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, 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 March 31, 1997
Units of Limited Partnership
Interest: $1,000 per unit 36,469
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
March 31, December 31,
1997 1996
------------ ------------
ASSETS (Unaudited) (Audited)
Rental Equipment, at Cost $ 44,368,548 $ 43,306,997
Less: Accumulated Depreciation (10,791,496) (9,611,491)
------------- -------------
33,577,052 33,695,506
------------- -------------
Rental Equipment Held for Sale 4,105,073 4,125,116
Deposit on Equipment 3,118,457 3,109,549
Options 3,033,618 3,033,618
Rents and Sales Receivable 694,696 659,999
Accounts Receivable - Others 0 3,309
Prepaid Expenses 143,520 70,557
Deferred Debt Costs (Net of Accumulated
Amortization of $189,693 and
$179,112, Respectively) 74,651 82,876
Cash and Cash Equivalents 4,499,955 5,671,367
------------- -------------
Total Assets $ 49,247,022 $ 50,451,897
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 18,745,498 $ 19,781,263
Interest Payable 221,970 210,289
Payable to General Partners 221,340 386,367
Payable to Affiliates 16,502 11,393
Payable to Others 0 102,058
Unearned Revenue 782,294 90,403
------------- -------------
Total Liabilities 19,987,604 20,581,773
------------- -------------
Partners' Equity:
Limited Partners (36,469 units
outstanding at March 31, 1997
and December 31, 1996) 29,285,758 29,890,358
General Partners (26,340) (20,234)
------------- -------------
Total Partners' Equity 29,259,418 29,870,124
------------- -------------
Total Liabilities and
Partners' Equity $ 49,247,022 $ 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 THREE MONTHS ENDED MARCH 31,
1997 1996
Revenues: ------------ ------------
Rental Income $ 1,971,090 $ 2,000,741
Interest Income 51,162 31,809
Gain on Sale of Equipment
Held for Sale 16,458 8,946
------------ ------------
Total Revenues 2,038,710 2,041,496
------------ ------------
Operating Expenses:
Management Fees - General
Partners 73,966 55,774
General and Administrative:
Affiliate 16,502 12,604
Other 48,463 28,434
Interest Expense 398,967 239,071
Depreciation and Amortization 1,190,585 1,020,756
------------ ------------
Total Operating Expenses 1,728,483 1,356,639
------------ ------------
Net Income $ 310,227 $ 684,857
============ ============
Allocation of Net Income:
Limited Partners $ 307,125 $ 678,008
General Partners 3,102 6,849
------------ ------------
$ 310,227 $ 684,857
============ ============
Net Income (Loss) Per $1,000 Limited
Partnership Unit Outstanding $ 8.42 $ 18.59
============ ============
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 THREE MONTHS ENDED MARCH 31,
1997 1996
------------- -------------
Cash Flows from Operating Activities:
Net Income $ 310,227 $ 684,857
Adjustments to Reconcile Net
Income (Loss) to Net Cash Provided
by Operation Activities:
Depreciation and
Amortization 1,190,585 1,020,756
Deferred Interest on
Notes Payable 131,870 120,645
Changes in Operating Assets
and Liabilities:
Decrease in Rental Equipment
Held for Sale 20,043 68,395
(Increase) Decrease in
Rents Receivable (36,180) (79,278)
(Increase) Decrease in Accounts
Receivable - General 3,309 4,069
(Increase) Decrease in
Prepaid Expenses (72,963) 2,042
Increase (Decrease) in
Interest Payable 11,681 6,316
Increase (Decrease) in
Payable to:
General Partners (165,027) 63,293
Affiliates 5,109 0
Others (102,058) (61,573)
Increase (Decrease) in
Unearned Revenue 691,891 (98,458)
------------- -------------
Net Cash Provided by
Operating Activities 1,988,487 1,731,064
------------- ------------
Cash Flows from Investing Activities:
Purchases of Equipment (1,061,551) (3,496)
(Increase) Decrease in
Sales Receivable 1,483 110,500
Escrow Deposit (8,908) (4,670,400)
------------- -------------
Net Cash (Used in)
Investing Activities (1,068,976) (4,563,396)
------------- -------------
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31,
1997 1996
------------ ------------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 0 4,900,000
Payment of Notes Payable (1,167,635) (1,099,114)
(Increase) Decrease in
Deferred Debt Costs (2,355) (5,073)
Distributions to Limited
Partners (911,725) (911,725)
Distributions to General
Partners (9,208) (9,208)
------------- -------------
Net Cash Provided by
(Used In) Financing
Activities (2,090,923) 2,874,880
------------- -------------
Increase (Decrease) in Cash (1,171,412) 42,548
Cash and Cash Equivalents at
Beginning of Period 5,671,367 3,186,738
------------- -------------
Cash and Cash Equivalents at
End of Period $ 4,499,955 $ 3,229,286
============= =============
Supplemental Cash Flow Information:
Interest Paid $ 387,286 $ 112,110
============= =============
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)
March 31, 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 three months ended March 31, 1997, nothing was drawn down
against or paid on a $10,450,000 credit facility issued by the CIT Group.
The total outstanding under this credit facility is $4,234,500. Under the
terms of the agreement, voluntary prepayments cannot be made until after
March 1, 1997 and the loan must be repaid in 1999.
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, 1997:
Equipment Management Fees $73,966
Acquisition Fees 28,988
General and Administrative Costs 16,502
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, 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
$4,499,995 at March 31, 1997, represents cash of $92,929, a repurchase
agreement of $4,406,000, and money market mutual funds of $1,026.
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 April 30, 1997, the Partnership paid distributions of $911,725 to
the Limited Partners and $9,208 to the General Partners for the quarter
ended March 31, 1997.
<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 decreased from $2,000,741 for the three months ended
March 31, 1996, to $1,971,090 for the three months ended March 31, 1997.
An increase of $606,150 in revenues resulted from the purchase of equipment
with leases in place during the intervening period. This was offset by a
$661,801 decrease in revenues from sales, casualties, and reduced re-lease
sales during the intervening period. Interest income increased for the
three months ending March 31, 1997 as compared to 1996, because the
Partnership had a higher average balance of cash available for investment.
Interest expense increased from $239,071 for the three months ended
March 31, 1996, to $398,967 for the three months ended March 31, 1997.
This increase resulted from a higher average level of debt during the
period. Management fee expense increased from $55,774 for the three months
ended March 31, 1996 to $73,966 for the three months ended March 31, 1997.
This increase was partially due to higher revenues on operating leases.
$11,536 of the expense is due to two leases for which the management fee is
calculated based on cash received rather than revenue recognized. These
leases paid three months' rent in advance, resulting in unearned revenue,
but the management fee expense was incurred because cash was received.
Depreciation expense increased for the three months ended March 31, 1997
versus 1996, because the Partnership had a higher 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 $310,227 for the three months ended March 31, 1997, compared
to $684,857 for the three months ended March 31, 1996.
During the three months ended March 31, 1996, the Partnership did not
incur any additional borrowing and made principal payments of $1,167,635 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 March
31, 1997, anticipated future borrowings, and future rental income, interest
income, and sales proceeds.
For the three months ended March 31, 1997, the Partnership had a net income
of $310,227. After adjusting net income during this period for
depreciation and amortization, deferred interest, and the changes in
operating assets and liabilities, net cash provided by operating activities
was $1,988,487. Cash used in investing activities consisted primarily of
$1,061,551 for the purchase of equipment. Cash used in financing
activities primarily was $1,167,635 in payment of notes payable and to pay
cash distributions to limited and general partners of $920,933. In total,
during the three months ending March 31, 1997, Cash and Cash Equivalents
decreased $1,171,412 from operating activities, investing activities and
financing activities, resulting in an ending Cash and Cash Equivalent
balance as of March 31, 1997, of $4,499,955.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at March 31, 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)
March 31, 1997
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 14, 1997 By: /s/J. Davenport Mosby, III
J. Davenport Mosby, III
President
Date: July 14, 1997 By: /s/John McDonald
John McDonald
Vice President
Date: July 14, 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 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,499,955
<SECURITIES> 0
<RECEIVABLES> 694,696
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 51,010,114
<DEPRECIATION> 13,327,989
<TOTAL-ASSETS> 49,247,022
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,259,418
<TOTAL-LIABILITY-AND-EQUITY> 49,247,022
<SALES> 0
<TOTAL-REVENUES> 2,038,710
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,329,516
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 398,967
<INCOME-PRETAX> 310,227
<INCOME-TAX> 0
<INCOME-CONTINUING> 310,227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 310,227
<EPS-PRIMARY> 8.42<F2>
<EPS-DILUTED> 8.42<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET.
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
