Page 1 of 12
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 March 31, 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 12
Part I. Financial Information
------------------------------
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
March 31, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 7,824 $11,571
Accounts receivable (net of allowance for
losses on accounts receivable of $473
and $548 at March 31, 1996 and December 31,
1995, respectively) 486 603
Notes receivable (net of allowance for losses
on notes receivable of $2,224 and $2,241
at March 31, 1996 and December 31, 1995,
respectively) 6,376 5,428
Equipment on operating leases and held for
lease (net of accumulated depreciation
of $32,200 and $32,579 at March 31, 1996
and December 31, 1995, respectively) 2,423 2,576
Net investment in financing leases (net of
allowance for early terminations of
$780 and $755 at March 31, 1996 and
December 31, 1995, respectively) 25,111 24,685
Investment in joint ventures 2,558 2,451
Capitalized acquisition fees (net of
accumulated amortization of $9,152 and
$8,961 at March 31, 1996 and December 31,
1995, respectively) 1,386 1,336
Other assets 1,569 1,612
------- -------
Total Assets $47,733 $50,262
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 2,288 $ 1,817
------- -------
Total Liabilities 2,288 1,817
------- -------
Partners' Capital
General Partner - -
Limited Partners, 6,500,000 units
authorized, 6,492,727 units issued and
6,292,678 units outstanding at March 31,
1996 and December 31, 1995, respectively 45,180 48,068
Unrealized gain on marketable securities
available-for-sale 265 377
------- -------
Total Partners' Capital 45,445 48,445
------- -------
Total Liabilities and Partners' Capital $47,733 $50,262
======= =======
The accompanying notes are an integral part of these statements.
<PAGE>
Page 3 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
INCOME
Rental income $1,585 $1,843
Earned income, financing leases 925 1,225
Equity in earnings from joint ventures 152 116
Interest income, notes receivable 232 267
Gain on sale of securities 176 18
Cable subscriber revenue 67 76
Other income 144 152
------ ------
Total Income 3,281 3,697
------ ------
EXPENSES
Depreciation 1,032 1,756
Amortization of acquisition fees 191 292
Lease related operating expenses 79 153
Management fees to General Partner 232 290
Reimbursed administrative costs
to General Partner 212 232
Interest expense -- 43
Provision for losses on receivables 80 107
Program service, cable system 29 24
General and administrative expenses 164 204
------ ------
Total Expenses 2,019 3,101
------ ------
NET INCOME BEFORE INCOME TAXES $1,262 $ 596
Income tax benefit 13 6
------ ------
NET INCOME $1,275 $ 602
====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .17 $ --
====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .60 $ .60
====== ======
ALLOCATION OF NET INCOME:
General Partner $ 200 $ 602
Limited Partners 1,075 --
------ ------
$1,275 $ 602
====== ======
The accompanying notes are an integral part of these statements.
<PAGE>
Page 4 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
Operating Activities:
Net income $ 1,275 $ 602
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,032 1,756
Amortization of acquisition fees 191 292
Gain (loss) on sale of equipment (145) 53
Equity in earnings from joint ventures (152) (116)
Provision for early termination, financing leases 96 --
Provision for losses on notes receivable (17) 107
Provision for losses on accounts receivable 1 --
Gain on sale of securities (176) (18)
Decrease (increase) in accounts receivable 116 (64)
Increase in accounts payable and accrued expenses 289 337
Increase in deferred income tax asset (13) (6)
Decrease (increase) in other assets (69) 11
-------- --------
Net cash provided by operating activities 2,428 2,954
-------- --------
Investing Activities:
Principal payments, financing leases 2,830 3,292
Principal payments, notes receivable 592 803
Proceeds from sale of equipment 353 748
Proceeds from sale of securities 205 18
Distributions from joint ventures 118 601
Purchase of equipment 19 (7)
Investment in securities (28) --
Investment in financing leases (4,432) (3,608)
Investment in notes receivable (1,596) (865)
Cable systems, property and equipment (12) (1)
Payment of acquisition fees (60) (210)
-------- --------
Net cash provided by investing activities (2,011) 771
-------- --------
Financing Activities:
Payments of principal, notes payable -- (1,746)
Redemptions of capital (175) (80)
Distributions to partners (3,989) (4,028)
-------- --------
Net cash used by financing activities (4,164) (5,854)
-------- --------
Increase (decrease) in cash and cash equivalents (3,747) (2,129)
Cash and cash equivalents, beginning of period 11,571 8,403
-------- --------
Cash and cash equivalents, end of period $ 7,824 $ 6,274
======== ========
Supplemental Cash Flow Information:
Cash paid for interest expense $ -- $ 43
The accompanying notes are an integral part of these statements.
<PAGE>
Page 5 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
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.
Non Cash Investing Activities. During the three months ended March 31,
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 March 31, 1996, the recorded investment in
notes that are considered to be impaired under Statement No. 114 was $2,616,000.
Included in this amount is $1,991,000 of impaired notes for which the related
allowance for losses is $1,801,000 and $625,000 for which there is no allowance.
The average recorded investment in impaired loans during the three months ended
March 31, 1996 was approximately $2,616,000.
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. The Partnership's net carrying value for this
outstanding note receivable was $73,000 at March 31, 1996, for which the
<PAGE>
Page 6 of 12
Partnership had an allowance for losses on notes of $17,000. This allowance of
$17,000 was reversed and recognized as income at March 31, 1996.
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
1996 1995
---- ----
(Amounts in Thousands)
Beginning balance $ 2,241 $ 2,264
Provision for losses (17) 107
Write downs -- --
------- -------
Ending balance $ 2,224 $ 2,371
======= =======
Note 5. Net Income (Loss) and Distributions Per Limited Partnership Unit.
Net income (loss) and distributions per limited partnership unit were
based on the limited partners' share of net income (loss) and distributions, and
the weighted average number of units outstanding of 6,305,106 and 6,367,514 for
the three months ended March 31, 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 is presented
below:
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended
March 31,
1996 1995
---- ----
INCOME
Rental income $431 $623
Gain on sale of equipment 50 43
Other income 66 58
---- ----
Total income 547 724
---- ----
EXPENSES
Depreciation 24 12
Lease related operating expenses -- 4
Management fees to General Partner 54 80
Interest expense 110 315
Other expense 29 83
---- ----
Total expenses 217 494
---- ----
Net income $330 $230
==== ====
<PAGE>
Page 7 of 12
Financing Joint Venture
The statements of operations of the financing joint venture is presented
below:
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended
March 31,
1996 1995
---- ----
INCOME
Interest income - notes receivable $42 $49
Other income 1 1
--- ---
Total income 43 50
--- ---
EXPENSES
Management fees to General Partner -- --
Other expenses -- 6
--- ---
Total expenses -- 6
--- ---
Net income $43 $44
=== ===
Foreclosed Cable Systems 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
March 31,
1996 1995
---- ----
INCOME
Subscriber revenue $ 408 $ 120
Other income 7 2
----- -----
Total income 415 122
----- -----
EXPENSES
Depreciation and amortization 170 28
Program services 144 33
Management fees to an affiliate of the
General Partner 26 5
General and administrative expenses 106 49
Provision for losses on accounts
receivable 4 2
----- -----
Total expenses 450 117
----- -----
Net income (loss) $ (35) $ 5
===== =====
<PAGE>
Page 8 of 12
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 $1,275,000 during the three months ended March 31, 1996,
as compared to net income of $602,000 during the three months ended March 31,
1995. The improved earnings is the result of a decrease in expenses that
exceeded the decrease in revenues.
The decrease in total revenues of $416,000 for the three months ended
March 31, 1996, as compared to the same period in 1995, was primarily the result
of a $258,000 decrease in rental income and a $300,000 decrease in earned income
from financing leases.
The decrease in rental income is reflective of a decrease in the size of
the equipment portfolio. The Partnership owned equipment with an aggregate
original cost of $95 million at March 31, 1996, as compared to $122 million at
March 31, 1995. Another factor contributing to the decrease in rental income was
equipment being off lease. Until new lessees or buyers of equipment can be
found, the equipment will continue to generate depreciation expense without any
corresponding rental income. The effect of this will be a reduction of the
Partnership earnings during this remarketing period.
The decrease in earned income from financing leases is due to a decrease
in the net investment in financing leases. The net investment in financing
leases was $25.1 million at March 31, 1996, as compared to $34 million at March
31, 1995. The net investment in financing leases will continue to decline as
payments are received over the lease term.
Partially offsetting the decrease in rental income and earned income from
financing leases was a gain on the sale of marketable securities of $176,000
during the three months ended March 31, 1996. These securities consisted of
common stock received through the exercise of stock warrants granted to the
Partnership as part of a financing agreement with two emerging growth companies.
In addition, at March 31, 1996, the Partnership owns shares of stock and stock
warrants in emerging growth companies that are publicly traded. The
Partnership's investments in stock and warrants is included in Other Assets on
the balance sheet. These investments in stock and stock warrants carry certain
restrictions, but generally can be exercised within a one year period.
Total expenses decreased by $1,082,000 during the three months ended March
31, 1996, as compared to the same period in 1995. A majority of the decrease in
total expenses was due to the decrease in depreciation expense of $724,000 for
the three months ended March 31, 1996, as compared to the same period in 1995.
This decrease is due to a decline in the amount of depreciable equipment owned
by the Partnership as well as an increasing portion of the equipment owned by
the Partnership becoming fully depreciated. The decrease in the amortization of
acquisition fees of $101,000 decreased for the same reason as the decrease in
depreciation expense.
Cable Television System:
The Partnership acquired a cable system in satisfaction of a defaulted
note receivable held by the Partnership. The Partnership assumed ownership of
<PAGE>
Page 9 of 12
this cable television system on December 23, 1994. The Partnership reported
cable subscriber revenues of $67,000 and programming expense of $29,000 during
the three months ended March 31, 1996, as compared to cable subscriber revenues
of $76,000 and programming expense of $24,000 during the same period in 1995.
The cable subscriber revenues from this cable television system are not expected
to have a significant impact upon the total revenues of the Partnership. The
Partnership intends to continue to operate this cable television system until
such time that market conditions improve and the cable television system can be
sold.
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 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.
The Partnership reported net cash generated by equipment leasing, financing
and cable television activities of $5,798,000 and $7,049,000 during the three
months ended March 31, 1996 and 1995, respectively. The net decrease in cash
generated is due to a decrease in rental income, payments on notes receivable
and financing leases, as previously discussed above in the results of
operations.
Sales proceeds decreased during the three months ended March 31, 1996, as
compared to the same period in 1995. The decrease of $395,000 during the three
months ended March 31, 1996, compared to 1995, is attributable to an decrease in
the amount of equipment sold. During the three months ended March 31, 1996, the
Partnership sold equipment with an aggregate original cost of $5 million, as
compared to $9.8 million during the same period in 1995.
The Partnership's debt was paid off as of December 31, 1995. As a result, the
Partnership did not make any payments of principal on outstanding debt during
the three months ended March 31, 1996, as compared to principal payments of
$1,746,000 during the three months ended March 31, 1995.
The Partnership received cash distributions from joint ventures of $118,000
during the three months ended March 31, 1996, as compared to cash distributions
of $601,000 during the same period in 1995. The decrease in distributions was
attributable to a distribution received by the Partnership during the three
months ended March 31, 1995 of the remaining proceeds received from the issuance
of lease backed certificates by the 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 outstanding 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 three months ended March 31, 1996, the Partnership made
investments in finance leases and equipment leases with an aggregate original
cost of $4.4 million, as compared to the $3.6 million acquired during the same
period in 1995. The equipment owned by the Partnership at March 31, 1996
approximates $95 million, as compared to the $122 million of equipment owned at
March 31, 1995.
As of March 31, 1996, the Partnership owned equipment being held for lease
with an original purchase price of $10,027,000 and a net book value of
$1,340,000, compared to $18,178,000 and $1,225,000, respectively, at March 31,
1995. The General Partner is actively engaged, on behalf of the Partnership, in
<PAGE>
Page 10 of 12
remarketing and selling the Partnership's equipment as it becomes available.
The total cash distributed to partners for the three months ended March 31,
1996 was $3,989,000, as compared to $4,028,000 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 $3,789,000 and $3,826,000 in
distributions during the three months ended March 31, 1996 and 1995,
respectively. The General Partner received $200,000 and $202,000 for its share
of the cash available for distribution during the three months ended March 31,
1996 and 1995, respectively. The Partnership currently anticipates making
distributions to partners during the remainder of 1996 at approximately the same
rate as the current distribution.
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 11 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
March 31, 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: None
b) Reports on 8-K: None
<PAGE>
Page 12 of 12
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
---- ----- ---------
May 13, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- - --------------------- Senior Vice President -------------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
May 13, 1996 Senior Vice President, /S/ BRYANT J. TONG
- - --------------------- Financial Operations -------------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
May 13, 1996 Senior Vice President of /S/ GARY W. MARTINEZ
- - --------------------- Phoenix Leasing Incorporated -------------------------
General Partner (Gary W. Martinez)
May 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,824
<SECURITIES> 0
<RECEIVABLES> 9,559
<ALLOWANCES> 2,697
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 60,514
<DEPRECIATION> 32,980
<TOTAL-ASSETS> 47,733
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 45,445
<TOTAL-LIABILITY-AND-EQUITY> 47,733
<SALES> 0
<TOTAL-REVENUES> 3,281
<CGS> 0
<TOTAL-COSTS> 2,019
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,262
<INCOME-TAX> (13)
<INCOME-CONTINUING> 1,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,275
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
