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, 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 March 31, 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 12, 2000
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,
2000 1999
(Unaudited) (Audited)
ASSETS
Rental Equipment, at Cost $ 4,306,218 $ 8,977,593
Less: Accumulated Depreciation 2,776,141 (4,021,698)
------------- -------------
1,530,077 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 286,263 317,828
Deferred Debt Costs (Net of Accumulated
Amortization of $500 and $26,559
Respectively) 500 1,000
Rent and Sales Proceeds Receivable 27,036 524,848
Prepaid Expense 30,910 22,248
Cash and Cash Equivalents 3,966,763 2,680,389
------------ ------------
Total Assets $ 9,648,561 $ 14,553,255
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 1,526,735 $ 1,500,921
Payable to: General Partners 2,143,389 2,012,014
Others 44,536 433,953
Unearned Revenue 258 18,258
------------- -------------
Total Liabilities 3,714,918 3,965,146
------------- -------------
Partners' Equity:
Limited Partners (36,469 units outstanding
at March 31, 2000 and December 31, 1999) 6,193,231 10,801,153
General Partners (259,588) (213,044)
------------- -------------
Total Partners' Equity 5,933,643 10,588,109
------------- -------------
Total Liabilities and Partners' Equity $ 9,648,561 $ 14,553,255
============= =============
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 MARCH 31,
2000 1999
---- ----
Revenues:
Rental Income $ 163,655 $ 738,076
Interest Income 40,050 45,864
Gain on Sale of Equipment 121,144 467,025
Gain on Sale of Other 372,679 1,864,988
------------ ------------
Total Revenues 697,528 3,115,953
------------ ------------
Operating Expenses:
Management Fees-General 34,078 7,815
Partners 259,961 0
Incentive Fees-General Partners 112,991 0
Resale Fees-General Partners
General and Administrative: 3,726 2,093
Affiliates 102,022 199,428
Other 25,814 92,980
Interest Expense 100,316 480,970
Depreciation and Amortization ------------ ------------
638,908 783,286
Total Operating Expenses ------------ ------------
Net Income Before Equity in 58,620 2,332,667
Income of Partnerships
Equity in Income of 0 200,526
Partnerships ------------ ------------
$ 58,620 $ 2,533,193
Net Income ============ ============
Allocation of Net Income: $ 58,034 $ 2,507,861
Limited Partners 586 25,332
General Partners ------------ ------------
$ 58,620 $ 2,533,193
============ ============
Net Income per $1,000 Limited $ 1.59 $ 68.77
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,
2000 1999
---- ----
Cash Flows from Operating
Activities:
Net Income $ 58,620 $ 2,533,193
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
(Gain) on Sale of Equipment (121,144) (467,025)
Depreciation and Amortization 100,316 480,970
Deferred Interest on Notes
Payable 25,814 52,826
Equity in Income of Investment
In Partnerships 0 (200,526)
Changes in Operating Assets
and Liabilities:
Decrease in Rental Equipment
Held for Sale 2,244,035 0
(Increase) Decrease in Rents
Receivable 497,812 181,905
(Increase) Decrease in
Prepaid Expenses (8,661) 20,022
Increase (Decrease) in
Interest Payable 0 (38,531)
(Increase) Decrease in
Accounts Receivable-General 0 (13,537)
Increase (Decrease) in
Payable to:
General Partners 131,375 187,389
Other (389,418) (317,226)
Increase (Decrease) in
Unearned Revenue (18,000) (5,000)
------------ ------------
Net Cash Provided by
Operating Activities 2,520,749 2,414,460
------------ ------------
Cash Flows from Investing
Activities:
Distributions Received 31,564 1,146,344
Proceeds from Sale of Equipment 3,447,146 1,010,459
(Purchase) Sale of Options 0 1,469,819
Proceeds of Option Casualties 0 5,733
----------- -----------
Net Cash Provided By
Investing Activities 3,478,710 3,632,355
----------- -----------
Cash Flows from Financing
Activities:
Payment of Notes Payable 0 (2,845,711)
Distributions to Limited
Partners (4,665,955) (911,725)
Distributions to General
Partners (47,130) (9,208)
----------- -----------
Net Cash Used In
Financing Activities (4,713,085) (3,766,644)
----------- -----------
Increase in Cash
and Cash Equivalents 1,286,374 2,280,171
Cash and Cash Equivalents at
Beginning of Period 2,680,389 3,702,451
----------- -----------
Cash and Cash Equivalents at End
of Period $ 3,966,763 $ 5,982,622
=========== ===========
Supplemental Cash Flow Information:
Interest Paid $ 0 $ 82,221
============ ===========
Non-Cash Activities:
Notes Payable in 2000 were increased by $25,814, the amount of Deferred
Interest on Notes Payable.
Notes Payable in 1999 were increased by $52,826, 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)
March 31, 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 24% 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.
There were no additional borrowing or payments for the three months
ended March 31, 2000.
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, 2000:
Equipment Management Fees $ 34,078
General and Administrative Costs 3,726
General Partners' Distributions 47,130
Incentive Fees 259,961
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
$3,966,763 at March 31, 2000, represents cash of $2,071, a repurchase
agreement of $3,941,000, and money market mutual funds of $23,692.
NOTE 6 - SUBSEQUENT EVENTS
On May 1, 2000, the Partnership paid distributions of $886,880 to the
Limited Partners and $8,961 to the General Partners. Incentive Management
fees of $209,281 were paid to the General Partners.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, 2000, Compared to Three Months Ended March 31,
1999.
Rental income decreased $738,076 for the three months ended March 31,
1999, to $163,655 for the three month period ended March 31, 2000. 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, 2000, as compared to the three months ended March
31, 1999.
During the three months ended March 31, 2000, the Partnership sold
Equipment Held for Sale with a Book Cost of $2,244,035 for net proceeds of
$2,616,714 resulting in a gain on sale of $372,679. During the three
months ended March 31, 2000, Rental Equipment with a book value of
$3,326,002 was sold for net proceeds of $3,447,146 resulting in a gain on
sale of $121,144. 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.
Incentive management fees increased from $0 for the three months ended
March 31, 1999 to $259,961 for the three months ended March 31, 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 three months ended March 31, 1999, to $112,991
for the three months ended March 31, 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 $25,814 for the three months ended March
31, 2000, as compared to $92,980 for the three months ended March 31, 1999.
This decrease was due to an average lower level of debt. Depreciation
expense decreased for the three months ended March 31, 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 income of $58,620 for the three months ended March 31, 2000, compared
to $2,533,193 for the three months ended March 31, 1999.
During the three months ended March 31, 2000, the Partnership did not
incur any additional borrowing and made $0 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, 2000, future rental income, interest income, and sales proceeds.
For the three months ended March 31, 2000, the Partnership had a net
income of $58,620. 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 $2,520,749.
Cash provided by investing activities consisted of $31,564 of distributions
from the Investment in Partnerships. Other cash flows from investing
activities were $3,447,146 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 $4,713,085. In total, during the three
months ending March 31, 2000, Cash and Cash Equivalents increased
$1,286,374 from operating activities, investing activities and financing
activities, resulting in an ending Cash and Cash Equivalent balance as of
March 31, 2000, of $3,966,763.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at March 31, 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.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
March 31, 2000
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: June 26, 2000 By: /s/J. Davenport Mosby, III
J. Davenport Mosby, III
President
RJ Leasing - 2, Inc.
A General Partner
Date: June 26, 2000 By: /s/Stephen R. Harwood
Stephen R. Harwood
President
Cypress Equipment Management Corp. II
Date: June 26, 2000 By: /s/Alex A. Najjar
Alex A. Najjar
Executive Vice President
Cypress Equipment Management Corp. II
