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, 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
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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 September
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)
September 30, December 31,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $11,220 $ 7,732
Accounts receivable (net of allowance for losses on
accounts receivable of $84 and $161 at September
30, 2000 and December 31, 1999, respectively) 225 95
Notes receivable (net of allowance for losses on
notes receivable of $11 and $409 at September 30,
2000 and December 31, 1999, respectively) 1,144 2,060
Equipment on operating leases and held for lease (net
of accumulated depreciation of $126 and $2,371 at
September 30, 2000 and December 31, 1999,
respectively) -- 8
Net investment in financing leases (net of allowance
for early terminations of $3 and $11 at September
30, 2000 and December 31, 1999, respectively) 266 1,090
Capitalized acquisition fees (net of accumulated
amortization of $10,881 and $10,811 at September
30, 2000 and December 31, 1999, respectively) 50 120
Marketable securities 140 42
Other assets -- 101
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Total Assets $13,045 $11,248
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 722 $ 846
------- -------
Total Liabilities 722 846
------- -------
Partners' Capital
General Partner -- --
Limited Partners, 6,500,000 units authorized,
6,492,727 units issued, 6,192,840 units
outstanding at September 30, 2000 and
December 31, 1999 12,183 10,361
Accumulated other comprehensive income 140 41
------- -------
Total Partners' Capital 12,323 10,402
------- -------
Total Liabilities and Partners' Capital $13,045 $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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
INCOME
Rental income $ 67 $ 114 $ 639 $ 382
Earned income, financing leases (11) 65 80 285
Gain on sale of equipment 29 35 211 97
Gain on sale of securities 152 163 410 397
Equity in earnings from joint
ventures, net -- 67 6 140
Interest income, notes receivable 215 226 350 526
Other income 177 95 450 275
------- ------- ------- -------
Total Income 629 765 2,146 2,102
------- ------- ------- -------
EXPENSES
Depreciation -- 19 8 145
Amortization of acquisition fees 23 40 70 157
Lease related operating expenses 37 -- 57 16
Management fees to General Partner 35 54 131 188
Reimbursed administrative costs to
General Partner 46 27 162 142
Provision for (recovery of) losses
on receivables 35 -- (359) 37
Legal expense 29 82 168 218
General and administrative expenses 21 37 87 113
------- ------- ------- -------
Total Expenses 226 259 324 1,016
------- ------- ------- -------
NET INCOME 403 506 1,822 1,086
Other comprehensive income:
Unrealized gains (losses) on
securities:
Unrealized holding gains (losses)
arising during period (103) 332 508 185
Less: reclassification adjustment
for gains included in net
income (152) (162) (410) (397)
------- ------- ------- -------
Other comprehensive income (255) 170 98 (212)
------- ------- ------- -------
COMPREHENSIVE INCOME $ 148 $ 676 $ 1,920 $ 874
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .06 $ .07 $ .29 $ .14
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ .25 $ -- $ .75
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ -- $ 81 $ -- $ 244
Limited Partners 403 425 1,822 842
------- ------- ------- -------
$ 403 $ 506 $ 1,822 $ 1,086
======= ======= ======= =======
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)
Nine Months Ended
September 30,
2000 1999
---- ----
Operating Activities:
--------------------
Net income $ 1,822 $ 1,086
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8 145
Amortization of acquisition fees 70 157
Equity in earnings from joint ventures, net (6) (140)
Gain on sale of equipment (211) (97)
Provision for early termination, financing leases 6 --
Provision for (recovery of) losses on notes
receivable (325) 37
Recovery of losses on accounts receivable (40) --
Gain on sale of securities (410) (397)
Decrease (increase) in accounts receivable (90) 19
Decrease in accounts payable and accrued expenses (124) (80)
Decrease in other assets 39 27
-------- --------
Net cash provided by operating activities 739 757
-------- --------
Investing Activities:
--------------------
Principal payments, financing leases 755 2,197
Principal payments, notes receivable 1,241 1,471
Proceeds from sale of equipment 274 98
Proceeds from sale of securities 410 397
Distributions from joint ventures 69 468
-------- --------
Net cash provided by investing activities 2,749 4,631
-------- --------
Financing Activities:
--------------------
Distributions to partners -- (4,888)
-------- --------
Net cash used in financing activities -- (4,888)
-------- --------
Increase in cash and cash equivalents 3,488 500
Cash and cash equivalents, beginning of period 7,732 6,877
-------- --------
Cash and cash equivalents, end of period $ 11,220 $ 7,377
======== ========
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 September 30, 2000, the Partnership has
investments in notes receivable, before allowance for losses, of $1,155,000 of
which $13,000 is considered to be impaired. The impaired loans of $13,000 are
net of specific write-downs of $136,000. The Partnership has an allowance for
losses of $11,000 as of September 30, 2000. The average recorded investment in
impaired loans during the nine months ended September 30, 2000 and 1999 was
approximately $116,000 and $394,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
2000 1999
---- ----
(Amounts in Thousands)
Beginning balance $ 409 $ 2,375
Provision for (recovery of) losses (325) 37
Write downs (73) (1,607)
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Ending balance $ 11 $ 805
======= =======
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 nine months ended
September 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:
September 30, December 31,
2000 1999
---- ----
(Amounts in Thousands)
Assets $ -- $177
Liabilities -- 35
Partners' Capital -- 142
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $ 71 $ 16 $404
Expenses -- 4 3 53
Net Income -- 67 13 351
The remaining equipment joint venture was closed during the nine months
ended September 30, 2000.
6
<PAGE>
Financing Joint Venture
-----------------------
The aggregate financial information of the financing joint venture is
presented as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $ 7 $ -- $ 2
Expenses -- -- -- 155
Net (Income) Loss -- 7 -- (153)
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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $122 $ -- $245
Expenses -- 27 -- 187
Net Income -- 95 -- 58
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").
The Ash complaint 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 and discovery has commenced. 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 V. Defendants have answered
the complaint and discovery has commenced. A class has been certified. The
plaintiffs' depositions have been taken, and plaintiffs recently took
depositions of defendants.
On August 28, 2000, the Ash and Berger actions were consolidated (the
"Consolidated Action") pursuant to stipulation by both parties. Plaintiffs
recently served a first request for production in the Consolidated Action;
defendants will respond to the first request for production on November 22,
2000.
The Companies intend to vigorously defend the Consolidated Action.
During the nine months ended September 30, 2000 and 1999, the
Partnership recorded legal expenses of approximately $0 and $101,000,
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 $403,000 and $1,822,000
during the three and nine months ended September 30, 2000, respectively, as
compared to net income of $506,000 and $1,086,000 during the three and nine
months ended September 30, 1999, respectively. The increase in net income for
the nine months ended September 30, 2000, compared to the same period in 1999,
is a result of an increase in rental income and a recovery of provision on
losses on notes receivable, offset by decreases in earned income from financing
leases and interest income from notes receivable.
Total income increased $44,000 for the nine months ended September 30,
2000, as compared to the same period in 1999. Rental income increased by
$257,000 for the nine months ended September 30, 2000, 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 nine months ended September
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 $2
million at September 30, 2000, as compared to $12 million at September 30, 1999.
Total income decreased $136,000 for the three months ended September 30, 2000,
as compared to the same period in 1999. This decrease was due to the fact that
no settlements related to rental activity were recognized during the quarter
ended September 30, 2000.
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 $76,000 and $205,000 for the three and
nine months ended September 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 $266,000 at September 30,
2000, as compared to $1 million at September 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 $11,000 and $176,000
for the three and nine months ended September 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,
which was partially offset by the receipt of an early payoff of a note
receivable. At September 30, 2000, the net investment in notes receivable was
$1,144,000, compared to $2,510,000 at September 30, 1999.
Total expenses decreased by $33,000 and $692,000 during the three and
nine months ended September 30, 2000, respectively, as compared to the same
period in 1999. The decrease in total expenses for the three and nine months
ended September 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
$35,000 and $396,000 as well as a decrease in nearly all of the items comprising
9
<PAGE>
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 $19,000 and $137,000
during the three and nine months ended September 30, 2000, respectively,
compared to 1999. 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.
Liquidity and Capital Resources
The Partnership's asset portfolio continues to decline as a result of the
ongoing liquidation of assets, and therefore, it is expected that the cash
generated from operations will also decline. The General Partner is continuing
its efforts in marketing these assets for sale.
The Partnership reported net cash generated by equipment leasing and
financing activities of $2,735,000 and $4,425,000 during the nine months ended
September 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 nine months ended September 30, 2000, as compared to cash
distributions of $468,000 during the same period in 1999. The decrease in
distributions from joint ventures is attributable to 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 a book value of $64,000 for the nine months
ended September 30, 2000, compared to $17,000 for the same period in 1999.
As of September 30, 2000, the Partnership owned equipment held for
lease with an original purchase price of $297,000 and a net book value of $0,
compared to $4 million and $16,000, respectively, at September 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 nine months ended
September 30, 2000 was $0, as compared to $4,888,000 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 $4,644,000
in distributions during the nine months ended September 30, 2000 and 1999,
respectively. The cumulative distributions to the Limited Partners are
$122,934,000 and $121,945,000 as of September 30, 2000 and 1999, respectively.
The General Partner received $0 and $244,000 for its share of the cash available
for distribution during the nine months ended September 30, 2000 and 1999,
respectively. The Partnership is not planning to make distributions in 2000,
compared to the 1999 distribution rate of 5%.
10
<PAGE>
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.
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses.
11
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
September 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").
The Ash complaint 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 and discovery has commenced. 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 V. Defendants have answered
the complaint and discovery has commenced. A class has been certified. The
plaintiffs' depositions have been taken, and plaintiffs recently took
depositions of defendants.
On August 28, 2000, the Ash and Berger actions were consolidated (the
"Consolidated Action") pursuant to stipulation by both parties. Plaintiffs
recently served a first request for production in the Consolidated Action;
defendants will respond to the first request for production on November 22,
2000.
The Companies intend to vigorously defend the Consolidated Action.
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
---- ----- ---------
November 13, 2000 Executive Vice President, /S/ GARY W. MARTINEZ
----------------- Chief Operating Officer --------------------
and a Director of (Gary W. Martinez)
Phoenix Leasing Incorporated
General Partner
November 13, 2000 Vice President, Finance, /S/ ANDREW N. GREGSON
----------------- Treasurer and a Director of ---------------------
Phoenix Leasing Incorporated (Andrew N. Gregson)
General Partner
13
