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, 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
-------
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 _____
169,604 Units of Limited Partnership Interest were outstanding as of June 30,
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)
June 30, December 31,
1998 1997
---- ----
ASSETS
Cash and cash equivalents $2,459 $2,693
Accounts receivable (net of allowance for
losses on accounts receivable of $111
and $157 at June 30, 1998 and December 31,
1997, respectively) 3 206
Notes receivable (net of allowance for losses
on notes receivable of $162 at June 30,
1998 and December 31, 1997) 525 812
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$5,665 and $6,141 at June 30, 1998 and
December 31, 1997, respectively) 64 204
Net investment in financing leases (net of
allowance for early terminations of $90
and $80 at June 30, 1998 and December 31,
1997, respectively) 1,059 1,758
Investment in joint ventures 187 296
Capitalized acquisition fees (net of
accumulated amortization of $3,553 and
$3,508 at June 30, 1998 and December 31,
1997, respectively) 69 114
Other assets 60 55
------ ------
Total Assets $4,426 $6,138
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 423 $ 508
------ ------
Total Liabilities 423 508
------ ------
Partners' Capital
General Partner -- --
Limited Partners, 300,000 units authorized,
175,285 units issued and 169,604 and
169,972 units outstanding at June 30,
1998 and December 31, 1997, respectively 3,973 5,604
Unrealized gains on available-for-sale
securities 30 26
------ ------
Total Partners' Capital 4,003 5,630
------ ------
Total Liabilities and Partners' Capital $4,426 $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 Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
INCOME
Rental income $ 281 $ 494 $ 603 $ 942
Earned income, financing leases 52 140 119 306
Gain on sale of equipment 27 149 48 182
Equity in earnings from joint
ventures, net 83 36 124 102
Interest income, notes receivable 31 49 63 134
Other income 35 51 63 89
------ ------ ------ ------
Total Income 509 919 1,020 1,755
------ ------ ------ ------
EXPENSES
Depreciation 73 72 141 237
Amortization of acquisition fees 22 41 45 93
Lease related operating expenses 17 11 33 81
Management fees to General Partner 30 62 62 127
Reimbursed administrative costs to
General Partner 24 57 53 123
Provision for losses on receivables 4 24 10 24
General and administrative expenses 32 38 62 73
------ ------ ------ ------
Total Expenses 202 305 406 758
------ ------ ------ ------
NET INCOME $ 307 $ 614 $ 614 $ 997
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 1.65 $ 3.12 $ 2.96 $ 4.87
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 3.09 $ 9.25 $12.55 $18.70
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 28 $ 83 $ 112 $ 168
Limited Partners 279 531 502 829
------ ------ ------ ------
$ 307 $ 614 $ 614 $ 997
====== ====== ====== ======
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)
Six Months Ended
June 30,
1998 1997
---- ----
Operating Activities:
Net income $ 614 $ 997
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 141 237
Amortization of acquisition fees 45 93
Gain on sale of equipment (48) (182)
Equity in earnings from joint ventures, net (124) (102)
Gain on sale of securities (4) --
Provision for (recovery of) losses in
accounts receivable (9) --
Provision for early termination,
financing leases 19 24
Decrease (increase) in accounts receivable 212 (1)
Decrease in accounts payable and accrued
expenses (85) (164)
Decrease (increase) in other assets (1) 41
------- -------
Net cash provided by operating activities 760 943
------- -------
Investing Activities:
Principal payments, financing leases 679 1,774
Principal payments, notes receivable 287 209
Proceeds from sale of equipment 48 277
Distributions from joint ventures 233 573
Proceeds from sale of securities 4 --
------- -------
Net cash provided by investing activities 1,251 2,833
------- -------
Financing Activities:
Redemptions of capital (3) (10)
Distributions to partners (2,242) (3,352)
------- -------
Net cash used by financing activities (2,245) (3,362)
------- -------
Increase (decrease) in cash and cash equivalents (234) 414
Cash and cash equivalents, beginning of period 2,693 3,323
------- -------
Cash and cash equivalents, end of period $ 2,459 $ 3,737
======= =======
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.
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 account will be reduced to zero through the allocation of income or
loss.
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 June 30, 1998, the Partnership has
investments in notes receivable, before allowance for losses, of $687,000 of
which $104,000 is considered to be impaired. The Partnership has an allowance
for losses of $162,000 as of June 30, 1998. The average recorded investment in
impaired loans during the six months ended June 30, 1998 and 1997 was
approximately $108,000 and $33,000, respectively.
The activity in the allowance for losses on notes receivable
during the six months ended June 30, is as follows:
1998 1997
---- ----
(Amounts In Thousands)
Beginning balance $162 $216
Provision for losses -- --
Write downs -- --
---- ----
Ending balance $162 $216
==== ====
5
<PAGE>
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 169,752 and 170,277 for the six
months ended June 30, 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 6. Investment in Joint Ventures:
----------------------------
Equipment Joint Venture
- -----------------------
The aggregate financial information of the equipment joint venture
is presented below:
June 30, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $313 $730
Liabilities 77 156
Partners' Capital 236 574
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
(Amounts in Thousands)
Revenue $374 $237 $556 $582
Expenses 27 97 47 181
Net Income 347 140 509 401
Financing Joint Ventures
- ------------------------
The aggregate financial information of the financing joint venture
is presented below:
June 30, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $680 $803
Liabilities 141 136
Partners' Capital 539 667
6
<PAGE>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
(Amounts in Thousands)
Revenue $22 $33 $48 $68
Expenses 4 3 8 17
Net Income 18 30 40 51
Foreclosed Cable Systems Joint Venture
- --------------------------------------
The aggregate financial information of the foreclosed cable
systems joint venture is presented below:
June 30, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $ -- $ --
Liabilities -- --
Partners' Capital -- --
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
(Amounts in Thousands)
Revenue $-- $ (2) $-- $(40)
Expenses -- 4 -- 4
Net Loss -- (6) -- (44)
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 and $614,000 during
the three and six months ended June 30, 1998, respectively, as compared to net
income of $614,000 and $997,000 during the three and six months ended June 30,
1997, respectively. The Partnership reported an overall decrease in total
revenues and expenses. However, the decrease in revenues exceeded the decrease
in expenses, generating a decrease in net income for the period.
Total revenues decreased by $410,000 and $735,000 during the three and
six months ended June 30, 1998, respectively, as compared to the same periods in
1997. 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 equipment. The $213,000 and $339,000 decrease in rental income for the
three and six months ended June 30, 1998, respectively, is attributable to a
decrease in the amount of equipment owned. At June 30, 1998, the Partnership
owned equipment with an aggregate original cost of $12.5 million, as compared to
the $24 million of equipment owned at June 30, 1997.
Earned income from financing leases decreased by $88,000 and $187,000
during the three and six months ended June 30, 1998, respectively, as compared
to the same periods in 1997. This is attributable to the decrease in the net
investment in financing leases since June 30, 1997. The Partnership owned
financing leases with a net investment of $1.1 million at June 30, 1998, as
compared to $3.2 million at June 30, 1997. 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 equipment of $27,000 and
$48,000 for the three and six months ended June 30, 1998, respectively, compared
$149,000 and $182,000 for the three and six months ended June 30, 1997,
respectively. The decreased gain on sale of equipment, as well as the decrease
in sales proceeds received, during 1998 is a result of a decrease in sales
activity of the Partnership's equipment portfolio. The Partnership sold
equipment with an aggregate original cost of $3.5 million for the six months
ended June 30, 1998 compared to $6.7 million for the same period in 1997.
Total expenses of the Partnership decreased by $103,000 and $352,000
during the three and six months ended June 30, 1998, respectively, compared to
the same periods in 1997. Most expense items decreased during the three and six
months ended June 30, 1998, as compared to the same periods in 1997 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.
8
<PAGE>
The Partnership reported net cash generated by equipment leasing and
financing activities during the six months ended June 30, 1998 of $1,726,000, as
compared to $2,926,000 during the same period in 1997. The decline in net cash
generated from leasing and financing activities for the six months ended June
30, 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 six months ended June 30, 1998, as compared to the previous year. The
Partnership received proceeds from the sale of equipment of $48,000 during the
six months ended June 30, 1998, as compared to $277,000 during the six months
ended June 30, 1997.
The Partnership received distributions from joint ventures of $233,000
and $573,000 for the six months ended June 30, 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 June 30, 1998, the Partnership owned equipment being held for
lease with an original cost of $5,115,000 and a net book value of $14,000, as
compared to equipment with an original cost of $3,715,000 and a net book value
of $70,000 at June 30, 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 $2,242,000 and $3,352,000 during
the six months ended June 30, 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 $2,130,000 and $3,184,000 in cash
distributions for the six months ended June 30, 1998 and 1997, respectively. The
cumulative cash distributions to limited partners at June 30, 1998 is
$37,828,000, as compared to $32,500,000 at June 30, 1997. The General Partner
received cash distributions of $112,000 and $168,000 for its share of the cash
distribution for the six months ended June 30, 1998 and 1997, respectively. The
Partnership made 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.
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.
June 30, 1998
Part II. Other Information.
-----------------
Item 1. Legal Proceedings.
-----------------
On October 28, 1997 a Class Action Complaint was filed against
Phoenix Leasing Incorporated, Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Incorporated (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 seeks 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 fidicuary
duty and breach of contract by the Companies as general partners of the
Partnerships. Plaintiffs are expected to serve an amended complaint on August
14, 1998. Discovery has not commenced. The Companies intend to vigorously defend
the Complaint.
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
---- ----- ---------
August 12, 1998 Senior Vice President /S/ GARY W. MARTINEZ
- --------------- and a Director of --------------------
Phoenix Leasing Associates, Inc. (Gary W. Martinez)
August 12, 1998 Chief Financial Officer, /S/ HOWARD SOLOVEI
- --------------- Treasurer and a Director of --------------------
Phoenix Leasing Associates, Inc. (Howard Solovei)
August 12, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,459
<SECURITIES> 0
<RECEIVABLES> 801
<ALLOWANCES> 273
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,729
<DEPRECIATION> 5,665
<TOTAL-ASSETS> 4,426
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,003
<TOTAL-LIABILITY-AND-EQUITY> 4,426
<SALES> 0
<TOTAL-REVENUES> 1,020
<CGS> 0
<TOTAL-COSTS> 406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 614
<INCOME-TAX> 0
<INCOME-CONTINUING> 614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 614
<EPS-PRIMARY> 2.96
<EPS-DILUTED> 0
</TABLE>
