Page 1 of 11
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, 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 ___
170,140 Units of Limited Partnership Interest were outstanding as of June 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)
June 30, December 31,
1997 1996
---- ----
ASSETS
Cash and cash equivalents $3,737 $ 3,323
Accounts receivable (net of allowance for losses
on accounts receivable of $119 and $125 at
June 30, 1997 and December 31, 1996, respectively) 126 125
Notes receivable (net of allowance for losses on
notes receivable of $216 at June 30, 1997 and
December 31, 1996) 833 1,042
Equipment on operating leases and held for lease (net
of accumulated depreciation of $10,223 and $12,008
at June 30, 1997 and December 31, 1996, respectively) 131 378
Netinvestment in financing leases (net of allowance
for early terminations of $92 and $68 at June 30,
1997 and December 31, 1996, respectively) 3,156 5,039
Investment in joint ventures 576 1,047
Capitalized acquisition fees (net of accumulated
amortization of $3,439 and $3,346 at June 30,
1997 and December 31, 1996, respectively) 168 261
Other assets 112 123
------ --------
Total Assets $8,839 $ 11,338
====== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 520 $ 684
------ --------
Total Liabilities 520 684
------ --------
Partners' Capital
General Partner -- (1)
Limited Partners, 300,000 units authorized,
175,285 units issued and 170,140 and 170,316
units outstanding at June 30, 1997 and
December 31, 1996, respectively 8,252 10,618
Unrealized gains on available-for-sale securities 67 37
------ --------
Total Partners' Capital 8,319 10,654
------ --------
Total Liabilities and Partners' Capital $8,839 $ 11,338
====== ========
The accompanying notes are an integral part of these statements.
<PAGE>
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PHOENIX INCOME FUND, L.P.
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
INCOME
Rental income $ 494 $ 510 $ 942 $ 1,235
Earned income, financing leases 140 247 306 538
Gain (loss) on sale of equipment 149 (57) 182 (71)
Gain on sale of securities -- 107 -- 128
Equity in earnings from joint
ventures, net 36 44 102 129
Interest income, notes receivable 49 63 134 132
Other income 51 53 89 85
------- ------- ------- -------
Total Income 919 967 1,755 2,176
------- ------- ------- -------
EXPENSES
Depreciation 72 250 237 681
Amortization of acquisition fees 41 71 93 147
Lease related operating expenses 11 25 81 78
Management fees to General Partner 62 75 127 159
Reimbursed administrative costs to
General Partner 57 65 123 139
Provision for losses on receivables 24 31 24 52
General and administrative expenses 38 32 73 64
------- ------- ------- -------
Total Expenses 305 549 758 1,320
------- ------- ------- -------
NET INCOME $ 614 $ 418 $ 997 $ 856
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 3.12 $ 1.94 $ 4.87 $ 4.00
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 9.25 $ 9.24 $ 18.70 $ 18.44
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 83 $ 86 $ 168 $ 173
Limited Partners 531 332 829 683
------- ------- ------- -------
$ 614 $ 418 $ 997 $ 856
======= ======= ======= =======
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)
Six Months Ended
June 30,
1997 1996
---- ----
Operating Activities:
Net income $ 997 $ 856
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 237 681
Amortization of acquisition fees 93 147
Loss (gain) on sale of equipment (182) 71
Equity in earnings from joint ventures, net (102) (129)
Gain on sale of securities -- (128)
Provision for early termination, financing leases 24 66
Recovery of losses on notes receivable -- (14)
Decrease (increase) in accounts receivable (1) 78
Decrease in accounts payable and accrued expenses (164) (156)
Decrease in other assets 41 64
------- -------
Net cash provided by operating activities 943 1,536
------- -------
Investing Activities:
Principal payments, financing leases 1,774 2,043
Principal payments, notes receivable 209 293
Proceeds from sale of equipment 277 173
Distributions from joint ventures 573 100
Proceeds from sale of securities -- 128
Investment in financing leases -- (119)
Payment of acquisition fees -- (68)
------- -------
Net cash provided by investing activities 2,833 2,550
------- -------
Financing Activities:
Redemptions of capital (10) (35)
Distributions to partners (3,352) (3,319)
------- -------
Net cash used by financing activities (3,362) (3,354)
------- -------
Increase in cash and cash equivalents 414 732
Cash and cash equivalents, beginning of period 3,323 2,364
------- -------
Cash and cash equivalents, end of period $ 3,737 $ 3,096
======= =======
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 six months ended June 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 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 June 30, 1997 and 1996, the recorded
investment in notes that are considered to be impaired was $67,000 and $157,000,
respectively, for which there was no related allowance for losses. The average
recorded investment in impaired loans during the six months ended June 30, 1997
and 1996 was approximately $33,000 and $158,000, respectively.
On February 14, 1996, the Partnership foreclosed upon a nonperforming
outstanding note receivable to a cable television operator to whom the
Partnership, along with other affiliated partnerships managed by the General
Partner, had extended credit. 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
six months ended June 30, is as follows:
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1997 1996
---- ----
(Amounts In Thousands)
Beginning balance $216 $230
Provision for 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 six months ended June 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 170,277 and 170,969 for the six months
ended June 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:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $2,024 $4,002
Liabilities 352 382
Partners' Capital 1,672 3,620
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $237 $491 $582 $1,039
Expenses 97 343 181 561
Net Income 140 148 401 478
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Financing Joint Ventures
The aggregate financial information of the financing joint venture
is presented below:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $927 $1,023
Liabilities 142 130
Partners' Capital 785 893
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $33 $42 $68 $85
Expenses 3 2 17 2
Net Income 30 40 51 83
Foreclosed Cable Systems Joint Venture
The aggregate financial information of the foreclosed cable
systems joint venture is presented below:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $46 $115
Liabilities -- 25
Partners' Capital 46 90
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $(2) $661 $(40) $965
Expenses 4 611 4 935
Net Income (Loss) (6) 50 (44) 30
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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 $614,000 and $997,000 during the
three and six months ended June 30, 1997, respectively, as compared to net
income of $418,000 and $856,000 during the three and six months, respectively,
ended June 30, 1996. The Partnership reported an overall decrease in total
revenues and expenses. However, the decrease in expenses exceeded the decrease
in revenues, generating an increase in net income for the period.
Total revenues decreased by $48,000 and $421,000 during the three and
six months ended June 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, earned income from financing leases and gain on
sale of securities. The $16,000 and $293,000 decrease in rental income for the
three and six months ended June 30, 1997, respectively, is attributable to a
decrease in the amount of equipment owned that is classified as operating
leases. At June 30, 1997, the Partnership owned equipment with an aggregate
original cost of $24 million, as compared to the $34.3 million of equipment
owned at June 30, 1996.
Earned income from financing leases decreased by $107,000 and $232,000
during the three and six months ended June 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 June 30, 1996. The Partnership owned
financing leases with a net investment of $3.2 million at June 30, 1997, as
compared to $6.7 million at June 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 three
and six months ended June 30, 1996 of $107,000 and $128,000, respectively. Such
a gain does not exist 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 $67,000 at June 30, 1997 compared to
$43,000 at June 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 six months ended June 30, 1997 is
an increase in gain on sale of equipment. The Partnership reported a gain on
sale of equipment of $149,000 and $182,000 for the three and six months ended
June 30, 1997, respectively, compared to a loss on sale of equipment of $57,000
and $71,000 for the three and six months ended June 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 $6.7 million for the six months ended June 30, 1997 compared to $4.1
million for the same period in 1996.
Total expenses of the Partnership decreased by $244,000 and $562,000
during the three and six months ended June 30, 1997, respectively, compared to
the same periods in 1996. Depreciation expense experienced the largest decrease
during the three and six months ended June 30, 1997, as compared to the same
periods in 1996. Depreciation expense decreased by $178,000 and $444,000 for the
<PAGE>
Page 9 of 11
three and six months ended June 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 six months ended June 30, 1997 of $2,926,000, as
compared to $3,872,000 during the same period in 1996. The decline in net cash
generated from leasing and financing activities for the six months ended June
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 $573,000
and $100,000 for the six months ended June 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 paid to the Partnership and the other venturers.
As of June 30, 1997, the Partnership owned equipment being held for
lease with an original cost of $3,715,000 and a net book value of $70,000, as
compared to equipment with an original cost of $3,767,000 and a net book value
of $257,000 at June 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 $3,352,000 and $3,319,000 during
the six months ended June 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 $3,184,000 and $3,153,000 in cash
distributions for the six months ended June 30, 1997 and 1996, respectively. The
cumulative cash distributions to limited partners at June 30, 1997 is
$32,500,000, as compared to $26,112,000 at June 30, 1996. The General Partner
received cash distributions of $168,000 and $166,000 for its share of the cash
distribution for the six months ended June 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, debt service and to provide cash distributions to the Partners.
<PAGE>
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PHOENIX INCOME FUND, L.P.
June 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:
One report, dated June 16, 1997, on Form 8-K was filed
during the quarter ending June 30, 1997, pursuant to Item 4 and Item 7 of that
form. No financial statements were filed as part of that report.
<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
---- ----- ---------
August 13, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- --------------- and a Director of ----------------------
Phoenix Leasing Associates, Inc. (Gary W. Martinez)
August 13, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- --------------- Senior Vice President, ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Associates, Inc.
August 13, 1997 Senior Vice President, /S/ BRYANT J. TONG
- --------------- Financial Operations of ----------------------
Phoenix Leasing Associates, Inc. (Bryant J. Tong)
August 13, 1997 Partnership Controller /S/ MICHAEL K. ULYATT
- --------------- of Phoenix Leasing Incorporated ----------------------
(Parent Company) (Michael K. Ulyatt)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,737
<SECURITIES> 0
<RECEIVABLES> 1,294
<ALLOWANCES> 335
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,354
<DEPRECIATION> 10,223
<TOTAL-ASSETS> 8,839
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,319
<TOTAL-LIABILITY-AND-EQUITY> 8,839
<SALES> 0
<TOTAL-REVENUES> 1,755
<CGS> 0
<TOTAL-COSTS> 758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 997
<INCOME-TAX> 0
<INCOME-CONTINUING> 997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 997
<EPS-PRIMARY> 4.87
<EPS-DILUTED> 0
</TABLE>
