalents (28) (385)
Cash and cash equivalents, beginning of period 755 1,339
------- -------
Cash and cash equivalents, end of period $ 727 $ 954
======= =======
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO 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.
Financial Accounting Pronouncements. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity would estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset. Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Partnership does not expect
the adoption of this statement to have a material impact on its financial
position and results of operations. The Partnership plans to adopt Statement No.
121 on January 1, 1996.
Non-Cash Investing Activity. On September 20, 1995, the Partnership
foreclosed upon a nonperforming outstanding note receivable to a cable
television system operator to whom the Partnership, along with other affiliated
partnerships managed by the General Partner, had extended credit. The
partnerships' notes receivables were exchanged for interests (their capital
contribution), on a pro rata basis, in a newly formed joint venture owned by the
partnerships and managed by the General Partner. The amount of the outstanding
note receivable that was contributed to the joint venture was $93,000.
Note 2. Reclassification.
Reclassification - Certain 1994 amounts have been reclassified to
conform to the 1995 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.
<PAGE>
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Note 4. Notes Receivable.
Impaired Notes Receivable. On January 1, 1995, the Partnership
adopted Financial Accounting Standards Board Statement No. 114 , "Accounting by
Creditors for Impairment of Loan", and Statement No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures."
Statement No. 114 requires that certain impaired loans be measured based on the
present value of expected cash flows discounted at the loans effective interest
rate; or, alternatively, at the loan's observable market price or the fair value
of the collateral if the loan is collateral dependent. Prior to 1995, the
allowance for losses on notes receivable was based on the undiscounted cash
flows or the fair value of the collateral for collateral dependent loans.
In accordance with Statement No. 114, a loan is classified as
in-substance foreclosure when the Company has taken possession of the collateral
regardless of whether formal foreclosure proceedings take place. Notes
receivable previously classified as in-substance foreclosed cable systems but
for which the Company had not taken possession of the collateral have been
reclassified to notes receivable.
At September 30, 1995, the recorded investment in notes that are
considered to be impaired under Statement No. 114 was $1,298,000. Included in
this amount is $12,000 of impaired notes for which the related allowance for
losses is $1,000 and $1,286,000 of impaired notes for which there is no
allowance. The average recorded investment in impaired loans during the nine
months ended September 30, 1995 was approximately $1,656,000. Generally, notes
receivable are classified as impaired and the accrual of interest on such notes
are discontinued when the contractual payment of principal or interest has
become 90 days past due or management has serious doubts about further
collectibility of the contractual payments. Any payments received subsequent to
the placement of the note receivable on to impaired status will generally be
applied towards the reduction of the outstanding note receivable balance, which
may include previously accrued interest as well as principal. Once the principal
and accrued interest balance has been reduced to zero, the remaining payments
will be applied to interest income.
During the quarter ended June 30, 1995, the Partnership received a
settlement on one of its notes receivable from a cable television system
operator which was considered to be impaired under Statement No. 114. The
Partnership received a partial recovery of $40,000 as a settlement which was
applied towards the $58,000 outstanding note receivable balance. The remaining
balance of $18,000 was written-off through its related allowance for loan
losses. The related allowance for loan losses for this note receivable was
provided for in a previous year in an amount equal to the carrying value of the
note. Upon receipt of the settlement of this note receivable, the Partnership
reduced the allowance for loan losses by $37,000 during the quarter ended June
30, 1995. This reduction in the allowance for loan losses was recognized as
income during the period.
The Partnership received a settlement from another impaired note
receivable and foreclosed upon the assets of another note receivable from a
cable television system operator during the nine months ended September 30,
1995.
The activity in the allowance for losses on notes receivable during
the nine months ended September 30, is as follows:
1995 1994
Beginning balance $ 202 $ 180
Provision for losses (37) 22
Write downs (54) -
----- -----
Ending balance $ 111 $ 202
===== =====
<PAGE>
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Note 5. Net Income (Loss) and Distribution 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 7,526 for the nine months ended September
30, 1995 and 1994. 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.
Foreclosed Cable System Joint Ventures
The aggregate combined statements of operations of the foreclosed
cable systems joint ventures is presented below:
<TABLE>
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
INCOME <C> <C> <C> <C>
Subscriber revenue $237 $228 $722 $678
Other income 4 3 12 9
---- ---- ---- ----
Total income 241 231 734 687
---- ---- ---- ----
EXPENSES
Depreciation and amortization 55 53 164 159
Program services 79 59 208 178
Management fees to an affiliate of the
General Partner 11 10 33 166
General and administrative expenses 75 59 230 30
Provision for losses on accounts receivable 2 2 7 7
---- ---- ---- ----
Total expenses 222 183 642 540
---- ---- ---- ----
Net income before income taxes 19 48 92 147
Income tax benefit 1 17 24 30
---- ---- ---- ----
Net income $ 20 $ 65 $116 $177
==== ==== ==== ====
</TABLE>
<PAGE>
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The Partnership reported net income of $26,000 and $45,000 for the three
and nine months ended September 30, 1995, respectively, as compared to $46,000
and $191,000 for the same periods in 1994. The decrease in net income during the
three months ended September 30, 1995 is mainly attributable to an increase in
expenses. The decrease in net income during the nine months ended September 30,
1995, as compared to the same period in 1994, is attributable to a decrease in
interest income from notes receivable and the absence of a gain on the sale of
marketable securities.
Total revenues increased by $23,000 during the three months ended September
30, 1995, as compared to the same period in 1994. This increase was primarily
the result of an increase in interest income from notes receivable. The increase
in interest income from notes receivable was the result of the payoff of a note
receivable from a cable television system operator that had been classified as
impaired. The Partnership had suspended the accrual of interest income on this
note. Upon the payoff, the proceeds were first applied to the outstanding
principal and accrued interest, with the excess recognized as interest income.
Total revenues decreased during the nine months ended September 30, 1995,
as compared to the same period in 1994, due to decreases in interest income from
notes receivable and the absence of a gain on the sale of marketable securities.
The gain on the sale of marketable securities during 1994 was attributable to
the sale of a stock warrant of an emerging growth company that the Partnership
had been granted as part of a lease/finance agreement.
The primary factor contributing to the decrease of interest income from
notes receivable for the nine months ended September 30, 1995, when compared to
the same period in 1994, is the Partnership's remaining notes receivable being
classified as impaired and the Partnership suspending the recognition of
interest income on such notes. At September 30, 1995, the Partnership had
outstanding notes receivable with a recorded net investment of $1,298,000 that
were considered to be impaired.
Total expenses increased by $43,000 during the three months ended September
30, 1995, but decreased by $46,000 for the nine months ended September 30, 1995,
as compared to the same periods in 1994. The increase in expenses during the
three months ended September 30, 1995, as compared to the same period in 1994,
is due to increases in management fees and legal expense. The decrease in total
expenses during the nine months ended September 30, 1995, as compared to the
same period in 1994, is attributable to decreases in depreciation expense and
provision for losses on receivables.
The increase in management fees during the three and nine months ended
September 30, 1995, as compared to the same periods in 1994, is attributable to
the payoffs of two notes receivable from cable television system operators. The
increase in legal expense during the three and nine months ended September 30,
1995, as compared to the same periods in 1994, is related to litigation on
defaulted notes receivable from cable television system operators.
<PAGE>
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During the nine months ended September 30, 1995, the Partnership received
settlement payments on two defaulted notes receivable from cable television
system operators. On one of these notes, the Partnership had provided a loan
loss reserve in an amount equal to the net carrying value of this note in a
prior year. Upon recovery of a portion of this defaulted note receivable, the
Partnership reduced the allowance for loan losses by $37,000 during the quarter
ended September 30, 1995. This reduction in the allowance for loan losses was
recognized as income during the period.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from its contractual
obligations with lessees and borrowers to receive rental payments and payments
of principal and interest. As the initial lease terms of the leases expire, the
Partnership will re-lease or sell the equipment. The future liquidity of the
Partnership will depend upon the General Partner's success in collecting
scheduled contractual payments from its lessees and borrowers. Additionally, the
Partnership has investments in foreclosed cable systems joint ventures that it
receives cash distributions of the excess cash.
The cash generated by leasing and financing activities was $628,000 during
the nine months ended September 30, 1995, as compared to $504,000 during the
same period in 1994. The increase in cash generated by leasing and financing
activities was due to the increase in payments from notes receivable. During the
nine months ended September 30, 1995, the Partnership received payoffs from two
defaulted notes receivable.
During the nine months ended September 30, 1995, the Partnership received
cash distributions of $11,000 from foreclosed cable joint ventures as compared
to cash distributions of $23,000 from foreclosed cable joint ventures during the
same period in 1994.
As of September 30, 1995, the Partnership owned equipment being held for
lease with an original cost of $212,000 and a net book value of $0, as compared
to $375,000 and $6,000 at September 30, 1994. The General Partner is actively
engaged, on behalf of the Partnership, in remarketing and selling the
Partnership's equipment as it becomes available.
The cash distributed to partners was $673,000 and $969,000 for the nine
months ended September 30, 1995 and 1994, respectively. In accordance with the
Partnership Agreement, the Limited Partners are entitled to 99% of the cash
available for distribution and the General Partner is entitled to 1%. As a
result, the Limited Partners received $666,000 and $960,000 in distributions
during the period ended September 30, 1995 and 1994, respectively. The
cumulative cash distributions to limited partners are $5,416,000 and $4,360,000
at September 30, 1995 and 1994, respectively. The General Partner received
$7,000 and $9,000 for its share of the cash distributions during the period
ended September 30, 1995 and 1994, respectively.
The Partnership anticipates making quarterly distributions to partners on
October 15, 1995, January 15, 1996 and April 15, 1996 at the same rate as the
July 15, 1995 distribution. However, the Partnership will switch to an annual
distribution method thereafter, with the first annual distribution to be made on
January 15, 1997. The Partnership's ability to distribute cash to partners is
dependent upon the Partnership receiving its contractual payments from notes
receivable and financing leases. If the cash generated by Partnership operations
decrease below expectations, the distributions to partners will be adjusted
accordingly.
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.
<PAGE>
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PHOENIX LEASING HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
September 30, 1995
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.
<TABLE>
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
(Registrant)
<CAPTION>
Date Title Signature
<S> <C> <C>
November 13, 1995 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- - ----------------- Senior Vice President ----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 13, 1995 Senior Vice President, /S/ BRYANT J. TONG
- - ----------------- Financial Operations ------------------
(Principal Accounting Officer) (Bryant J. Tong)
and a Director of
Phoenix Leasing Incorporated
General Partner
November 13, 1995 Senior Vice President of /S/ GARY W. MARTINEZ
- - ----------------- Phoenix Leasing Incorporated --------------------
General Partner (Gary W. Martinez)
November 13, 1995 Partnership Controller /S/ MICHAEL K. ULYATT
- - ----------------- Phoenix Leasing Incorporated ---------------------
General Partner (Michael K. Ulyatt)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 727
<SECURITIES> 0
<RECEIVABLES> 1,308
<ALLOWANCES> 111
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 129
<DEPRECIATION> 129
<TOTAL-ASSETS> 2,619
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,570
<TOTAL-LIABILITY-AND-EQUITY> 2,619
<SALES> 0
<TOTAL-REVENUES> 162
<CGS> 0
<TOTAL-COSTS> 117
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (32)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 45
<INCOME-TAX> 0
<INCOME-CONTINUING> 45
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45
<EPS-PRIMARY> 5.12
<EPS-DILUTED> 0
</TABLE>
