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 September 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 September 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
September 30, December 31,
1996 1995
------------ ------------
ASSETS (Unaudited) (Audited)
Leased Equipment, at Cost $ 39,880,765 $ 33,358,046
Less: Accumulated Depreciation (8,990,608) (5,972,307)
------------ ------------
30,890,157 27,385,739
Equipment Held for Sale 492,680 3,607,031
Residual Participation 0 134,396
Deposit on Equipment 3,106,501 0
Options 3,038,114 3,038,114
Rent Receivable 679,240 760,716
Sales Receivable 0 110,500
Interest Receivable 99,803 63,752
Accounts Receivable - General 0 3,598
Escrow Deposit 3,504,817 0
Residual Participations Receivable 0 914,066
Prepaid Expenses 81,376 21,659
Deferred Debt Costs (Net of
Accumulated Amortization of
$168,570 and $144,300,
Respectively) 91,069 83,135
Cash and Cash Equivalents 6,347,673 3,186,738
------------ ------------
Total Assets $ 48,331,430 $ 39,309,444
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 0 $ 61,573
Interest Payable 78,712 56,182
Payable to: General Partners 118,679 99,187
Notes Payable 17,419,402 9,900,879
Unearned Revenue 215,687 109,840
------------ ------------
Total Liabilities 17,832,480 10,227,661
------------ ------------
Partners' Equity:
Limited Partners (36,469 units
outstanding at September 30, 1996,
and December 31, 1995) 30,512,897 29,109,906
General Partners (13,947) (28,123)
------------ ------------
Total Partners' Equity 30,498,950 29,081,783
------------ ------------
Total Liabilities and
Partners' Equity $ 48,331,430 $ 39,309,444
============ ============
The accompanying notes are an integral part
of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
------------ ------------
Revenues:
Rental Income $ 5,914,206 $ 4,930,378
Interest Income 249,265 359,026
Gain on Sale of Equipment 1,066,586 53,348
Gain on Sale of Equipment
Held for Sale 1,591,240 0
------------ ------------
Total Revenues 8,821,297 5,342,752
------------ ------------
Operating Expenses:
Management Fees - General Partners 164,711 227,477
General and Administrative:
Affiliate 52,172 39,847
Other 358,876 193,114
Interest Expense 885,174 419,471
Depreciation and Amortization 3,180,398 2,583,327
------------ ------------
Total Operating Expenses 4,641,331 3,463,236
------------ ------------
Net Income $ 4,179,966 $ 1,879,516
============ ============
Allocation of Net Income :
Limited Partners $ 4,138,166 $ 1,860,721
General Partners 41,800 18,795
------------ ------------
$ 4,179,966 $ 1,879,516
============ ============
Net Income Per $1,000 Limited
Partnership Unit Outstanding $ 113.47 $ 51.02
============ ============
Number of Limited Partnership
Units Outstanding 36,469 36,469
============ ============
The accompanying notes are an integral part
of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1996 1995
------------ ------------
Revenues:
Rental Income $ 1,960,134 $ 1,592,150
Interest Income 174,283 114,930
Gain on Sale of Equipment 988,676 0
------------ ------------
Total Revenues 3,123,093 1,707,080
------------ ------------
Operating Expenses:
Management Fees - General Partners (250) 63,467
General and Administrative:
Affiliate 23,732 19,148
Other 226,426 49,162
Interest Expense 321,989 190,987
Loss on Sale of Rental Equipment 0 1,385
Depreciation and Amortization 1,107,430 947,710
------------ ------------
Total Expenses 1,679,327 1,271,859
------------ ------------
Net Income $ 1,443,766 $ 435,221
============ ============
Allocation of Net Income :
Limited Partners $ 1,429,328 $ 430,869
General Partners 14,438 4,352
------------ ------------
$ 1,443,766 $ 435,221
============ ============
Net Income Per $1,000 Limited
Partnership Unit $ 39.19 $ 11.81
============ ============
Number of Limited Partnership Units 36,469 36,469
============ ============
The accompanying notes are an integral part
of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
------------ ------------
Cash Flows from Operating Activities:
Net Income $ 4,179,966 $ 1,879,516
Adjustments to Reconcile Net
Income to Net Cash Provided
by (Used in) Operating Activities:
(Gain) Loss on Sale of
Equipment (1,066,586) (53,348)
Depreciation and
Amortization 3,180,398 2,583,327
Deferred Interest on
Notes Payable 368,302 0
Changes in Operating Assets
and Liabilities:
(Increase) Decrease in
Equipment Held for Sale 3,114,351 0
(Increase) Decrease in
Rent Receivable 81,476 373,856
(Increase) Decrease in
Interest Receivable (99,331) 0
(Increase) Decrease in
Accounts Receivable -
General 3,598 0
(Increase) Decrease in
Prepaid Expenses (59,717) 4,745
Increase (Decrease) in
Interest Payable 15,868 82,202
Increase (Decrease) in
Payable to:
General Partners 19,492 (40,067)
Affiliates 0 (5,381)
Other (61,573) 0
Increase (Decrease) in
Unearned Revenue 105,847 (78,392)
------------ ------------
Net Cash Provided by
Operating Activities 9,782,091 4,746,458
------------ ------------
Cash Flows from Investing Activities:
Purchase of Equipment (2,708,215) (10,246,842)
Purchase of Options 0 (3,030,146)
Purchase of Residual Participation 0 (130,492)
Deposit on Equipment (3,106,501) 0
Proceeds from Sale of Equipment 1,269,756 3,050,958
(Increase) Decrease in
Sales Receivable 110,500 (39,275)
Payment on Notes Receivable 0 299,961
Escrow Deposit (3,504,817) 0
------------ ------------
<PAGE>
Net Cash Provided by (Used in)
Investing Activities (7,939,277) (10,095,836)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 9,278,197 8,408,270
Payment of Notes Payable (5,165,073) (2,737,534)
(Increase) Decrease in
Deferred Debt Costs (32,204) (96,367)
Distributions to
Limited Partners (2,735,175) (3,071,054)
Distributions to
General Partners (27,624) (31,018)
------------ ------------
Net Cash Provided by
Financing Activities 1,318,121 2,472,297
------------ ------------
Increase (Decrease) in Cash 3,160,935 (2,877,081)
Cash and Cash Equivalents at
Beginning of Period 3,186,738 8,330,741
------------ ------------
Cash and Cash Equivalents at
End of Period $ 6,347,673 $ 5,453,660
============ ============
Supplemental Cash Flow Information:
Interest Paid $ 501,004 $ 419,471
============ ============
Non-Cash Activities:
Notes Payable increased by $368,302, 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.
The accompanying notes are an integral part
of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 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, manu-
facturing, 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 distribution
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 distribution 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.
During the nine months ended September 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 repaid, resulting in an
outstanding balance of $4,800,000 as of September 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 $4,378,197
originated during the nine months. The maturities of these notes
are: 1996 - $2,028,450; 1997 - $423,323; 1998 - $477,434; 1999 -
$248,990; after 2000 - $1,200,000.
<PAGE>
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 nine months
ended September 30, 1996:
Equipment Management Fees $ 164,711
General and Administrative Costs 52,172
General Partners' Distributions 27,624
Acquisition Fees 159,513
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.
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 $6,347,673 at September 30, 1996, represents cash of
$100,167, a repurchase agreement of $4,640,000, and money market
funds of $1,607,506.
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 $2,704,317. The Partnership is committed to
buying an additional 30.1% interest in December 1996.
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 October 31, 1996, the Partnership paid distributions of
$911,725 to the Limited Partners and $9,208 to the General
Partners for the quarter ended September 30, 1996.
<PAGE>
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
Nine Months Ended September 30, 1996, Compared to Nine
Months Ended September 30, 1995
Rental income increased from $4,930,378 for the nine months
ended September 30, 1995, to $5,914,206 for the nine months ended
September 30, 1996. While sales, casualties, and reduced re-
lease rates during the intervening period reduced revenues by
$1,108,824, the purchase of equipment during the intervening
period increased revenue by $2,092,652. Interest income
decreased for the nine months ended September 30, 1996, as
compared to 1995, because the Partnership had a lower average
balance of cash available for investment.
Interest expense increased from $419,471 for the nine months
ended September 30, 1995, to $885,174 for the nine months ended
September 30, 1996. This increase resulted from an increased
average level of debt during the period. Management fee expense
was less for the nine months ended September 30, 1996, as
compared to 1995, due to the calculations on two leases being
based on the cash received by the Partnership instead of the
revenues recognized by the Partnership. Depreciation expense
increased for the nine months ended September 30, 1996 versus
1995, because the Partnership had a larger depreciable basis of
equipment.
During the nine months ended September 30, 1995, Rental
Equipment with an original cost of $5,061,689 was sold for a gain
of $53,348. During the nine months ended September 30, 1996,
Rental Equipment with an original cost of $340,997 was sold for a
gain of $153,830. There were additional insurance proceeds of
$912,756 on units previously declared as casualties. Rental
Equipment Held for Sale with a net book value of $3,178,691 was
sold at a gain of $1,591,240.
The net effect of the above revenue and expense items
resulted in net income of $4,179,966 for the nine months ended
September 30, 1996, compared to $1,879,516 for the nine months
ended September 30, 1995.
During the nine months ended September 30, 1996, the
Partnership incurred $9,278,197 of additional borrowing and made
$5,165,073 of principal payments on notes.
<PAGE>
Three Months Ended September 30, 1996, compared to Three
Months Ended September 30, 1995
Rental income increased from $1,592,150 for the three months
ended September 30, 1995, to $1,960,134 for the three months
ended September 30, 1996. While sales and reduced re-lease rates
during the intervening period reduced revenues by $159,300, the
purchase of equipment during the intervening period increased
revenues by $527,284. Interest income increased for the three
months ended September 30, 1996, as compared to 1995, because the
Partnership had a larger average balance of cash available for
investment.
Interest expense increased from $190,987 for the three
months ended September 30, 1995, to $321,989 for the three months
ended September 30, 1996. This increase resulted from a
increased average level of debt during the period. Management
fee expense was less for the three months ended September 30,
1996, as compared to 1995, because of a recalculation of
management fees. Depreciation expense increased for the three
months ended September 30, 1996 versus 1995, because the
Partnership had a larger depreciable basis of equipment.
There were no sales of equipment in the three months ended
September 30, 1995. During the three months ended September 30,
1996, Rental Equipment with an original cost of $175,294 was sold
for a gain of $75,920. There were additional insurance proceeds
of $912,756 on units previously declared as casualties.
The net effect of the above revenue and expense items
resulted in net income of $1,443,766 for the three months ended
September 30, 1996, compared to $435,221 three months ended
September 30, 1995.
During the three months ended September 30, 1996, the
Partnership incurred $3,000,000 of additional borrowing and made
$984,359 of principal payments on notes. <PAGE>
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 September 30, 1996,
anticipated future borrowings, and future rental income, interest
income, and sales proceeds.
For the nine months ended September 30, 1996, the
Partnership had a net income of $4,179,966. 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 $9,782,091. Cash
provided by investing activities consisted primarily of sales and
casualty proceeds of $1,269,756. Cash used in investing
activities was $3,504,817 for an escrow deposit, $2,708,215 for
the purchase of equipment, and $3,106,501 for a deposit on
equipment. Cash provided by financing activities consisted
primarily of proceeds from notes payable in the amount of
$9,278,197. Cash used in financing activities was $5,165,073 for
payment of notes payable and $2,762,799 for distributions to
limited and general partners. In total, during the nine months
ending September 30, 1996, Cash and Cash Equivalents increased
$3,160,935, resulting in an ending Cash and Cash Equivalent
balance as of September 30, 1996, of $6,347,673.
In the opinion of the General Partners, the Partnership will
have, through Cash and Cash Equivalents at September 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)
September 30, 1996
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: November 26, 1996 By: /s/J. Davenport Mosby, III
-----------------------------
J. Davenport Mosby, III
President
Date: November 26, 1996 By: /s/John McDonald
-----------------------------
John McDonald
Vice President
Date: November 26, 1996 By: /s/Christine Kleinrichert
-----------------------------
Christine Kleinrichert
Secretary and Treasurer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,347,673
<SECURITIES> 0
<RECEIVABLES> 779,043
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 42,512,191
<DEPRECIATION> 11,129,354
<TOTAL-ASSETS> 48,331,430
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,498,950
<TOTAL-LIABILITY-AND-EQUITY> 48,331,430
<SALES> 0
<TOTAL-REVENUES> 8,821,297
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,756,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 885,174
<INCOME-PRETAX> 4,179,966
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,179,966
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,179,966
<EPS-PRIMARY> 113.47<F2>
<EPS-DILUTED> 113.47<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET.
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
