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 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 0-18278
-------
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
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $10,168 $11,571
Accounts receivable (net of allowance
for losses on accounts receivable of
$430 and $548 at September 30, 1996
and December 31, 1995, respectively) 494 603
Notes receivable (net of allowance for
losses on notes receivable of $2,224 and
$2,241 at September 30, 1996 and December 31,
1995, respectively) 5,347 5,428
Equipment on operating leases and held for lease
(net of accumulated depreciation of $28,606
and $32,579 at September 30, 1996 and December 31,
1995, respectively) 1,822 2,576
Net investment in financing leases (net of allowance
for early terminations of $868 and $755 at
September 30, 1996 and December 31, 1995,
respectively) 19,540 24,685
Investment in joint ventures 2,714 2,451
Capitalized acquisition fees (net of accumulated
amortization of $9,509 and $8,961 at
September 30, 1996 and December 31, 1995,
respectively) 1,103 1,336
Other assets 1,215 1,612
------- -------
Total Assets $42,403 $50,262
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,795 $ 1,817
------- -------
Total Liabilities 1,795 1,817
------- -------
Partners' Capital
General Partner -- --
Limited Partners, 6,500,000 units authorized,
6,492,727 units issued and 6,253,183 and
6,318,955 units outstanding at September 30,
1996 and December 31, 1995, respectively 40,541 48,068
Unrealized gain on available-for-sale securities 67 377
------- -------
Total Partners' Capital 40,608 48,445
------- -------
Total Liabilities and Partners' Capital $42,403 $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
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 $ 1,770 $ 1,508 $ 4,870 $ 4,897
Earned income, financing leases 785 1,007 2,620 3,386
Gain (loss) on sale of equipment 186 (23) 295 852
Gain on sale of securities -- -- 977 206
Equity in earnings from joint
ventures, net 186 183 417 505
Interest income, notes receivable 212 350 701 898
Cable subscriber revenue 54 61 184 215
Other income 143 157 442 444
------- ------- ------- -------
Total Income 3,336 3,243 10,506 11,403
------- ------- ------- -------
EXPENSES
Depreciation 577 1,360 2,870 4,622
Amortization of acquisition fees 153 259 548 793
Lease related operating expenses 81 121 225 372
Management fees to General Partner 221 274 715 878
Reimbursed administrative costs
to General Partner 167 235 557 685
Provision for losses on receivables 87 151 265 405
Program service, cable system 32 28 91 80
Legal expenses 51 125 151 271
General and administrative expenses 89 191 287 497
------- ------- ------- -------
Total Expenses 1,458 2,744 5,709 8,603
------- ------- ------- -------
NET INCOME BEFORE INCOME TAXES $ 1,878 $ 499 $ 4,797 $ 2,800
Income tax benefit 15 15 42 28
------- ------- ------- -------
NET INCOME $ 1,893 $ 514 $ 4,839 $ 2,828
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .28 $ .05 $ .68 $ .22
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .60 $ .60 $ 1.80 $ 1.80
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 198 $ 202 $ 597 $ 1,425
Limited Partners 1,695 312 4,242 1,403
------- ------- ------- -------
$ 1,893 $ 514 $ 4,839 $ 2,828
======= ======= ======= =======
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
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
---- ----
Operating Activities:
Net income $ 4,839 $ 2,828
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,870 4,622
Amortization of acquisition fees 548 793
Gain on sale of equipment (295) (852)
Equity in earnings from joint ventures, net (417) (505)
Provision for early termination, financing
leases 280 --
Provision for (recovery of) losses on notes
receivable (17) 20
Provision for losses on accounts receivable 2 385
Gain on sale of securities (977) (206)
Decrease (increase) in accounts receivable 107 (21)
Increase (decrease) in accounts payable and
accrued expenses 70 (95)
Increase in deferred income tax asset (42) (30)
Decrease in other assets 76 160
-------- --------
Net cash provided by operating activities 7,044 7,099
-------- --------
Investing Activities:
Principal payments, financing leases 8,452 9,664
Principal payments, notes receivable 1,811 2,819
Proceeds from sale of equipment 760 3,028
Proceeds from sale of securities 1,005 206
Distributions from joint ventures 297 872
Purchase of equipment -- (5)
Investment in financing leases (6,085) (4,005)
Investment in notes receivable (1,788) (1,798)
Investment in joint ventures (69) --
Cable systems, property and equipment (29) (77)
Investment in securities (28) --
Payment of acquisition fees (407) (260)
-------- --------
Net cash provided by investing activities 3,919 10,444
-------- --------
Financing Activities:
Payments of principal, notes payable -- (2,868)
Redemptions of capital (440) (245)
Distributions to partners (11,926) (12,059)
-------- --------
Net cash used by financing activities (12,366) (15,172)
-------- --------
Increase (decrease) in cash and cash equivalents (1,403) 2,371
Cash and cash equivalents, beginning of period 11,571 8,403
-------- --------
Cash and cash equivalents, end of period $ 10,168 $ 10,774
======== ========
Supplemental Cash Flow Information:
Cash paid for interest expense $ -- $ 78
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 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 nine months ended September
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 September 30, 1996, the recorded
investment in notes that are considered to be impaired under Statement No. 114
was $2,655,000. Included in this amount is $1,952,000 of impaired notes for
which the related allowance for losses is $1,801,000 and $703,000 for which
there is no allowance. The average recorded investment in impaired loans during
the nine months ended September 30, 1996 was approximately $2,618,000.
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 nine months ended
September 30, 1996.
<PAGE>
Page 6 of 12
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 $ 2,241 $ 2,264
Provision for losses (17) 20
Write downs -- (133)
------- -------
Ending balance $ 2,224 $ 2,151
======= =======
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 6,282,129 and 6,354,127 for the nine
months ended September 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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Earned income, financing leases $ 331 $ 548 $1,092 $1,687
Gain on sale of equipment 247 70 406 278
Other income 38 76 158 290
------ ------ ------ ------
Total income 616 694 1,656 2,255
------ ------ ------ ------
EXPENSES
Depreciation 71 24 199 78
Lease related operating expenses 1 -- 21 7
Management fees to General Partner 41 59 149 226
Interest expense 32 197 216 767
General and administrative expenses 74 31 195 146
------ ------ ------ ------
Total expenses 219 311 780 1,224
------ ------ ------ ------
Net income $ 397 $ 383 $ 876 $1,031
====== ====== ====== ======
<PAGE>
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Financing Joint Venture
The statements of operations of the financing joint venture are
presented below:
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Interest income - notes receivable $ 39 $ 46 $121 $142
Other income 1 1 3 2
---- ---- ---- ----
Total income 40 47 124 144
---- ---- ---- ----
EXPENSES
Management fees to General Partner 2 2 4 4
General and administrative expenses -- -- -- 6
---- ---- ---- ----
Total expenses 2 2 4 10
---- ---- ---- ----
Net income $ 38 $ 45 $120 $134
==== ==== ==== ====
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Subscriber revenue $ 675 $ 116 $1,848 $ 355
Gain on sale of cable system 331 -- 341 --
Other income 14 2 31 5
------ ------ ------ ------
Total income 1,020 118 2,220 360
------ ------ ------ ------
EXPENSES
Depreciation and amortization 166 29 575 86
Program services 193 44 595 111
Management fees to an affiliate
of the General Partner 341 5 402 16
General and administrative expenses 190 44 484 128
Provision for losses on accounts
receivable 7 1 19 4
------ ------ ------ ------
Total expenses 897 123 2,075 345
------ ------ ------ ------
Net income (loss) $ 123 $ (5) $ 145 $ 15
====== ====== ====== ======
<PAGE>
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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 $1,893,000 during the three months ended
September 30, 1996, as compared to net income of $514,000 for the three months
ended September 30, 1995. During the nine months ended September 30, 1996, the
Partnership reported net income of $4,839,000, as compared to net income of
$2,828,000 during the same period in 1995.
The Partnership reported an increase in total revenues of $93,000 during
the three months ended September 30, 1996, as compared to the same period in
1995. This increase was primarily the result of increases in rental income of
$262,000 and gain on the sale of equipment of $209,000 during the three months
ended September 30, 1996, as compared to the same period in 1995. Included in
rental income during the three and nine months ended September 30, 1996 is a
settlement payment of $638,000 from a lessee that had defaulted in 1992.
The decrease in earned income from financing leases of $222,000 and
$766,000 for the three and nine months ended September 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 $19.5
million at September 30, 1996 from $25.9 million at September 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
lease term 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 nine months ended
September 30, 1995, as compared to the same period in 1996, was primarily
attributable to a negotiated sale of equipment leased by 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
$977,000 during the nine months ended September 30, 1996, as compared to a gain
on the sale of marketable securities of $206,000 during the nine months ended
September 30, 1995. These securities consisted of common stock and stock
warrants granted to the Partnership as part of a financing agreement with
several emerging growth companies. In addition, the Partnership owns shares of
common stock and stock warrants in emerging growth companies that are publicly
traded with unrealized gains of $67,000 at September 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 $1,286,000 and $2,894,000 during the three
and nine months ended September 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 $783,000 and $1,752,000 for the three and
nine months ended September 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. In addition, the Partnership experienced
declines in most other expense categories during the three and nine months ended
<PAGE>
Page 9 of 12
September 30, 1996, when compared to the same period in 1995.
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. The revenues from this cable
television system did not have a significant impact upon total revenues during
the three and nine months ended September 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.
The Partnership reported net cash generated by equipment leasing, financing
and cable television activities of $17,307,000 and $19,582,000 during the nine
months ended September 30, 1996 and 1995, respectively. The net decrease in cash
generated is due to a decrease in payments from notes receivable.
Sales proceeds decreased during the nine months ended September 30, 1996, as
compared to the same period in 1995. The decrease of $2,268,000 during the nine
months ended September 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 nine months ended September 30, 1996, the Partnership
sold equipment with an aggregate original cost of $17.4 million, as compared to
$30.8 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 $2,868,000 during the nine
months ended September 30, 1995.
The Partnership received cash distributions from joint ventures of $297,000
during the nine months ended September 30, 1996, as compared to cash
distributions of $872,000 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 this new 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 nine months ended September 30, 1996, the Partnership
purchased equipment leases with an aggregate original cost of $6.1 million, as
compared to the $4 million acquired during the same period in 1995. The
equipment owned by the Partnership at September 30, 1996 approximates $84.8
million, as compared to the $101.6 million of equipment owned at September 30,
1995.
<PAGE>
Page 10 of 12
As of September 30, 1996, the Partnership owned equipment being held for
lease with an original purchase price of $10,925,000 and a net book value of
$961,000, compared to $14,357,000 and $1,257,000, respectively, at September 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 nine months ended September
30, 1996 was $11,926,000, as compared to $12,059,000 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 $11,329,000 and
$11,456,000 in distributions during the nine months ended September 30, 1996 and
1995, respectively. The cumulative cash distributions to limited partners as of
September 30, 1996 is $84,466,000, as compared to $69,335,000 at September 30,
1995. The General Partner received $597,000 and $603,000 for its share of the
cash available for distribution during the nine months ended September 30, 1996
and 1995, respectively. The Partnership currently anticipates making
distributions to partners during 1997 at approximately the same rate as the
distributions made during 1996.
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
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
<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
---- ----- ---------
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> 10,168
<SECURITIES> 0
<RECEIVABLES> 8,495
<ALLOWANCES> 2,654
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 30,428
<DEPRECIATION> 28,606
<TOTAL-ASSETS> 42,403
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,608
<TOTAL-LIABILITY-AND-EQUITY> 42,403
<SALES> 0
<TOTAL-REVENUES> 10,506
<CGS> 0
<TOTAL-COSTS> 5,709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 265
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,797
<INCOME-TAX> 42
<INCOME-CONTINUING> 4,839
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,839
<EPS-PRIMARY> .68
<EPS-DILUTED> 0
</TABLE>
