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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 0-19063
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 _____
170,052 Units of Limited Partnership Interest were outstanding as of September
30, 1997.
Transitional small business disclosure format:
Yes _____ No __X__
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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,
1997 1996
-------- --------
ASSETS
Cash and cash equivalents $ 3,133 $ 3,323
Accounts receivable (net of allowance for losses
on accounts receivable of $135 and $125 at
September 30, 1997 and December 31, 1996,
respectively) 159 125
Notes receivable (net of allowance for losses
on notes receivable of $216 at September 30,
1997 and December 31, 1996) 963 1,042
Equipment on operating leases and held for lease
(net of accumulated depreciation of $9,952 and
$12,008 at September 30, 1997 and December 31, 1996,
respectively) 281 378
Net investment in financing leases (net of allowance
for early terminations of $73 and $68 at September
30, 1997 and December 31, 1996, respectively) 2,376 5,039
Investment in joint ventures 374 1,047
Capitalized acquisition fees (net of accumulated
amortization of $3,474 and $3,346 at September
30, 1997 and December 31, 1996, respectively) 148 261
Other assets 113 123
-------- --------
Total Assets $ 7,547 $ 11,338
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 586 $ 684
-------- --------
Total Liabilities 586 684
-------- --------
Partners' Capital (Deficit)
General Partner -- (1)
Limited Partners, 300,000 units authorized,
175,285 units issued and 170,052 and 170,316
units outstanding at September 30, 1997 and
December 31, 1996, respectively 6,896 10,618
Unrealized gains on available-for-sale securities 65 37
-------- --------
Total Partners' Capital (Deficit) 6,961 10,654
-------- --------
Total Liabilities and Partners' Capital (Deficit) $ 7,547 $ 11,338
======== ========
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,
1997 1996 1997 1996
------- ------- ------- -------
INCOME
Rental income $ 336 $ 463 $ 1,278 $ 1,699
Earned income, financing leases 95 222 401 760
Gain (loss) on sale of equipment 56 10 238 (61)
Equity in earnings from joint
ventures, net 40 100 142 229
Gain on sale of securities -- -- -- 128
Interest income, notes receivable 53 58 186 190
Other income 40 40 130 124
------- ------- ------- -------
Total Income 620 893 2,375 3,069
------- ------- ------- -------
EXPENSES
Depreciation 105 187 342 868
Amortization of acquisition fees 35 54 128 201
Lease related operating expenses 9 23 90 101
Management fees to General Partner 45 67 172 226
Reimbursed administrative costs to
General Partner 32 66 154 205
Provision for losses on receivables 44 55 68 107
General and administrative expenses 29 34 103 98
------- ------- ------- -------
Total Expenses 299 486 1,057 1,806
------- ------- ------- -------
NET INCOME $ 321 $ 407 $ 1,318 $ 1,263
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 1.39 $ 1.87 $ 6.26 $ 5.87
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 9.35 $ 9.33 $ 28.05 $ 27.77
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 84 $ 87 $ 252 $ 260
Limited Partners 237 320 1,066 1,003
------- ------- ------- -------
$ 321 $ 407 $ 1,318 $ 1,263
======= ======= ======= =======
The accompanying notes are an integral part of these statements.
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PHOENIX INCOME FUND, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1997 1996
------- -------
Operating Activities:
Net income $ 1,318 $ 1,263
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 342 868
Amortization of acquisition fees 128 201
Loss (gain) on sale of equipment (238) 61
Equity in earnings from joint ventures, net (142) (229)
Gain on sale of securities -- (128)
Provision for early termination, financing leases 34 92
Provision for losses on accounts receivable 34 29
Recovery of losses on notes receivable -- (14)
Decrease (increase) in accounts receivable (68) 38
Decrease in accounts payable and accrued expenses (113) (139)
Decrease in other assets 39 64
------- -------
Net cash provided by operating activities 1,334 2,106
------- -------
Investing Activities:
Principal payments, financing leases 2,341 3,040
Principal payments, notes receivable 379 452
Proceeds from sale of equipment 351 199
Distributions from joint ventures 815 179
Proceeds from sale of securities -- 128
Investment in financing leases (70) (128)
Purchase of equipment -- (24)
Investment in notes receivable (300) --
Investment in joint ventures -- (35)
Payment of acquisition fees -- (70)
------- -------
Net cash provided by investing activities 3,516 3,741
------- -------
Financing Activities:
Redemptions of capital (13) (40)
Distributions to partners (5,027) (4,994)
------- -------
Net cash used by financing activities (5,040) (5,034)
------- -------
Increase (decrease) in cash and cash equivalents (190) 813
Cash and cash equivalents, beginning of period 3,323 2,364
------- -------
Cash and cash equivalents, end of period $ 3,133 $ 3,177
======= =======
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.
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 financial statements of the Partnership.
Note 4. Notes Receivable.
Impaired Notes Receivable. At September 30, 1997, the recorded
investment in notes that are considered to be impaired was $190,000. Included in
this amount is $67,000 of impaired notes for which the related allowance for
losses is $32,000 and $123,000 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 $86,000 and $156,000, respectively.
On February 14, 1996, the Partnership foreclosed upon a non-performing
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 at March 31, 1996, for which the
Partnership had an allowance for losses on notes of $14,000. Because the market
value of the cable system exceeded the carrying value, this allowance of $14,000
was reversed and recognized as income at March 31, 1996. This cable television
system was subsequently sold on August 30, 1996.
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
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1997 1996
------ -----
(Amounts In Thousands)
Beginning balance $ 216 $ 230
Recovery of losses - (14)
Write downs - -
------ -----
Ending balance $ 216 $ 216
====== ======
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, 1997 and 1996, are $0 and $83,000 respectively, ($0 and $.49 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 170,213 and 170,848 for the nine months
ended September 30, 1997 and 1996, 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.
Note 7. Investment in Joint Ventures:
Equipment Joint Venture
The aggregate financial information of the equipment joint venture is
presented below:
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 $ 1,655
Expenses 173 219 355 779
Net Income 147 397 548 876
<PAGE>
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Financing Joint Ventures
The aggregate financial information of the financing joint venture
is presented below:
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 $ 30 $ 40 $ 99 $ 124
Expenses 3 2 21 4
Net Income 27 38 78 120
Foreclosed Cable Systems Joint Venture
The aggregate financial information of the foreclosed cable
systems joint venture is presented below:
September 30, December 31,
1997 1996
------- -------
(Amounts in Thousands)
Assets $ -- $ 115
Liabilities -- 25
Partners' Capital -- 90
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
(Amounts in Thousands)
Revenue $ 165 $ 908 $ 125 $ 1,873
Expenses 7 777 11 1,712
Net Income 158 131 114 161
<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
The Partnership reported net income of $321,000 and $1,318,000 during
the three and nine months ended September 30, 1997, respectively, as compared to
net income of $407,000 and $1,263,000 during the three and nine months,
respectively, ended September 30, 1996. The decline in net income experienced
during the three months ended September 30, 1997, compared to the same period in
1996, is attributable to a decline in earned income from financing leases.
Whereas, the increase in net income for the nine months ended September 30,
1997, compared to the same period in 1996, is a result of an increase in gain on
sale of equipment.
Total revenues decreased by $273,000 and $694,000 during the three and
nine months ended September 30, 1997, respectively, as compared to the same
periods in 1996. The decrease in total revenues is due primarily to decreases in
rental income from operating leases and earned income from financing leases. The
$127,000 and $421,000 decrease in rental income for the three and nine months
ended September 30, 1997, respectively, is attributable to a decrease in the
amount of equipment owned that is classified as operating leases. At September
30, 1997, the Partnership owned equipment with an aggregate original cost of
$21.5 million, as compared to the $33.2 million of equipment owned at September
30, 1996.
Earned income from financing leases decreased by $127,000 and $359,000
during the three and nine months ended September 30, 1997, respectively, as
compared to the same periods in 1996. This is attributable to the decrease in
the net investment in financing leases since September 30, 1996. The Partnership
owned financing leases with a net investment of $2.4 million at September 30,
1997, as compared to $5.6 million at September 30, 1996. The net investment in
financing leases will continue to decline over the lease term as payments are
received.
The Partnership reported a gain on sale of securities during the nine
months ended September 30, 1996 of $128,000 which contributed to increasing net
income for that period. No such gain exists during 1997. The gain from
securities recognized in 1996 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 finance agreements with 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 $65,000 at September
30, 1997 compared to $41,000 at September 30, 1996. These investments in stock
and stock warrants carry certain restrictions, but generally can be exercised
within one year.
Partially offsetting the factors discussed previously which contributed
to decreasing total revenues for the three and nine months ended September 30,
1997 is an increase in gain on sale of equipment. The Partnership reported a
gain on sale of equipment of $56,000 and $238,000 for the three and nine months
ended September 30, 1997, respectively, compared to a gain on sale of equipment
of $10,000 and loss on sale of equipment of $61,000 for the three and nine
months ended September 30, 1996, respectively. The gain on sale of equipment, as
well as the increase in sales proceeds received, during 1997 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 $9.2 million for
the nine months ended September 30, 1997 compared to $5.3 million for the same
period in 1996.
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Total expenses of the Partnership decreased by $187,000 and $749,000
during the three and nine months ended September 30, 1997, respectively,
compared to the same periods in 1996. Depreciation expense experienced the
largest decrease during the three and nine months ended September 30, 1997, as
compared to the same periods in 1996. Depreciation expense decreased by $82,000
and $526,000 for the three and nine months ended September 30, 1997,
respectively, compared to the same periods in the prior year, due 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 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, 1997 of
$4,054,000, as compared to $5,598,000 during the same period in 1996. The
decline in net cash generated from leasing and financing activities for the nine
months ended September 30, 1997, as compared to the same period in the previous
year, is attributable to decreases in rental income from operating leases and
principal payments from financing leases, as previously discussed in the Results
of Operations.
The Partnership received distributions from joint ventures of $815,000
and $179,000 for the nine months ended September 30, 1997 and 1996,
respectively. The increase in distributions from joint ventures is attributable
to one joint venture having paid its outstanding debt in full in November 1996.
Previously, any excess cash flow generated by this joint venture was being used
to pay off the outstanding debt. The excess cash flow generated by this joint
venture is currently being distributed to the Partnership and the other
venturers.
The Partnership continues to reinvest a portion of the revenues from
the assets owned in new leasing and financing transactions. During the nine
months ended September 30, 1997, the Partnership invested $70,000 in equipment
leases and $300,000 in investments in notes receivable, compared to $128,000 in
equipment leases and $0 in investments in notes receivable during the same
period in the previous year.
As of September 30, 1997, the Partnership owned equipment being held
for lease with an original cost of $3,724,000 and a net book value of $42,000,
as compared to equipment with an original cost of $5,713,000 and a net book
value of $354,000 at September 30, 1996. 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 $5,027,000 and $4,994,000 during
the nine months ended September 30, 1997 and 1996, 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 $4,775,000 and $4,744,000 in cash
distributions for the nine months ended September 30, 1997 and 1996,
respectively. The cumulative cash distributions to limited partners at September
30, 1997 is $34,091,000, as compared to $27,704,000 at September 30, 1996. The
<PAGE>
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General Partner received cash distributions of $252,000 and $250,000 for its
share of the cash distribution for the nine months ended September 30, 1997 and
1996, respectively. The Partnership anticipates making distributions during the
remainder of 1997 at approximately the same rate as the current distribution.
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses and to provide cash distributions to the Partners.
<PAGE>
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PHOENIX INCOME FUND, L.P.
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>
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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, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- ------------------- and a Director of -----------------------
Phoenix Leasing Associates, Inc. (Gary W. Martinez)
November 12, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ------------------- Senior Vice President, -----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Associates, Inc.
November 12, 1997 Senior Vice President, /S/ BRYANT J. TONG
- ------------------- Financial Operations of -----------------------
Phoenix Leasing Associates, Inc. (Bryant J. Tong)
<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> 3,133
<SECURITIES> 0
<RECEIVABLES> 1,473
<ALLOWANCES> 351
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,233
<DEPRECIATION> 9,952
<TOTAL-ASSETS> 7,547
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,961
<TOTAL-LIABILITY-AND-EQUITY> 7,547
<SALES> 0
<TOTAL-REVENUES> 2,375
<CGS> 0
<TOTAL-COSTS> 1,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 68
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,318
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,318
<EPS-PRIMARY> 6.26
<EPS-DILUTED> 0
</TABLE>
