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 March 31, 1998
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
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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
requirements for the past 90 days.
Yes __X__ No _____
169,804 Units of Limited Partnership Interest were outstanding as of March 31,
1998.
Transitional small business disclosure format:
Yes _____ No __X__
Page 1 of 11
<PAGE>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX INCOME FUND, L.P.
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
March 31, December 31,
1998 1997
---- ----
ASSETS
Cash and cash equivalents $1,892 $2,693
Accounts receivable (net of allowance for losses
on accounts receivable of $139 and $157 at
March 31, 1998 and December 31, 1997, respectively) 163 206
Notes receivable (net of allowance for losses on
notes receivable of $162 at March 31, 1998 and
December 31, 1997) 660 812
Equipment on operating leases and held for lease
(net of accumulated depreciation of $5,760 and
$6,141 at March 31, 1998 and December 31, 1997,
respectively) 136 204
Net investment in financing leases (net of allowance
for early terminations of $85 and $80 at March 31,
1998 and December 31, 1997, respectively) 1,407 1,758
Investment in joint ventures 207 296
Capitalized acquisition fees (net of accumulated
amortization of $3,531 and $3,508 at March 31,
1998 and December 31, 1997, respectively) 91 114
Other assets 43 55
------ ------
Total Assets $4,599 $6,138
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 363 $ 508
------ ------
Total Liabilities 363 508
------ ------
Partners' Capital
General Partner - -
Limited Partners, 300,000 units authorized,
175,285 units issued and 169,804 and 169,972
units outstanding at March 31, 1998 and
December 31, 1997, respectively 4,218 5,604
Unrealized gains on available-for-sale
securities 18 26
------ ------
Total Partners' Capital 4,236 5,630
------ ------
Total Liabilities and Partners' Capital $4,599 $6,138
====== ======
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX INCOME FUND, L.P.
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
INCOME
Rental income $ 343 $ 481
Earned income, financing leases 68 166
Equity in earnings from joint ventures, net 41 66
Interest income, notes receivable 32 84
Other income 27 39
-------- --------
Total Income 511 836
-------- --------
EXPENSES
Depreciation 68 164
Amortization of acquisition fees 23 52
Lease related operating expenses 17 70
Management fees to General Partner 32 65
Reimbursed administrative costs to General Partner 28 67
Provision for losses on receivables 6 -
General and administrative expenses 30 35
-------- --------
Total Expenses 204 453
-------- --------
NET INCOME $ 307 $ 383
======== ========
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 1.31 $ 1.75
======== ========
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 9.46 $ 9.45
======== ========
ALLOCATION OF NET INCOME:
General Partner $ 84 $ 85
Limited Partners 223 298
-------- --------
$ 307 $ 383
======== ========
The accompanying notes are an integral part of these statements.
3
<PAGE>
PHOENIX INCOME FUND, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
Operating Activities:
Net income $ 307 $ 383
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 68 164
Amortization of acquisition fees 23 52
Gain on sale of equipment (21) (33)
Equity in earnings from joint ventures, net (41) (66)
Provision for early termination, financing leases 6 -
Decrease in accounts receivable 43 22
Decrease in accounts payable and accrued expenses (145) (55)
Decrease in other assets 4 42
------- -------
Net cash provided by operating activities 244 509
------- -------
Investing Activities:
Principal payments, financing leases 345 935
Principal payments, notes receivable 152 115
Proceeds from sale of equipment 21 116
Distributions from joint ventures 130 323
------- -------
Net cash provided by investing activities 648 1,489
------- -------
Financing Activities:
Redemptions of capital (2) (2)
Distributions to partners (1,691) (1,695)
------- -------
Net cash used by financing activities (1,693) (1,697)
------- -------
Increase (decrease) in cash and cash
equivalents (801) 301
Cash and cash equivalents, beginning of
period 2,693 3,323
------- -------
Cash and cash equivalents, end of period $ 1,892 $ 3,624
======= =======
The accompanying notes are an integral part of these statements.
4
<PAGE>
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 1997 amounts have been reclassified to
conform to the 1998 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 March 31, 1998, the recorded investment
in notes that are considered to be impaired was $113,000 for which there was no
related allowance for losses. The average recorded investment in impaired loans
during the three months ended March 31, 1998 and 1997 was approximately $113,000
and $160,000, respectively.
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
1998 1997
---- ----
(Amounts In Thousands)
Beginning balance $162 $216
Provision for losses - -
Write downs - -
---- ----
Ending balance $162 $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.
5
<PAGE>
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 169,853 and 170,298 for the three months
ended March 31, 1998 and 1997, 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:
March 31, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $ 361 $ 730
Liabilities 111 156
Partners' Capital 250 574
Three Months Ended
March 31,
1998 1997
---- ----
(Amounts in Thousands)
Revenue $ 181 $ 346
Expenses 20 84
Net Income 161 262
6
<PAGE>
Financing Joint Ventures
The aggregate financial information of the financing joint venture is
presented below:
March 31, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $ 722 $ 803
Liabilities 118 136
Partners' Capital 604 667
Three Months Ended
March 31,
1998 1997
---- ----
(Amounts in Thousands)
Revenue $ 25 $ 35
Expenses 4 14
Net Income 21 21
Foreclosed Cable Systems Joint Venture
The aggregate financial information of the financing joint venture is
presented below:
March 31, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $ - $ -
Liabilities - -
Partners' Capital - -
Three Months Ended
March 31,
1998 1997
---- ----
(Amounts in Thousands)
Revenue $ - $ (38)
Net Loss - (38)
7
<PAGE>
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 $307,000 during the three months
ended March 31, 1998, as compared to net income of $383,000 during the three
months ended March 31, 1997. The Partnership reported an overall decrease in
total revenues and expenses. However, the decrease in revenues exceeded the
decrease in expense, generating a decrease in net income for the period.
Total revenues decreased by $325,000 during the three months ended
March 31, 1998, as compared to the same period in 1997. The decrease in total
revenues is due primarily to a decrease in rental income from operating leases
of $138,000 for the three months ended March 31, 1998, as compared to the same
period in 1997. The decrease in rental income is attributable to a decrease in
the amount of equipment owned that is classified as operating leases. At March
31, 1998, the Partnership owned equipment with an aggregate original cost of $14
million, as compared to the $27 million of equipment owned at March 31, 1997.
Earned income from financing leases decreased by $98,000 during the
three months ended March 31, 1998, as compared to the same period in 1997. This
is attributable to the decrease in the net investment in financing leases since
March 31, 1997. The Partnership owned financing leases with a net investment of
$1.4 million at March 31, 1998, as compared to $4.1 million at March 31, 1997.
The net investment in financing leases will continue to decline over the lease
term as payments are received.
Total expenses of the Partnership decreased by $249,000 during the
three months ended March 31, 1998, compared to the same period in 1997.
Depreciation expense experienced the largest decrease during the three months
ended March 31, 1998, as compared to the same period in 1997. Depreciation
expense decreased 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 three months ended March 31, 1998 of $741,000,
as compared to $1,559,000 during the same period in 1997. The decline in net
cash generated from leasing and financing activities for the three months ended
March 31, 1998, 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.
An additional factor contributing to the decline in net cash generated
is the reduction in the amount of proceeds received from the sale of equipment
for the three months ended March 31, 1998, as compared to the previous year. The
Partnership received proceeds from the sale of equipment of $21,000 during the
three months ended March 31, 1998, as compared to $116,000 during the three
months ended March 31, 1997.
8
<PAGE>
The Partnership received distributions from joint ventures of $130,000
and $323,000 for the three months ended March 31, 1998 and 1997, respectively.
The decrease in distributions from joint ventures is attributable to one joint
venture experiencing a decline in cash available for distributions as a result
of a reduction in rental income and sales proceeds received.
As of March 31, 1998, the Partnership owned equipment being held for
lease with an original cost of $5,558,000 and a net book value of $28,000, as
compared to equipment with an original cost of $3,847,000 and a net book value
of $131,000 at March 31, 1997. 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 $1,691,000 and $1,695,000 during
the three months ended March 31, 1998 and 1997, 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 $1,606,000 and $1,610,000 in cash
distributions for the three months ended March 31, 1998 and 1997, respectively.
The cumulative cash distributions to limited partners at March 31, 1998 is
$37,304,000, as compared to $30,926,000 at March 31, 1997. The General Partner
received cash distributions of $85,000 for its share of the cash distribution
for the three months ended March 31, 1998 and 1997. The Partnership anticipates
making distributions at a lower rate beginning with the April 15, 1998
distribution.
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. During the three months
ended March 31, 1998, the number of units that have been redeemed has been
immaterial.
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses.
9
<PAGE>
PHOENIX INCOME FUND, L.P.
March 31, 1998
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
10
<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 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
---- ----- ---------
May 13, 1998 Senior Vice President /S/ GARY W. MARTINEZ
- --------------- and a Director of --------------------
Phoenix Leasing Associates, Inc. (Gary W. Martinez)
May 13, 1998 Chief Financial Officer, /S/ HOWARD SOLOVEI
- --------------- Treasurer and a Director of --------------------
Phoenix Leasing Associates, Inc. (Howard Solovei)
May 13, 1998 Senior Vice President, /S/ BRYANT J. TONG
- --------------- Financial Operations of --------------------
Phoenix Leasing Associates, Inc. (Bryant J. Tong)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,892
<SECURITIES> 0
<RECEIVABLES> 1,124
<ALLOWANCES> 301
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,896
<DEPRECIATION> 5,760
<TOTAL-ASSETS> 4,599
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,236
<TOTAL-LIABILITY-AND-EQUITY> 4,599
<SALES> 0
<TOTAL-REVENUES> 511
<CGS> 0
<TOTAL-COSTS> 204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 307
<INCOME-TAX> 0
<INCOME-CONTINUING> 307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 0
</TABLE>
