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, 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
-------
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
----- -----
169,587 Units of Limited Partnership Interest were outstanding as of September
30, 2000.
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)
September 30, December 31,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $652 $388
Accounts receivable (net of allowance for losses
on accounts receivable of $16 and $19 at
September 30, 2000 and December 31, 1999,
respectively) 11 26
Notes receivable (net of allowance for losses
on notes receivable of $0 at September 30, 2000
and December 31, 1999) -- 61
Equipment on operating leases and held for lease
(net of accumulated depreciation of $19 and
$636 at September 30, 2000 and December 31, 1999,
respectively) -- --
Investment in joint ventures -- 32
Other assets 11 8
---- ----
Total Assets $674 $515
==== ====
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 31 $ 70
---- ----
Total Liabilities 31 70
---- ----
Partners' Capital
General Partner -- --
Limited Partners, 300,000 units authorized,
175,285 units issued and 169,587 units
outstanding at September 30, 2000 and
December 31, 1999 631 436
Accumulated other comprehensive income 12 9
---- ----
Total Partners' Capital 643 445
---- ----
Total Liabilities and Partners' Capital $674 $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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
INCOME
Rental income $ 58 $ 92 $ 77 $ 418
Earned income, financing leases -- 2 -- 25
Equity in earnings from joint
ventures, net -- 17 3 40
Interest income, notes receivable 49 7 46 47
Gain on sale of securities -- 473 172 473
Other income 10 52 44 139
------- ------- ------- -------
Total Income 117 643 342 1,142
------- ------- ------- -------
EXPENSES
Depreciation -- 1 -- 5
Amortization of acquisition fees -- 4 -- 24
Lease related operating expenses -- 1 22 14
Management fees to General Partner 4 21 12 51
Reimbursed administrative costs to
General Partner 10 10 32 42
Provision for losses on receivables 24 2 20 --
General and administrative expenses 22 18 61 70
------- ------- ------- -------
Total Expenses 60 57 147 206
------- ------- ------- -------
NET INCOME 57 586 195 936
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains arising
during period 1 475 175 467
Less: reclassification adjustment
for gains included in net
income -- (473) (172) (473)
------- ------- ------- -------
Other comprehensive income 1 2 3 (6)
------- ------- ------- -------
COMPREHENSIVE INCOME $ 58 $ 588 $ 198 $ 930
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .34 $ 3.46 $ 1.15 $ 5.52
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ -- $ --
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ -- -- -- --
Limited Partners 57 586 195 936
------- ------- ------- -------
$ 57 $ 586 $ 195 $ 936
======= ======= ======= =======
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)
Nine Months Ended
September 30,
2000 1999
---- ----
Operating Activities:
--------------------
Net income $ 195 $ 936
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation -- 5
Amortization of acquisition fees -- 24
Gain on sale of equipment (22) (50)
Gain on sale of securities (172) (473)
Equity in earnings from joint ventures, net (3) (40)
Provision for (recovery of) losses in accounts
receivable 14 (34)
Provision for early termination, financing leases -- 34
Provision for losses on notes receivable 6 --
Decrease in accounts receivable 1 32
Decrease in accounts payable and accrued expenses (39) (106)
Decrease in other assets -- 22
------- -------
Net cash provided by (used in) operating activities (20) 350
------- -------
Investing Activities:
--------------------
Principal payments, financing leases 3 299
Principal payments, notes receivable 55 203
Proceeds from sale of equipment 19 67
Proceeds from sale of securities 172 473
Distributions from joint ventures 35 155
------- -------
Net cash provided by investing activities 284 1,197
------- -------
Increase in cash and cash equivalents 264 1,547
Cash and cash equivalents, beginning of period 388 3,050
------- -------
Cash and cash equivalents, end of period $ 652 $ 4,597
======= =======
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 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 September 30, 2000, the Partnership has
investments in notes receivable, before allowance for losses, of $0. The
impaired loans of $0 are net of specific write-downs of $132,000. The
Partnership has an allowance for losses of $0 as of September 30, 2000. The
average recorded investment in impaired loans during the nine months ended
September 30, 2000 and 1999 was approximately $20,000 and $74,000 respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
2000 1999
---- ----
(Amounts In Thousands)
Beginning balance $-- $162
Provision for losses 6 --
Write downs (6) --
---- ----
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 for the nine months ended
September 30, 2000 and 1999. 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:
September 30, December 31,
2000 1999
---- ----
(Amounts in Thousands)
Assets $ -- $177
Liabilities -- 35
Partners' Capital -- 142
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $ 71 $ 16 $404
Expenses -- 4 3 53
Net Income -- 67 13 351
The equipment joint venture was closed during the nine months ended
September 30, 2000.
6
<PAGE>
Financing Joint Ventures
------------------------
The aggregate financial information of the financing joint venture is
presented below:
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ -- $ 7 $ -- $ 2
Expenses -- -- -- 155
Net Income (Loss) -- 7 -- (153)
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.
-------------
Results of Operations
The Partnership reported net income of $57,000 and $195,000 for the
three and nine months ended September 30, 2000, respectively, as compared to net
income of $586,000 and $936,000 during the three and nine months ended September
30, 1999, respectively. 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 $526,000 and $800,000 for the three and
nine months ended September 30, 2000, respectively, as compared to the same
period in 1999. The decrease in total revenues for the three and nine months
ended September 30, 2000 is primarily due to decreases in gain on sale of
securities, rental income, earned income from financing leases and a decrease in
earnings from joint ventures. The $34,000 and $341,000 decrease in rental income
for the three and nine months ended September 30, 2000 is attributable to a
decrease in the amount of equipment owned that is classified as operating
leases. At September 30, 2000, the Partnership owned equipment with an aggregate
original cost of $23,000, as compared to the $3.2 million of equipment owned at
September 30, 1999.
Earned income from financing leases decreased by $2,000 and $25,000
during the three and nine months ended September 30, 2000, as compared to the
same period in 1999. The Partnership had investments in financing leases with a
net investment of $0 at September 30, 2000, as compared to $32,000 at September
30, 1999.
Earnings from joint ventures decreased $17,000 and $37,000 for the
three and nine months ended September 30, 2000, compared to the same period in
1999. The decrease was due to one 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 increased by $42,000 for the
three months ended September 30, 2000, compared to 1999. This increase is due to
settlements received from lessees during the quarter ended September 30, 2000.
Interest income from notes receivable decreased by $1,000 for the nine months
ended September 30, 2000, compared to 1999. This decrease was offset by the
aforementioned settlements received. 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 $0 at September 30, 2000, compared to
$68,000 at September 30, 1999.
The Partnership reported a gain on sale of securities of $0 and
$172,000 for the three and nine months ended September 30, 2000, compared to
$473,000 for both the three and nine months ended September 30, 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 nine
months ended September 30, 2000. In addition, at September 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 $12,000. These
8
<PAGE>
stock warrants contain certain restrictions, but are generally exercisable
within one year.
Total expenses of the Partnership decreased by $59,000 during the nine
months ended September 30, 2000, compared to the same period in 1999. Total
expenses increased by $3,000 during the three months ended September 30, 2000,
compared to the same period in 1999. Most expense items decreased. Management
fees decreased $17,000 and $39,000, acquisition fees decreased $4,000 and
$24,000, reimbursed costs to the general partner decreased $0 and $10,000 and
depreciation expense decreased by $1,000 and $5,000 for the three and nine
months ended September 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 of one lease and one loan. The General Partner is continuing
its efforts in marketing these assets for sale.
The Partnership reported net cash generated by equipment leasing and
financing activities during the nine months ended September 30, 2000 of $38,000,
as compared to net cash generated of $852,000 during the same period in 1999.
The decline in net cash generated from leasing and financing activities for the
nine months ended September 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 $155,000 for the nine months ended September 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 September 30, 2000, the Partnership owned equipment being held
for lease with an original cost of $23,000 and a net book value of $0, as
compared to equipment with an original cost of $2,004,000 and a net book value
of $0 at September 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 nine months ended
September 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 nine months ended September 30, 2000
and 1999. The cumulative cash distributions to limited partners at September 30,
2000 is $43,274,000, as compared to $38,891,000 at September 30, 1999. The
General Partner received cash distributions of $0 for its share of the cash
distribution for the nine months ended September 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>
PHOENIX INCOME FUND, L.P.
September 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").
The Ash complaint 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 and discovery has commenced. 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 V. Defendants have answered
the complaint and discovery has commenced. A class has been certified. The
plaintiffs' depositions have been taken, and plaintiffs recently took
depositions of defendants.
On August 28, 2000, the Ash and Berger actions were consolidated (the
"Consolidated Action") pursuant to stipulation by both parties. Plaintiffs
recently served a first request for production in the Consolidated Action;
defendants will respond to the first request for production on November 22,
2000.
The Companies intend to vigorously defend the Consolidated Action.
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
---- ----- ---------
November 13, 2000 Senior Vice President /S/ GARY W. MARTINEZ
----------------- and a Director of ----------------------
Phoenix Leasing Associates, Inc. (Gary W. Martinez)
November 13, 2000 Vice President, Finance, /S/ ANDREW N. GREGSON
----------------- Treasurer and a Director of ----------------------
Phoenix Leasing Associates, Inc. (Andrew N. Gregson)
11
