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, 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 March 31, 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
March 31, December 31,
1999 1998
(Unaudited) (Audited)
ASSETS
Rental Equipment, at Cost $ 21,507,385 $ 23,253,102
Less: Accumulated Depreciation (10,463,603) (11,192,367)
------------- -------------
11,043,782 12,060,735
Rental Equipment Held for Sale 3,672,601 3,672,601
Deposit on Equipment 3,118,969 3,118,969
Options 806,694 2,282,246
Investment In Partnerships 6,549,963 7,495,781
Net Investment in Direct Financing Lease 840,731 840,731
Deferred Debt Costs (Net of Accumulated
Amortization of $661 and $29,214
Respectively) 915 8,366
Rent and Sales Proceeds Receivable 355,230 537,135
Accounts Receivable - General 19,045 5,508
Prepaid Expense 77,715 97,737
Cash and Cash Equivalents 5,982,622 3,702,451
------------ ------------
Total Assets $ 32,468,267 $ 33,822,260
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 3,704,845 $ 6,497,730
Payable to: General Partners 288,697 101,308
Others 134,386 451,612
Interest Payable 9,656 48,187
Unearned Revenue 18,009 23,009
------------- -------------
Total Liabilities 4,155,593 7,121,846
------------- -------------
Partners' Equity:
Limited Partners (36,469 units outstanding
at March 31,1999 and December 31, 1998) 28,348,472 26,752,336
General Partners (35,798) (51,922)
------------- -------------
Total Partners' Equity 28,312,674 26,700,414
------------- -------------
Total Liabilities and Partners' Equity $ 32,468,267 $ 33,822,260
============= =============
The accompanying notes are an integral
part of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31,
1999 1998
---- ----
Revenues:
Rental Income $ 738,076 $ 1,373,329
Interest Income 45,864 46,653
Income from Direct Financing
Lease 0 30,490
Gain on Sale of Equipment 467,025 0
Gain on Sale of Other 1,864,988 0
------------ ------------
Total Revenues 3,115,953 1,450,472
------------ ------------
Operating Expenses:
Management Fees-General 7,815 76,888
Partners
General and Administrative: 2,093 1,060
Affiliates 199,428 192,217
Other 92,980 420,868
Interest Expense 480,970 690,706
Depreciation and Amortization ------------ ------------
783,286 1,381,739
Total Operating Expenses ------------ ------------
Net Income Before Equity in 2,332,667 68,733
Income of Partnerships
Equity in Income of 200,526 200,526
Partnerships ------------ ------------
$ 2,533,193 $ 269,259
Net Income ============ ============
Allocation of Net Income: $ 2,507,861 $ 266,566
Limited Partners 25,332 2,693
General Partners ------------ ------------
$ 2,533,193 $ 269,259
============ ============
Net Income per $1,000 Limited $ 68.77 $ 7.31
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 THREE MONTHS ENDED MARCH 31,
1999 1998
---- ----
Cash Flows from Operating
Activities:
Net Income $ 2,533,193 $ 269,259
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
(Gain) on Sale of Equipment (467,025) 0
Depreciation and Amortization 480,970 690,706
Deferred Interest on Notes
Payable 52,826 118,783
Equity in Income of Investment
In Partnerships (200,526) (200,526)
Changes in Operating Assets
and Liabilities:
(Increase) Decrease in Rents
Receivable 181,905 (181,102)
(Increase) Decrease in
Prepaid Expenses 20,022 (191,756)
Increase (Decrease) in
Interest Payable (38,531) (67,866)
(Increase) Decrease in
Accounts Receivable-General (13,537) 12,000
Increase (Decrease) in
Payable to:
General Partners 187,389 (75,673)
Other (317,226) (93,082)
Increase (Decrease) in Unearned
Revenue (5,000) (24,627)
------------ ------------
Net Cash Provided by
Operating Activities 2,414,460 256,116
------------ ------------
Cash Flows from Investing
Activities:
Purchase of Direct Financing
Lease 0 56,859
Investment in Partnerships 0 7,338
Distributions Received 1,146,344 1,348,434
Proceeds from Sale of Equipment 1,010,459 0
(Purchase) Sale of Options 1,469,819 0
Proceeds of Option Casualties 5,733 0
----------- -----------
Net Cash Provided by Investing
Activities 3,632,355 1,412,631
----------- -----------
Cash Flows from Financing
Activities:
Payment of Notes Payable (2,845,711) (1,530,093)
(Increase) Decrease in Deferred
Debt Costs 0 13,965
Distributions to Limited
Partners (911,725) (911,725)
Distributions to General
Partners (9,208) (9,208)
----------- -----------
Net Cash (Used In)
Financing Activities (3,766,644) (2,437,061)
----------- -----------
Increase (Decrease) in Cash
and Cash Equivalents 2,280,171 (768,314)
Cash and Cash Equivalents at
Beginning of Period 3,702,451 4,480,112
----------- -----------
Cash and Cash Equivalents at End
of Period $ 5,982,622 $ 3,711,798
=========== ===========
Supplemental Cash Flow Information:
Interest Paid $ 82,221 $ 369,951
============ ===========
Non-Cash Activities:
Notes Payable in 1999 were increased by $52,826, the amount of Deferred
Interest on Notes Payable.
Notes Payable in 1998 were increased by $118,783, 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, 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 three months ended March 31, 1999, the loan associated with
the Allied Signal Option was partially paid in the amount of $1,269,311.
During the same period the loan associated with the Federal Paper Board
transaction was paid in full for $956,699. 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 three months ended March 31, 1999:
Equipment Management Fees $ 7,815
General and Administrative Costs 2,093
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, 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
$5,982,622 at March 31, 1999, represents cash of $7,248, a repurchase
agreement of $5,969,000, and money market mutual funds of $6,374.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Options on rail cars were purchased in March 1995. On February 25,
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 $1,864,988 for the Partnership. This
leaves 57 cars on this option for January 2000 which the Partnership has
exercised. The strike price on the remaining cars is $427,500.
The option that becomes available in August 1999 has had one casualty
and now has an approximate strike price of $1,527,168.
NOTE 7 - SUBSEQUENT EVENTS
On April 14, 1999, the Partnership made an early pay off of the loan
associated with the direct financing lease.
On April 30, 1999, the Partnership paid distributions of $3,646,900 to
the Limited Partners and $36,838 to the General Partners.
On May 14, 1999, the Partnership received $7,950,000 for the sale of
the Pennsylvania Power and Light Transaction.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, 1999, Compared to Three Months Ended March 31,
1998.
Rental income decreased $1,373,329 for the three months ended March
31, 1998, to $738,076 for the three month period ended March 31, 1999.
This decrease was primarily due to equipment coming off lease or being sold
in the intervening period. Interest income was comparable for the three
months ended March 31, 1999, as compared to the three months ended March
31, 1998. During the three months ended March 31, 1999, rental equipment
with a book value of $543,435 was sold for $1,010,459 resulting in a gain
on sale of $467,025. During the three months ended March 31, 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 $1,864,988 for the Partnership.
Interest expense decreased to $92,980 for the three months ended March
31, 1999, as compared to $420,868 for the three months ended March 31,
1998. This decrease was due to an average lower level of debt.
Depreciation expense decreased for the three months ended March 31, 1999
versus 1998, because certain equipment is no longer being depreciated using
an accelerated method and a lower average depreciable basis of equipment.
The net effect of the above revenue and expense items resulted in a
net income of $2,533,193 for the three months ended March 31, 1999,
compared to $269,259 for the three months ended March 31, 1998.
During the three months ended March 31, 1999, the Partnership did not
incur any additional borrowing and made $2,845,711 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 March
31, 1999, future rental income, interest income, and sales proceeds.
For the three months ended March 31, 1999, the Partnership had a net
income of $2,533,193. 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 $2,414,460.
Cash provided by investing activities consisted of $1,146,344 of
distributions from the Investment in Partnerships. Other cash flows from
investing activities were $1,010,459 from the proceeds of the sale of
rental equipment and $1,469,344 from the sale of options. Cash used in
financing activities was $2,845,711 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, 1999, Cash and Cash Equivalents
increased $2,280,171 from operating activities, investing activities and
financing activities, resulting in an ending Cash and Cash Equivalent
balance as of March 31, 1999, of $5,982,622.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at March 31, 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.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
March 31, 1999
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: July 2, 1999 By: /s/J. Davenport Mosby, III
J. Davenport Mosby,III
President
Date: July 2, 1999 By: /s/John McDonald
John McDonald
Vice President
Date: July 2, 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 QUARTERLY PERIOD ENDED MARCH 31, 1999,
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,982,622
<SECURITIES> 0
<RECEIVABLES> 374,275
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,507,385
<DEPRECIATION> 10,463,603
<TOTAL-ASSETS> 32,468,267
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,312,674
<TOTAL-LIABILITY-AND-EQUITY> 32,468,267
<SALES> 0
<TOTAL-REVENUES> 3,115,953
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 690,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,980
<INCOME-PRETAX> 2,533,193
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,533,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,533,193
<EPS-BASIC> 68.77<F2>
<EPS-DILUTED> 68.77<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET.
<F2>EPS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT
</FN>
</TABLE>
