SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission File Number 0-21256
Cypress Equipment Fund II, Ltd.
(Exact name of Registrant as specified in its charter)
Florida 59-3082723
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 573-3800
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 requirements
for the past 90 days.
YES X NO
Number of Units at
Title of Each Class June 30, 1996
Units of Limited Partnership 36,469
Interest: $1,000 per unit
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 1995 Form 10-K, filed with the
Securities and Exchange Commission on June 25, 1996
Parts III and IV - Form S-1 Registration Statement
and all amendments and supplements thereto
File No. 33-44119<PAGE>
PART I - Financial Information
Item 1. Financial Statements
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
BALANCE SHEETS
June 30, December 31,
ASSETS 1996 1995
(Unaudited) (Audited)
Leased Equipment, at Cost $ 40,026,762 $ 33,358,046
Less: Accumulated
Depreciation (7,965,198) (5,972,307)
32,061,564 27,385,739
Equipment Held for Sale 492,680 3,607,031
Residual Participations 0 134,396
Options 3,038,114 3,038,114
Rents Receivable 657,517 760,716
Sales Receivable 0 110,500
Interest Receivable 0 63,752
Accounts Receivable - General 0 3,598
Escrow Deposit 3,505,807 0
Residual Participations Receivable 0 914,066
Prepaid Expenses 57,598 21,659
Deferred Debt Costs (Net of
Accumulated Amortization of
$159,764 and $144,300,
Respectively) 91,988 83,135
Cash and Cash Equivalents 5,661,149 3,186,738
Total Assets $ 45,566,417 $ 39,309,444
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 0 $ 61,573
Interest Payable 57,402 56,182
Payable to General Partners 224,329 99,187
Notes Payable 15,278,531 9,900,879
Unearned Revenue 30,038 109,840
Total Liabilities 15,590,300 10,227,661
Partners' Equity:
Limited Partners (36,469 units
outstanding at June 30, 1996,
and December 31, 1995) 29,995,294 29,109,906
General Partners (19,177) (28,123)
Total Partners' Equity 29,976,117 29,081,783
Total Liabilities and
Partners' Equity $ 45,566,417 $ 39,309,444
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
1996 1995
Revenues:
Rental Income $ 3,954,072 $ 3,338,229
Interest Income 74,982 244,095
Gain on Sale of Equipment 77,910 54,733
Gain on Sale of Equipment
Held for Sale 1,591,240 0
Total Revenues 5,698,204 3,637,057
Operating Expenses:
Management Fees - General
Partners 164,961 164,010
General and Administrative:
Affiliate 28,440 20,699
Other 132,450 143,952
Interest Expense 563,185 228,484
Depreciation and Amortization 2,072,968 1,635,617
Total Operating Expenses 2,962,004 2,192,762
Net Income $ 2,736,200 $ 1,444,295
Allocation of Net Income:
Limited Partners $ 2,708,838 $ 1,429,852
General Partners 27,362 14,443
$ 2,736,200 $ 1,444,295
Net Income Per $1,000 Limited
Partnership Unit Outstanding $ 74.28 $ 39.21
Number of Limited Partnership
Units Outstanding 36,469 36,469
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30,
1996 1995
Revenues:
Rental Income $ 1,953,331 $ 1,715,423
Interest Income 43,173 114,562
Gain on Sale of Equipment 77,910 49,151
Gain on Sale of Equipment
Held for Sale 1,582,294 0
Total Revenues 3,656,708 1,879,136
Operating Expenses:
Management Fees - General
Partners 109,187 75,050
General and Administrative:
Affiliate 15,836 13,437
Other 104,016 82,689
Interest Expense 324,114 136,848
Depreciation and Amortization 1,052,212 882,799
Total Operating Expenses 1,605,365 1,190,823
Net Income $ 2,051,343 $ 688,313
Allocation of Net Income:
Limited Partners $ 2,030,830 $ 681,430
General Partners 20,513 6,883
$ 2,051,343 $ 688,313
Net Income Per $1,000 Limited
Partnership Unit Outstanding $ 55.69 $ 18.69
Number of Limited Partnership
Units Outstanding 36,469 36,469
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
1996 1995
Cash Flows from Operating Activities:
Net Income $ 2,736,200 $ 1,444,295
Adjustments to Reconcile Net
Income to Net Cash Provided
by (Used in) Operating Activities:
(Gain) Loss on Sale of
Equipment (77,910) (54,733)
Depreciation and
Amortization 2,072,968 1,635,617
Deferred Interest on
Notes Payable 243,072 0
Changes in Operating Assets
and Liabilities:
(Increase) Decrease in
Equipment Held for Sale 3,114,351 0
(Increase) Decrease in
Rents Receivable 103,199 147,225
(Increase) Decrease in
Interest Receivable 471 0
(Increase) Decrease in
Accounts Receivable-
General 3,598 0
(Increase) Decrease in
Prepaid Expenses (35,939) (62,696)
Increase (Decrease) in
Accounts Payable (61,573) 264,162
Increase (Decrease) in
Interest Payable (5,441) 19,883
Increase (Decrease) in
Payable to:
General Partners 125,142 (22,451)
Affiliates 0 (5,381)
Increase (Decrease) in
Unearned Revenue (79,802) (90,476)
Net Cash Provided by
Operating Activities 8,138,336 3,275,445
Cash Flows from Investing Activities:
Purchases of Equipment (2,678,918) (3,832,937)
Purchase of Options 0 (3,036,623)
Purchase of Residual
Participations 0 (123,385)
Proceeds from Sale of Equipment 179,000 3,052,343
(Increase) Decrease in
Sales Receivable 110,500 0
Payment on Note Receivable 0 247,736
Escrow Deposit (3,505,807) 0
Net Cash (Used in)
Investing Activities (5,895,225) (3,692,866)
Cash Flows from Financing Activities:
Proceeds from Notes Payable 6,278,197 4,367,546
Payment of Notes Payable (4,180,714) (2,011,103)
(Increase) Decrease in
Deferred Debt Costs (24,317) (4,250)
Distributions to
Limited Partners (1,823,450) (2,159,329)
Distributions to
General Partners (18,416) (21,810)
Net Cash Provided by
Financing Activities 231,300 171,054
Increase (Decrease) in Cash 2,474,411 (246,367)
Cash and Cash Equivalents at
Beginning of Period 3,186,738 8,330,741
Cash and Cash Equivalents at
End of Period $ 5,661,149 $ 8,084,374
Supplemental Cash Flow Information:
Interest Paid $ 325,555 $ 208,601
Non-Cash Activities:
Notes Payable increased by $243,072, the amount of Deferred Interest
on Notes Payable.
A 1996 non-cash reclassification resulted in increases of: Leased
Equipment by $4,155,501; Notes Payable by $3,037,097; and Interest
Payable by $6,662.
This reclassification also decreased: Residual Participations by
$134,396; Residual Participations Receivable by $914,066; and
Accounts Receivable - Interest by $63,280.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
NOTE 1 - ORGANIZATION
Cypress Equipment Fund II, Ltd. (the "Partnership"), a Florida
limited partnership, was formed November 13, 1991, for the purpose
of acquiring and leasing transportation, manufacturing, industrial
and other capital equipment. The Partnership was funded with
limited partner capital contributions and commenced operations on
June 22, 1992. The Partnership will terminate on December 31, 2015,
or sooner, in accordance with the terms of the Limited Partnership
Agreement. The Partnership has received Limited and General Partner
capital contributions of $36,469,000 and $2,000, respectively.
Cypress Equipment Management Corporation II, a California
corporation and a wholly-owned subsidiary of Cypress Leasing
Corporation, is the Managing General Partner; RJ Leasing - 2, Inc.,
a Florida corporation and a second-tier subsidiary of Raymond James
Financial, Inc., is the Administrative General Partner; and Raymond
James Partners, Inc., a Florida corporation and a wholly-owned
subsidiary of Raymond James Financial, Inc., is the other General
Partner.
Cash distributions, subject to payment of the equipment
management fees, and profits and losses of the Partnership shall be
allocated 99% to the Limited Partners and 1% to the General
Partners. Once each Limited Partner has received cumulative cash
distributions equal to his capital contributions, an incentive
management fee equaling 4% of cash available for distributions will
be paid to the General Partners. When each Limited Partner has
received cumulative cash distributions equal to his capital
contributions plus an amount equal to 8% of adjusted capital
contributions per annum, an incentive management fee equaling 23% of
cash available for distributions will be paid to the General
Partners.
NOTE 2 - NOTES PAYABLE
A significant amount of the rental equipment acquired by the
Partnership is pledged at time of purchase as collateral for the
notes payable.<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
June 30, 1996
NOTE 2 - NOTES PAYABLE (Continued)
During the six months ended June 30, 1996, $4,900,000 was
drawn down against a $10,450,000 credit facility issued by the CIT
Group and $2,000,000 was paid resulting in an outstanding balance of
$4,800,000 as of June 30, 1996. Under the terms of the agreement,
voluntary prepayments cannot be made until after March 1, 1997 and
the loan must be repaid in 1999.
Additional notes payable in the amount of $1,378,197
originated during the six months. The maturities of these notes
are: 1996 - $228,450; 1997 - $423,323; 1998 - $477,434; 1999 -
$248,990.
NOTE 3 - COMPENSATION AND REIMBURSEMENTS TO GENERAL PARTNERS AND
AFFILIATES
The General Partners and their affiliates are entitled to the
following types of compensation and reimbursements for costs and
expenses incurred for the Partnership for the six months ended June
30, 1996:
Equipment Management Fees $ 164,961
Acquisition Fees 74,013
General and Administrative Costs 28,440
General Partners' Distributions 18,416
NOTE 4 - BASIS OF PREPARATION
The unaudited financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. These statements should
be read in conjunction with the financial statements and notes
thereto included with the Partnership's Form 10-K for the year ended
December 31, 1995. In the opinion of management, these financial
statements include all adjustments, consisting only of normal
recurring adjustments, necessary to summarize fairly the
Partnership's financial position and results of operations. The
results of operations for the period may not be indicative of the
results to be expected for the year.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
June 30, 1996
NOTE 5 - CASH AND CASH EQUIVALENTS
It is the Partnership's policy to include short-term
investments with an original maturity of three months or less in
Cash and Cash Equivalents. These short-term investments are
comprised of money market mutual funds and a repurchase agreement.
All of the Partnership's securities included in Cash and Cash
Equivalents are considered held-to-maturity. The balance of
$5,661,149 at June 30, 1996, represents cash of $60,680, a
repurchase agreement of $3,988,723, and money market mutual funds of
$1,611,746.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
On June 30, 1996, the Partnership purchased a 9.9% interest in
a partnership which owns boiler equipment used in a paper pulp
processing mill for $2,675,422. The Partnership is committed to
buying an additional 30.1% interest in December 1996, contingent
upon a new agreement among the owner-participants concerning the
remarketing of the equipment.
In March 1995, the Partnership purchased various railcar
options. If the options are exercised upon lease terminations in
July 1997, August 1999, and January 2000, the Partnership will pay
the strike prices of approximately $572,516, $1,535,122, and
$5,137,500 respectively, to the seller for 98 railcars, 193 railcars
and 685 railcars, respectively.
NOTE 7 - SUBSEQUENT EVENTS
On July 18, 1996 the partnership received insurance proceeds
of $912,756 for settlement of damages under the Partnership's
supplemental insurance policy for 231 railroad cars that had been
previously leased to Illinois Central.
On July 31, 1996, the Partnership paid distributions of
$911,725 to the Limited Partners and $9,208 to the General Partners
for the quarter ended June 30, 1996.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 1996, Compared to Six Months Ended
June 30, 1995
Rental income increased from $3,338,229 for the six months
ended June 30, 1995, to $3,954,072 for the six months ended June 30,
1996. An increase of $1,621,000 in revenues resulted from the
purchase of equipment with leases in place during the intervening
period. This was offset by a $1,005,000 decrease in revenues from
leases that were terminated or equipment that was sold during the
intervening period. Interest income decreased for the six months
ended June 30, 1996, as compared to 1995, because the Partnership
had a lower average balance of cash available for investment.
Interest expense increased from $228,484 for the six months
ended June 30, 1995, to $563,185 for the six months ended June 30,
1996. This increase primarily resulted from a higher average level
of debt during the period. Management fee expense was about the
same for the six months ended June 30, 1996, as compared to 1995,
due to the calculations of two leases being based on the cash
received by the Partnership instead of the revenue recognized by the
Partnership. Depreciation expense increased for the six months
ended June 30, 1996 versus 1995, because the Partnership had a
higher depreciable basis of equipment due to new lease commitments.
During the six months ended June 30, 1996, equipment with an
original cost of $3,472,764 was sold for $4,954,863, resulting in a
gain on sale of $1,669,150. .
The net effect of the above revenue and expense items resulted
in a net income of $2,736,200 for the six months ended June 30,
1996, compared to $1,444,925 for the six months ended June 30, 1995.
During the six months ended June 30, 1996, the Partnership
incurred $6,278,197 of additional borrowing and principal payments
of $4,180,714 were made on notes.
Three Months Ended June 30, 1996, Compared to Three Months Ended
June 30, 1995
Rental income increased from $1,715,423 for the three months
ended June 30, 1995, to $1,953,331 for the three months ended June
30, 1996. An increase of $678,000 in revenues resulted from the
purchase of equipment with leases in place in the intervening
period. This was offset by a $399,000 decrease in revenues from
leases that were terminated or equipment that was sold during the
intervening period and a $41,000 decrease in revenues due to reduced
re-lease rates. Interest income decreased for the three months
ended June 30, 1996, as compared to 1995, because the Partnership
had a lower average balance of cash available for investment.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations (Continued)
Three Months Ended June 30, 1996, Compared to Three Months Ended
June 30, 1995
Interest expense increased from $136,848 for the three months
ended June 30, 1995, to $324,114 for the three months ended June 30,
1996. This increase resulted from a higher average level of debt
during the period. Management fee expense was higher for the three
months ended June 30, 1996, as compared to 1995 because of an
increase in revenues. Depreciation expense increased for the three
months ended June 30, 1996 versus 1995, because the Partnership had
a higher depreciable basis of equipment due to purchases.
During the three months ended June 30, 1996, equipment with an
original cost of $3,333,491 was sold for $4,807,250, resulting in a
gain on sale of $1,660,204.
The net effect of the above revenue and expense items resulted
in a net income of $2,051,343 for the three months ended June 30,
1996, compared to $688,313 for the three months ended June 30, 1995.
During the three months ended June 30, 1996, the Partnership
incurred $1,378,197 of additional borrowing and made $3,081,600 of
principal payments on notes.
Liquidity and Capital Resources
Short-term liquidity requirements consist of funds needed to
make cash distributions to limited and general partners and meet
commitments for investments in equipment, administrative expenses,
and debt retirement. These short-term needs will be funded by Cash
and Cash Equivalents at June 30, 1996, anticipated future
borrowings, and future rental income, interest income, and sales
proceeds.
For the six months ended June 30, 1996, the Partnership had
a net income of $2,736,200. After adjusting net income during this
period for depreciation and amortization, gain on sale, and the
changes in operating assets and liabilities, net cash provided by
operating activities was $8,138,336. Cash provided by investing
activities consisted primarily of sales proceeds of $289,500. Cash
used in investing activities was $3,505,807 for an escrow deposit
and $2,678,918 for the purchase of equipment. Cash provided by
financing activities consisted primarily of proceeds from notes
payable in the amount of $6,278,197. Cash used in financing
activities was $4,180,714 in payment of notes payable and to pay
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (Continued)
cash distributions to limited and general partners of $1,841,866.
In total, during the six months ending June 30, 1996, Cash and Cash
Equivalents increased $2,474,411 from operating activities,
investing activities and financing activities, resulting in an
ending Cash and Cash Equivalent balance as of June 30, 1996, of
$5,661,149.
In the opinion of the General Partners, the Partnership will
have, through Cash and Cash Equivalents at June 30, 1996, and
through future rental income, interest income, and equipment sales
proceeds, sufficient funds to remain liquid for the foreseeable
future. The General Partners are not aware of any trends that could
adversely affect the Partnership's liquidity or the ability to meet
near-term obligations.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
June 30, 1996
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None.
b) Reports on Form 8-K - None.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Cypress Equipment Fund II, Ltd.
RJ Leasing - 2, Inc.
Administrative General Partner
Date: August 14, 1996 By: /s/J. Davenport Mosby III
J. Davenport Mosby, III
President
Date: August 14, 1996 By: /s/John M. McDonald
John M. McDonald
Vice President
Date: August 14, 1996 By: /s/Christa Kleinrichert
Christa Kleinrichert
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTIANS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 5,661,149
<SECURITIES> 0
<RECEIVABLES> 657,517
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 42,658,188
<DEPRECIATION> 10,103,944
<TOTAL-ASSETS> 45,566,417
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,976,117
<TOTAL-LIABILITY-AND-EQUITY> 45,566,417
<SALES> 0
<TOTAL-REVENUES> 3,637,057
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,398,819
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 563,185
<INCOME-PRETAX> 2,736,200
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,736,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,736,200
<EPS-PRIMARY> 74.28<F2>
<EPS-DILUTED> 74.28<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET.
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
