Page 1 of 12
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 June 30, 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 _____
6,216,158 Units of Limited Partnership Interest were outstanding as of June 30,
1997.
Transitional small business disclosure format:
Yes _____ No __X__
<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)
June 30, December 31,
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 7,910 $12,134
Accounts receivable (net of allowance for
losses on accounts receivable of $328 and
$424 at June 30, 1997 and December 31,
1996, respectively) 348 484
Notes receivable (net of allowance for losses
on notes receivable of $2,196 and $2,224 at
June 30, 1997 and December 31, 1996, respectively) 7,950 4,654
Equipment on operating leases and held for
lease(net of accumulated depreciation of
$14,537 and $26,179 at June 30, 1997 and
December 31, 1996, respectively) 424 1,376
Net investment in financing leases (net of
allowance for early terminations of $791
and $941 at June 30, 1997 and December 31,
1996, respectively) 14,245 16,973
Investment in joint ventures 1,353 2,278
Capitalized acquisition fees (net of accumulated
amortization of $9,984 and $9,695 at June 30,
1997 and December 31, 1996, respectively) 936 957
Other assets 325 719
------- -------
Total Assets $33,491 $39,575
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,658 $ 1,511
------- -------
Total Liabilities 1,658 1,511
------- -------
Partners' Capital
General Partner -- --
Limited Partners, 6,500,000 units authorized,
6,492,727 units issued, 6,216,158 and 6,242,943
units outstanding at June 30, 1997 and December
31, 1996, respectively 31,675 37,539
Unrealized gain on available-for-sale securities 158 525
------- -------
Total Partners' Capital 31,833 38,064
------- -------
Total Liabilities and Partners' Capital $33,491 $39,575
======= =======
The accompanying notes are an integral part of these statements.
<PAGE>
Page 3 of 12
<TABLE>
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)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Rental income $ 480 $ 1,660 $ 1,386 $ 3,100
Earned income, financing leases 605 909 1,259 1,834
Gain (loss) on sale of equipment 164 (37) 666 108
Gain on sale of securities -- 800 -- 977
Equity in earnings from joint ventures, net 60 80 174 232
Interest income, notes receivable 253 257 476 489
Cable subscriber revenue -- 64 -- 130
Other income 170 155 333 299
------- ------- ------- -------
Total Income 1,732 3,888 4,294 7,169
------- ------- ------- -------
EXPENSES
Depreciation 217 1,260 525 2,292
Amortization of acquisition fees 131 204 289 395
Lease related operating expenses 97 65 178 144
Management fees to General Partner 149 263 353 494
Reimbursed administrative costs
to General Partner 150 177 319 390
Provision for losses on receivables 195 98 195 177
Program service, cable system -- 31 -- 60
Legal expenses 70 34 151 100
General and administrative expenses 59 99 112 198
------- ------- ------- -------
Total Expenses 1,068 2,231 2,122 4,250
------- ------- ------- -------
NET INCOME BEFORE INCOME TAXES $ 664 $ 1,657 $ 2,172 $ 2,919
Income tax benefit 2 14 3 27
------- ------- ------- -------
NET INCOME $ 666 $ 1,671 $ 2,175 $ 2,946
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .08 $ .23 $ .29 $ .40
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .60 $ .60 $ 1.20 $ 1.20
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 198 $ 199 $ 395 $ 399
Limited Partners 468 1,472 1,780 2,547
------- ------- ------- -------
$ 666 $ 1,671 $ 2,175 $ 2,946
======= ======= ======= =======
</TABLE>
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)
Six Months Ended
June 30,
1997 1996
---- ----
Operating Activities:
Net income $ 2,175 $ 2,946
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 525 2,292
Amortization of acquisition fees 289 395
Gain on sale of equipment (666) (108)
Equity in earnings from joint ventures, net (174) (232)
Provision for early termination,
financing leases 113 192
Provision for (recovery of) losses on
notes receivable 82 (17)
Provision for losses on accounts receivable -- 2
Gain on sale of securities -- (977)
Decrease in accounts receivable 136 131
Increase in accounts payable and
accrued expenses 44 241
Increase in deferred income tax asset (3) (27)
Decrease (increase) in other assets 30 (47)
-------- --------
Net cash provided by operating activities 2,551 4,791
-------- --------
Investing Activities:
Principal payments, financing leases 4,719 5,788
Principal payments, notes receivable 1,330 1,246
Proceeds from sale of equipment 975 524
Proceeds from sale of securities -- 1,005
Distributions from joint ventures 1,099 208
Investment in financing leases (1,986) (5,708)
Investment in notes receivable (4,708) (1,787)
Cable systems, property and equipment -- (19)
Investment in securities -- (28)
Payment of acquisition fees (165) (337)
--------- ---------
Net cash provided by investing activities 1,264 892
-------- --------
Financing Activities:
Redemptions of capital (150) (363)
Distributions to partners (7,889) (7,966)
--------- ---------
Net cash used by financing activities (8,039) (8,329)
--------- ---------
Decrease in cash and cash equivalents (4,224) (2,646)
Cash and cash equivalents, beginning of period 12,134 11,571
-------- --------
Cash and cash equivalents, end of period $ 7,910 $ 8,925
======== ========
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 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 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 June 30, 1997, the recorded investment in
notes that are considered to be impaired was $1,893,000 for which the related
allowance for losses is $1,893,000. The average recorded investment in impaired
loans during the six months ended June 30, 1997 was approximately $1,965,000.
At June 30, 1996, the recorded investment in notes that are considered
to be impaired was $2,583,000. Included in this amount was $1,959,000 of
impaired notes for which the related allowance for losses was $1,801,000, and
$624,000 of impaired notes for which there was no allowance. The average
recorded investment in impaired loans during the six months ended June 30, 1996
was approximately $2,599,000.
<PAGE>
Page 6 of 12
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 82 (17)
Write downs (110) -
--------- --------
Ending balance $ 2,196 $ 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 6,234,148 and 6,294,146 for the six
months ended June 30, 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:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 2,024 $ 4,002
Liabilities 352 382
Partners' Capital 1,672 3,620
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 237 $ 491 $ 582 $ 1,039
Expenses 97 343 81 561
Net Income 40 148 401 478
<PAGE>
Page 7 of 12
Financing Joint Venture
The aggregate financial information of the financing joint venture is
presented as follows:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 927 $ 1,023
Liabilities 142 130
Partners' Capital 785 893
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 33 $ 42 $ 68 $ 85
Expenses 3 2 17 2
Net Income 30 40 51 83
Foreclosed Cable Systems Joint Ventures
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 1,270 $ 1,330
Liabilities 219 197
Partners' Capital 1,051 1,133
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 102 $ 786 $ 162 $ 1,201
Expenses 122 729 244 1,179
Net Income (Loss) (20) 57 (82) 22
<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 $666,000 and $2,175,000 during the three and
six months ended June 30, 1997, respectively, as compared to net income of
$1,671,000 and $2,946,000 during the three and six months ended June 30, 1996,
respectively. The decline in net income during the three and six months ended
June 30, 1997, is a result of an absence of a gain on sale of securities as that
recognized during 1996. During the three and six months ended June 30, 1996, the
Partnership reported a gain on sale of securities of $800,000 and $977,000,
respectively.
The decrease in total revenues of $2,156,000 and $2,875,000 for the
three and six months ended June 30, 1997, respectively, as compared to the same
periods in 1996, is primarily the result of decreases in rental income, earned
income from financing leases and gain on sale of securities. 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
$56.3 million at June 30, 1997, as compared to $89.2 million at June 30, 1996.
Another factor contributing to the decrease in rental income is equipment being
held for 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 is $14.2 million at June 30, 1997, as compared to $22.3 million
at June 30, 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 six months ended June
30, 1997, the Partnership invested $2 million in new financing leases, compared
to $5.7 million for the same period in 1996.
The decline in total revenues for the three and six months ended June
30, 1997, as compared to the same periods in the prior year, is also
attributable to the absence of a gain on sale of securities. During the three
and six months ended June 30, 1996, the Partnership reported a gain on sale of
securities of $800,000 and $977,000, respectively. The securities sold during
1996 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 gain of $158,000 at June 30, 1997 compared to $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.
Partially offsetting the decreases rental income, earned income from
financing leases and gain on sale of securities is an increase in gain on sale
of equipment of $201,000 and $558,000 for the three and six months ended June
30, 1997, respectively, compared to the same periods 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 $22.4 million for the six months ended June 30, 1997, compared to $12.6
million for the same period in 1996.
<PAGE>
Page 9 of 12
Total expenses decreased by $1,163,000 and $2,128,000 during the three
and six months ended June 30, 1997, respectively, as compared to the same
periods in 1996. A majority of the decrease in total expenses is due to the
decrease in depreciation expense of $1,043,000 and $1,767,000 for the three and
six months ended June 30, 1997, respectively, as compared to the same periods 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 six months
ended June 30, 1997. 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.
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 $8,600,000 and $11,825,000 during
the six months ended June 30, 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 a
slight increase in principal payments from notes receivables of $84,000 for the
six months ended June 30, 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 six months ended June 30, 1997, the Partnership invested
$4.7 million in notes receivable, compared to $1.8 million for the six months
ended June 30, 1996.
Proceeds from the sale of equipment increased during the six months
ended June 30, 1997, as compared to the same period in 1996. The increase of
$451,000 during the six months ended June 30, 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
$1,099,000 during the six months ended June 30, 1997, as compared to cash
distributions of $208,000 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 six months ended June 30, 1997, the Partnership made
investments in finance leases and equipment leases with an aggregate original
cost of $2 million, as compared to the $5.7 million acquired during the same
period in 1996. The equipment owned by the Partnership at June 30, 1997
approximates $56.3 million, as compared to the $89.2 million of equipment owned
at June 30, 1996. Additionally, the Partnership invested $4.7 million in notes
<PAGE>
Page 10 of 12
receivable during the six months ended June 30, 1997 compared to $1.8 million
for the same period in 1996.
As of June 30, 1997, the Partnership owned equipment being held for
lease with an original purchase price of $10,300,000 and a net book value of
$346,000, compared to $8,172,000 and $918,000, respectively, at June 30, 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 six months ended June
30, 1997 was $7,889,000, as compared to $7,966,000 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 $7,494,000 and
$7,567,000 in distributions during the six months ended June 30, 1997 and 1996,
respectively. The General Partner received $395,000 and $399,000 for its share
of the cash available for distribution during the six months ended June 30, 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>
Page 11 of 12
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
June 30, 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:
(27) Financial Data Schedule
b) Reports on 8-K:
One report, dated June 16, 1997, on Form 8-K was filed during
the quarter ending June 30, 1997, pursuant to Item 4 and Item 7 of that form. No
financial statements were filed as part of that report.
<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
---- ----- ---------
August 13, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- --------------- and a Director of ----------------------
Phoenix Leasing Incorporated (Gary W. Martinez)
General Partner
August 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
August 13, 1997 Senior Vice President, /S/ BRYANT J. TONG
- --------------- Financial Operations of ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
August 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,910
<SECURITIES> 0
<RECEIVABLES> 10,822
<ALLOWANCES> 2,524
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,961
<DEPRECIATION> 14,537
<TOTAL-ASSETS> 33,491
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 31,833
<TOTAL-LIABILITY-AND-EQUITY> 33,491
<SALES> 0
<TOTAL-REVENUES> 4,294
<CGS> 0
<TOTAL-COSTS> 2,122
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 195
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,172
<INCOME-TAX> (3)
<INCOME-CONTINUING> 2,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,175
<EPS-PRIMARY> .29
<EPS-DILUTED> 0
</TABLE>
