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 September 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 _____
6,213,588 Units of Limited Partnership Interest were outstanding as of September
30, 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)
September 30, December 31,
1997 1996
------- -------
ASSETS
Cash and cash equivalents $ 8,632 $12,134
Accounts receivable (net of allowance for
losses on accounts receivable of $316 and
$424 at September 30, 1997 and December 31,
1996, respectively) 392 484
Notes receivable (net of allowance for losses
on notes receivable of $2,235 and $2,224 at
September 30, 1997 and December 31, 1996,
respectively) 7,454 4,654
Equipment on operating leases and held for lease
(net of accumulated depreciation of $12,184 and
$26,179 at September 30, 1997 and December 31,
1996, respectively) 329 1,376
Net investment in financing leases (net of allowance
for early terminations of $838 and $941 at September
30, 1997 and December 31, 1996, respectively) 11,768 16,973
Investment in joint ventures 959 2,278
Capitalized acquisition fees (net of accumulated
amortization of $10,113 and $9,695 at September 30,
1997 and December 31, 1996, respectively) 815 957
Other assets 195 719
------- -------
Total Assets $30,544 $39,575
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,661 $ 1,511
------- -------
Total Liabilities 1,661 1,511
------- -------
Partners' Capital
General Partner -- --
Limited Partners, 6,500,000 units authorized,
6,492,727 units issued, 6,213,588 and 6,242,943
units outstanding at September 30, 1997 and
December 31, 1996, respectively 28,790 37,539
Unrealized gain on available-for-sale securities 93 525
------- -------
Total Partners' Capital 28,883 38,064
------- -------
Total Liabilities and Partners' Capital $30,544 $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 Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
INCOME
Rental income $ 769 $ 1,770 $ 2,155 $ 4,870
Earned income, financing leases 510 785 1,769 2,620
Gain on sale of equipment 104 186 770 295
Gain on sale of securities -- -- -- 977
Equity in earnings from joint
ventures, net 66 186 241 417
Interest income, notes receivable 349 212 824 701
Cable subscriber revenue -- 54 -- 184
Other income 135 143 468 442
------- ------- ------- -------
Total Income 1,933 3,336 6,227 10,506
------- ------- ------- -------
EXPENSES
Depreciation 243 577 768 2,870
Amortization of acquisition fees 129 153 418 548
Lease related operating expenses 20 81 199 225
Management fees to General Partner 165 221 517 715
Reimbursed administrative costs
to General Partner 90 167 409 557
Provision for losses on receivables 86 87 281 265
Program service, cable system -- 32 -- 91
Legal expenses 104 51 255 151
General and administrative expenses 39 89 151 287
------- ------- ------- -------
Total Expenses 876 1,458 2,998 5,709
------- ------- ------- -------
NET INCOME BEFORE INCOME TAXES $ 1,057 $ 1,878 $ 3,229 $ 4,797
Income tax benefit -- 15 3 42
------- ------- ------- -------
NET INCOME $ 1,057 $ 1,893 $ 3,232 $ 4,839
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .13 $ .28 $ .42 $ .68
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .60 $ .60 $ 1.80 $ 1.80
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 196 $ 198 $ 591 $ 597
Limited Partners 861 1,695 2,641 4,242
------- ------- ------- -------
$ 1,057 $ 1,893 $ 3,232 $ 4,839
======= ======= ======= =======
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)
Nine Months Ended
September 30,
1997 1996
-------- --------
Operating Activities:
Net income $ 3,232 $ 4,839
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 768 2,870
Amortization of acquisition fees 418 548
Gain on sale of equipment (770) (295)
Equity in earnings from joint ventures, net (241) (417)
Provision for early termination,financing
leases 160 280
Provision for (recovery of) losses on
notes receivable 121 (17)
Provision for losses on accounts receivable -- 2
Gain on sale of securities -- (977)
Decrease in accounts receivable 92 107
Increase in accounts payable and accrued
expenses 39 70
Increase in deferred income tax asset (3) (42)
Decrease in other assets 95 76
-------- --------
Net cash provided by operating activities 3,911 7,044
-------- --------
Investing Activities:
Principal payments, financing leases 6,868 8,452
Principal payments, notes receivable 1,999 1,811
Proceeds from sale of equipment 1,212 760
Proceeds from sale of securities -- 1,005
Distributions from joint ventures 1,560 297
Investment in financing leases (1,986) (6,085)
Investment in notes receivable (4,920) (1,788)
Investment in joint ventures -- (69)
Cable systems, property and equipment -- (29)
Investment in securities -- (28)
Payment of acquisition fees (165) (407)
-------- --------
Net cash provided by investing activities 4,568 3,919
-------- --------
Financing Activities:
Redemptions of capital (162) (440)
Distributions to partners (11,819) (11,926)
-------- --------
Net cash used by financing activities (11,981) (12,366)
-------- --------
Decrease in cash and cash equivalents (3,502) (1,403)
Cash and cash equivalents, beginning of period 12,134 11,571
-------- --------
Cash and cash equivalents, end of period $ 8,632 $ 10,168
======== ========
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.
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 September 30, 1997, the recorded
investment in notes that are considered to be impaired was $2,029,000. Included
in this amount is $1,884,000 of impaired notes for which the related allowance
for losses is $1,884,000 and $145,000 for which there is no allowance. The
average recorded investment in impaired loans during the nine months ended
September 30, 1997 and 1996 was approximately $1,986,000 and $2,618,000,
respectively.
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 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 during the nine
months ended September 30, 1996.
<PAGE>
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The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1997 1996
-------- --------
(Amounts in Thousands)
Beginning balance $ 2,224 $ 2,241
Provision for losses 121 (17)
Write downs (110) -
-------- --------
Ending balance $ 2,235 $ 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 6,227,719 and 6,282,129 for the nine
months ended September 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:
September 30, December 31,
1997 1996
------- -------
(Amounts in Thousands)
Assets $ 1,203 $ 4,002
Liabilities 355 382
Partners' Capital 848 3,620
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
(Amounts in Thousands)
Revenue $ 320 $ 616 $ 903 $ 1,656
Expenses 173 219 355 780
Net Income 147 397 548 876
<PAGE>
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Financing Joint Venture
The aggregate financial information of the financing joint venture is
presented as follows:
September 30, December 31,
1997 1996
------- -------
(Amounts in Thousands)
Assets $ 872 $ 1,023
Liabilities 145 130
Partners' Capital 727 893
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
(Amounts in Thousands)
Revenue $ 31 $ 40 $ 99 $ 124
Expenses 4 2 21 4
Net Income 27 38 78 120
Foreclosed Cable Systems Joint Ventures
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
September 30, December 31,
1997 1996
------- -------
(Amounts in Thousands)
Assets $ 1,209 $ 1,330
Liabilities 220 197
Partners' Capital 989 1,133
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
(Amounts in Thousands)
Revenue $ 270 $ 1,018 $ 432 $ 2,219
Expenses 128 895 372 2,074
Net Income 142 123 60 145
<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 $1,057,000 and $3,232,000 during the three
and nine months ended September 30, 1997, respectively, as compared to net
income of $1,893,000 and $4,839,000 during the three and nine months ended
September 30, 1996, respectively. The decline in net income during the three and
nine months ended September 30, 1997, is a result of a reduction in rental
income. Additionally, the absence of a gain on sale of securities during the
nine months ended September 30, 1997 also contributed to the decline in net
income for the period. During the nine months ended September 30, 1996, the
Partnership recognized a gain on sale of securities of $977,000.
The decrease in total revenues of $1,403,000 and $4,279,000 for the
three and nine months ended September 30, 1997, respectively, as compared to the
same periods in 1996, is primarily the result of decreases in rental income and
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 $50.8 million at September 30,
1997, as compared to $84.8 million at September 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 $11.8 million at September 30, 1997, as compared to $19.5
million at September 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 nine
months ended September 30, 1997, the Partnership invested $2 million in new
financing leases, compared to $6.1 million for the same period in 1996.
The decline in total revenues for the nine months ended September 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 nine months ended
September 30, 1996, the Partnership reported a gain on sale of securities of
$977,000. 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 gains of $93,000 at September 30, 1997
compared to $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.
Partially offsetting the decreases in rental income and earned income
from financing leases for the nine months ended September 30, 1997, compared to
the same period in 1996, is an increase in gain on sale of equipment of
$475,000. 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 $28 million for the nine months ended September 30,
<PAGE>
Page 9 of 12
1997, compared to $17.4 million for the same period in 1996.
Total expenses decreased by $582,000 and $2,711,000 during the three
and nine months ended September 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 $334,000 and $2,102,000 for the three and
nine months ended September 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 nine months
ended September 30, 1997. 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.
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 $12,778,000 and $17,307,000 during
the nine months ended September 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 receivable of
$188,000 for the nine months ended September 30, 1997, compared to the same
period in 1996. This increase is attributable to new investments in notes
receivable made during 1996 and 1997. During the nine months ended September 30,
1997, the Partnership invested $4.9 million in notes receivable, compared to
$1.8 million for the nine months ended September 30, 1996.
Proceeds from the sale of equipment increased during the nine months
ended September 30, 1997, as compared to the same period in 1996. The increase
of $452,000 during the nine months ended September 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
$1,560,000 during the nine months ended September 30, 1997, as compared to cash
distributions of $297,000 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 nine months ended September 30, 1997, the Partnership
made investments in finance leases and equipment leases with an aggregate
<PAGE>
Page 10 of 12
original cost of $2 million, as compared to the $6.1 million acquired during the
same period in 1996. The equipment owned by the Partnership at September 30,
1997 approximates $50.8 million, as compared to the $84.8 million of equipment
owned at September 30, 1996. Additionally, the Partnership invested $4.9 million
in notes receivable during the nine months ended September 30, 1997 compared to
$1.8 million for the same period in 1996.
As of September 30, 1997, the Partnership owned equipment being held
for lease with an original purchase price of $9,403,000 and a net book value of
$280,000, compared to $10,925,000 and $961,000, respectively, at September 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 nine months ended
September 30, 1997 was $11,819,000, as compared to $11,926,000 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
$11,228,000 and $11,329,000 in distributions during the nine months ended
September 30, 1997 and 1996, respectively. The total cumulative cash
distribution to limited partners as of September 30, 1997 was $99,449,000, as
compared to $84,466,000 at September 30, 1996. The General Partner received
$591,000 and $597,000 for its share of the cash available for distribution
during the nine months ended September 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>
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PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
September 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: 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, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- ------------------- and a Director of ----------------------
Phoenix Leasing Incorporated (Gary W. Martinez)
General Partner
November 12, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ------------------- Senior Vice President, ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 12, 1997 Senior Vice President, /S/ BRYANT J. TONG
- ------------------- Financial Operations of ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,632
<SECURITIES> 0
<RECEIVABLES> 10,397
<ALLOWANCES> 2,551
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 12,513
<DEPRECIATION> 12,184
<TOTAL-ASSETS> 30,544
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,883
<TOTAL-LIABILITY-AND-EQUITY> 30,544
<SALES> 0
<TOTAL-REVENUES> 6,227
<CGS> 0
<TOTAL-COSTS> 2,998
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 281
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,229
<INCOME-TAX> (3)
<INCOME-CONTINUING> 3,232
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,232
<EPS-PRIMARY> .42
<EPS-DILUTED> 0
</TABLE>
