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 March 31, 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 March 31, 1996
Units of Limited Partnership
Interest: $1,000 per unit 36,469
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
March 31, December 31,
1996 1995
ASSETS (Unaudited) (Audited)
Leased Equipment, at Cost $ 37,517,043 $ 33,358,046
Less: Accumulated
Depreciation (6,986,312) (5,972,307)
30,530,731 27,385,739
Equipment Held for Sale 3,538,636 3,607,031
Residual Participations 0 134,396
Options 3,038,114 3,038,114
Rent Receivable 839,994 760,716
Sales Receivable 0 110,500
Interest Receivable 0 63,752
Accounts Receivable - General 0 3,598
Escrow Deposit 4,670,400 0
Residual Participations Receivable 0 914,066
Prepaid Expenses 19,617 21,659
Deferred Debt Costs (Net of
Accumulated Amortization of
$151,050 and $144,300,
Respectively) 81,458 83,135
Cash and Cash Equivalents 3,229,286 3,186,738
Total Assets $ 45,948,236 $ 39,309,444
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts Payable $ 0 $ 61,573
Interest Payable 69,159 56,182
Payable to General Partners 162,480 99,187
Notes Payable 16,859,508 9,900,879
Unearned Revenue 11,382 109,840
Total Liabilities 17,102,529 10,227,661
Partners' Equity:
Limited Partners (36,469 units
outstanding at March 31, 1996,
and December 31, 1995) 28,876,189 29,109,906
General Partners (30,482) (28,123)
Total Partners' Equity 28,845,707 29,081,783
Total Liabilities and
Partners' Equity $ 45,948,236 $ 39,309,444
The accompanying notes are an integral
part of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31,
1996 1995
Revenues:
Rental Income $ 2,000,741 $ 1,622,806
Interest Income 31,809 129,533
Gain on Sale of Equipment
Held for Sale 8,946 0
Gain on Sale of Equipment 0 5,582
Total Revenues 2,041,496 1,757,921
Operating Expenses:
Management Fees - General
Partners 55,774 88,960
General and Administrative:
Affiliate 12,604 7,262
Other 28,434 61,263
Interest Expense 239,071 91,636
Depreciation and Amortization 1,020,756 752,818
Total Operating Expenses 1,356,639 1,001,939
Net Income $ 684,857 $ 755,982
Allocation of Net Income:
Limited Partners $ 678,008 $ 748,422
General Partners 6,849 7,560
$ 684,857 $ 755,982
Net Income (Loss) Per $1,000 Limited
Partnership Unit Outstanding $ 18.59 $ 20.52
Number of Limited Partnership
Units Outstanding 36,469 36,469
The accompanying notes are an integral
part of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31,
1996 1995
Cash Flows from Operating Activities:
Net Income $ 684,857 $ 755,982
Adjustments to Reconcile Net
Income (Loss) to Net Cash Provided
by Operation Activities:
(Gain) Loss on Sale of
Equipment 0 (5,582)
Depreciation and
Amortization 1,020,756 752,818
Deferred Interest on
Notes Payable 120,645 0
Changes in Operating Assets
and Liabilities:
(Increase) Decrease in
Equipment Held for Sale 68,395 0
(Increase) Decrease in
Rents Receivable (79,278) 1,267,758
(Increase) Decrease in
Interest Receivable 471 0
(Increase) Decrease in Accounts
Receivable - General 3,598 0
(Increase) Decrease in
Prepaid Expenses 2,042 (87,475)
Increase (Decrease) in
Accounts Payable (61,573) 269,543
Increase (Decrease) in
Interest Payable 6,316 12,936
Increase (Decrease) in
Payable to:
General Partners 63,293 13,420
Affiliates 0 (5,381)
Increase (Decrease) in
Unearned Revenue (98,458) (64,593)
Net Cash Provided by
(Used in)Operating
Activities 1,731,064 2,909,426
Cash Flows from Investing Activities:
Purchases of Equipment (3,496) (6,055)
Purchases of Options 0 (3,012,789)
Proceeds from Sale of Equipment 0 5,582
(Increase) Decrease in
Sales Receivable 110,500 0
Payment on Notes Receivable 0 204,737
Escrow Deposit (4,670,400) 0
Net Cash Provided by
(Used in) Investing
Activities (4,563,396) (2,808,525)
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31,
1996 1995
Cash Flows from Financing Activities:
Proceeds from Notes Payable 4,900,000 1,476,455
Payment of Notes Payable (1,099,114) (875,391)
(Increase) Decrease in
Deferred Debt Costs (5,073) (2,750)
Distributions to Limited
Partners (911,725) (911,725)
Distributions to General
Partners (9,208) (9,207)
Net Cash Provided by
(Used in) Financing
Activities 2,874,880 (322,618)
Increase (Decrease) in Cash 42,548 (221,717)
Cash and Cash Equivalents at
Beginning of Period 3,186,738 8,330,741
Cash and Cash Equivalents at
End of Period $ 3,229,286 $ 8,109,024
Supplemental Cash Flow Information:
Interest Paid $ 112,110 $ 78,700
Non-Cash Activities:
Notes Payable increased by $120,645, the amount of Deferred Interest
on Notes Payable.
A 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; Accounts Receivable - Deferred Residual Participation by
$914,066; and Accounts Receivable - Deferred Residual Participation
Interest by $63,280.
The accompanying notes are an integral
part of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 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.
During the quarter, $4,900,000 was drawn down against a
$10,450,000 credit facility issued by the CIT Group increasing the
total outstanding under this credit facility to $6,800,000. Under
the terms of the agreement, voluntary prepayments cannot be made
until after March 1, 1997 and the loan must be repaid in 1999.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1996
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 three months ended
March 31, 1996:
Equipment Management Fees $ 55,774
Acquisition Fees 64,341
General and Administrative Costs 12,604
General Partners' Distributions 9,208
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 repurchase agreement.
All of the Partnership's securities included in Cash and Cash
Equivalents are considered held-to-maturity. The balance of
$3,229,286 at March 31, 1996, represents cash of $1,835,222,
repurchase agreement of $1,265,654, and money market mutual funds of
$128,410. At March 31, 1996, the estimated market value of the
repurchase agreement was $1,265,654, resulting in no unrealized gain
or loss.<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1996
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The PLM Options were purchased in March 1995. 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 April 30, 1996, the Partnership paid distributions of
$911,725 to the Limited Partners and $9,208 to the General Partners
for the quarter ended March 30, 1996.
On May 7, 1996, equipment with an original cost of $323,089
was sold for $391,250.
On June 3, 1996, equipment with an original cost of $2,803,539
was sold for $4,215,000.
On June 18, 1996, equipment with an original cost of $206,863
was sold for $201,000.<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
Rental income increased from $1,622,806 for the three months
ended March 31, 1995, to $2,000,741 for the three months ended March
31, 1996. This increase resulted from terminations and sales during
the intervening period which reduced revenues by $513,177, the
purchase of equipment during the period increased revenues by
$942,582. Interest income decreased for the three months ending
March 31, 1995 as compared to 1994, because the Partnership had a
smaller average balance of cash available for investment.
Interest expense increased from $91,636 for the three months
ended March 31, 1995, to $239,071 for the three months ended March
31, 1996. This increase primarily resulted from a higher average
level of debt during the period. Management fee expense decreased
from 1995 due to the calculations for two leases purchased after
March 31, 1995 being based on the cash received by the Partnership
instead of the revenue recognized by the Partnership. Depreciation
expense increased for the three months ended March 31, 1996 versus
1995, because the Partnership had a larger depreciable basis of
equipment due to purchases in the intervening period.
The net effect of the above revenue and expense items resulted
in a net income of $684,857 for the three months ended March 31,
1996, compared to $755,982 for the three months ended March 31,
1995.
During the three months ended March 31, 1996, the Partnership
incurred $4,900,000 of additional borrowing to establish an escrow
account for the purchase of a 40% interest in a partnership. The
purchase price will be approximately $10,500,000 including
acquisition fees of approximately $290,000.
Liquidity and Capital Resources
The primary sources of funds originating in the three months
ended March 31, 1996, were $1,731,064 of cash provided by
operations, sales proceeds of $110,500, and $4,900,000 of additional
borrowing. These sources and Cash and Cash Equivalents as of
December 31, 1995, were used to make a deposit into escrow of
$4,670,400, notes payments of $1,099,114, cash distributions of
$920,933, and to pay operating expenses. As of March 31, 1996, the
Partnership had $3,229,286 of Cash and Cash Equivalents. The
equipment portfolio is comprised of eight leases which are
classified as operating leases and two leases which are classified
as full-payout leases.<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources (Continued)
In the opinion of the General Partners there are no material
trends, favorable or unfavorable, in the Partnership's capital
resources and the resources will be sufficient to meet the
Partnership's needs for the foreseeable future. The General
Partners expect to make additional equipment purchases.
Short-term liquidity requirements consist of funds needed to
make distributions 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
March 31, 1996, anticipated future borrowings, and rental income and
sales proceeds in the current period.
In the opinion of the General Partners, the Partnership will
have, through rental income and equipment sales proceeds, funds or
sources of funds to remain liquid for the expected life of the
Partnership. The General Partners are not aware of any trends that
significantly affect the Partnership's liquidity.
The cash balance at March 31, 1996, was $3,229,286. The
Partnership had a net income of $684,857 for the three months ended
March 31, 1996. After adjusting for depreciation and amortization,
and the changes in operating assets and liabilities, net cash
provided by operating activities was $1,731,064. Cash used by
investing activity was $4,670,400 for an escrow deposit for the
purchase of a 40% interest in a partnership. Cash provided by
financing activities consisted of proceeds from notes payable in the
amount of $4,900,000.
The Partnership anticipates that Cash and Cash Equivalents at
December 31, 1995, and funds from operations in 1996 will be
adequate to cover all 1996 operating contingencies.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
March 31, 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: July 15, 1996 By: /s/J. Davenport Mosby, III
J. Davenport Mosby, III
President
Date: July 15, 1996 By: /s/John McDonald
John McDonald
Vice President
Date: July 15, 1996 By: /s/Christa Kleinrichert
Christa Kleinrichert
Secretary and Treasurer
<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 MARCH 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,229,286
<SECURITIES> 0
<RECEIVABLES> 839,994
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 43,316,256
<DEPRECIATION> 9,246,889
<TOTAL-ASSETS> 45,948,236
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,845,707
<TOTAL-LIABILITY-AND-EQUITY> 45,948,236
<SALES> 0
<TOTAL-REVENUES> 2,041,496
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,117,568
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239,071
<INCOME-PRETAX> 684,857
<INCOME-TAX> 0
<INCOME-CONTINUING> 684,857
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 684,857
<EPS-PRIMARY> 18.59<F2>
<EPS-DILUTED> 18.59<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET.
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
