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 June 30, 2000
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 June 30, 2000
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
June 30, December 31,
2000 1999
(Unaudited) (Audited)
ASSETS
Rental Equipment, at Cost $ 4,306,218 $ 8,977,593
Less: Accumulated Depreciation (2,841,693) (4,021,698)
------------- -------------
1,464,525 4,955,895
------------- -------------
Rental Equipment Held for Sale 688,043 2,932,078
Deposit on Equipment 3,118,969 3,118,969
Investment In Partnerships 257,309 317,828
Deferred Debt Costs (Net of Accumulated
Amortization of $875 and $26,559,
Respectively) 125 1,000
Rent and Sales Proceeds Receivable 50,188 524,848
Prepaid Expenses 16,875 22,248
Cash and Cash Equivalents 759,935 2,680,389
------------ ------------
Total Assets $ 6,355,969 $ 14,553,255
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 1,553,453 $ 1,500,921
Payable to: General Partners 10,195 2,012,014
Others 84,513 433,953
Unearned Revenue 20,258 18,258
------------- -------------
Total Liabilities 1,668,419 3,965,146
------------- -------------
Partners' Equity:
Limited Partners (36,469 units outstanding
at June 30, 2000 and December 31, 1999) 4,959,602 10,801,153
General Partners (272,052) (213,044)
------------- -------------
Total Partners' Equity 4,687,550 10,588,109
------------- -------------
Total Liabilities and Partners' Equity $ 6,355,969 $ 14,553,255
============= =============
The accompanying notes are an integral
part of these financial statements.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
2000 1999
---- ----
Revenues:
Rental Income $ 273,309 $ 1,649,465
Interest Income 62,003 106,900
Gain on Sale of Equipment 69,244 466,655
Gain on Sale of Equipment Held
for Sale 0 4,066,309
Gain on Sale of Other 372,439 1,845,048
------------ ------------
Total Revenues 776,995 8,134,377
------------ ------------
Operating Expenses:
Management Fees-General 42,921 27,822
Partners 469,242 0
Incentive Fees-General Partners 112,991 0
Resale Fees-General Partners
General and Administrative: 18,361 12,133
Affiliates 206,338 284,303
Other 52,532 153,820
Interest Expense 166,243 927,024
Depreciation and Amortization ------------ ------------
1,068,628 1,405,102
Total Operating Expenses ------------ ------------
Net Income (Loss) Before Equity (291,633) 6,729,275
in Income of Partnerships
Equity in Income of 0 401,052
Partnerships ------------ ------------
$ (291,633) $ 7,130,327
Net Income (Loss) ============ ============
Allocation of Net Income(Loss): $ (288,717) $ 7,059,024
Limited Partners (2,916) 71,303
General Partners ------------ ------------
$ (291,633) $ 7,130,327
============ ============
Net Income (Loss) per $1,000
Limited Partnership Unit $ (7.92) $ 193.56
Outstanding ============ ============
Number of Limited Partnership 36,469 36,469
Units Outstanding ============ ============
The accompanying notes are an integral
part of these financial statements.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30,
2000 1999
---- ----
Revenues:
Rental Income $ 109,654 $ 911,389
Interest Income 21,953 61,036
Gain(Loss)on Sale of Equipment (51,900) (370)
Gain on Sale of Equipment Held
for Sale 0 4,066,309
Gain(Loss)on Sale of Other (240) (19,940)
------------ ------------
Total Revenues 79,467 5,018,424
------------ ------------
Operating Expenses:
Management Fees-General 8,843 20,007
Partners 209,281 0
Incentive Fees-General Partners
General and Administrative: 14,635 10,040
Affiliates 104,316 84,875
Other 26,718 60,840
Interest Expense 65,927 446,054
Depreciation and Amortization ------------ ------------
429,720 621,816
Total Operating Expenses ------------ ------------
Net Income (Loss) Before Equity (350,253) 4,396,608
in Income of Partnerships
Equity in Income of 0 200,526
Partnerships ------------ ------------
$ (350,253) $ 4,597,134
Net Income (Loss) ============ ============
Allocation of Net Income(Loss): $ (346,750) $ 4,551,163
Limited Partners (3,503) 45,971
General Partners ------------ ------------
$ (350,253) $ 4,597,134
============ ============
Net Income (Loss) per $1,000 $ (9.51) $ 124.80
Limited Partnership Unit ============ ============
Outstanding
36,469 36,469
Number of Limited Partnership ============ ============
Units Outstanding
The accompanying notes are an integral
part of these financial statements.
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30,
2000 1999
---- ----
Cash Flows from Operating
Activities:
Net Income (Loss) $ (291,633) $ 7,130,327
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
(Gain) on Sale of Equipment (69,244) (466,655)
Depreciation and Amortization 166,243 927,024
Deferred Interest on Notes
Payable 52,532 88,375
Equity in Income of Investment
In Partnerships 0 (401,052)
Changes in Operating Assets
and Liabilities:
(Increase) Decrease in
Equipment Held for Sale 2,244,035 3,672,601
(Increase) Decrease in
Rents Receivable 455,193 (395,207)
(Increase) Decrease in Accounts
Receivable - General 19,466 185,001
(Increase) Decrease in
Prepaid Expenses 5,373 77,605
Increase (Decrease) in
Interest Payable 0 (42,292)
Increase (Decrease) in
Payable to:
General Partners (2,001,819) (59,255)
Other (349,440) (197,436)
Increase (Decrease) in
Unearned Revenue 2,000 (5,000)
------------ ------------
Net Cash Provided by
Operating Activities 232,706 10,514,036
------------ ------------
Cash Flows from Investing
Activities:
Distributions Received 60,519 1,197,782
Proceeds from Sale of Equipment 3,395,245 1,010,089
(Purchase) Sale of Options 0 1,469,819
Proceeds of Option Casualties 0 5,733
----------- -----------
Net Cash Provided By
Investing Activities 3,455,765 3,683,423
----------- -----------
Cash Flows from Financing
Activities:
Payment of Notes Payable 0 (3,818,776)
(Increase) Decrease in
Deferred Debt Costs and
Trustee Fees 0 (1,500)
Distributions to Limited
Partners (5,552,835) (4,558,625)
Distributions to General
Partners (56,091) (46,046)
----------- -----------
Net Cash (Used In)
Provided by Financing (5,608,926) (8,424,947)
Activities ----------- -----------
Increase (Decrease) in Cash
and Cash Equivalents (1,920,454) 5,772,512
Cash and Cash Equivalents at
Beginning of Period 2,680,389 3,702,451
----------- -----------
Cash and Cash Equivalents at End
of Period $ 759,935 $ 9,474,963
=========== ===========
Supplemental Cash Flow Information:
Interest Paid $ 0 $ 107,737
============ ===========
Non-Cash Activities:
Notes Payable in 1999 were increased by $88,375, the amount of Deferred
Interest on Notes Payable.
Notes Payable in 2000 were increased by $52,532, the amount of Deferred
Interest on Notes Payable.
The accompanying notes are an integral
part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 2000
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 six months ended June 30, 1999, there was no additional
borrowing or payments.
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 six months ended June 30, 2000:
Equipment Management Fees $ 49,921
General and Administrative Costs 18,361
General Partners' Distributions 56,091
Incentive Fees 469,242
Resale Fees 112,991
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, 1999. 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
$759,935 at June 30, 2000 represents cash of $4,737, a repurchase agreement
of $746,000 and money market mutual funds of $9,198.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 2000, Compared to Six Months Ended June 30, 1999.
Rental income decreased to $273,309 for the six months ended June 30,
2000, from $1,649,465 for the six month period ended June 30, 1999. This
decrease was primarily due to equipment coming off lease or being sold in
the intervening period. Interest income decreased for the six months ended
June 30, 2000, as compared to the six months ended June 30, 1999. This
decrease was primarily due to a decreased average balance of cash available
for investment. During the six months ended June 30, 2000, rental
equipment with a book value of $3,326,002 was sold for net proceeds of
$3,395,245 resulting in a gain on sale of $69,244. During the six months
ended June 30, 2000, the partnership sold equipment held for sale with a
book cost of $2,244,035 for net proceeds of $2,616,474 resulting in a gain
on sale of $372,439. During the six months ended June 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 six months ended June 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 six months ended June 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 $4,066,309.
Incentive management fees increased from $0 for the six months ended
June 30, 1999, to $469,242 for the six months ended June 30, 2000. The 4%
incentive management fee was earned with the August 10, 1999 distribution,
as each Limited Partner has received cumulative cash distributions equal to
his capital contributions. Equipment resale fees increased from $0 for the
six months ended June 30, 1999, to $112,991 for the six months ended June
30, 2000. The equipment resale fee was deferred without interest until the
Limited Partners began receiving cumulative cash distributions equal to
payout plus an amount equal to 8% of adjusted capital contributions per
annum cumulative from each Limited Partner's closing date.
Interest expense decreased to $52,532 for the six months ended June
30, 2000, as compared to $153,280 for the six months ended June 30, 1999.
This decrease was due to an average lower level of debt. Depreciation
expense decreased for the six months ended June 30, 2000 versus 1999, due
to a lower average depreciable basis of equipment.
The net effect of the above revenue and expense items resulted in a
net loss of $291,633 for the six months ended June 30, 2000, compared to
net income of $7,130,327 for the six months ended June 30, 1999.
During the six months ended June 30, 2000, the Partnership did not
incur any additional borrowing and made $0 of principal payments on notes.
Three Months Ended June 30, 2000, Compared to Three Months Ended June 30,
1999
Rental income decreased to $109,654 for the three months ended June
30, 2000 as compared to rental income of $911,389 for the three months
ended June 30, 1999. This decrease was primarily due to equipment coming
off lease or being sold in the intervening period. Interest income
decreased for the three months ended June 30, 2000, as compared to the
three months ended June 30, 1999. This was due to a decreased level of
cash available for investment.
During the three months ended June 30, 1999 there was a gain on sale
of equipment held for sale of $4,066,309 as compared to a loss on the sale
of equipment of $51,900 for the three months ended June 30, 2000.
Incentive management fees increased from $0 for the three months ended June
30, 1999 to $209,281 for the three months ended June 30, 2000.
Interest expense decreased to $26,718 for the three months ended June
30, 2000, as compared to $60,840 for the three months ended June 30, 1999.
This decrease was due to an average lower level of debt. Depreciation
expense decreased for the three months ended June 30, 2000 versus 1999.
This decrease was primarily due to equipment coming off lease or being sold
in the intervening period.
The net effect of the above revenue and expense items resulted in a
net loss of $350,253 for the three months ended June 30, 2000, compared to
a net income of $4,597,134 for the three months ended June 30, 1999.
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 June
30, 2000, future rental income, interest income, and sales proceeds.
For the six months ended June 30, 2000, the Partnership had a net loss
of $291,633. 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 $232,706. Cash
provided by investing activities consisted of $60,519 of distributions from
the Investment in Partnerships. Other cash flows from investing activities
were $3,395,245 from the proceeds of the sale of rental equipment. Cash
used in financing activities was to pay cash distributions to limited and
general partners of $5,608,926. In total, during the six months ending
June 30, 2000, Cash and Cash Equivalents decreased $1,920,454 from
operating activities, investing activities and financing activities,
resulting in an ending Cash and Cash Equivalent balance as of June 30,
2000, of $759,935.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at June 30, 2000, 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.
Date: July 27, 2000 By: /s/J. Davenport Mosby, III
J. Davenport Mosby, III
President
RJ Leasing - 2, Inc.
A General Partner
Date: July 27, 2000 By: /s/Stephen R. Harwood
Stephen R. Harwood
President
Cypress Equipment Management Corp. II
Date: July 27, 2000 By: /s/Alex A. Najjar
Alex A. Najjar
Executive Vice President
Cypress Equipment Management Corp. II
