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, 1999
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 (727) 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, 1999
Units of Limited Partnership
Interest: $1,000 per unit 36,469
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 1998 Form 10-K, filed with the
Securities and Exchange Commission on June 16, 1999
Parts III and IV - Form S-1 Registration Statement
and all amendments and supplements thereto
File No. 33-44119
PART I - Financial Information
Item 1. Financial Statements
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
BALANCE SHEETS
September 30, December 31,
1999 1998
(Unaudited) (Audited)
ASSETS
Rental Equipment, at Cost $ 21,507,385 $ 23,253,102
Less: Accumulated Depreciation (11,353,435) (11,192,367)
------------- -------------
10,153,950 12,060,735
------------- -------------
Rental Equipment Held for Sale 2,244,035 3,672,601
Deposit on Equipment 3,118,969 3,118,969
Options 134,257 2,282,246
Investment In Partnerships 180,001 7,495,781
Net Investment in Direct Financing Lease 840,731 840,731
Deferred Debt Costs and Trustee Fees (Net
Of Accumulated Amortization of $2,687
And $29,214 Respectively) 1,888 8,366
Rent and Sales Proceeds Receivable 425,627 537,135
Accounts Receivable - General 762 5,508
Prepaid Expenses 22,056 97,737
Cash and Cash Equivalents 1,046,807 3,702,451
------------ ------------
Total Assets $ 18,169,083 $ 33,822,260
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 1,908,916 $ 6,497,730
Payable to: General Partners 66,983 101,308
Others 221,931 451,612
Interest Payable 2,205 48,187
Unearned Revenue 18,258 23,009
------------- -------------
Total Liabilities 2,218,293 7,121,846
------------- -------------
Partners' Equity:
Limited Partners (36,469 units outstanding
at September 30, 1999 and December 31, 16,110,206 26,752,336
1998) (159,416) (51,922)
General Partners ------------- -------------
15,950,790 26,700,414
Total Partners' Equity ------------- -------------
$ 18,169,083 $ 33,822,260
Total Liabilities and Partners' Equity ============= =============
The accompanying notes are an integral
part of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
---- ----
Revenues:
Rental Income $ 2,567,114 $ 3,947,619
Interest Income 222,649 137,444
Income from Direct Financing
Lease 0 102,703
Gain on Sale of Equipment 466,655 109,508
Gain on Sale of Equipment Held
for Sale 4,064,379 0
Gain on Sale of Other 1,845,048 0
------------ ------------
Total Revenues 9,165,845 4,297,274
------------ ------------
Operating Expenses:
Management Fees-General 53,408 289,128
Partners
Incentive Management Fees- 487,007 0
General Partners
General and Administrative: 27,784 84,841
Affiliates 644,261 563,597
Other 195,751 1,086,204
Interest Expense 1,372,828 1,961,304
Depreciation and Amortization ------------ ------------
2,781,039 3,985,074
Total Operating Expenses ------------ ------------
Net Income Before Equity in
Income of Partnerships 6,384,806 312,200
Equity in Income of
Partnerships 9,822,406 601,578
------------ ------------
Net Income $16,207,212 $ 913,778
============ ============
Allocation of Net Income:
Limited Partners $16,045,140 $ 904,640
General Partners 162,072 9,138
------------ ------------
$16,207,212 $ 913,778
============ ============
Net Income per $1,000 Limited
Partnership Unit Outstanding $ 439.97 $ 24.81
============ ============
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.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1999 1998
---- ----
Revenues:
Rental Income $ 917,649 $ 1,115,803
Interest Income 115,749 40,456
Income from Direct Financing
Lease 0 35,522
Gain(Loss)on Sale of Equipment 0 0
Gain(Loss)on Sale of Equipment
Held for Sale (1,930) 109,508
------------ ------------
Total Revenues 1,031,469 1,301,289
------------ ------------
Operating Expenses:
Management Fees-General
Partners 25,586 86,006
Incentive Management Fees-
General Partners 487,007 0
General and Administrative:
Affiliates 15,651 31,426
Other 359,958 83,386
Interest Expense 41,931 294,483
Depreciation and Amortization 445,804 575,002
------------ ------------
Total Operating Expenses 1,375,937 1,070,303
------------ ------------
Net Income(Loss)Before Equity
in Income of Partnerships (344,468) 230,986
Equity in Income of
Partnerships 9,421,354 200,526
------------ ------------
Net Income $ 9,076,886 $ 431,512
============ ============
Allocation of Net Income:
Limited Partners $ 8,986,117 $ 427,197
General Partners 90,769 4,315
------------ ------------
$ 9,076,886 $ 431,512
============ ============
Net Income per $1,000 Limited $ 246.40 $ 11.71
Partnership Unit Outstanding ============ ============
Number of Limited Partnership 36,469 36,469
Units Outstanding ============ ============
The accompanying notes are an integral
part of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
---- ----
Cash Flows from Operating
Activities:
Net Income $16,207,212 $ 913,778
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
(Gain) on Sale of Equipment (466,655) (109,508)
Depreciation and Amortization 1,372,828 1,961,304
Deferred Interest on Notes
Payable 120,050 334,392
Equity in Income of Investment
In Partnerships (9,822,406) (601,578)
Changes in Operating Assets
and Liabilities:
(Increase) Decrease in
Equipment Held for Sale 3,672,601 0
(Increase) Decrease in
Rents Receivable 111,508 (286,321)
(Increase) Decrease in Accounts
Receivable - General 4,746 (142,549)
(Increase) Decrease in
Prepaid Expenses 75,681 (158,432)
Increase (Decrease) in
Interest Payable (45,982) (107,626)
Increase (Decrease) in
Payable to:
General Partners (34,325) (49,088)
Other (229,681) (174,803)
Increase (Decrease) in
Unearned Revenue (4,751) (84,694)
Net Cash Provided by ------------ ------------
Operating Activities 10,960,825 1,494,875
------------ ------------
Cash Flows from Investing
Activities:
Direct Financing Lease 0 182,558
Investment in Partnerships 0 3,022
Distributions Received 1,294,514 3,675,487
Proceeds from Sale of Equipment 1,010,089 918,473
Purchases of Equipment 0 (30,664)
(Purchase) Sale of Options 1,469,819 0
Proceeds of Option Casualties 5,733 0
(Purchase)of Equipment Held
for Sale (1,571,598) 0
Sale of Investment in
Partnership 15,843,672 0
Net Cash Provided By ----------- -----------
Investing Activities 18,052,229 4,748,876
----------- -----------
Cash Flows from Financing
Activities:
Payment of Notes Payable (4,708,863) (4,167,145)
(Increase) Decrease in
Deferred Debt Costs and
Trustee Fees (2,999) 10,098
Distributions to Limited
Partners (26,687,270) (2,735,175)
Distributions to General
Partners (269,567) (27,624)
----------- -----------
Net Cash (Used In)
Provided by Financing
Activities (31,668,699) (6,919,846)
----------- -----------
Increase (Decrease) in Cash
and Cash Equivalents (2,655,644) (676,095)
Cash and Cash Equivalents at
Beginning of Period 3,702,451 4,480,112
----------- -----------
Cash and Cash Equivalents at End
of Period $ 1,046,807 $ 3,804,017
=========== ===========
Supplemental Cash Flow Information:
Interest Paid $ 123,888 $ 931,930
============ ===========
Non-Cash Activities:
Notes Payable in 1999 were increased by $120,050, the amount of Deferred
Interest on Notes Payable.
Notes Payable in 1998 were increased by $334,392, the amount of Deferred
Interest on Notes Payable.
The accompanying notes are an integral
part of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
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, 1999, the loan associated
with the Allied Signal Option was partially paid in the amount of
$1,269,311. During the same period the loans associated with: the Federal
Paper Board transaction was paid in full for $956,699; Ally Capital
Partners was paid in full for $413,369; the Texasgulf Option was paid in
full for $341,019. There was no additional borrowing.
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 nine months ended September 30, 1999:
Equipment Management Fees $ 53,408
Incentive Management Fees 487,007
General and Administrative Costs 27,784
General Partners' Distributions 269,567
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, 1998. 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
$1,046,807 at September 30, 1999, represents cash of $1,152, a repurchase
agreement of $1,041,000 and money market mutual funds of $4,655.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Options on rail cars were purchased in March 1995. The Partnership
exercised its option on the remaining 57 plastic pellet cars on lease to
Alliedsignal, Inc. The Partnership is obligated to pay a strike price of
$553,225.
NOTE 7 - SUBSEQUENT EVENTS
On October 29, 1999, the Partnership received $211,150 from the sale
of equipment previously on lease to Affiliated Computer Services.
On November 1, 1999, the Partnership received $1,787,600 from the sale
of satellite communications equipment previously on lease to Hughes Network
Systems, Inc.
On November 2, 1999, the Partnership paid distributions of $700,205 to
the Limited Partners and $7,073 to the General Partners. The General
Partners also received incentive management fees of $29,470.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999, Compared to Nine Months Ended
September 30, 1998.
Rental income decreased to $2,567,114 for the nine months ended
September 30, 1999, from $3,947,619 for the nine month period ended
September 30, 1998. This decrease was primarily due to equipment coming
off lease or being sold in the intervening period. Interest income
increased to $222,649 for the nine months ended September 30, 1999, as
compared to $137,444 for the nine months ended September 30, 1998. This
increase was primarily due to an increased average balance of cash for
investment. During the nine months ended September 30, 1999, rental
equipment with a book value of $543,435 was sold for $1,010,089 resulting
in a gain on sale of $466,655. During the nine months ended September 30,
1999, part of the option that was to become available in January 2000 was
exercised. The lessee, General Chemical Partners, was granted an early
lease termination and General Chemical (Soda Ash) Partners purchased 624
rail cars producing a gain on sale of $1,845,048 for the Partnership.
During the nine months ended September 30, 1999, equipment held for sale
with a book value of $3,672,601 was sold for $7,950,000 resulting in a gain
on sale of $4,064,379. During this period an option on railcars was
exercised which are currently being remarketed. This transaction increased
Equipment Held for Sale to $2,244,035.
Interest expense decreased to $195,751 for the nine months ended
September 30, 1999, as compared to $1,086,204 for the nine months ended
September 30, 1998. This decrease was due to an average lower level of
debt. Depreciation expense decreased for the nine months ended September
30, 1999 versus 1998, due to a lower average depreciable basis of
equipment.
During the nine months ended September 30, 1999, incentive management
fees were $487,007 as compared to $ 0 for the nine months ended September
30, 1998. The 4% incentive management fees were earned with the August 10,
1999 distribution as each Limited Partner has received cumulative cash
distributions equal to his capital contributions.
The net effect of the above revenue and expense items resulted in a
net income of $6,384,806 for the nine months ended September 30, 1999,
compared to a net income of $312,200 for the three months ended September
30, 1998 before Equity in Income of Partnerships. During the nine month
period ended September 30, 1999, the Partnership sold its 40% interest in
the Federal Paper Board. This resulted in Equity in Income of Partnerships
of $9,822,406 for the nine months ended September 30, 1999 as compared to
$601,578 for the nine months ended September 30, 1998. This resulted in a
net income of $16,207,212 for the nine months ended September 30, 1999 as
compared to a net income of $913,778 for the nine months ended September
30, 1998.
During the nine months ended September 30, 1999, the Partnership did
not incur any additional borrowing and made $4,708,863 of principal
payments on notes.
Three Months Ended September 30, 1999, Compared to Three Months Ended
September 30, 1998
Rental income decreased to $917,649 for the three months ended
September 30, 1999 as compared to rental income of $1,115,803 for the three
months ended September 30, 1998. This decrease was primarily due to
equipment coming off lease or being sold in the intervening period.
Interest income increased for the three months ended September 30, 1999, as
compared to the three months ended September 30, 1998. This was due to a
higher level of cash available for investment.
Interest expense decreased to $41,931 for the three months ended
September 30, 1999, as compared to $294,483 for the three months ended
September 30, 1998. This decrease was due to an average lower level of
debt. Depreciation expense decreased for the three months ended September
30, 1999 versus 1998. This decrease was primarily due to equipment coming
off lease or being sold in the intervening period.
During the three months ended September 30, 1999, incentive management
fees were $487,007 as compared to $ 0 for the three months ended September
30, 1998. The 4% incentive management fees were earned with the August 10,
1999 distribution as each Limited Partner has received cumulative cash
distributions equal to his capital contributions.
The net effect of the above revenue and expense items resulted in a
net loss of $344,468 for the three months ended September 30, 1999,
compared to a net income of $431,512 for the three months ended September
30, 1998 before Equity in Income of Partnerships. During the three month
period ended September 30, 1999, the Partnership sold its 40% interest in
the Federal Paper Board. This resulted in Equity in Income of Partnerships
of $9,421,354 for the three months ended September 30, 1999 as compared to
$200,526 for the three months ended September 30, 1998. This resulted in a
net income of $9,076, 886 for the three months ended September 30, 1999 as
compared to a net income of $ 431,512 for the three months ended September
30, 1998.
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, 1999, future rental income, interest income, and sales
proceeds.
For the nine months ended September 30, 1999, the Partnership had a net
income of $16,207,212. After adjusting net income during this period for
depreciation and amortization, and the changes in operating assets and
liabilities, net cash provided by operating activities was $10,960,825.
Cash provided by investing activities consisted primarily of $15,843,672
from the sale of an Investment in Partnership and distributions from
partnerships of $1,294,514. Other cash provided by investing activities
were $1,469,819 from the sale of options and $1,010,089 from the sale of
rental equipment. Cash used in investing activities was $1,571,598 for the
purchase of equipment held for sale. Cash used in financing activities was
$4,708,863 in payment of notes payable and to pay cash distributions to
limited and general partners of $26,956,837. In total, during the nine
months ending September 30, 1999, Cash and Cash Equivalents decreased
$2,655,644 from operating activities, investing activities and financing
activities, resulting in an ending Cash and Cash Equivalent balance as of
September 30, 1999, of $1,046,807.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at September 30, 1999, 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.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None.
b) Reports on Form 8-K -None.
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 12, 1999 By: /s/J. Davenport Mosby, III
J. Davenport Mosby, III
President
Date: November 12, 1999 By: /s/John McDonald
John McDonald
Vice President
Date: November 12, 1999 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 QUARTER ENDED SEPTEMBER 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,046,807
<SECURITIES> 0
<RECEIVABLES> 426,389
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,507,385
<DEPRECIATION> 11,353,435
<TOTAL-ASSETS> 18,169,083
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,950,790
<TOTAL-LIABILITY-AND-EQUITY> 18,169,083
<SALES> 0
<TOTAL-REVENUES> 9,165,845
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,585,288
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195,751
<INCOME-PRETAX> 16,207,212
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,207,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,207,212
<EPS-BASIC> 439.97<F2>
<EPS-DILUTED> 439.97<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
