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, 1997
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, 1997
Units of Limited Partnership 36,469
Interest: $1,000 per unit
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 1996 Form 10-K, filed with the
Securities and Exchange Commission on June 16, 1997
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,
1997 1996
(Unaudited) (Audited)
ASSETS ------------ ------------
Leased Equipment, at Cost $ 44,923,234 $ 43,306,997
Less: Accumulated Depreciation (11,995,685) (9,611,491)
------------ ------------
32,927,549 33,695,506
------------ ------------
Equipment Held for Sale 4,105,073 4,125,116
Deposit on Equipment 3,118,969 3,109,549
Options 3,030,652 3,033,618
Deferred Debt Costs (Net of
Accumulated Amortization of
$263,152 and $179,112,
Respectively) 102,485 82,876
Rent and Sales Proceeds Receivable 668,240 663,308
Prepaid Expenses 66,380 70,557
Cash and Cash Equivalents 3,882,041 5,671,367
------------ ------------
Total Assets $ 47,901,389 $ 50,451,897
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 18,833,446 $ 19,781,263
Payable to: General Partners 117,811 386,367
Affiliates 0 11,393
Other 65,202 102,058
Interest Payable 257,438 210,289
Unearned Revenue 97,927 90,403
------------ ------------
Total Liabilities 19,371,824 20,581,773
------------ ------------
Partners' Equity:
Limited Partners (36,469 units
outstanding at June 30, 1997,
and December 31, 1996) 28,563,202 29,890,358
General Partners (33,637) (20,234)
------------ ------------
Total Partners' Equity 28,529,565 29,870,124
------------ ------------
Total Liabilities and
Partners' Equity $ 47,901,389 $ 50,451,897
============ ============
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 SIX MONTHS ENDED JUNE 30,
1997 1996
------------ ------------
Revenues:
Rental Income $ 4,039,437 $ 3,954,072
Interest Income 89,036 74,982
Gain on Sale of Equipment 0 77,910
Gain on Sale of Equipment
Held for Sale 16,458 1,591,240
------------ ------------
Total Revenues 4,144,931 5,698,204
------------ ------------
Operating Expenses:
Management Fees - General
Partners 147,409 164,961
General and Administrative:
Affiliate 20,035 28,440
Other 202,650 132,450
Interest Expense 805,297 563,185
Depreciation and Amortization 2,468,233 2,072,968
------------ ------------
Total Operating Expenses 3,643,624 2,962,004
------------ ------------
Net Income $ 501,307 $ 2,736,200
============ ============
Allocation of Net Income:
Limited Partners $ 496,294 $ 2,708,838
General Partners 5,013 27,362
------------ ------------
$ 501,307 $ 2,736,200
============ ============
Net Income Per $1,000 Limited
Partnership Unit Outstanding $ 13.61 $ 74.28
============ ============
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 JUNE 30,
1997 1996
------------ ------------
Revenues:
Rental Income $ 2,068,347 $ 1,953,331
Interest Income 37,874 43,173
Gain on Sale of Equipment 0 77,910
Gain on Sale of Equipment
Held for Sale 0 1,582,294
------------ ------------
Total Revenues 2,106,221 3,656,708
------------ ------------
Operating Expenses:
Management Fees - General
Partners 73,443 109,187
General and Administrative:
Affiliate 3,533 15,836
Other 154,187 104,016
Interest Expense 406,330 324,114
Depreciation and Amortization 1,277,648 1,052,212
------------ ------------
Total Operating Expenses 1,915,141 1,605,365
------------ ------------
Net Income $ 191,080 $ 2,051,343
============ ============
Allocation of Net Income:
Limited Partners $ 189,169 $ 2,030,830
General Partners 1,911 20,513
------------ ------------
$ 191,080 $ 2,051,343
============ ============
Net Income Per $1,000 Limited
Partnership Unit Outstanding $ 5.19 $ 55.69
============ ============
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 CASH FLOWS
------------------------
(Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
1997 1996
------------ ------------
Cash Flows from Operating Activities:
Net Income $ 501,307 $ 2,736,200
Adjustments to Reconcile Net
Income to Net Cash Provided
by (Used in) Operating Activities:
(Gain) on Sale of Equipment 0 (77,910)
Depreciation and Amortization 2,468,233 2,072,968
Deferred Interest on Notes Payable 265,455 243,072
Changes in Operating Assets
and Liabilities:
Decrease in Equipment Held for Sale 20,043 3,114,351
(Increase) Decrease in
Rents Receivable (9,724) 103,199
Decrease in Interest Receivable 0 471
Decrease in Accounts
Receivable- General 3,309 3,598
(Increase) Decrease in
Prepaid Expenses 4,177 (35,939)
Decrease in Accounts Payable (36,856) (61,573)
Increase (Decrease) in
Interest Payable 47,149 (5,441)
Increase (Decrease) in Payable to:
General Partners (268,556) 125,142
Affiliates (11,393) 0
Increase (Decrease) in
Unearned Revenue 7,524 (79,802)
------------ ------------
Net Cash Provided by
Operating Activities 2,990,668 8,138,336
------------ ------------
Cash Flows from Investing Activities:
Purchases of Equipment (1,616,236) (2,678,918)
Casualty of Options 2,966 0
Purchase of Residual
Participations 0 0
Proceeds from Sale of Equipment 0 179,000
Decrease in Sales Receivable 1,483 110,500
Payment on Note Receivable 0 0
Escrow Deposit (9,420) (3,505,807)
------------ ------------
Net Cash (Used in)
Investing Activities (1,621,207) (5,895,225)
------------ ------------ <PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS (continued)
------------------------------------
(Unaudited)
1997 1996
------------ ------------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 6,504,889 6,278,197
Payment of Notes Payable (7,718,161) (4,180,714)
(Increase) in Deferred Debt Costs (103,649) (24,317)
Distributions to Limited Partners (1,823,450) (1,823,450)
Distributions to General Partners (18,416) (18,416)
------------ ------------
Net Cash Provided by
(Used In) Financing
Activities (3,158,787) 231,300
------------ ------------
Increase (Decrease) in Cash (1,789,326) 2,474,411
Cash and Cash Equivalents at
Beginning of Period 5,671,367 3,186,738
------------ ------------
Cash and Cash Equivalents at
End of Period $ 3,882,041 $ 5,661,149
============ ============
Supplemental Cash Flow Information:
Interest Paid $ 492,693 $ 325,555
============ ============
Non-Cash Activities:
Notes Payable in 1997 increased by $265,455, 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)
June 30, 1997
-------------
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 six months ended June 30, 1997, the outstanding balance of
$4,234,500 with the CIT Group Credit Facility was paid in full. In June
1997 a credit facility of $9,234,500 was arranged with Heller Financial and
the amount drawn down was $6,234,500.
Additional notes payable in the amount of $270,389 originated during
the six months. The maturities of these notes are: 1997 - $22,532; 1998 -
$54,078; 1999 - $54,078; 2000 - $54,078; 2001 and thereafter - $85,623.
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, 1997:
Equipment Management Fees $147,409
Acquisition Fees 38,621
General and Administrative Costs 20,035
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, 1996. 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
$3,882,041 at June 30, 1997, represents cash of $2,090,002, a repurchase
agreement of $1,791,000, and money market mutual funds of $1,039.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
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 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, 1997.
On July 16, 1997 the first option referred to in Note 6 was exercised
and simultaneously, the railcars were sold to Great Lakes Carbon.<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
Six Months Ended June 30, 1997, Compared to Six Months Ended June 30, 1996
Rental income increased from $3,954,072 for the six months ended June
30, 1996, to $4,039,437 for the six months ended June 30, 1997. An
increase of $1,257,100 in revenues resulted from the purchase of equipment
with leases in place during the intervening period. This was offset by a
$1,171,735 decrease in revenues from leases that were terminated or
equipment that was sold during the intervening period. Interest income
increased for the six months ended June 30, 1997, as compared to 1996,
because the Partnership had a higher average balance of cash available for
investment.
Interest expense increased from $563,185 for the six months ended June
30, 1996, to $805,297 for the six months ended June 30, 1997. This
increase resulted from a higher average level of debt during the period.
Management fee expense decreased for the six months ended June 30, 1997, as
compared to 1996, 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, 1997 versus 1996, because the Partnership had a higher depreciable
basis of equipment due to new lease commitments.
During the six months ended June 30, 1997, equipment with an original
cost of $36,710 was sold for $36,500, resulting in a gain on sale of
$16,458. 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 $501,307 for the six months ended June 30, 1997, compared to
$2,736,200 for the six months ended June 30, 1996.
During the six months ended June 30, 1997, the Partnership incurred
$6,504,889 of additional borrowing and made $7,718,161 of principal
payments on notes.
Three Months Ended June 30, 1997, Compared to Three Months Ended
June 30, 1996
Rental income increased from $1,953,331 for the three months ended
June 30, 1996, to $2,068,347 for the three months ended June 30, 1997. An
increase of $650,952 in revenues resulted from the purchase of equipment
with leases in place in the intervening period. This was offset by a
$363,298 decrease in revenues from leases that were terminated or equipment
that was sold during the intervening period and a $172,638 decrease in
revenues due to reduced re-lease rates. Interest income decreased for the
three months ended June 30, 1997, as compared to 1996, because the
Partnership had a lower average balance of cash available for investment.
Interest expense increased from $324,114 for the three months ended
June 30, 1996, to $406,330 for the three months ended June 30, 1997. This
increase resulted from a higher average level of debt during the period.
Management fee expense was lower for the three months ended June 30, 1997,
as compared to 1996 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 three months ended
June 30, 1997 versus 1996, because the Partnership had a higher depreciable
basis of equipment due to purchases.
The net effect of the above revenue and expense items resulted in a
net income of $191,080 for the three months ended June 30, 1997, compared
to $2,051,343 for the three months ended June 30, 1996.
During the three months ended June 30, 1997, the Partnership incurred
$6,504,889 of additional borrowing and made $6,550,526 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, 1997, anticipated future borrowings, and future rental income, interest
income, and sales proceeds.
For the six months ended June 30, 1997, the Partnership had a net
income of $501,307. 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
$2,990,668. Cash used in investing activities consisted primarily of
$9,420 for an escrow deposit and $1,616,236 for the purchase of equipment.
Cash provided by financing activities consisted primarily of proceeds from
notes payable in the amount of $6,504,899. Cash used in financing
activities was $7,718,161 in payment of notes payable and to pay cash
distributions to limited and general partners of $1,841,866. In total,
during the six months ending June 30, 1997, Cash and Cash Equivalents
decreased $1,789,326 from operating activities, investing activities and
financing activities, resulting in an ending Cash and Cash Equivalent
balance as of June 30, 1997, of $3,882,041.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at June 30, 1997, 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)
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: September 15, 1997 By: /s/ J. Davenport Mosby, III
J. Davenport Mosby, III
President
Date: September 15, 1997 By: /s/ John McDonald
John McDonald
Vice President
Date: September 15, 1997 By: /s/ Christa Kleinrichert
Christa Kleinrichert
Secretary and Treasurer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT PURSUSANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,882,041
<SECURITIES> 0
<RECEIVABLES> 668,240
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 51,564,800
<DEPRECIATION> 14,532,178
<TOTAL-ASSETS> 47,901,389
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,529,565
<TOTAL-LIABILITY-AND-EQUITY> 47,901,389
<SALES> 0
<TOTAL-REVENUES> 4,144,931
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,838,327
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 805,297
<INCOME-PRETAX> 501,307
<INCOME-TAX> 0
<INCOME-CONTINUING> 501,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 501,307
<EPS-PRIMARY> 13.61<F2>
<EPS-DILUTED> 13.61<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET.
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
