Page 1 of 13
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the quarterly period ended March 31, 1997
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 ___
6,235,557 Units of Limited Partnership Interest were outstanding as of March 31,
1997.
Transitional small business disclosure format:
Yes ___ No _X_
<PAGE>
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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,
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 11,536 $ 12,134
Accounts receivable (net of allowance for
losses on accounts receivable of $375 and
$424 at March 31, 1997 and December 31,
1996, respectively) 341 484
Notes receivable (net of allowance for losses
on notes receivable of $2,224 at March 31,
1997 and December 31, 1996) 5,129 4,654
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$15,454 and $26,179 at March 31, 1997 and
December 31, 1996, respectively) 646 1,376
Net investment in financing leases (net of
allowance for early terminations of $876
and $941 at March 31, 1997 and December 31,
1996, respectively) 16,309 16,973
Investment in joint ventures 1,768 2,278
Capitalized acquisition fees (net of
accumulated amortization of $9,853 and $9,695
at March 31, 1997 and December 31, 1996,
respectively) 918 957
Other assets 394 719
---------- ----------
Total Assets $ 37,041 $ 39,575
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,784 $ 1,511
---------- ----------
Total Liabilities 1,784 1,511
---------- ----------
Partners' Capital
General Partner -- --
Limited Partners, 6,500,000 units
authorized, 6,492,727 units issued,
6,235,557 and 6,242,943 units outstanding
at March 31, 1997 and December 31, 1996,
respectively 35,066 37,539
Unrealized gain on available-for-sale securities 191 525
---------- ----------
Total Partners' Capital 35,257 38,064
---------- ----------
Total Liabilities and Partners' Capital $ 37,041 $ 39,575
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
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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,
1997 1996
---- ----
INCOME
Rental income $ 906 $1,440
Earned income, financing leases 654 925
Gain on sale of equipment 501 145
Equity in earnings from joint ventures, net 114 152
Interest income, notes receivable 223 232
Gain on sale of securities -- 176
Cable subscriber revenue -- 67
Other income 166 144
------ ------
Total Income 2,564 3,281
------ ------
EXPENSES
Depreciation 308 1,032
Amortization of acquisition fees 158 191
Lease related operating expenses 81 79
Management fees to General Partner 204 232
Reimbursed administrative costs
to General Partner 169 212
Legal expense 81 66
Provision for losses on receivables -- 80
General and administrative expenses 56 127
------ ------
Total Expenses 1,057 2,019
------ ------
NET INCOME BEFORE INCOME TAXES $1,507 $1,262
Income tax benefit 1 13
------ ------
NET INCOME $1,508 $1,275
====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .21 $ .17
====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .60 $ .60
====== ======
ALLOCATION OF NET INCOME:
General Partner $ 197 $ 200
Limited Partners 1,311 1,075
------ ------
$1,508 $1,275
====== ======
The accompanying notes are an integral part of these statements.
<PAGE>
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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,
1997 1996
---- ----
Operating Activities:
Net income $ 1,508 $ 1,275
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 308 1,032
Amortization of acquisition fees 158 191
Gain on sale of equipment (501) (145)
Equity in earnings from joint ventures, net (114) (152)
Provision for early termination, financing leases -- 96
Recovery of losses on notes receivable -- (17)
Provision for losses on accounts receivable -- 1
Gain on sale of securities -- (176)
Decrease in accounts receivable 143 116
Increase in accounts payable and accrued expenses 154 289
Increase in deferred income tax asset (1) (13)
Increase in other assets (8) (69)
-------- --------
Net cash provided by operating activities 1,647 2,428
-------- --------
Investing Activities:
Principal payments, financing leases 2,340 2,830
Principal payments, notes receivable 825 592
Proceeds from sale of equipment 920 353
Proceeds from sale of securities -- 205
Distributions from joint ventures 624 118
Purchase of equipment -- 19
Investment in financing leases (1,673) (4,432)
Investment in notes receivable (1,300) (1,596)
Investment in securities -- (28)
Cable systems, property and equipment -- (12)
Payment of acquisition fees -- (60)
-------- --------
Net cash provided (used) by investing activities 1,736 (2,011)
-------- --------
Financing Activities:
Redemptions of capital (34) (175)
Distributions to partners (3,947) (3,989)
-------- --------
Net cash used by financing activities (3,981) (4,164)
-------- --------
Decrease in cash and cash equivalents (598) (3,747)
Cash and cash equivalents, beginning of period 12,134 11,571
-------- --------
Cash and cash equivalents, end of period $ 11,536 $ 7,824
======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
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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 1996 amounts have been reclassified to
conform to the 1997 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) ceased operations on
October 23, 1996. The Subsidiary was a corporation subject to state and federal
tax regulations. The Subsidiary reported to the taxing authority on the accrual
basis. When income and expenses were recognized in different periods for
financial reporting purposes than for income tax purposes, deferred taxes were
provided for such differences using the liability method.
Note 4. Notes Receivable.
Impaired Notes Receivable. At March 31, 1997, the recorded investment
in notes that are considered to be impaired was $2,037,000. Included in this
amount is $1,915,000 of impaired notes for which the related allowance for
losses is $1,915,000, and $122,000 of impaired notes for which there is no
allowance. The average recorded investment in impaired loans during the three
months ended March 31, 1997 was approximately $2,037,000.
At March 31, 1996, the recorded investment in notes that are
considered to be impaired was $2,616,000. Included in this amount was $1,991,000
of impaired notes for which the related allowance for losses was $1,801,000, and
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$625,000 of impaired notes for which there was 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
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. This joint
venture subsequently sold the cable system on August 30, 1996 at a small gain.
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
1997 1996
---- ----
(Amounts in Thousands)
Beginning balance $ 2,224 $ 2,241
Provision for losses -- (17)
Write downs -- --
------- -------
Ending balance $ 2,224 $ 2,224
======= =======
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 6,239,231 and 6,305,106 for the three
months ended March 31, 1997 and 1996, 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 aggregate financial information of the equipment joint venture is
presented as follows:
March 31, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $2,863 $4,002
Liabilities 323 382
Partners' Capital 2,540 3,620
<PAGE>
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Three Months Ended
March 31,
1997 1996
---- ----
(Amounts in Thousands)
Revenue $374 $547
Expenses 112 217
Net Income 262 330
Financing Joint Venture
The aggregate financial information of the financing joint venture is
presented as follows:
March 31, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 967 $1,023
Liabilities 127 130
Partners' Capital 840 893
Three Months Ended
March 31,
1997 1996
---- ----
(Amounts in Thousands)
Revenue $ 35 $ 43
Expenses 14 --
Net Income 21 43
Foreclosed Cable Systems Joint Ventures
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
March 31, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 1,255 $ 1,330
Liabilities 184 197
Partners' Capital 1,071 1,133
<PAGE>
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Three Months Ended
March 31,
1997 1996
---- ----
(Amounts in Thousands)
Revenue $ 61 $ 415
Expenses 123 450
Net Loss (62) (35)
<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 $1,508,000 during the three months ended
March 31, 1997, as compared to net income of $1,275,000 during the three months
ended March 31, 1996. The improved earnings is the result of a decrease in
expenses that exceeded the decrease in revenues.
The decrease in total revenues of $717,000 for the three months ended
March 31, 1997, as compared to the same period in 1996, is primarily the result
of a $534,000 decrease in rental income and a $271,000 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 $61 million at March 31, 1997, as compared to $95 million at
March 31, 1996. 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 $16.3 million at March 31, 1997, as compared to $25.1
million at March 31, 1996. 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 of
accounting. This effect will be mitigated to some degree as the Partnership
continues to invest in new financing leases over its life. During the three
months ended March 31, 1997, the Partnership invested $1.7 million in new
financing leases, compared to $4.4 million for the same period in 1996.
Partially offsetting the decrease in rental income and earned income
from financing leases is an increase in gain on sale of equipment of $356,000
for the three months ended March 31, 1997, compared to the same period in the
prior year. This increase is a result of an increase in sales activity of the
Partnership's equipment portfolio. The Partnership sold equipment with an
aggregate original cost of $17.8 million for the three months ended March 31,
1997, compared to $5 million for the same period in 1996.
The gain on the sale of securities of $176,000 during the three months
ended March 31, 1996 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 stock 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 $962,000 during the three months ended
March 31, 1997, as compared to the same period in 1996. A majority of the
decrease in total expenses is due to the decrease in depreciation expense of
$724,000 for the three months ended March 31, 1997, as compared to the same
<PAGE>
Page 10 of 13
period in 1996. 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.
Cable Television System:
On October 10, 1996, Phoenix Westcom Cablevision Inc. (the Subsidiary)
sold all of its tangible and intangible assets used in the operation of its
cable television system. As a result of the sale of the cable television
system's assets, the Subsidiary ceased operations. Accordingly, there are no
result of operations from this cable television system during the three months
ended March 31, 1997. The revenues from this cable television system did not
have a significant impact upon total revenues during the three months ended
March 31, 1996.
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 $4,812,000 and $5,850,000 during
the three months ended March 31, 1997 and 1996, respectively. The net decrease
in cash generated is due to a decrease in rental income and payments on
financing leases, as previously discussed above in the results of operations.
Partially offsetting the decreases in rental income and payments on financing
leases is an increase in principal payments from notes receivables of $233,000
for the three months ended March 31, 1997, compared to the same period in 1996.
This increase is attributable to new investment in notes receivable made during
1996 and 1997. During the three months ended March 31, 1997, the Partnership
invested $1.3 million in notes receivable, compared to $1.6 million for the
three months ended March 31, 1996.
Proceeds from the sale of equipment increased during the three months
ended March 31, 1997, as compared to the same period in 1996. The increase of
$567,000 during the three months ended March 31, 1997, compared to 1996, is
attributable to an increase in the amount of equipment sold, as previously
discussed.
The Partnership received cash distributions from joint ventures of
$624,000 during the three months ended March 31, 1997, as compared to cash
distributions of $118,000 during the same period in 1996. In November of 1996,
one equipment joint venture's outstanding debt was repaid in full. As a result
this equipment joint venture began making distributions.
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, 1997, the Partnership made
investments in finance leases and equipment leases with an aggregate original
cost of $1.7 million, as compared to the $4.4 million acquired during the same
period in 1996. The equipment owned by the Partnership at March 31, 1997
approximates $61 million, as compared to the $95 million of equipment owned at
March 31, 1996.
As of March 31, 1997, the Partnership owned equipment being held for
lease with an original purchase price of $9,044,000 and a net book value of
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$509,000, compared to $10,027,000 and $1,340,000, respectively, at March 31,
1996. 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 three months ended March
31, 1997 was $3,947,000, as compared to $3,989,000 for the same period in 1996.
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 $3,750,000 and
$3,789,000 in distributions during the three months ended March 31, 1997 and
1996, respectively. The General Partner received $197,000 and $200,000 for its
share of the cash available for distribution during the three months ended March
31, 1997 and 1996, respectively. The Partnership currently anticipates making
distributions to partners during the remainder of 1997 at approximately the same
rate as 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>
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PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
March 31, 1997
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>
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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 LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
------------------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
May 13, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ------------- Senior Vice President, -----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
May 13, 1997 Senior Vice President, /S/ BRYANT J. TONG
- ------------- Financial Operations of -----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
May 13, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- ------------- and a Director of -----------------------
Phoenix Leasing Incorporated (Gary W. Martinez)
General Partner
May 13, 1997 Partnership Controller of /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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,536
<SECURITIES> 0
<RECEIVABLES> 8,069
<ALLOWANCES> 2,599
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 16,100
<DEPRECIATION> 15,454
<TOTAL-ASSETS> 37,041
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,257
<TOTAL-LIABILITY-AND-EQUITY> 37,041
<SALES> 0
<TOTAL-REVENUES> 2,564
<CGS> 0
<TOTAL-COSTS> 1,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,507
<INCOME-TAX> (1)
<INCOME-CONTINUING> 1,508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,508
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
