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, 2000
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
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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
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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
----- -----
6,192,840 Units of Limited Partnership Interest were outstanding as of June 30,
2000.
Transitional small business disclosure format:
Yes No X
----- -----
Page 1 of 13
<PAGE>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
June 30, December 31,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $10,031 $ 7,732
Accounts receivable (net of allowance for losses on
accounts receivable of $90 and $161 at June 30,
2000 and December 31, 1999, respectively) 105 95
Notes receivable (net of allowance for losses on notes
receivable of $11 and $409 at June 30, 2000 and
December 31, 1999, respectively) 1,546 2,060
Equipment on operating leases and held for lease
(net of accumulated depreciation of $622 and
$2,371 at June 30, 2000 and December 31, 1999,
respectively) -- 8
Net investment in financing leases (net of
allowance for early terminations of $4 and $11
at June 30, 2000 and December 31, 1999,
respectively) 441 1,090
Capitalized acquisition fees (net of accumulated
amortization of $10,858 and $10,811 at June 30,
2000 and December 31, 1999, respectively) 73 120
Marketable securities 395 42
Other assets -- 101
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Total Assets $12,591 $11,248
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 417 $ 846
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Total Liabilities 417 846
------- -------
Partners' Capital
General Partner -- --
Limited Partners, 6,500,000 units authorized,
6,492,727 units issued, 6,192,840 units
outstanding at June 30, 2000 and December 31, 1999 11,779 10,361
Accumulated other comprehensive income 395 41
------- -------
Total Partners' Capital 12,174 10,402
------- -------
Total Liabilities and Partners' Capital $12,591 $11,248
======= =======
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
INCOME
Rental income $ 391 $ 153 $ 571 $ 268
Earned income, financing leases 27 87 91 219
Gain on sale of equipment 145 49 182 62
Gain on sale of securities 104 235 258 235
Equity in earnings from joint
ventures, net -- 51 6 73
Interest income, notes receivable 56 154 136 300
Other income 149 92 273 180
------- ------- ------- -------
Total Income 872 821 1,517 1,337
------- ------- ------- -------
EXPENSES
Depreciation -- 46 7 126
Amortization of acquisition fees 21 50 47 117
Lease related operating expenses 13 12 19 16
Management fees to General Partner 55 64 96 133
Reimbursed administrative costs to
General Partner 49 57 116 114
Provision for (recovery of) losses
on receivables (18) 16 (393) 37
Legal expense 20 61 139 136
General and administrative expenses 37 41 67 77
------- ------- ------- -------
Total Expenses 177 347 98 756
------- ------- ------- -------
NET INCOME 695 474 1,419 581
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period 108 (47) 611 (147)
Less: reclassification adjustment
for gains included in net
income (104) (235) (258) (235)
------- ------- ------- -------
Other comprehensive income 4 (282) 353 (382)
------- ------- ------- -------
COMPREHENSIVE INCOME $ 699 $ 192 $ 1,772 $ 199
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .11 $ .07 $ .23 $ .07
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ .25 $ -- $ .50
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ -- $ 81 $ -- $ 163
Limited Partners 695 393 1,419 418
------- ------- ------- -------
$ 695 $ 474 $ 1,419 $ 581
======= ======= ======= =======
The accompanying notes are an integral part of these statements.
3
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
2000 1999
---- ----
Operating Activities:
--------------------
Net income $ 1,419 $ 581
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 7 126
Amortization of acquisition fees 47 117
Equity in earnings from joint ventures, net (6) (73)
Gain on sale of equipment (182) (62)
Provision for early termination, financing leases 6 --
Provision for (recovery of) losses on notes
receivable (351) 37
Recovery of losses on accounts receivable (48) --
Gain on sale of securities (258) (235)
Decrease in accounts receivable 38 9
Decrease in accounts payable and accrued
expenses (429) (133)
Decrease in other assets 38 21
-------- --------
Net cash provided by operating activities 281 388
-------- --------
Investing Activities:
--------------------
Principal payments, financing leases 581 1,665
Principal payments, notes receivable 865 1,059
Proceeds from sale of equipment 245 65
Proceeds from sale of securities 258 235
Distributions from joint ventures 69 148
Payment of acquisition fees -- 3
-------- --------
Net cash provided by investing activities 2,018 3,175
-------- --------
Financing Activities:
--------------------
Distributions to partners -- (3,264)
-------- --------
Net cash used in financing activities -- (3,264)
-------- --------
Increase in cash and cash equivalents 2,299 299
Cash and cash equivalents, beginning of period 7,732 6,877
-------- --------
Cash and cash equivalents, end of period $ 10,031 $ 7,176
======== ========
The accompanying notes are an integral part of these statements.
4
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. General.
-------
The accompanying unaudited condensed consolidated 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.
The Partnership Agreement stipulates the methods by which income will
be allocated to the General Partner and the limited partners. Such allocations
will be made using income or loss calculated under Generally Accepted Accounting
Principles for book purposes, which varies from income or loss calculated for
tax purposes.
The calculation of items of income and loss for book and tax purposes
may result in book basis capital accounts that vary from the tax basis capital
accounts. The requirement to restore any deficit capital balances by the General
Partner will be determined based on the tax basis capital accounts. At
liquidation of the Partnership, the General Partner's remaining book basis
capital accounts will be reduced to zero through the allocation of income or
loss.
Note 2. Reclassification.
----------------
Reclassification - Certain 1999 amounts have been reclassified to
conform to the 2000 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.
Note 4. Notes Receivable.
----------------
Impaired Notes Receivable. At June 30, 2000, the Partnership has
investments in notes receivable, before allowance for losses, of $1,557,000 of
which $159,000 is considered to be impaired. The impaired loans of $159,000 are
net of specific write-downs of $280,000. The Partnership has an allowance for
losses of $11,000 as of June 30, 2000. The average recorded investment in
impaired loans during the six months ended June 30, 2000 and 1999 was
approximately $167,000 and $261,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
six months ended June 30, is as follows:
2000 1999
---- ----
(Amounts in Thousands)
Beginning balance $ 409 $2,375
Provision for (recovery of) losses (351) 37
Write downs (47) --
------ ------
Ending balance $ 11 $2,412
====== ======
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 6,192,840 for the six months ended June
30, 2000 and 1999. 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,
2000 1999
---- ----
(Amounts in Thousands)
Assets $ -- $177
Liabilities -- 35
Partners' Capital -- 142
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $232 $ 16 $332
Expenses -- 39 3 48
Net Income -- 193 13 284
The remaining equipment joint venture was closed during the six months
ended June 30, 2000.
6
<PAGE>
Financing Joint Venture
-----------------------
The aggregate financial information of the financing joint venture is
presented as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $ 1 $ -- $ 2
Expenses -- 111 -- 162
Net Loss -- (110) -- (160)
The remaining financing joint venture was closed during the third
quarter of 1999.
Foreclosed Cable Systems Joint Ventures
---------------------------------------
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $ 63 $ -- $ 123
Expenses -- 82 -- 160
Net Loss -- (19) -- (37)
The remaining forclosed cable system joint ventures were closed during
1999.
7
<PAGE>
Note 7. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint (the "Complaint") was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Inc. (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and re-filed them in a separate lawsuit
making similar allegations (the "Ash Action").
In the Ash action, Plaintiffs have filed a fourth amended complaint
which includes six causes of action: breach of fiduciary duty, constructive
fraud, judicial dissolution of Cash Distribution Fund IV, judicial dissolution
of Cash Distribution Fund V, accounting and alter ego. Defendants recently
answered the complaint. Plaintiffs have served four requests for production on
July 25, 2000. The plaintiffs depositions have been taken and plaintiffs
recently took depositions of defendants.
The Berger complaint relates to alleged misrepresentations made in
connection with the offering of Cash Distribution Fund V. Defendants have
answered the complaint and discovery has commenced. A class has been certified.
Plaintiffs have served three requests for production; defendants responded to
the third request for production on July 25, 2000. The plaintiffs deposition has
been taken and plaintiffs recently took depositions of defendants.
The Companies intend to vigorously defend both actions.
During the six months ended June 30, 2000 and 1999, the Partnership
recorded legal expenses of approximately $0 and $59,000, respectively, in
connection with the above litigation as indemnification to the General Partner.
The Partnership is not a party to any legal proceedings which would
have a material adverse impact on its financial position.
8
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------
Results of Operations.
---------------------
Results of Operations
Phoenix Leasing Cash Distribution Fund IV, a California limited
partnership (the "Partnership"), reported net income of $695,000 and $1,419,000
during the three and six months ended June 30, 2000, respectively, as compared
to net income of $474,000 and $581,000 during the three and six months ended
June 30, 1999, respectively. The increase in net income for the three and six
months ended June 30, 2000, compared to the same period in 1999, is a result of
an increase in rental income and a recovery of provision for losses of notes
receivable, offset by decreases in earned income from financing leases and
interest income from notes receivable.
Total income increased $51,000 and $180,000 for the three and six
months ended June 30, 2000, as compared to the same period in 1999. Rental
income increased by $238,000 and $303,000 for the three and six months ended
June 30, 2000, respectively, compared to the same period in 1999. The increase
in rental income is due to settlements related to rental activity being
recognized as income in the three and six months ended June 30, 2000; however,
this was offset by a decrease in the Partnership's equipment portfolio. The
Partnership owned equipment with an aggregate original cost of $3.5 million at
June 30, 2000, as compared to $17 million at June 30, 1999.
The above increases in income were offset by decreases in earned income
from financing leases and interest income from notes receivable. The decrease in
earned income from financing leases of $60,000 and $128,000 for the three and
six months ended June 30, 2000, respectively, compared to the same period in the
prior year, is due to a decrease in the net investment in financing leases. The
net investment in financing leases was $441,000 at June 30, 2000, as compared to
$1.6 million at June 30, 1999. 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.
Interest income from notes receivable decreased by $98,000 and $164,000
for the three and six months ended June 30, 2000, respectively, compared to the
same period in 1999. The decrease in interest income from notes receivable is
attributable to the decline in net investment in notes receivable. At June 30,
2000, the net investment in notes receivable was $1,546,000, compared to
$2,922,000 at June 30, 1999.
Total expenses decreased by $170,000 and $658,000 during the three and
six months ended June 30, 2000, respectively, as compared to the same period in
1999. The decrease in total expenses for the three and six months ended June 30,
2000, compared to the same period in the previous year, is a result of a change
in the estimated allowances for losses on receivables of $34,000 and $430,000 as
well as a decrease in nearly all of the items comprising total expenses, with
depreciation expense contributing the next largest decrease. These decreases are
the result of the continued decrease in the size of the equipment portfolio.
Depreciation expense decreased $46,000 and $119,000 during the three and six
months ended June 30, 2000, respectively, compared to 1999. This decrease is due
9
<PAGE>
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.
Liquidity and Capital Resources
The Partnership's primary source of liquidity is derived from its
contractual obligations with a diversified group of 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 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 and
financing activities of $1,727,000 and $3,112,000 during the six months ended
June 30, 2000 and 1999, respectively. The net decrease in cash generated is due
to a decrease in payments on financing leases and notes receivable.
The Partnership received cash distributions from joint ventures of
$69,000 during the six months ended June 30, 2000, as compared to cash
distributions of $148,000 during the same period in 1999. The decrease in
distributions from joint ventures is attributable to a decline in the amount of
cash available for distribution from two equipment joint ventures as a result of
one joint venture closing during the third quarter of 1999 and the other joint
venture closing during the first quarter of 2000.
Proceeds from the sale of equipment increased as a result of an
increase in sales activity of the Partnership's equipment portfolio. The
Partnership sold equipment with an aggregate original cost of $6.5 million for
the six months ended June 30, 2000, compared to $5.4 million for the same period
in 1999.
As of June 30, 2000, the Partnership owned equipment held for lease
with an original purchase price of $695,000 and a net book value of $0, compared
to $7.5 million and $14,000, respectively, at June 30, 1999. The General Partner
is actively engaged, on behalf of the Partnership, in remarketing and selling
the Partnership's equipment as it becomes available. 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 total cash distributed to partners for the six months ended June
30, 2000 was $0, as compared to $3,264,000 for the same period in 1999. 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 $0 and $3,101,000 in
distributions during the six months ended June 30, 2000 and 1999, respectively.
The cumulative distributions to the Limited Partners are $122,934,000 and
$120,402,000 as of June 30, 2000 and 1999, respectively. The General Partner
received $0 and $163,000 for its share of the cash available for distribution
during the six months ended June 30, 2000 and 1999, respectively. The
Partnership is not planning to make distributions in 2000, compared to the 1999
distribution rate of 5%.
As provided for by the partnership agreement, the General Partner has
determined to exercise its discretion that no further redemptions in the
Partnership will be permitted after March 31, 1998.
10
<PAGE>
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses.
Impact of the Year 2000 Issue
The General Partner has appointed ResourcePhoenix.com. (RPC), an
affiliate of the General Partner, to manage its Year 2000 project.
RPC has a Year 2000 project plan in place and a "Y2K Project Team" has
been appointed. The team has identified risks, and has implemented remediation
procedures for its Year 2000 issues. RPC has budgeted for the necessary changes,
built contingency plans, and has progressed along the scheduled timeline.
Installation of all remediation changes to critical software and hardware was
completed on November 5, 1999. As of July 31, 2000, RPC has not encountered any
material year 2000 problems with the hardware and software systems used in our
operations. In addition, none of RPC's critical vendors have reported any
material year 2000 problems nor have they experienced any decline in service
levels from such vendors.
RPC will continue to monitor internal and external issues related to
year 2000.
Costs incurred by the Partnership will be expensed as incurred and are
not currently anticipated to be material to the Partnership's financial position
or results of operations.
The Partnership's customers consist of lessees and borrowers. The
Partnership does not have exposure to any individual customer that would
materially impact the Partnership should the customer experience a significant
Year 2000 problem.
11
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
June 30, 2000
Part II. Other Information.
-----------------
Item 1. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint (the "Complaint") was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Inc. (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and re-filed them in a separate lawsuit
making similar allegations (the "Ash Action").
In the Ash action, Plaintiffs have filed a fourth amended complaint
which includes six causes of action: breach of fiduciary duty, constructive
fraud, judicial dissolution of Cash Distribution Fund IV, judicial dissolution
of Cash Distribution Fund V, accounting and alter ego. Defendants recently
answered the complaint. Plaintiffs have served four requests for production on
July 25, 2000. The plaintiffs depositions have been taken and plaintiffs
recently took depositions of defendants.
The Berger complaint relates to alleged misrepresentations made in
connection with the offering of Cash Distribution Fund V. Defendants have
answered the complaint and discovery has commenced. A class has been certified.
Plaintiffs have served three requests for production; defendants responded to
the third request for production on July 25, 2000. The plaintiffs deposition has
been taken and plaintiffs recently took depositions of defendants.
The Companies intend to vigorously defend both actions.
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
12
<PAGE>
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 11, 2000 Executive Vice President, /S/ GARY W. MARTINEZ
--------------- Chief Operating Officer --------------------
and a Director of (Gary W. Martinez)
Phoenix Leasing Incorporated
General Partner
August 11, 2000 Vice President, Finance, /S/ ANDREW N. GREGSON
--------------- Treasurer and a Director of ---------------------
Phoenix Leasing Incorporated (Andrew N. Gregson)
General Partner
13
