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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the quarterly period ended September 30, 1996
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 0-19063
-------
PHOENIX INCOME FUND, L.P .
- --------------------------------------------------------------------------------
Registrant
California 68-0204588
- --------------------- ----------------------------------
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 ___
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Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX INCOME FUND, L.P.
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 3,177 $ 2,364
Accounts receivable (net of allowance
for losses on accounts receivable of $126
and $147 at September 30, 1996 and
December 31, 1995, respectively) 152 219
Notes receivable (net of allowance for
losses on notes receivable of $216 and
$230 at September 30, 1996 and
December 31, 1995, respectively) 1,350 1,850
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$13,394 and $15,279 at September 30, 1996
and December 31, 1995, respectively) 697 1,407
Net investment in financing leases (net of
allowance for early terminations of
$123 and $436 at September 30, 1996
and December 31, 1995, respectively) 5,582 8,980
Investment in joint ventures 1,250 1,103
Capitalized acquisition fees (net of
accumulated amortization of $3,285 and
$3,084 at September 30, 1996 and
December 31, 1995, respectively) 310 505
Other assets 130 284
-------- --------
Total Assets $ 12,648 $ 16,712
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 665 $ 868
-------- --------
Total Liabilities 665 868
-------- --------
Partners' Capital
General Partner (4) (14)
Limited Partners, 300,000 units authorized,
175,285 units issued and 170,561 and
171,073 units outstanding at September 30,
1996 and December 31, 1995, respectively 11,946 15,727
Unrealized gains on available-for-sale
securities 41 131
-------- --------
Total Partners' Capital 11,983 15,844
-------- --------
Total Liabilities and Partners' Capital $ 12,468 $ 16,712
======== ========
The accompanying notes are an integral part of these statements.
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PHOENIX INCOME FUND, L.P.
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Rental income $ 473 $ 779 $1,638 $2,567
Earned income, financing leases 222 324 760 1,092
Gain on sale of securities -- -- 128 --
Equity in earnings from joint
ventures, net 100 98 229 266
Interest income, notes receivable 58 63 190 197
Other income 40 52 124 190
------ ------ ------ ------
Total Income 893 1,316 3,069 4,312
------ ------ ------ ------
EXPENSES
Depreciation 187 796 868 2,548
Amortization of acquisition fees 54 87 201 328
Lease related operating expenses 23 53 101 228
Management fees to General Partner 67 89 226 319
Reimbursed administrative costs to
General Partner 66 84 205 239
Interest expense -- 15 -- 136
Provision for losses on receivables 55 -- 107 --
General and administrative expenses 34 45 98 153
------ ------ ------ ------
Total Expenses 486 1,169 1,806 3,951
------ ------ ------ ------
NET INCOME $ 407 $ 147 $1,263 $ 361
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 1.87 $ -- $ 5.87 $ --
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 9.33 $ 8.88 $27.77 $26.39
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 87 $ 147 $ 260 $ 361
Limited Partners 320 -- 1,003 --
------ ------ ------ ------
$ 407 $ 147 $1,263 $ 361
====== ====== ====== ======
The accompanying notes are an integral part of these statements.
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PHOENIX INCOME FUND, L.P.
STATEMENTS CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
---- ----
Operating Activities:
Net income $ 1,263 $ 361
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 868 2,548
Amortization of acquisition fees 201 328
Loss on sale of equipment 61 93
Equity in earnings from joint ventures, net (229) (266)
Gain on sale of securities (128) --
Provision for early termination, financing
leases 92 --
Provision for losses on accounts receivable 29 --
Recovery of losses on notes receivable (14) --
Decrease in accounts receivable 38 220
Decrease in accounts payable and accrued
expenses (139) (457)
Decrease in other assets 64 139
-------- --------
Net cash provided by operating activities 2,106 2,966
-------- --------
Investing Activities:
Principal payments, financing leases 3,040 3,826
Principal payments, notes receivable 452 425
Proceeds from sale of equipment 199 937
Distributions from joint ventures 179 464
Proceeds from sale of securities 128 --
Investment in financing leases (128) (86)
Purchase of equipment (24) --
Investment in notes receivable -- (42)
Investment in joint ventures (35) --
Payment of acquisition fees (70) (40)
-------- --------
Net cash provided by investing activities 3,741 5,484
-------- --------
Financing Activities:
Payments of principal, notes payable -- (5,836)
Redemptions of capital (40) (97)
Distributions to partners (4,994) (4,765)
-------- --------
Net cash used by financing activities (5,034) (10,698)
-------- --------
Increase (decrease) in cash and cash equivalents 813 (2,248)
Cash and cash equivalents, beginning of period 2,364 5,712
-------- --------
Cash and cash equivalents, end of period $ 3,177 $ 3,464
======== ========
Supplemental Cash Flow Information:
Cash paid for interest expense $ -- $ 148
The accompanying notes are an integral part of these statements.
<PAGE>
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PHOENIX INCOME FUND, L.P.
NOTES TO 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 nine months ended September
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 $62,000 to Investment in Joint Ventures on the balance sheet.
Note 2. Reclassification.
Reclassification - Certain 1995 amounts have been reclassified to
conform to the 1996 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 financial statements of the Partnership.
Note 4. Notes Receivable.
Impaired Notes Receivable. At September 30, 1996, the recorded
investment in notes that are considered to be impaired under Statement No. 114
was $152,000 for which there is no related allowance for losses. The average
recorded investment in impaired loans during the nine months ended September 30,
1996 was approximately $156,000.
On February 14, 1996, the Partnership foreclosed upon a nonperforming
outstanding note receivable to a cable television operator to whom the
Partnership, along with other affiliated partnerships managed by the General
Partner, had extended credit. The Partnership's net carrying value for this
outstanding note receivable was $62,000, for which the Partnership had an
allowance for losses on notes of $14,000. Because the estimated market value of
the cable system at the foreclosure date exceeded the carrying value, this
allowance of $14,000 was reversed and recognized as income during the nine
months ended September 30, 1996. This cable television system was subsequently
sold on August 30, 1996 at a small gain.
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The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1996 1995
---- ----
(Amounts In Thousands)
Beginning balance $ 230 $ 230
Provision for losses (14) --
Write downs -- --
----- -----
Ending balance $ 216 $ 230
===== =====
Note 5. Equipment on Operating Leases and Held for Lease.
The Partnership's policy, as disclosed on the Partnership's latest
annual report filed on Form 10-K, is to provide additional depreciation expense
where reviews of equipment indicate that rentals plus anticipated sales proceeds
will not exceed expenses, including depreciation expense, in any future period.
As a result, the Partnership has provided additional depreciation expense on
various leases that are near the end of their initial lease term where the
estimated fair market value is not expected to exceed the net book value of such
leases. The portion of additional depreciation expense included in the caption
"Depreciation" on the statement of operations for the nine months ended
September 30, 1996 and 1995, are $83,000 and $283,000, respectively ($.49 and
$1.65 per limited partnership unit, respectively).
Note 6. 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 170,848 and 171,513 for the nine months
ended September 30, 1996 and 1995, respectively. For purposes of allocating net
income (loss) to each individual limited partner, the Partnership allocates net
income (loss) based upon each respective limited partner's net capital
contributions.
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Note 7. Investment in Joint Ventures:
Equipment Joint Venture
The statements of operations of the equipment joint venture are
presented below:
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Earned income, financing leases $ 331 $ 548 $1,092 $1,688
Gain on sale of equipment 247 70 405 278
Other income 38 76 158 290
------ ------ ------ ------
Total income 616 694 1,655 2,256
------ ------ ------ ------
EXPENSES
Depreciation 71 24 199 78
Lease related operating expenses 1 -- 21 7
Management fees to General Partner 40 59 149 227
Interest expense 33 197 215 767
General and administrative expenses 74 31 195 146
------ ------ ------ ------
Total expenses 219 311 779 1,225
------ ------ ------ ------
Net income $ 397 $ 383 $ 876 $1,031
====== ====== ====== ======
Financing Joint Venture
The statements of operations of the financing joint venture are
presented below:
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Interest income - notes receivable $ 39 $ 46 $121 $142
Other income 1 1 3 2
---- ---- ---- ----
Total income 40 47 124 144
---- ---- ---- ----
EXPENSES
Management fees to general partner 2 2 4 4
General and administrative expenses -- -- -- 6
---- ---- ---- ----
Total expenses 2 2 4 10
---- ---- ---- ----
Net income $ 38 $ 45 $120 $134
==== ==== ==== ====
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Foreclosed Cable Systems Joint Venture
The statements of operations of the foreclosed cable systems joint
venture are presented below:
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Subscriber revenue $ 567 $-- $1,524 $--
Gain on sale of cable system 331 -- 331 --
Other income 12 -- 20 --
------ --- ------ ---
Total income 910 -- 1,875 --
------ --- ------ ---
EXPENSES
Depreciation and amortization 134 -- 482 --
Program services 155 -- 477 --
Management fees to an affiliate of the
General Partner 336 -- 379 --
General and administrative expenses 148 -- 360 --
Provision for losses on accounts receivable 6 -- 16 --
------ --- ------ ---
Total expenses 779 -- 1,714 --
------ --- ------ ---
Net income $ 131 $-- $ 161 $--
====== === ====== ===
<PAGE>
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PHOENIX INCOME FUND, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Phoenix Income Fund, L.P. (the Partnership) reported net income of
$407,000 and $1,263,000 during the three and nine months ended September 30,
1996, respectively, as compared to net income of $147,000 and $361,000 during
the three and nine months ended September 30, 1995, respectively. The increase
in earnings during both periods was primarily attributable to the decrease in
depreciation expense.
Total revenues decreased by $423,000 and $1,243,000 during the three and
nine months ended September 30, 1996, respectively, as compared to the same
periods in 1995. The decrease in total revenues is due primarily to decreases in
rental income from operating leases and earned income from financing leases.
Rental income decreased by $306,000 and $929,000, and earned income from
financing leases decreased by $102,000 and $332,000, during the three and nine
months ended September 30, 1996, respectively, as compared to the same periods
in 1995. The decrease in rental income and earned income from financing leases
is attributable to a decrease in the amount of equipment owned. At September 30,
1996, the Partnership owned equipment with an aggregate original cost of $33.2
million, as compared to the $39.5 million of equipment owned at September 30,
1995.
Offsetting the overall decrease in revenues during the nine months ended
September 30, 1996, was a gain on the sale of securities of $128,000. This gain
was due to the exercise and sale of stock warrants held by the Partnership. The
Partnership has been granted stock warrants as part of its lease or financing
agreements with emerging growth companies.
Total expenses of the Partnership decreased by $683,000 and $2,145,000
during the three and nine months ended September 30, 1996, respectively, as
compared to the same periods in 1995. Depreciation expense experienced the
largest decrease during both the three and nine months ended September 30, 1996.
Depreciation expense decreased by $609,000 and $1,680,000 during the three and
nine months ended September 30, 1996, respectively, as compared to the same
periods in 1995. Depreciation expense decreased due primarily to the decrease in
the amount of equipment owned by the Partnership, as well as, an increasing
portion of the equipment portfolio having been fully depreciated.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from its contractual
obligations with a diversified group of lessees and borrowers for fixed lease
terms at fixed payment amounts. As the initial lease terms of the Partnership's
short term operating leases 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 its contractually owed amounts from lessees and
borrowers as well as re-leasing and selling the Partnership's equipment when the
lease terms expire.
The Partnership reported net cash generated by equipment leasing and
financing activities during the nine months ended September 30, 1996 of
$5,598,000, as compared to $7,217,000 during the same period in 1995. In
addition, the Partnership received proceeds from the sale of equipment of
<PAGE>
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$199,000 during the nine months ended September 30, 1996, as compared to
$937,000 during the nine months ended September 30, 1995. These proceeds were
used for the repayment of debt and for the payment of cash distributions to the
partners. During the nine months ended September 30, 1996, the Partnership did
not make any debt payments, as compared to payments of $5,836,000 of principal
on its outstanding debt during the same period in 1995. The Partnership's
outstanding debt was paid off during 1995.
As of September 30, 1996, the Partnership owned equipment being held for
lease with an original cost of $5,713,000 and a net book value of $354,000, as
compared to equipment with an original cost of $8,051,000 and a net book value
of $551,000 at September 30, 1995. The General Partner is actively engaged, on
behalf of the Partnership, in remarketing and selling the Partnership's off
lease equipment. 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 cash distributed to partners was $4,994,000 and $4,765,000 during
the nine months ended September 30, 1996 and 1995, respectively. 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 $4,744,000 and $4,527,000 in cash
distributions for the nine months ended September 30, 1996 and 1995,
respectively. The cumulative cash distributions to limited partners at September
30, 1996 is $27,704,000, as compared to $21,404,000 at September 30, 1995. The
General Partner received cash distributions of $250,000 and $238,000 for its
share of the cash distribution for the nine months ended September 30, 1996 and
1995, respectively. The Partnership anticipates making distributions to partners
during 1997 at approximately the same rate as the current distributions made
during the nine months ended September 30, 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 cash distributions to the Partners.
<PAGE>
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PHOENIX INCOME FUND, L.P.
September 30, 1996
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>
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHOENIX INCOME FUND, L.P.
-------------------------
(Registrant)
BY: PHOENIX LEASING ASSOCIATES LP,
a California limited partnership,
General Partner
BY: PHOENIX LEASING ASSOCIATES, INC.
a Nevada corporation,
General Partner
Date Title Signature
---- ----- ---------
November 12, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ----------------- Senior Vice President -----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Associates, Inc.
General Partner
November 12, 1996 Senior Vice President, /S/ BRYANT J. TONG
- ----------------- Financial Operations -----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Associates, Inc.
General Partner
November 12, 1996 Senior Vice President /S/ GARY W. MARTINEZ
- ----------------- Phoenix Leasing Associates, Inc. -----------------------
General Partner (Gary W. Martinez)
November 12, 1996 Partnership Controller /S/ MICHAEL K. ULYATT
- ----------------- Phoenix Leasing Incorporated -----------------------
General Partner (Michael K. Ulyatt)
(Parent Company)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,177
<SECURITIES> 0
<RECEIVABLES> 1,844
<ALLOWANCES> 342
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,091
<DEPRECIATION> 13,394
<TOTAL-ASSETS> 12,648
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,983
<TOTAL-LIABILITY-AND-EQUITY> 12,468
<SALES> 0
<TOTAL-REVENUES> 3,069
<CGS> 0
<TOTAL-COSTS> 1,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 107
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,263
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,263
<EPS-PRIMARY> 5.87
<EPS-DILUTED> 0
</TABLE>
