UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2000
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.
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Registrant
California 68-0204588
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State of Jurisdiction I.R.S. Employer Identification No.
2401 Kerner Boulevard, San Rafael, California 94901-5527
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Address of Principal Executive Offices Zip Code
Registrant's telephone number, including area code: (415) 485-4500
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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
----- -----
169,587 Units of Limited Partnership Interest were outstanding as of June 30,
2000.
Transitional small business disclosure format:
Yes No X
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Page 1 of 12
<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,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $552 $388
Accounts receivable (net of allowance for losses
on accounts receivable of $4 and $19 at
June 30, 2000 and December 31, 1999, respectively) 37 26
Notes receivable (net of allowance for losses on
notes receivable of $0 at June 30, 2000 and
December 31, 1999) 15 61
Equipment on operating leases and held for lease
(net of accumulated depreciation of $342 and
$636 at June 30, 2000 and December 31, 1999,
respectively) -- --
Investment in joint ventures -- 32
Other assets 10 8
---- ----
Total Assets $614 $515
==== ====
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 29 $ 70
---- ----
Total Liabilities 29 70
---- ----
Partners' Capital
General Partner -- --
Limited Partners, 300,000 units authorized,
175,285 units issued and 169,587 units
outstanding at June 30, 2000 and
December 31, 1999 574 436
Accumulated other comprehensive income 11 9
---- ----
Total Partners' Capital 585 445
---- ----
Total Liabilities and Partners' Capital $614 $515
==== ====
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX INCOME FUND, L.P.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
INCOME
Rental income $ -- $ 202 $ 19 $ 326
Earned income, financing leases -- 2 -- 23
Equity in earnings from joint ventures,
net -- 15 3 23
Interest income, notes receivable -- 22 -- 40
Gain on sale of securities -- -- 172 --
Other income 15 46 31 87
----- ----- ----- -----
Total Income 15 287 225 499
----- ----- ----- -----
EXPENSES
Depreciation -- 2 -- 5
Amortization of acquisition fees 1 6 -- 20
Lease related operating expenses 8 1 22 13
Management fees to General Partner -- 13 8 30
Reimbursed administrative costs to
General Partner 11 15 23 32
Recovery of losses on receivables (4) (1) (4) (1)
General and administrative expenses 21 30 38 51
----- ----- ----- -----
Total Expenses 37 66 87 150
----- ----- ----- -----
NET INCOME (LOSS) (22) 221 138 349
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period (12) 1 174 (8)
Less: reclassification adjustment for
gains included in net income -- -- (172) --
----- ----- ----- -----
Other comprehensive income (12) 1 2 (8)
----- ----- ----- -----
COMPREHENSIVE INCOME $ (34) $ 222 $ 140 $ 341
===== ===== ===== =====
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $(.14) $1.30 $ .81 $2.06
===== ===== ===== =====
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ -- $ --
===== ===== ===== =====
ALLOCATION OF NET INCOME (LOSS):
General Partner $ -- $ -- $ -- $ --
Limited Partners (22) 221 138 349
----- ----- ----- -----
$ (22) $ 221 $ 138 $ 349
===== ===== ===== =====
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,
2000 1999
---- ----
Operating Activities:
--------------------
Net income $ 138 $ 349
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation -- 5
Amortization of acquisition fees -- 20
Gain on sale of equipment (4) (35)
Gain on sale of securities (172) --
Equity in earnings from joint ventures, net (3) (23)
Recovery of losses in accounts receivable (14) --
Recovery of early termination, financing leases -- (1)
Provision for losses on notes receivable 10 --
Decrease in accounts receivable 3 22
Decrease in accounts payable and accrued
expenses (41) (161)
Decrease in other assets -- 21
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Net cash provided by (used in) operating activities (83) 197
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Investing Activities:
--------------------
Principal payments, financing leases 3 280
Principal payments, notes receivable 36 179
Proceeds from sale of equipment 1 52
Proceeds from sale of securities 172 --
Distributions from joint ventures 35 97
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Net cash provided by investing activities 247 608
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Increase in cash and cash equivalents 164 805
Cash and cash equivalents, beginning of period 388 3,050
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Cash and cash equivalents, end of period $ 552 $ 3,855
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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.
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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 1999 amounts have been reclassified to
conform to the 2000 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, 2000, the Partnership has
investments in notes receivable, before allowance for losses, of $15,000 of
which all is considered to be impaired. The impaired loans of $15,000 are net of
specific write-downs of $136,000. The Partnership has an allowance for losses of
$0 as of June 30, 2000. The average recorded investment in impaired loans during
the six months ended June 30, 2000 and 1999 was approximately $31,000 and
$78,000 respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
six months ended June 30, is as follows:
2000 1999
---- ----
(Amounts In Thousands)
Beginning balance $ -- $162
Provision for losses 10 --
Write downs (10) --
---- ----
Ending balance $ -- $162
==== ====
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 169,587 and 169,587 for the six months
ended June 30, 2000 and 1999, 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.
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Equipment Joint Venture
-----------------------
The aggregate financial information of the equipment joint venture is
presented below:
June 30, December 31,
2000 1999
---- ----
(Amounts in Thousands)
Assets $ -- $177
Liabilities -- 35
Partners' Capital -- 142
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $232 $ 16 $332
Expenses -- 39 3 48
Net Income -- 193 13 284
The equipment joint venture was closed during the six months ended June
30, 2000.
6
<PAGE>
Financing Joint Ventures
------------------------
The aggregate financial information of the financing joint venture is
presented below:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $ 1 $ -- $ 2
Expenses -- 111 -- 162
Net Income (Loss) -- (110) -- (160)
The financing joint venture was closed during the third quarter of
1999.
7
<PAGE>
PHOENIX INCOME FUND, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------
Results of Operations.
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Results of Operations
The Partnership reported a net loss of $22,000 for the three months
ended June 30, 2000 and net income of $138,000 for the six months ended June 30,
2000, as compared to net income of $221,000 and $349,000 during the three and
six months ended June 30, 1999. The Partnership reported an overall decrease in
total revenues and expenses. However, the decreases in revenues exceeded the
decreases in expenses, generating a decrease in net income for the period.
Total revenues decreased by $272,000 and $274,000 for the three and six
months ended June 30, 2000, as compared to the same period in 1999. The decrease
in total revenues for the three and six months ended June 30, 2000 is primarily
due to decreases in rental income, earned income from financing leases, interest
income from notes receivable and a decrease in earnings from joint ventures.
However, an increase in gain on sale of securities of $172,000 during the six
months ended June 30, 2000, compared to the previous period, caused a smaller
decrease in revenues for the period than there would have been otherwise. The
$202,000 and $307,000 decrease in rental income for the three and six months
ended June 30, 2000 is attributable to a decrease in the amount of equipment
owned that is classified as operating leases. At June 30, 2000, the Partnership
owned equipment with an aggregate original cost of $392,000, as compared to the
$4.3 million of equipment owned at June 30, 1999.
Earned income from financing leases decreased by $2,000 and $23,000
during the three and six months ended June 30, 2000, as compared to the same
period in 1999. The Partnership had investments in financing leases with a net
investment of $0 at June 30, 2000, as compared to $6,000 at June 30, 1999.
Earnings from joint ventures decreased $15,000 and $20,000 for the
three and six months ended June 30, 2000, compared to the same period in 1999.
The decrease was due to one joint joint venture closing during the third quarter
of 1999 and another joint venture closing during the first quarter of 2000.
Interest income from notes receivable decreased by $22,000 and $40,000
for the three and six months ended June 30, 2000, compared to 1999. The decrease
in interest income from notes receivable is attributable to the decline in net
investment in notes receivable. The net investment in notes receivable was
$15,000 at June 30, 2000, compared to $92,000 at June 30, 1999.
The Partnership reported a gain on sale of securities of $0 and
$172,000 for the three and six months ended June 30, 2000, compared to $0 in
1999. The securities sold for 2000 consisted of common stock received though the
exercise of stock warrants granted to the Partnership as part of financing
agreements with emerging growth companies that are publicly traded. The
Partnership received proceeds of $172,000 from the sale of these securities
during the six months ended June 30, 2000. In addition, at June 30, 2000, the
Partnership owns shares of stock and stock warrants in emerging growth companies
that are publicly traded with an unrealized gain of approximately $11,000. These
stock warrants contain certain restrictions, but are generally exercisable
within one year.
8
<PAGE>
Total expenses of the Partnership decreased by $29,000 and $63,000
during the three and six months ended June 30, 2000, compared to the same period
in 1999. Most expense items decreased. Management fees decreased $13,000 and
$22,000, acquisition fees decreased $5,000 and $20,000, reimbursed costs to the
general partner decreased $4,000 and $9,000 and depreciation expense decreased
by $2,000 and $5,000 for the three and six months ended June 30, 2000,
respectively, as compared to the same period in 1999. These decreases are
attributable to the decline in the amount of equipment owned as previously
discussed, as well as, the equipment portfolio having been fully depreciated
during the year ended December 31, 1999.
Liquidity and Capital Resources
The Partnership's asset portfolio continues to decline as a result of
the ongoing liquidation of assets, and therefore, it is expected that the cash
generated from operations will also decline. The remaining assets of the
Partnership consist primarily of a note receivable and two leases. The General
Partner is continuing its efforts in marketing these assets for sale.
The Partnership reported net cash used by equipment leasing and
financing activities during the six months ended June 30, 2000 of $44,000, as
compared to net cash generated of $656,000 during the same period in 1999. The
decline in net cash generated from leasing and financing activities for the six
months ended June 30, 2000, as compared to the same period in the previous year,
is attributable to decreases in rental income from operating leases, principal
payments from financing leases and principal payments from notes receivable, as
previously discussed in the Results of Operations.
The Partnership received distributions from joint ventures of $35,000
and $97,000 for the six months ended June 30, 2000 and 1999, respectively. The
decrease in distributions from joint ventures is attributable to one joint
venture closing during the third quarter of 1999 and another joint venture
closing during the first quarter of 2000.
As of June 30, 2000, the Partnership owned equipment being held for
lease with an original cost of $392,000 and a net book value of $0, as compared
to equipment with an original cost of $2,894,000 and a net book value of $79,000
at June 30, 1999. The General Partner is actively engaged, on behalf of the
Partnership, in selling the Partnership's off lease equipment.
The cash distributed to partners was $0 during the six months ended
June 30, 2000 and 1999. 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 $0 in cash distributions for the six months ended June 30, 2000 and
1999. The cumulative cash distributions to limited partners at June 30, 2000 is
$43,274,000, as compared to $37,828,000 at June 30, 1999. The General Partner
received cash distributions of $0 for its share of the cash distribution for the
six months ended June 30, 2000 and 1999.
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.
9
<PAGE>
Impact of the Year 2000 Issue
The General Partner has appointed ResourcePhoenix.com. (RPC), an
affiliate of the General Partner, to manage its Year 2000 project.
RPC has a Year 2000 project plan in place and a "Y2K Project Team" has
been appointed. The team has identified risks, and has implemented remediation
procedures for its Year 2000 issues. RPC has budgeted for the necessary changes,
built contingency plans, and has progressed along the scheduled timeline.
Installation of all remediation changes to critical software and hardware was
completed on November 5, 1999. As of July 31, 2000, RPC has not encountered any
material year 2000 problems with the hardware and software systems used in our
operations. In addition, none of RPC's critical vendors have reported any
material year 2000 problems nor have they experienced any decline in service
levels from such vendors.
RPC will continue to monitor internal and external issues related to
year 2000.
Costs incurred by the Partnership will be expensed as incurred and are
not currently anticipated to be material to the Partnership's financial position
or results of operations.
The Partnership's customers consist of lessees and borrowers. The
Partnership does not have exposure to any individual customer that would
materially impact the Partnership should the customer experience a significant
Year 2000 problem.
10
<PAGE>
PHOENIX INCOME FUND, L.P.
June 30, 2000
Part II. Other Information.
-----------------
Item 1. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint (the "Complaint") was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Inc. (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 sought 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 fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and re-filed them in a separate lawsuit
making similar allegations (the "Ash Action").
In the Ash action, Plaintiffs have filed a fourth amended complaint
which includes six causes of action: breach of fiduciary duty, constructive
fraud, judicial dissolution of Cash Distribution Fund IV, judicial dissolution
of Cash Distribution Fund V, accounting and alter ego. Defendants recently
answered the complaint. Plaintiffs have served four requests for production on
July 25, 2000. The plaintiffs depositions have been taken and plaintiffs
recently took depositions of defendants.
The Berger complaint relates to alleged misrepresentations made in
connection with the offering of Cash Distribution Fund V. Defendants have
answered the complaint and discovery has commenced. A class has been certified.
Plaintiffs have served three requests for production; defendants responded to
the third request for production on July 25, 2000. The plaintiffs deposition has
been taken and plaintiffs recently took depositions of defendants.
The Companies intend to vigorously defend both actions.
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
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Item 6. Exhibits and Reports on 8-K:
---------------------------
a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None
11
<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 11, 2000 Senior Vice President /S/ GARY W. MARTINEZ
--------------- and a Director of ----------------------
Phoenix Leasing Associates, Inc. (Gary W. Martinez)
August 11, 2000 Vice President, Finance, /S/ ANDREW N. GREGSON
--------------- Treasurer and a Director of ----------------------
Phoenix Leasing Associates, Inc. (Andrew N. Gregson)
12
