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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, 1996
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 ___
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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)
September 30, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 1,430 $ 655
Accounts receivable 8 18
Notes receivable (net of allowance for losses
on notes receivable $0 and $706 at
September 30, 1996 and December 31, 1995,
respectively) -- 581
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$56 at September 30, 1996 and December 31,
1995) -- --
Net investment in financing leases 140 311
Investment in joint ventures 222 266
Capitalized acquisition fees (net of accumulated
amortization of $290 and $260 at September 30,
1996 and December 31, 1995, respectively) 6 36
Securities available-for-sale 2 149
Other assets 2 1
------- -------
Total Assets $ 1,810 $ 2,017
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 38 $ 44
------- -------
Total Liabilities 38 44
------- -------
Partners' Capital
General Partner (3) (14)
Limited Partners, 25,000 units authorized,
7,526 units issued and outstanding at
September 30, 1996 and December 31, 1995 1,773 1,838
Unrealized gains on available-for-sale securities 2 149
------- -------
Total Partners' Capital 1,772 1,973
------- -------
Total Liabilities and Partners' Capital $ 1,810 $ 2,017
======= =======
The accompanying notes are an integral part of
these statements.
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Rental income $ 19 $ 2 $ 27 $ 5
Earned income, financing leases 7 18 31 60
Gain on sale of equipment -- -- 12 4
Equity in earnings (losses) from
joint ventures (1) (2) 23 2
Interest income, notes receivable -- 71 -- 71
Gain on sale of marketable securities 34 -- 34 --
Other income 12 8 29 20
----- ----- ----- -----
Total Income 71 97 156 162
----- ----- ----- -----
EXPENSES
Depreciation and amortization 21 13 30 24
Management fees to General Partner 27 18 37 26
Reimbursed administrative costs to
General Partner 3 3 10 14
Provision for (recovery of) losses
on receivables (190) 5 (190) (32)
Legal expense 1 25 26 62
General and administrative expenses 4 7 14 23
----- ----- ----- -----
Total Expenses (134) 71 (73) 117
----- ----- ----- -----
NET INCOME $ 205 $ 26 $ 229 $ 45
===== ===== ===== =====
NET INCOME PER LIMITED
PARTNERSHIP UNIT $26.94 $3.25 $28.67 $5.12
===== ===== ===== =====
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $-- $18.53 $37.27 $88.54
===== ===== ===== =====
ALLOCATION OF NET INCOME:
General Partner $ 2 $ 2 $ 13 $ 7
Limited Partners 203 24 216 38
----- ----- ----- -----
$ 205 $ 26 $ 229 $ 45
===== ===== ===== =====
The accompanying notes are an integral part of
these statements.
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
---- ----
Operating Activities:
Net income $ 229 $ 45
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 30 24
Gain on sale of equipment (12) (4)
Equity in earnings from joint ventures, net (23) (2)
Recovery of losses on notes receivable (190) (37)
Provision for losses on accounts receivable -- 5
Gain on sale of marketable securities (34) --
Decrease in accounts receivable 10 6
Decrease in accounts payable and accrued expenses (6) (24)
Decrease (increase) in other assets (1) 2
------- -------
Net cash provided by operating activities 3 15
------- -------
Investing Activities:
Principal payments, financing leases 171 172
Principal payments, notes receivable 771 441
Proceeds from sale of equipment 12 6
Proceeds from sale of marketable securities 34 --
Distributions from joint ventures 67 11
------- -------
Net cash provided by investing activities 1,055 630
------- -------
Financing Activities:
Distributions to partners (283) (673)
------- -------
Net cash used by financing activities (283) (673)
------- -------
Increase (decrease) in cash and cash equivalents 775 (28)
Cash and cash equivalents, beginning of period 655 755
------- -------
Cash and cash equivalents, end of period $ 1,430 $ 727
======= =======
The accompanying notes are an integral part of
these statements.
<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.
Note 2. Reclassification.
Reclassification - Certain 1995 amounts have been reclassified to
conform to the 1996 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. During the quarter ended September 30, 1996,
the Partnership received a settlement on its one remaining note receivable from
a cable television system operator which was considered to be impaired under
Statement No. 114. The Partnership received a partial recovery of $672,000 as a
settlement which was applied towards the $1,188,000 outstanding note receivable
balance. The remaining balance of $516,000 was written-off through its related
allowance for loan losses provided for in a previous year. Upon receipt of the
settlement of this note receivable, the Partnership reduced the allowance for
loan losses by $190,000 during the quarter ended September 30, 1996. This
reduction in the allowance for loan losses was recognized as income during the
period.
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1996 1995
---- ----
(Amounts in Thousands)
Beginning balance $ 706 $ 202
Provision for losses (190) (37)
Write downs (516) (54)
----- -----
Ending balance $-- $ 111
===== =====
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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, 1996 and 1995. 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:
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Subscriber revenue $ 108 $ 237 $ 379 $ 722
Gain (adjustment to gain) on sale of
cable system 3 -- 1,205 --
Other income 2 4 18 12
------ ------ ------ ------
Total income 113 241 1,602 734
------ ------ ------ ------
EXPENSES
Depreciation and amortization 32 55 106 164
Program services 38 79 130 208
Management fees to an affiliate of the
General Partner 5 11 135 33
General and administrative expenses 42 77 168 231
Provision for losses on accounts
receivable 1 2 4 7
------ ------ ------ ------
Total expenses 118 224 543 643
------ ------ ------ ------
Net income (loss) $ (5) $ 17 $1,059 $ 91
====== ====== ====== ======
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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.
The Partnership reported net income of $205,000 for the three months ended
September 30, 1996, as compared to net income of $26,000 for the same period in
1995. During the nine months ended September 30, 1996, the Partnership reported
net income of $229,000, as compared to net income of $45,000 during the nine
months ended September 30, 1995. The increase in Partnership earnings during the
three and nine months ended September 30, 1996, as compared to the same periods
in 1995, is attributable to a reduction in the provision for losses on
receivables of $190,000.
The largest item contributing to the decrease in total revenues during the
three and nine months ended September 30, 1996, as compared to the same periods
in 1995, was the $71,000 decrease in interest income from notes receivable.
During the three months ended September 30, 1995, the Partnership received a
payoff of a note receivable from a cable television system operator in an amount
that exceed the carrying value. This note had been classified as impaired and
the Partnership had suspended the accrual of interest income on this note. Upon
payoff, the proceeds were first applied to the outstanding principal and accrued
interest, with the excess recognized as interest income. In addition, the
Partnership had an allowance for losses on this note in which it reduced through
an adjustment to the provision for losses on notes receivable of $37,000.
The Partnership also reported decreases in earned income from financing
leases of $11,000 and $29,000 during the three and nine months ended September
30, 1996, respectively, as compared to the same periods in 1995. This decrease
is reflective of a decrease in the net investment in finance leases. The
Partnership reported a net investment in finance leases of $140,000 at September
30, 1996, as compared to $366,000 at September 30, 1995.
The above decreases in revenues were offset in part by a gain on the sale of
securities, an increase in rental income and other income. The largest item that
increased during the three and nine months ended September 30, 1996, when
compared to the same period in 1995, was the $34,000 increase in the gain on the
sale of marketable securities. This gain is 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. At September 30, 1996, the Partnership had remaining
investments in stock warrants of public companies with unrealized gains of
$2,000. These stock warrants contain certain restrictions, but are generally
exercisable within one year.
Total expenses decreased during the three and nine months ended September
30, 1996, as compared to the same periods in 1995, due to an adjustment to the
allowance for losses on notes receivable of $190,000 during the three and nine
months ended September 30, 1996. Another factor contributing to the decrease in
total expenses was a decrease in legal expenses. The decrease in legal expenses
during 1996, as compared to 1995, is attributable to the settlement and payoffs
of the Partnerships remaining notes receivable that were impaired.
During the three months ended September 30, 1996, the Partnership received a
payoff on an impaired note receivable from a cable television system operator.
This outstanding note receivable had been classified as impaired and the
Partnership had suspended the accrual of interest income on this note. The
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carrying value of this note was $1,188,000, for which the Partnership had an
allowance for loan losses of $706,000, resulting in a net carrying value of
$482,000. The Partnership received total settlement proceeds of $672,000 on this
note, which resulted in a recovery of $190,000 of the allowance for losses on
notes receivables.
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. 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 flows.
The cash generated by leasing and financing activities was $945,000 during
the nine months ended September 30, 1996, as compared to $628,000 during the
same period in 1995. The Partnership received settlements of impaired notes
receivable during both periods.
During the nine months ended September 30, 1996, the Partnership received
cash distributions of $67,000 from foreclosed cable systems joint ventures, as
compared to cash distributions of $11,000 from foreclosed cable systems joint
ventures during the same period in 1995. This increase in distributions is
attributable to the distribution of the sale proceeds from the sale of a cable
television system owned by one of these joint ventures during the first quarter
of 1996.
The cash distributed to partners was $283,000 and $673,000 for the nine
months ended September 30, 1996 and 1995, 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 $280,000 and $666,000 in distributions
during the period ended September 30, 1996 and 1995, respectively. The
cumulative cash distributions to limited partners are $5,837,000 and $5,416,000
at September 30, 1996 and 1995, respectively. The General Partner received
$3,000 and $7,000 for its share of the cash distributions during the period
ended September 30, 1996 and 1995, respectively.
The Partnership made its quarterly distribution to partners on April 15,
1996 at the same rate as the January 15, 1996 distribution, but at a rate lower
than the distributions made during the same period in 1995. The distribution
made on April 15, 1996 was the last scheduled quarterly distribution made by the
Partnership. The Partnership has switched to an annual distribution method with
the first annual distribution to be made on January 15, 1997. As a result of a
settlement payment on an impaired note during the quarter ended September 30,
1996, the Partnership plans to include these proceeds in the January 15, 1997
distribution to partners. 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 increase or 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.
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PHOENIX LEASING HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
September 30, 1996
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
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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 HIGH TECH/HIGH YIELD FUND,
----------------------------------
A CALIFORNIA LIMITED PARTNERSHIP
--------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
November 12, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ----------------- Senior Vice President -----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 12, 1996 Senior Vice President, /S/ BRYANT J. TONG
- ----------------- Financial Operations -----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
November 12, 1996 Senior Vice President of /S/ GARY W. MARTINEZ
- ----------------- Phoenix Leasing Incorporated -----------------------
General Partner (Gary W. Martinez)
November 12, 1996 Partnership Controller /S/ MICHAEL K. ULYATT
- ----------------- Phoenix Leasing Incorporated -----------------------
General Partner (Michael K. Ulyatt)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,430
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 56
<DEPRECIATION> 56
<TOTAL-ASSETS> 1,810
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,773
<TOTAL-LIABILITY-AND-EQUITY> 1,810
<SALES> 0
<TOTAL-REVENUES> 156
<CGS> 0
<TOTAL-COSTS> (73)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (190)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 229
<INCOME-TAX> 0
<INCOME-CONTINUING> 229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229
<EPS-PRIMARY> 28.67
<EPS-DILUTED> 0
</TABLE>
