Page 1 of 11
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 June 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 0-18278
-------
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
Registrant
California 68-0191380
- ------------------------- ----------------------------------
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>
Page 2 of 11
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
June 30, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 8,925 $11,571
Accounts receivable (net of allowance for
losses on accounts receivable of $441 and
$548 at June 30, 1996 and December 31, 1995,
respectively) 470 603
Notes receivable (net of allowance for losses
on notes receivable of $2,224 and $2,241 at
June 30, 1996 and December 31, 1995, respectively) 5,913 5,428
Equipment on operating leases and held for lease
(net of accumulated depreciation of $29,864 and
$32,579 at June 30, 1996 and December 31, 1995,
respectively) 2,063 2,576
Net investment in financing leases (net of
allowance for early terminations of $781 and
$755 at June 30, 1996 and December 31, 1995,
respectively) 22,269 24,685
Investment in joint ventures 2,548 2,451
Capitalized acquisition fees (net of accumulated
amortization of $9,356 and $8,961 at June 30,
1996 and December 31, 1995, respectively) 1,241 1,336
Other assets 1,356 1,612
------- -------
Total Assets $44,785 $50,262
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 2,021 $ 1,817
------- -------
Total Liabilities 2,021 1,817
------- -------
Partners' Capital
General Partner -- --
Limited Partners, 6,500,000 units authorized,
6,492,727 units issued and 6,264,698 and
6,318,955 units outstanding at June 30, 1996
and December 31, 1995, respectively 42,685 48,068
Unrealized gain on available-for-sale securities 79 377
------- -------
Total Partners' Capital 42,764 48,445
------- -------
Total Liabilities and Partners' Capital $44,785 $50,262
======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 3 of 11
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Rental income $ 1,660 $ 1,493 $ 3,100 $ 3,389
Earned income, financing leases 909 1,154 1,834 2,379
Gain (loss) on sale of equipment (37) 928 108 876
Gain on sale of securities 800 188 977 206
Equity in earnings from joint
ventures, net 80 206 232 322
Interest income, notes receivable 257 280 489 548
Cable subscriber revenue 64 78 130 155
Other income 155 135 299 286
------- ------- ------- -------
Total Income 3,888 4,462 7,169 8,161
------- ------- ------- -------
EXPENSES
Depreciation 1,260 1,507 2,292 3,262
Amortization of acquisition fees 204 242 395 533
Lease related operating expenses 65 97 144 251
Management fees to General Partner 263 314 494 605
Reimbursed administrative costs
to General Partner 177 218 390 450
Provision for losses on receivables 98 147 177 255
Program service, cable system 31 27 60 52
Legal expenses 34 58 100 146
General and administrative expenses 99 146 198 306
------- ------- ------- -------
Total Expenses 2,231 2,756 4,250 5,860
------- ------- ------- -------
NET INCOME BEFORE INCOME TAXES $ 1,657 $ 1,706 $ 2,919 $ 2,301
Income tax benefit 14 6 27 13
------- ------- ------- -------
NET INCOME $ 1,671 $ 1,712 $ 2,946 $ 2,314
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .23 $ .17 $ .40 $ .17
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .60 $ .60 $ 1.20 $ 1.20
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 199 $ 621 $ 399 $ 1,223
Limited Partners 1,472 1,091 2,547 1,091
------- ------- ------- -------
$ 1,671 $ 1,712 $ 2,946 $ 2,314
======= ======= ======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 4 of 11
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1996 1995
---- ----
Operating Activities:
Net income $ 2,946 $ 2,314
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,292 3,262
Amortization of acquisition fees 395 533
Gain on sale of equipment (108) (876)
Equity in earnings from joint ventures, net (232) (322)
Provision for early termination, financing leases 192 --
Provision for losses on notes receivable (17) 20
Provision for losses on accounts receivable 2 235
Gain on sale of securities (977) (206)
Decrease in accounts receivable 131 58
Increase (decrease) in accounts payable and
accrued expenses 241 (408)
Increase in deferred income tax asset (27) (14)
Decrease (increase) in other assets (47) 161
-------- --------
Net cash provided by operating activities 4,791 4,757
-------- --------
Investing Activities:
Principal payments, financing leases 5,788 6,506
Principal payments, notes receivable 1,246 1,345
Proceeds from sale of equipment 524 2,784
Proceeds from sale of securities 1,005 206
Distributions from joint ventures 208 857
Purchase of equipment -- (5)
Investment in financing leases (5,708) (3,981)
Investment in notes receivable (1,787) (1,304)
Cable systems, property and equipment (19) (74)
Investment in securities (28) --
Payment of acquisition fees (337) (282)
-------- --------
Net cash provided by investing activities 892 6,052
-------- --------
Financing Activities:
Payments of principal, notes payable -- (2,307)
Redemptions of capital (363) (203)
Distributions to partners (7,966) (8,046)
-------- --------
Net cash used by financing activities (8,329) (10,556)
-------- --------
Increase (decrease) in cash and cash equivalents (2,646) 253
Cash and cash equivalents, beginning of period 11,571 8,403
-------- --------
Cash and cash equivalents, end of period $ 8,925 $ 8,656
======== ========
Supplemental Cash Flow Information:
Cash paid for interest expense $ -- $ 65
The accompanying notes are an integral
part of these statements.
<PAGE>
Page 5 of 11
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
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.
Non Cash Investing Activities. During the six months ended June 30,
1996, the Partnership, along with other affiliated partnerships managed by the
General Partner, obtained title to a cable television company that had been
pledged as collateral for a non-performing note. As a result, the Partnership
reclassified $73,000 to Investment in Joint Ventures on the balance sheet.
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.
Phoenix Westcom Cablevision, Inc. (the Subsidiary) is a corporation
subject to state and federal tax regulations. The Subsidiary reports to the
taxing authority on the accrual basis. When income and expenses are recognized
in different periods for financial reporting purposes than for income tax
purposes, deferred taxes are provided for such differences using the liability
method.
Note 4. Notes Receivable.
Impaired Notes Receivable. At June 30, 1996, the recorded investment in
notes that are considered to be impaired under Statement No. 114 was $2,583,000.
Included in this amount is $1,959,000 of impaired notes for which the related
allowance for losses is $1,801,000 and $624,000 for which there is no allowance.
The average recorded investment in impaired loans during the six months ended
June 30, 1996 was approximately $2,599,000.
On February 14, 1996, the Partnership foreclosed upon a nonperforming
outstanding note receivable to a cable television operator to whom the
Partnership, along with other affiliated partnerships managed by the General
Partner, had extended credit. Upon foreclosure, this note was reclassified to
Investment in Joint Ventures on the balance sheet. The Partnership's net
carrying value for this outstanding note receivable was $73,000, for which the
Partnership had an allowance for losses on notes of $17,000. This allowance of
$17,000 was reversed and recognized as income during the six months ended June
30, 1996.
The activity in the allowance for losses on notes receivable during the
six months ended June 30, is as follows:
1996 1995
---- ----
(Amounts in Thousands)
Beginning balance $ 2,241 $ 2,264
Provision for losses (17) 20
Write downs -- (45)
------- -------
Ending balance $ 2,224 $ 2,239
======= =======
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Page 6 of 11
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 6,294,146 and 6,359,752 for the six
months ended June 30, 1996 and 1995, 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 Venture
- -----------------------
The statements of operations of the equipment joint venture are
presented below:
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Earned income, financing leases $ 329 $ 516 $ 761 $1,139
Gain on sale of equipment 108 165 158 209
Other income 54 156 120 214
------ ------ ------ ------
Total income 491 837 1,039 1,562
------ ------ ------ ------
EXPENSES
Depreciation 103 42 128 54
Lease related operating expenses 19 2 20 7
Management fees to General Partner 55 88 109 167
Interest expense 73 256 183 571
General and administrative expenses 93 31 121 114
------ ------ ------ ------
Total expenses 343 419 561 913
------ ------ ------ ------
Net income $ 148 $ 418 $ 478 $ 649
====== ====== ====== ======
Financing Joint Venture
- -----------------------
The statements of operations of the financing joint venture are
presented below:
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Interest income - notes receivable $41 $47 $83 $97
Other income 1 1 2 1
--- --- --- ---
Total income 42 48 85 98
--- --- --- ---
EXPENSES
Management fees to General Partner 2 3 2 3
General and administrative expenses -- -- -- 6
--- --- --- ---
Total expenses 2 3 2 9
--- --- --- ---
Net income $40 $45 $83 $89
=== === === ===
<PAGE>
Page 7 of 11
Foreclosed Cable Systems Joint Ventures
- ---------------------------------------
The aggregate combined statements of operations of the foreclosed cable
systems joint ventures are presented below:
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Subscriber revenue $ 765 $ 119 $1,173 $ 239
Gain on sale of cable system 10 -- 10 --
Other income 10 1 17 3
------ ------ ------ ------
Total income 785 120 1,200 242
------ ------ ------ ------
EXPENSES
Depreciation and amortization 240 29 409 57
Program services 259 34 402 67
Management fees to an affiliate of the
General Partner 34 5 61 11
General and administrative expenses 188 36 294 85
Provision for losses on accounts
receivable 7 1 12 2
------ ------ ------ ------
Total expenses 728 105 1,178 222
------ ------ ------ ------
Net income $ 57 $ 15 $ 22 $ 20
====== ====== ====== ======
<PAGE>
Page 8 of 11
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
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 IV and Subsidiary (the
Partnership) reported net income of $1,671,000 during the three months ended
June 30, 1996, as compared to net income of $1,712,000 for the three months
ended June 30, 1995. The Partnership reported net income of $2,946,000 during
the six months ended June 30, 1996, as compared to net income of $2,314,000
during the same period in 1995. Net income decreased by $41,000 during the three
months ended June 30, 1996, but increased by $632,000 during the six months
ended June 30, 1996, when compared to the same periods in 1995.
The decrease in total revenues of $574,000 and $992,000 during the three
and six months ended June 30, 1996, respectively, as compared to the same
periods in 1995, was primarily the result of decreases in earned income from
financing leases and a decreased gain on sale of equipment. The decrease in
earned income from financing leases of $245,000 and $545,000 for the three and
six months ended June 30, 1996, respectively, as compared to the same periods in
the previous year, is reflective of a decrease in the Partnership's net
investment in financing leases to $22.3 million at June 30, 1996 from $29.8
million at June 30, 1995. The investment in financing leases, as well as earned
income from financing leases, will decrease over the lease term as the
Partnership amortizes income over the life of the lease using the interest
method. This effect will be mitigated to some degree as the Partnership
continues to invest in new financing leases over its life.
The large gain on the sale of equipment during the three and six months
ended June 30, 1995, respectively, as compared to the same periods in 1996, was
primarily attributable to a negotiated payoff of a lease with an emerging growth
company that had been in default and the underlying equipment had been reduced
through depreciation.
The Partnership reported a gain on the sale of marketable securities of
$800,000 and $977,000 during the three and six months ended June 30, 1996, as
compared to the gain on the sale of marketable securities of $188,000 and
$206,000 during the three and six months ended June 30, 1995. These securities
consisted of common stock received through the exercise of stock warrants
granted to the Partnership as part of a financing agreement with several
emerging growth companies. In addition, the Partnership owns shares of stock and
stock warrants in emerging growth companies that are publicly traded with
unrealized gains of $79,000 at June 30, 1996. These investments in stock and
stock warrants carry certain restrictions, but generally can be exercised within
a one year period.
Total expenses decreased by $525,000 and $1,610,000 during the three and
six months ended June 30, 1996, respectively, as compared to the same periods in
1995. A majority of the decrease in total expenses was due to the decrease in
depreciation expense of $247,000 and $970,000 for the three and six months ended
June 30, 1996, respectively, as compared to the same periods in 1995. This
decrease is due to a decline in the amount of depreciable equipment owned by the
Partnership.
Cable Television System:
Included in the total revenues of the Partnership is cable subscriber
revenues from a cable television system the Partnership received as the result
of a default on a note receivable. The Partnership assumed ownership of this
cable television system on December 23, 1994. As a result, there were no results
of operations from this cable television system during 1994. The revenues from
this cable television system did not have a significant impact upon total
revenues during the three and six months ended June 30, 1996 and 1995.
Liquidity and Capital Resources
The Partnership's primary source of liquidity is derived from its
contractual obligations with lessees for fixed lease terms at fixed rental
amounts, and from payments of principal and interest on its outstanding notes
receivable. As the initial lease terms expire, the Partnership will re-lease the
equipment or sell the equipment. The future liquidity of the Partnership will
depend upon the General Partner's success in collecting the contractual amounts
owed, as well as re-leasing and selling the Partnership's equipment as it comes
off lease.
<PAGE>
Page 9 of 11
The Partnership reported net cash generated by equipment leasing, financing
and cable television activities of $11,825,000 and $12,608,000 during the six
months ended June 30, 1996 and 1995, respectively. The net decrease in cash
generated is due to a decrease in rental payments from lessees and payments on
notes receivable.
Sales proceeds decreased during the six months ended June 30, 1996, as
compared to the same period in 1995. The decrease of $2,260,000 during the six
months ended June 30, 1996, compared to 1995, is attributable to a decrease in
the amount of equipment sold as well as a decrease in the market value of such
equipment. During the six months ended June 30, 1996, the Partnership sold
equipment with an aggregate original cost of $12.6 million, as compared to $23.5
million during the same period in 1995.
The Partnership's outstanding debt was paid off during 1995. As a result,
the Partnership did not make any payments of principal during 1996, as compared
to payments of principal on its outstanding debt of $2,307,000 during the six
months ended June 30, 1995.
The Partnership received cash distributions from joint ventures of $208,000
during the six months ended June 30, 1996, as compared to cash distributions of
$857,000 during the same period in 1995. Distributions from joint ventures were
higher during 1995 due to the Partnership receiving a distribution of excess
cash on hand from a new joint venture that was formed on August 1, 1994. The
excess cash on hand of the joint venture was generated from the proceeds
received from the issuance of lease backed certificates by this joint venture.
This joint venture is not expected to generate any significant amounts of cash
available for distribution until the outstanding lease backed certificates of
the joint venture are paid in full, since all of the rental and note payments
being received are being used to pay off the lease backed certificates.
The Partnership anticipates reinvesting a portion of the cash generated from
operations in new leasing or financing transactions over the life of the
Partnership. During the six months ended June 30, 1996, the Partnership
purchased equipment leases with an aggregate original cost of $5.7 million, as
compared to the $4 million acquired during the same period in 1995. The
equipment owned by the Partnership at June 30, 1996 approximates $89 million, as
compared to the $109 million of equipment owned at June 30, 1995.
As of June 30, 1996, the Partnership owned equipment being held for lease
with an original purchase price of $8,172,000 and a net book value of $918,000,
compared to $17,673,000 and $1,377,000, respectively, at June 30, 1995. The
General Partner is actively engaged, on behalf of the Partnership, in
remarketing and selling the Partnership's equipment as it becomes available.
The total cash distributed to partners for the six months ended June 30,
1996 was $7,966,000, as compared to $8,046,000 for the same period in 1995. In
accordance with the partnership agreement, the limited partners are entitled to
95% of the cash available for distribution and the General Partner is entitled
to 5%. As a result, the limited partners received $7,567,000 and $7,644,000 in
distributions during the six months ended June 30, 1996 and 1995, respectively.
The cumulative cash distributions to limited partners as of June 30, 1996 is
$80,704,000, as compared to $65,524,000 at June 30, 1995. The General Partner
received $399,000 and $402,000 for its share of the cash available for
distribution during the six months ended June 30, 1996 and 1995, respectively.
The Partnership currently anticipates making distributions to partners during
1996 at approximately the same rate as 1995.
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses, debt service and to provide for distributions to partners.
<PAGE>
Page 10 of 11
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
June 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
<PAGE>
Page 11 of 11
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 IV,
A CALIFORNIA LIMITED PARTNERSHIP
------------------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
August 13, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- --------------- Senior Vice President -----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
August 13, 1996 Senior Vice President, /S/ BRYANT J. TONG
- --------------- Financial Operations -----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
August 13, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,925
<SECURITIES> 0
<RECEIVABLES> 9,048
<ALLOWANCES> 2,665
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 31,927
<DEPRECIATION> 29,864
<TOTAL-ASSETS> 44,785
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 42,764
<TOTAL-LIABILITY-AND-EQUITY> 44,785
<SALES> 0
<TOTAL-REVENUES> 7,169
<CGS> 0
<TOTAL-COSTS> 4,250
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 177
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,919
<INCOME-TAX> 27
<INCOME-CONTINUING> 2,946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,946
<EPS-PRIMARY> .40
<EPS-DILUTED> 0
</TABLE>
