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, 1998
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, 1998
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, 1998
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, December31,
1998 1997
ASSETS (Unaudited) (Audited)
Rental Equipment, at Cost $ 34,234,667 $ 34,234,667
Less: Accumulated Depreciation (13,311,973) (12,630,987)
------------ ------------
20,922,694 21,603,680
------------ ------------
Rental Equipment Held for Sale 4,105,073 4,105,073
Deposit on Equipment 3,118,969 3,118,969
Options 2,282,246 2,282,246
Rents and Sales Receivable 918,705 737,603
Accounts Receivable - Others 0 12,000
Prepaid Expenses 280,164 88,408
Deferred Debt Costs (Net of Accumulated
Amortization of $300,220 and
$290,498, Respectively) 20,553 44,238
Cash and Cash Equivalents 3,711,798 4,480,112
Net Investment in Direct Financing
Lease 1,269,202 1,326,061
Investment in Partnerships 8,854,231 10,009,477
------------ ------------
Total Assets $ 45,483,635 $ 47,807,867
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 17,673,595 $ 19,084,905
Interest Payable 73,914 141,780
Payable to General Partners 112,270 187,943
Payable to Affiliates 0 0
Payable to Others 175,544 268,626
Unearned Revenue 434,334 458,961
------------ ------------
Total Liabilities 18,469,657 20,142,215
------------ ------------
Partners' Equity:
Limited Partners (36,469 units
outstanding at March 31, 1998
and December 31, 1997) 27,062,767 27,707,925
General Partners (48,789) (42,273)
----------- ------------
Total Partners' Equity 27,013,978 27,665,652
----------- ------------
Total Liabilities and
Partners' Equity $ 45,483,635 $ 47,807,867
============ ============
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,
1998 1997
Revenues:
Rental Income $ 1,373,329 $ 1,429,833
Interest Income 46,653 51,162
Income from Direct Financing
Lease 30,490 0
Gain on Sale of Equipment
Held for Sale 0 16,458
------------ -----------
Total Revenues 1,450,472 1,497,453
------------ -----------
Operating Expenses:
Management Fees - General
Partners 76,888 73,966
General and Administrative:
Affiliates 1,060 16,502
Other 192,217 48,463
Interest Expense 420,868 370,763
Depreciation and Amortization 690,706 801,191
------------ -----------
Total Operating Expenses 1,381,739 1,310,895
Net Income Before Equity in
Income of Partnerships 68,733 186,558
Equity in Income of
Partnerships 200,526 123,659
------------ -----------
Net Income $ 269,259 $ 310,217
============ ============
Allocation of Net Income:
Limited Partners $ 266,566 $ 307,115
General Partners 2,693 3,102
------------ ------------
$ 269,259 $ 310,217
============ ============
Net Income Per $1,000 Limited
Partnership Unit Outstanding $ 7.31 $ 8.42
============ ============
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,
1998 1997
Cash Flows from Operating Activities:
Net Income $ 269,259 $ 310,218
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation and
Amortization 690,706 801,191
Deferred Interest on
Notes Payable 118,783 131,870
Equity in Income of Investment
In Partnerships (200,526) (123,659)
Changes in Operating Assets
and Liabilities:
Decrease in Rental Equipment
Held for Sale 0 20,043
(Increase) Decrease in
Rents Receivable (181,102) (36,180)
(Increase) Decrease in Accounts
Receivable - Others 12,000 3,309
(Increase) Decrease in
Prepaid Expenses (191,756) (72,963)
Increase (Decrease) in
Interest Payable (67,866) 79,281
Increase (Decrease) in
Payable to:
General Partners (75,673) (165,027)
Affiliates 0 5,110
Others (93,082) (102,058)
Increase (Decrease) in
Unearned Revenue (24,627) 150,641
----------- -----------
Net Cash Provided by
Operating Activities 256,116 1,001,776
----------- -----------
Cash Flows from Investing Activities:
Purchases of Equipment 0 (1,061,551)
Escrow Deposit 0 (8,908)
Direct Financing Lease 56,859 0
Investment in Partnerships 7,338 0
Distributions Received 1,348,434 417,981
(Increase) Decrease in
Sales Receivable 0 1,483
----------- -----------
Net Cash (Used in)
Investing Activities 1,412,631 (650,995)
----------- -----------
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31,
1998 1997
Cash Flows from Financing Activities:
Proceeds from Notes Payable 0 0
Payment of Notes Payable (1,530,093) (598,905)
(Increase) Decrease in
Deferred Debt Costs 13,965 (2,355)
Distributions to Limited
Partners (911,725) (911,725)
Distributions to General
Partners (9,208) (9,208)
----------- ----------
Net Cash Provided by
(Used In) Financing Activities (2,437,061) (1,522,193)
----------- ----------
Increase (Decrease) in Cash
and Cash Equivalents (768,314) (1,171,412)
Cash and Cash Equivalents at
Beginning of Period 4,480,112 5,671,367
----------- ----------
Cash and Cash Equivalents at
End of Period $ 3,711,798 $ 4,499,955
============ ============
Supplemental Cash Flow Information:
Interest Paid $ 369,951 $ 176,997
============ ============
Notes Payable in 1997 were increased by $606,257, the amount of Deferred
Interest on Notes Payable.
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, 1998
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, 1998, nothing was paid on the
$7,834,500 outstanding under the Heller Financial credit facility. Under
the terms of the agreement $3,600,000 of this balance matures in 1998, the
remainder matures 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, 1998
Equipment Management Fees $ 76,888
General and Administrative Costs 1,060
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, 1997. 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
$3,711,798 at March 31, 1998, represents cash of $47,720, a repurchase
agreement of $3,663,000, and money market mutual funds of $1,078.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Options were purchased in March 1995. If the options are exercised
upon lease terminations 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 April 30, 1998, the Partnership paid distributions of $911,725 to
the Limited Partners and $9,208 to the General Partners for the quarter
ended March 31, 1998.
<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 $1,429,833 for the three months ended
March 31, 1997, to $1,373,329 for the three months ended March 31, 1998.
An increase of $101,144 in revenues resulted from increased re-leasing
rates. This was offset by a $157,653 decrease in revenues was primarily
from residual sharing agreements. Interest income was comparable for the
three months ending March 31, 1998 and the three months ended March 31,
1997.
Interest expense and management fee expense was comparable for the
three months ended March 31, 1998 as compared to the three months ended
March 31, 1997. Depreciation expense decreased for the three months ended
March 31, 1998 versus 1997, because certain equipment is no longer being
depreciated using an accelerated method.
The net effect of the above revenue and expense items resulted in a
net income of $269,259 for the three months ended March 31, 1998, compared
to $310,227 for the three months ended March 31, 1997.
During the three months ended March 31, 1998, the Partnership did not
incur any additional borrowing and made principal payments of $1,530,093 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, 1998, anticipated future borrowings, and future rental income, interest
income, and sales proceeds.
For the three months ended March 31, 1998, the Partnership had a net
income of $269,259. 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 $256,116. Cash provided by investing activities consisted primarily of
$1,348,434 of distributions from Investment in Partnerships. Cash used in
financing activities primarily was $1,530,093 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, 1998, Cash and Cash
Equivalents decreased $768,314 from operating activities, investing
activities and financing activities, resulting in an ending Cash and Cash
Equivalent balance as of March 31, 1998, of $3,711,798.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at March 31, 1998, 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, 1998
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: August 7, 1998 By: /s/J. Davenport Mosby, III
J. Davenport Mosby, III
President
Date: August 7, 1998 By: /s/John McDonald
John McDonald
Vice President
Date: August 7, 1998 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
QUARATERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,711,798
<SECURITIES> 0
<RECEIVABLES> 918,705
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 34,234,667
<DEPRECIATION> 13,311,973
<TOTAL-ASSETS> 45,483,635
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,013,978
<TOTAL-LIABILITY-AND-EQUITY> 45,483,635
<SALES> 0
<TOTAL-REVENUES> 1,450,472
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 960,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 420,868
<INCOME-PRETAX> 269,259
<INCOME-TAX> 0
<INCOME-CONTINUING> 269,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 269,259
<EPS-PRIMARY> 7.31<F2>
<EPS-DILUTED> 7.31<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET.
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
