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, 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 September 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
September 30, December 31,
1997 1996
------------ ------------
(Unaudited) (Audited)
ASSETS
Leased Equipment, at Cost $ 45,476,689 $ 43,306,997
Less: Accumulated Depreciation (13,232,240) (9,611,491)
------------ ------------
32,244,449 33,695,506
Equipment Held for Sale 4,105,073 4,125,116
Deposit on Equipment 3,118,969 3,109,549
Options 2,282,246 3,033,618
Deferred Debt Costs (Net of
Accumulated Amortization of
$278,181 and $179,112,
Respectively) 91,029 82,876
Rent and Sales Proceeds Receivable 733,670 663,308
Prepaid Expenses 56,469 70,557
Cash and Cash Equivalents 4,632,305 5,671,367
------------ ------------
Total Assets $ 47,264,210 $ 50,451,897
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 17,929,035 $ 19,781,263
Payable to: General Partners 52,762 386,367
Affiliates 0 11,393
Other 129,235 102,058
Interest Payable 169,413 210,289
Unearned Revenue 631,466 90,403
------------ ------------
Total Liabilities 18,911,911 20,581,773
------------ ------------
Partners' Equity:
Limited Partners (36,469 units
outstanding at September 30,
1997, and December 31, 1996) 28,387,707 29,890,358
General Partners (35,408) (20,234)
------------ ------------
Total Partners' Equity 28,352,299 29,870,124
------------ ------------
Total Liabilities and
Partners' Equity $ 47,264,210 $ 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 NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
------------ ------------
Revenues:
Rental Income $ 6,051,180 $ 5,914,206
Interest Income 146,263 249,265
Gain on Sale of Equipment 0 1,066,586
Gain on Sale of Equipment
Held for Sale 565,046 1,591,240
------------ ------------
Total Revenues 6,762,489 8,821,297
------------ ------------
Operating Expenses:
Management Fees - General
Partners 220,121 164,711
General and Administrative:
Affiliate 32,103 52,172
Other 328,956 358,876
Interest Expense 1,216,519 885,174
Depreciation and Amortization 3,719,817 3,180,398
------------ ------------
Total Operating Expenses 5,517,516 4,641,331
------------ ------------
Net Income $ 1,244,973 $ 4,179,966
============ ============
Allocation of Net Income:
Limited Partners $ 1,232,523 $ 4,138,166
General Partners 12,450 41,800
------------ ------------
$ 1,244,973 $ 4,179,966
============ ============
Net Income Per $1,000 Limited
Partnership Unit Outstanding $ 33.80 $ 113.47
============ ============
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,
1997 1996
------------ ------------
Revenues:
Rental Income $ 2,011,743 $ 1,960,134
Interest Income 57,227 174,283
Gain on Sale of Equipment 0 988,676
Gain on Sale of Equipment
Held for Sale 548,588 0
------------ ------------
Total Revenues 2,617,558 3,123,093
------------ ------------
Operating Expenses:
Management Fees - General
Partners 72,712 (250)
General and Administrative:
Affiliate 12,068 23,732
Other 126,306 226,426
Interest Expense 411,222 321,989
Depreciation and Amortization 1,251,584 1,107,430
------------ ------------
Total Operating Expenses 1,873,892 1,679,327
------------ ------------
Net Income $ 743,666 $ 1,443,766
============ ============
Allocation of Net Income:
Limited Partners $ 736,229 $ 1,429,328
General Partners 7,437 14,438
------------ ------------
$ 743,666 $ 1,443,766
============ ============
Net Income Per $1,000 Limited
Partnership Unit Outstanding $ 20.19 $ 39.19
============ ============
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 NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
------------ ------------
Cash Flows from Operating Activities:
Net Income $ 1,244,973 $ 4,179,966
Adjustments to Reconcile Net
Income to Net Cash Provided
by (Used in) Operating Activities:
(Gain) on Sale of
Equipment 0 (1,066,586)
Depreciation and
Amortization 3,719,817 3,180,398
Deferred Interest on
Notes Payable 389,970 368,302
Changes in Operating Assets
and Liabilities:
Decrease in Equipment
Held for Sale 20,043 3,114,351
(Increase) Decrease in
Rents Receivable (75,154) 81,476
Decrease in Interest
Receivable 0 (99,331)
Decrease in Accounts
Receivable- General 3,309 3,598
(Increase) Decrease in
Prepaid Expenses 14,088 (59,717)
Decrease in Accounts
Payable 27,177 0
Increase (Decrease) in
Interest Payable (40,876) 15,868
Increase (Decrease) in
Payable to:
General Partners (333,605) 19,492
Affiliates (11,393) 0
Increase (Decrease) in
Unearned Revenue 541,063 105,847
------------ ------------
Net Cash Provided by
Operating Activities 5,499,412 9,782,091
------------ ------------
<PAGE>
STATEMENTS OF CASH FLOWS (continued)
Cash Flows from Investing Activities:
Purchases of Equipment (2,169,691) (2,708,215)
Casualty of Options 2,966 0
Retirement of Option 748,406 0
Proceeds from Sale of Equipment 0 1,269,756
Decrease in Sales
Receivable 1,483 110,500
Escrow Deposit (9,420) (3,504,817)
------------ ------------
Net Cash (Used in)
Investing Activities (1,426,256) (7,939,277)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 6,935,384 9,278,197
Payment of Notes Payable (9,177,582) (5,165,073)
(Increase) in Deferred
Debt Costs (107,221) (32,204)
Distributions to
Limited Partners (2,735,175) (2,735,175)
Distributions to
General Partners (27,624) (27,624)
------------ ------------
Net Cash Provided by
(Used In) Financing
Activities (5,112,218) 1,318,121
------------ ------------
Increase (Decrease) in Cash (1,039,062) 3,160,935
Cash and Cash Equivalents at
Beginning of Period 5,671,367 3,186,738
------------ ------------
Cash and Cash Equivalents at
End of Period $ 4,632,305 $ 6,347,673
============ ============
Supplemental Cash Flow Information:
Interest Paid $ 867,425 $ 501,004
============ ============
Non-Cash Activities:
Notes Payable in 1997 increased by $389,970, 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, 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 nine months ended September 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 nine 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 AFFILIAITES
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, 1997:
Equipment Management Fees $220,121
Acquisition Fees 70,108
General and Administrative Costs 32,103
General Partners' Distributions 27,624
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
$4,632,305 at September 30, 1997, represents cash of $32,253, a repurchase
agreement of $4,599,000, and money market mutual funds of $1,052.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Options were purchased in March 1995. If the options are exercised
upon lease terminations in August 1999, and January 2000, the Partnership
will pay the strike prices of approximately $1,535,122 and $5,137,500
respectively, to the seller for 193 railcars and 685 railcars,
respectively.
NOTE 7 - SUBSEQUENT EVENTS
On November 4, 1997, the Partnership paid distributions of $911,725 to
the Limited Partners and $9,208 to the General Partners for the quarter
ended September 30, 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
Nine Months Ended September 30, 1997, Compared to Nine Months Ended
September 30, 1996
Rental income increased from $5,914,206 for the nine months ended
September 30, 1996, to $6,051,180 for the nine months ended September 30,
1997. The increase resulted from a $1,841,203 increase in revenues from
the purchase of equipment with leases in place during the intervening
period. This was offset by a $1,199,702 decrease in revenues from leases
that were terminated or equipment that was sold during the intervening
period. Additionally there was a decrease of $504,527 in revenues of
leases that were in place. Interest income decreased for the nine months
ended September 30, 1997, as compared to 1996, because the Partnership had
a lower average balance of cash available for investment.
Interest expense increased from $885,174 for the nine months ended
September 30, 1996, to $1,216,519 for the nine months ended September 30,
1997. This increase resulted from a higher average level of debt during
the period. Management fee expense increased for the nine months ended
September 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 nine months ended September 30, 1997 versus 1996, because the
Partnership had a higher depreciable basis of equipment due to new lease
commitments.
During the nine months ended September 30, 1997, Equipment Held for
Sale with a net book value of $20,042 was sold for $36,500, resulting in a
gain on sale of $16,458. In this period an option was exercised that had a
total cost of $1,338,217 and was sold for a net of $1,886,805 resulting in
a gain on sale of $548,558. 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 a
net income of $1,244,973 for the nine months ended September 30, 1997,
compared to $4,179,966 for the nine months ended September 30, 1996.
During the nine months ended September 30, 1997, the Partnership
incurred $6,935,384 of additional borrowing and made $9,177,582 of
principal payments on notes.
Three Months Ended September 30, 1997, Compared to Three Months Ended
September 30, 1996
Rental income increased from $1,960,134 for the three months ended
September 30, 1996, to $2,011,743 for the three months ended September 30,
1997. An increase of $584,101 in revenues resulted from the purchase of
equipment with leases in place in the intervening period. This was offset
by a $359,641 decrease in revenues from leases that were terminated or
equipment that was sold during the intervening period and a $172,851
decrease in revenues due to reduced re-lease rates. Interest income
decreased for the three months ended September 30, 1997, as compared to
1996, because the Partnership had a lower average balance of cash available
for investment.
Interest expense increased from $321,989 for the three months ended
September 30, 1996, to $411,222 for the three months ended September 30,
1997. This increase resulted from a higher average level of debt during
the period. Management fee expense was higher for the three months ended
September 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 September 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 $743,666 for the three months ended September 30, 1997,
compared to $1,443,766 for the three months ended September 30, 1996.
During the three months ended September 30, 1997, the Partnership
incurred $430,495 of additional borrowing and made $1,459,421 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
September 30, 1997, anticipated future borrowings, and future rental
income, interest income, and sales proceeds.
For the nine months ended September 30, 1997, the Partnership had a
net income of $1,244,973. 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
$5,499,412. Cash used in investing activities consisted primarily of
$9,420 for an escrow deposit and $2,169,691 for the purchase of equipment.
Cash provided by financing activities consisted primarily of proceeds from
notes payable in the amount of $6,935,384. Cash used in financing
activities consisted primarily of $9,177,582 in payment of notes payable
and cash distributions to limited and general partners of $2,762,799. In
total, during the nine months ending September 30, 1997, Cash and Cash
Equivalents decreased $1,039,062 from operating activities, investing
activities and financing activities, resulting in an ending Cash and Cash
Equivalent balance as of September 30, 1997, of $4,632,305.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at September 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)
September 30, 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: November 26, 1997 By: /s/J.Davenport Mosby, III
J. Davenport Mosby, III
President
Date: November 26, 1997 By: /s/John McDonald
John McDonald
Vice President
Date: November 26, 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 SEPTEMBER 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,632,305
<SECURITIES> 0
<RECEIVABLES> 733,670
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 45,476,689
<DEPRECIATION> 13,232,240
<TOTAL-ASSETS> 47,264,210
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,352,299
<TOTAL-LIABILITY-AND-EQUITY> 47,264,210
<SALES> 0
<TOTAL-REVENUES> 6,762,489
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,300,997
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,216,519
<INCOME-PRETAX> 1,244,973
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,244,973
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,244,973
<EPS-PRIMARY> 33.80<F2>
<EPS-DILUTED> 33.80<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET.
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
