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, 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.
- --------------------------------------------------------------------------------
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 March 31,
2000.
Transitional small business disclosure format:
Yes No X
----- -----
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)
March 31, December 31,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $565 $388
Accounts receivable (net of allowance for losses on
accounts receivable of $18 and $19 at March 31,
2000 and December 31, 1999, respectively) 26 26
Notes receivable (net of allowance for losses on
notes receivable of $0 at March 31, 2000 and
December 31, 1999) 46 61
Equipment on operating leases and held for lease
(net of accumulated depreciation of $342 and
$636 at March 31, 2000 and December 31, 1999,
respectively) -- --
Investment in joint ventures -- 32
Other assets 23 8
---- ----
Total Assets $660 $515
==== ====
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 40 $ 70
---- ----
Total Liabilities 40 70
---- ----
Partners' Capital
General Partner -- --
Limited Partners, 300,000 units authorized, 175,285
units issued and 169,587 units outstanding at
March 31, 2000 and December 31, 1999 596 436
Accumulated other comprehensive income 24 9
---- ----
Total Partners' Capital 620 445
---- ----
Total Liabilities and Partners' Capital $660 $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
March 31,
2000 1999
---- ----
INCOME
Rental income $ 19 $ 124
Earned income, financing leases -- 21
Equity in earnings from joint ventures, net 3 8
Gain on sale of securities 172 --
Interest income, notes receivable -- 18
Other income 16 41
----- -----
Total Income 210 212
----- -----
EXPENSES
Depreciation -- 3
Amortization of acquisition fees -- 14
Lease related operating expenses 13 12
Management fees to General Partner 8 17
Reimbursed administrative costs to General Partner 12 17
General and administrative expenses 17 20
----- -----
Total Expenses 50 83
----- -----
NET INCOME 160 129
Other comprehensive income:
Unrealized income (losses) on securities:
Unrealized holding income (losses) arising
during period 186 (9)
Less: reclassification adjustment for gains
included in net income (172) --
----- -----
Other comprehensive income (loss) 14 (9)
----- -----
COMPREHENSIVE INCOME $ 174 $ 120
===== =====
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .95 $ .76
===== =====
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ -- $ --
===== =====
ALLOCATION OF NET INCOME:
General Partner $ -- $ --
Limited Partners 160 129
----- -----
$ 160 $ 129
===== =====
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,
2000 1999
---- ----
Operating Activities:
- --------------------
Net income $ 160 $ 129
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation -- 3
Amortization of acquisition fees -- 14
Equity in earnings from joint ventures, net (3) (8)
Gain on sale of equipment (4) (12)
Gain on sale of securities (172) --
Decrease (increase) in accounts receivable -- (43)
Decrease in accounts payable and accrued
expenses (30) (74)
Decrease in other assets -- 4
------- -------
Net cash provided by (used in) operating activities (49) 13
------- -------
Investing Activities:
- --------------------
Principal payments, financing leases 3 256
Principal payments, notes receivable 15 79
Proceeds from sale of securities 172 --
Proceeds from sale of equipment 1 12
Distributions from joint ventures 35 39
------- -------
Net cash provided by investing activities 226 386
------- -------
Increase in cash and cash equivalents 177 399
Cash and cash equivalents, beginning of period 388 3,050
------- -------
Cash and cash equivalents, end of period $ 565 $ 3,449
======= =======
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 March 31, 2000, the Partnership has
investments in notes receivable, before allowance for losses, of $46,000 of
which $46,000 is considered to be impaired. The impaired loans of $46,000 are
net of specific write-downs of $168,000. The Partnership has an allowance for
losses of $0 as of March 31, 2000. The average recorded investment in impaired
loans during the three months ended March 31, 2000 and 1999 was approximately
$46,000 and $87,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
2000 1999
---- ----
(Amounts In Thousands)
Beginning balance $ - $ 162
Provision for losses - -
Write downs - -
----- -----
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 three months ended March
31, 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:
March 31, December 31,
2000 1999
---- ----
(Amounts in Thousands)
Assets $ - $177
Liabilities - 35
Partners' Capital - 142
Three Months Ended
March 31,
2000 1999
---- ----
(Amounts in Thousands)
Revenue $ 16 $101
Expenses 3 9
Net Income 13 92
The equipment joint venture was closed during the three months ended
March 31, 2000.
6
<PAGE>
Financing Joint Venture
- -----------------------
The aggregate financial information of the financing joint venture is
presented below:
Three Months Ended
March 31,
2000 1999
---- ----
(Amounts in Thousands)
Revenue $ - $ 1
Expenses - 51
Net Income (Loss) - (50)
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 $160,000 during the three months
ended March 31, 2000, as compared to net income of $129,000 during the three
months ended March 31, 1999. The Partnership reported an overall decrease in
total revenues and expenses. However, the decreases in expenses exceeded the
decreases in revenues, generating an increase in net income for the period.
Total revenues decreased by $2,000 for the three months ended March 31,
2000, as compared to the same period in 1999. The decrease in total revenues for
the three months ended March 31, 2000 is primarily due to decreases in rental
income, earned income from financing leases and interest income from notes
receivable. However, an increase in gain on sale of securities of $172,000
during the three months ended March 31, 2000, compared to the previous period,
caused a smaller decrease in revenues for this period than there would have been
otherwise. The $105,000 decrease in rental income for the three months ended
March 31, 2000 is attributable to a decrease in the amount of equipment owned
that is classified as operating leases. At March 31, 2000, the Partnership owned
equipment with an aggregate original cost of $392,000, as compared to the $5.6
million of equipment owned at March 31, 1999.
Earned income from financing leases decreased by $21,000, during the
three months ended March 31, 2000, as compared to the same period in 1999. The
Partnership had investments in financing leases with a net investment of $0 at
March 31, 2000 and 1999.
Interest income from notes receivable decreased by $18,000 for the
three months ended March 31, 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 $46,000 at March
31, 2000, compared to $61,000 at March 31, 1999.
The Partnership reported a gain on sale of securities of $172,000 for
the three months ended March 31, 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 three months
ended March 31, 2000. In addition, at March 31, 2000, the Partnership owns
shares of stock and stock warrants in emerging growth companies that are
publicly traded with an unrealized gain of approximately $24,000. These stock
warrants contain certain restrictions, but are generally exercisable within one
year.
Total expenses of the Partnership decreased by $33,000 during the three
months ended March 31, 2000, compared to the same period in 1999. All expense
items decreased. Management fees decreased $9,000, acquisition fees decreased
$14,000, reimbursed costs to the general partner decreased $5,000 and
depreciation expense decreased by $3,000 for the three months ended March 31,
2000, as compared to the same period in 1999. These decreases are attributable
8
<PAGE>
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 primary source of liquidity comes from its
contractual obligations with a diversified group of 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 used by equipment leasing and
financing activities during the three months ended March 31, 2000 of $62,000, as
compared to net cash generated of $348,000 during the same period in 1999. The
decline in net cash generated from leasing and financing activities for the
three months ended March 31, 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 $39,000 for the three months ended March 31, 2000 and 1999, respectively.
The decrease in distributions from joint ventures is attributable to one joint
venture closing during the third quarter of 1999.
As of March 31, 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 $2,948,000 and a net book value of
$109,000 at March 31, 1999. The General Partner is actively engaged, on behalf
of the Partnership, in remarketing and selling the Partnership's off lease
equipment.
The cash distributed to partners was $0 during the three months ended
March 31, 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 three months ended March 31, 2000 and
1999. The cumulative cash distributions to limited partners at March 31, 2000 is
$43,274,000, as compared to $38,891,000 at March 31, 1999. The General Partner
received cash distributions of $0 for its share of the cash distribution for the
three months ended March 31, 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.
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses.
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.
9
<PAGE>
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 April 30, 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.
March 31, 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. The court sustained
Defendant's demurrers to the first four claims and Defendants have recently
answered the complaint concerning the remaining claims.
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.
The Plaintiff's deposition has been taken and no other depositions are
scheduled.
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
-----------------
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
---- ----- ---------
May 12, 2000 Senior Vice President /S/ GARY W. MARTINEZ
- -------------- and a Director of ----------------------
Phoenix Leasing Associates, Inc. (Gary W. Martinez)
May 12, 2000 Vice President, Finance, /S/ ANDREW N. GREGSON
- -------------- Treasurer and a Director of ----------------------
Phoenix Leasing Associates, Inc.
12
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 565
<SECURITIES> 24
<RECEIVABLES> 44
<ALLOWANCES> 18
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 342
<DEPRECIATION> 342
<TOTAL-ASSETS> 660
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 620
<TOTAL-LIABILITY-AND-EQUITY> 660
<SALES> 0
<TOTAL-REVENUES> 210
<CGS> 0
<TOTAL-COSTS> 50
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 160
<INCOME-TAX> 0
<INCOME-CONTINUING> 160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 160
<EPS-BASIC> .95
<EPS-DILUTED> 0
</TABLE>
