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, 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 0-20133
-------
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
- --------------------------------------------------------------------------------
Registrant
California 68-0222136
- --------------------- ----------------------------------
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
--- ---
1,904,208 Units of Limited Partnership Interest were outstanding as of September
30, 1998.
Transitional small business disclosure format:
Yes No X
--- ---
Page 1 of 12
<PAGE>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 3,862 $ 5,087
Accounts receivable (net of allowance for losses on
accounts receivable of $190 and $220 at September
30, 1998 and December 31, 1997, respectively) 75 264
Notes receivable (net of allowance for losses on notes
receivable of $496 and $368 at September 30, 1998
and December 31, 1997, respectively) 9,564 6,514
Equipment on operating leases and held for lease (net
of accumulated depreciation of $5,524 and $7,035 at
September 30, 1998 and December 31, 1997,
respectively) 247 293
Net investment in financing leases (net of allowance
for early terminations of $436 and $341 at September
30, 1998 and December 31, 1997, respectively) 8,712 10,974
Investment in joint ventures 140 353
Capitalized acquisition fees (net of accumulated
amortization of $2,536 and $2,326 at September 30,
1998 and December 31, 1997, respectively) 575 550
Other assets 133 42
-------- --------
Total Assets $ 23,308 $ 24,077
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,032 $ 884
-------- --------
Total Liabilities 1,032 884
-------- --------
Partners' Capital
General Partner (16) (38)
Limited Partners, 5,000,000 units authorized,
2,045,838 units issued, 1,904,208 and 1,925,475
units outstanding at September 30, 1998 and
December 31, 1997, respectively 22,256 23,227
Unrealized gains on available-for-sale securities 36 4
-------- --------
Total Partners' Capital 22,276 23,193
-------- --------
Total Liabilities and Partners' Capital $ 23,308 $ 24,077
======== ========
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
INCOME
Rental income $ 353 $ 453 $1,288 $1,414
Earned income, financing leases 327 486 1,104 1,633
Equity in earnings from joint ventures,
net 45 56 221 201
Interest income, notes receivable 443 209 949 543
Other income 77 77 280 250
------ ------ ------ ------
Total Income 1,245 1,281 3,842 4,041
------ ------ ------ ------
EXPENSES
Depreciation 112 146 319 419
Amortization of acquisition fees 84 76 210 240
Lease related operating expenses 18 23 51 70
Management fees to General Partner 113 104 296 324
Reimbursed administrative costs
to General Partner 62 76 218 258
Provision for losses on receivables 83 76 239 217
Legal expense 39 99 148 175
General and administrative expenses 22 24 99 87
------ ------ ------ ------
Total Expenses 533 624 1,580 1,790
------ ------ ------ ------
NET INCOME $ 712 $ 657 $2,262 $2,251
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .35 $ .32 $ 1.12 $ 1.10
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .50 $ .50 $ 1.50 $ 1.50
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 37 $ 36 $ 111 $ 112
Limited Partners 675 621 2,151 2,139
------ ------ ------ ------
$ 712 $ 657 $2,262 $2,251
====== ====== ====== ======
The accompanying notes are an integral part of these statements.
3
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Operating Activities:
- --------------------
Net income $ 2,262 $ 2,251
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 319 419
Amortization of acquisition fees 210 240
Gain on sale of equipment (80) (121)
Gain on sale of securities (1) (20)
Equity in earnings from joint ventures, net (221) (201)
Provision for early termination, financing
leases 111 142
Provision for losses on notes receivable 128 74
Provision for losses on accounts receivable -- 1
Decrease (increase) in accounts receivable 189 (27)
Increase (decrease) in accounts payable and
accrued expenses 172 (185)
Decrease (increase) in other assets (59) 59
------- -------
Net cash provided by operating activities 3,030 2,632
------- -------
Investing Activities:
- --------------------
Principal payments, financing leases 4,802 5,625
Principal payments, notes receivable 1,566 1,359
Proceeds from sale of equipment 230 304
Proceeds from sale of securities 1 20
Distributions from joint ventures 434 1,130
Investment in financing leases (3,074) (2,407)
Investment in notes receivable (4,744) (3,861)
Payment of acquisition fees (259) (97)
------- -------
Net cash provided (used) by investing activities (1,044) 2,073
------- -------
Financing Activities:
- --------------------
Redemptions of capital (241) (193)
Distributions to partners (2,970) (3,001)
------- -------
Net cash used by financing activities (3,211) (3,194)
------- -------
Increase (decrease) in cash and cash equivalents (1,225) 1,511
Cash and cash equivalents, beginning of period 5,087 3,140
------- -------
Cash and cash equivalents, end of period $ 3,862 $ 4,651
======= =======
The accompanying notes are an integral part of these statements.
4
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND V, 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 September 30, 1998, the Partnership has
investments in notes receivable, before allowance for losses, of $10,060,000 of
which $382,000 considered to be impaired. The Partnership has an allowance for
losses of $496,000 as of September 30, 1998. The average recorded investment in
impaired loans during the nine months ended September 30, 1998 and 1997 was
approximately $367,000 and $24,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1998 1997
---- ----
(Amounts In Thousands)
Beginning balance $ 368 $ 124
Provision for losses 128 74
Write downs -- (64)
----- -----
Ending balance $ 496 $ 134
===== =====
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 1,918,566 and 1,939,294 for the nine
months ended September 30, 1998 and 1997 respectively. For purposes of
allocating income (loss) to each individual 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 combined financial information of the equipment joint
ventures is presented as follows:
September 30, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $147 $730
Liabilities 78 156
Partners' Capital 69 574
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
(Amounts in Thousands)
Revenue $133 $320 $689 $903
Expenses 8 173 55 355
Net Income 125 147 634 548
6
<PAGE>
Financing Joint Ventures
- ------------------------
The aggregate combined financial information of the financing joint
ventures is presented as follows:
September 30, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $613 $803
Liabilities 143 136
Partners' Capital 470 667
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
(Amounts in Thousands)
Revenue $20 $31 $68 $99
Expenses 5 4 13 21
Net Income 15 27 55 78
Note 7. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing Incorporated, Phoenix Leasing Associates, II and III LP., 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 a 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. Discovery has not commenced. The Companies intend to vigorously
defend the Complaint.
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 "Marin Action"). Plaintiffs subsequently amended the Marin
Action on August 14, 1998. On October 23, 1998, the Companies filed a demurrer
to the Marin Action, seeking its dismissal. Discovery has not commenced. The
Companies intend to vigorously defend the Complaint.
During the nine months ended September 30, 1998, the Partnerships
recorded legal expenses of approximately $34,000 in connection with the above
litigation as indemnification to the General Partner.
7
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
---------------------
Results of Operations
Phoenix Leasing Cash Distribution Fund V, L.P. (the "Partnership")
reported net income of $712,000 and $2,262,000 during the three and nine months
ended September 30, 1998, respectively, as compared to net income of $657,000
and $2,251,000 during the three and nine months ended September 30, 1997,
respectively. Net income for the three and nine months ended September 30, 1998
increased slightly as compared to the same periods in the prior year as a result
of an increase in interest income from notes receivable.
Total income decreased by $36,000 and $199,000 for the three and nine
months ended September 30, 1998, respectively, as compared to the same periods
in 1997, primarily as a result of a decline in earned income from financing
leases. Earned income from financing leases decreased by $159,000 and $529,000
during the three and nine months ended September 30, 1998, as compared to the
same periods in 1997, due to a decrease in the Partnership's investment in
financing leases. The investment in financing leases is $8.7 million at
September 30, 1998, as compared to $11.6 million at September 30, 1997. The
investment in financing leases, as well as earned income from financing leases,
will decrease over the lease term as the Partnership amortizes income over the
life of the lease using the interest method. This decrease may be offset in part
by a continuous investment of the excess cash flows of the Partnership in new
leasing and financing transactions over the life of the Partnership. During the
nine months ended September 30, 1998, the Partnership made new investments in
financing leases of $3.1 million, compared to $2.4 million during the nine
months ended September 30, 1997.
Another factor contributing to the decrease in total income is the
decline in rental income of $100,000 and $126,000 for the three and nine months
ended September 30, 1998 compared to the same periods in the previous year. The
decrease in rental income is attributable to a decrease in the amount of
equipment owned. At September 30, 1998, the Partnership owned equipment with an
aggregate original cost of approximately $29.5 million, as compared to $37.2
million at September 30, 1997.
Partially offsetting the decreases in earned income from financing
leases and rental income for the three and nine months ended September 30, 1998,
compared to the same periods in 1997, is an increase in interest income from
notes receivable of $234,000 and $406,000, respectively. This increase is
attributable to new investments made in notes receivable during 1997 and 1998.
During the nine months ended September 30, 1998, the Partnership made new
investments in notes receivable of $4.7 million, compared to $3.9 million during
the nine months ended September 30, 1997.
Total expenses for the three and nine months ended September 30, 1998
decreased by $91,000 and $210,000, as compared to the same periods in the
previous year. The decrease in the various items making up total expenses is
primarily attributable to a reduction in the amount of equipment owned by the
Partnership.
8
<PAGE>
The Partnership did experience an increase in provision for losses on
receivables for the three and nine months ended September 30, 1998, compared to
the same periods in 1997. The increase in provision for losses is attributable
to an increase in provision for losses on notes receivable resulting from the
Partnership's increased investment in notes receivable.
Liquidity and Capital Resources
The Partnership's primary source of liquidity is derived from its
contractual obligations with lessees for fixed lease terms at fixed rental
amounts, and from payments of principal and interest on outstanding notes
receivable. As the initial lease terms expire, the Partnership will re-lease the
equipment or sell the equipment. The future liquidity of the Partnership will
depend on the General Partner's success in collecting the contractual amounts
owed, as well as re-leasing and selling the Partnership's equipment as it comes
off lease.
The cash generated from leasing and financing activities during the
three and nine months ended September 30, 1998 and 1997 was $9,398,000 and
$9,616,000, respectively. The reduction in cash generated is attributable to a
decline in payments from financing leases. Payments from financing leases
decreased during 1998, compared to 1997, as a result of the Partnership's
declining investment in financing leases.
The Partnership may reinvest the cash generated by operating and
financing activities in new leasing and financing transactions over the life of
the Partnership. During the nine months ended September 30, 1998, the
Partnership acquired new equipment leases of $3.1 million and new investments in
notes receivable of $4.7 million, as compared to investments of $2.4 million in
equipment leases and $3.9 million in notes receivable during the same period in
1997.
As of September 30, 1998, the Partnership owned equipment being held
for lease with an original cost of $4,229,000 and a net book value of $242,000,
compared to $4,088,000 and $135,000, respectively, at September 30, 1997. The
General Partner is actively engaged, on behalf of the Partnership, in
remarketing and selling the Partnership's equipment as it becomes available.
Distributions from joint ventures decreased by $696,000 during the nine
months ended September 30, 1998, compared to the same period in 1997. The
decrease in distributions from joint ventures for the nine months ended
September 30, 1998, compared to the prior year, is attributable to a decline in
the amount of cash available for distribution from one equipment joint venture
as a result of a decrease in rental income and proceeds from sale of equipment.
The cash distributed to partners for the nine months ended September
30, 1998 was $2,970,000, as compared to $3,001,000 during the nine months ended
September 30, 1997. In accordance with the Partnership Agreement, the limited
partners are entitled to 97% of the cash available for distribution and the
General Partner is entitled to 3%. As a result, the limited partners received
$2,881,000 and $2,911,000 in distributions during the nine months ended
September 30, 1998 and 1997, respectively. The cumulative distributions to the
Limited Partners are $23,106,000 and $19,261,000 as of September 30, 1998 and
1997, respectively. The General Partner received $89,000 and $90,000 in cash
distributions for the nine months ended September 30, 1998 and 1997,
respectively. The Partnership anticipates making distributions to partners
during 1998 at the same rate as 1997.
9
<PAGE>
As stated in the Partnership's prospectus, redemptions were at the
discretion of the General Partner. It has become necessary to discontinue
redemptions to assure that the Partnership does not have to change its
distribution schedules due to unexpected redemptions and also to assure that it
is able to reinvest lease proceeds to maximize returns for those investors who
continue in the Partnership. No further redemptions in the Partnership will be
permitted after July 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 "Year 2000 problem" arose because many existing computer programs
use only the last two digits to refer to a year. Therefore, these computers and
computer programs do not properly recognize a year that begins with "20" instead
of the familiar "19." If not corrected, many computer applications could fail or
create erroneous results.
The General Partner has performed an assessment of the computer
programs used to conduct the business of the Partnership that are subject to
Year 2000 risk. The General Partner and its affiliates are currently in the
process of testing, upgrading, modifying and replacing existing computer
programs that have been determined not to be Year 2000 compliant. It is
estimated that this project will be completed in mid 1999. However, if this
project is not completed in a timely matter, the Year 2000 issue could have a
material impact on the Partnership's operations. The costs of these changes are
being incurred by the General Partner or its affiliates. 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
General Partner currently does not have a contingency plan, but will continue to
evaluate the need for such plan as systems and programs are tested.
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.
The assessments of the risks and costs of the Year 2000 issue are based
on management's best estimates. However, there can be no guarantee that these
estimates will be achieved and the actual results could differ materially from
those estimates.
10
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
September 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 LP., 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 a 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. Discovery has not commenced. The Companies intend to vigorously
defend the Complaint.
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 "Marin Action"). Plaintiffs subsequently amended the Marin
Action on August 14, 1998. On October 23, 1998, the Companies filed a demurrer
to the Marin Action, seeking its dismissal. Discovery has not commenced. The
Companies intend to vigorously defend the Complaint.
During the nine months ended September 30, 1998, the Partnerships
recorded legal expenses of approximately $34,000 in connection with the above
litigation as indemnification to the General Partner.
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 LEASING CASH DISTRIBUTION FUND V, L.P
---------------------------------------------
(Registrant)
BY: PHOENIX LEASING ASSOCIATES II, L.P.
a California limited partnership,
General Partner
BY: PHOENIX LEASING ASSOCIATES II, INC.
a Nevada corporation,
General Partner
Date Title Signature
---- ----- ---------
November 11, 1998 Senior Vice President /S/ GARY W. MARTINEZ
- -------------------- and a Director of --------------------
Phoenix Leasing Associates II,Inc. (Gary W. Martinez)
November 11, 1998 Chief Financial Officer, /S/ HOWARD SOLOVEI
- -------------------- Treasurer and a Director of --------------------
Phoenix Leasing Associates II, Inc.(Howard Solovei)
November 11, 1998 Senior Vice President, /S/ BRYANT J. TONG
- -------------------- Financial Operations of --------------------
(Principal Accounting Officer) (Bryant J.Tong)
Phoenix Leasing Associates II, Inc.
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,862
<SECURITIES> 0
<RECEIVABLES> 10,325
<ALLOWANCES> 686
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,771
<DEPRECIATION> 5,524
<TOTAL-ASSETS> 23,308
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,276
<TOTAL-LIABILITY-AND-EQUITY> 23,308
<SALES> 0
<TOTAL-REVENUES> 3,842
<CGS> 0
<TOTAL-COSTS> 1,580
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 239
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,262
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,262
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 0
</TABLE>