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, 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 September 30, 2000
Units of Limited Partnership
Interest: $1,000 per unit 36,469
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 1999 Form 10-K, filed with the
Securities and Exchange Commission on June 16, 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
September 30, December 31,
2000 1999
(Unaudited) (Audited)
ASSETS
Rental Equipment, at Cost $ 4,306,218 $ 8,977,593
Less: Accumulated Depreciation (2,907,245) (4,021,698)
------------- -------------
1,398,973 4,955,895
------------- -------------
Rental Equipment Held for Sale 0 2,932,078
Deposit on Equipment 3,118,969 3,118,969
Investment In Partnerships 225,974 317,828
Deferred Debt Costs (Net Of Accumulated
Amortization of $1,250 and $26,559
Respectively) 1,250 1,000
Rent and Sales Proceeds Receivable 19,269 524,848
Prepaid Expenses 9,375 22,248
Cash and Cash Equivalents 946,847 2,680,389
------------ ------------
Total Assets $ 5,720,657 $ 14,553,255
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 1,580,171 $ 1,500,921
Payable to: General Partners 18,711 2,012,014
Others 232,056 433,953
Unearned Revenue 258 18,258
------------- -------------
Total Liabilities 1,831,196 3,965,146
------------- -------------
Partners' Equity:
Limited Partners (36,469 units outstanding
at September 30, 2000 and December 31, 1999) 4,169,495 10,801,153
General Partners (280,034) (213,044)
------------- -------------
Total Partners' Equity 3,889,461 10,588,109
------------- -------------
Total Liabilities and Partners' Equity $ 5,720,657 $ 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 NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
---- ----
Revenues:
Rental Income $ 382,964 $ 2,567,114
Interest Income 68,267 222,649
Gain on Sale of Equipment 69,244 466,655
Gain (Loss) on Sale of
Equipment Held for Sale (404,615) 4,064,379
Gain on Sale of Other 372,439 1,845,048
------------ ------------
Total Revenues 488,299 9,165,845
------------ ------------
Operating Expenses:
Management Fees-General Partners 51,623 53,408
Incentive Management Fees-
General Partners 553,966 487,007
Resale Fees-General Partners 120,491 0
General and Administrative:
Affiliates 23,776 27,784
Other 233,096 644,261
Interest Expense 79,250 195,751
Depreciation and Amortization 232,170 1,372,828
------------ ------------
Total Operating Expenses 1,294,372 2,781,039
------------ ------------
Net Income (Loss) Before Equity
in Income of Partnerships (806,073) 6,384,806
Equity in Income of Partnerships 0 9,822,406
------------ ------------
Net Income (Loss) $ (806,073) $16,207,212
============ ============
Allocation of Net Income (Loss):
Limited Partners $ (798,012) $16,045,140
General Partners (8,061) 162,072
------------ ------------
$ (806,073) $16,207,212
============ ============
Net Income (Loss) per $1,000
Limited Partnership Unit
Outstanding $ (21.88) $ 439.97
============ ============
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,
2000 1999
---- ----
Revenues:
Rental Income $ 109,655 $ 917,649
Interest Income 6,264 115,749
Gain(Loss)on Sale of Equipment
Held for Sale (404,615) (1,930)
------------ ------------
Total Revenues (288,696) 1,031,469
------------ ------------
Operating Expenses:
Management Fees-General Partners 8,702 25,586
Incentive Management Fees-
General Partners 84,724 487,007
Resale Fees -
General Partners 7,500 0
General and Administrative:
Affiliates 5,415 15,651
Other 26,758 359,958
Interest Expense 26,718 41,931
Depreciation and Amortization 65,927 445,804
------------ ------------
Total Operating Expenses 225,744 1,375,937
------------ ------------
Net Income(Loss)Before Equity
in Income of Partnerships (514,440) (344,468)
Equity in Income of Partnerships 0 9,421,354
------------ ------------
Net Income (Loss) $ (514,440) $ 9,076,886
============ ============
Allocation of Net Income(Loss):
Limited Partners $ (509,296) $ 8,986,117
General Partners (5,144) 90,769
------------ ------------
$ (514,440) $ 9,076,886
============ ============
Net Income (Loss) per $1,000
Limited Partnership Unit
Outstanding $ (13.97) $ 246.40
============ ============
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 CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
---- ----
Cash Flows from Operating
Activities:
Net Income (Loss) $ (806,073) $16,207,212
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
(Gain) on Sale of Equipment (69,244) (466,655)
Depreciation and Amortization 232,170 1,372,828
Deferred Interest on Notes
Payable 79,250 120,050
Equity in Income of Investment
In Partnerships 0 (9,822,406)
Changes in Operating Assets
and Liabilities:
(Increase) Decrease in
Equipment Held for Sale 2,932,078 3,672,601
(Increase) Decrease in
Rents Receivable 505,579 111,508
(Increase) Decrease in Accounts
Receivable - General 0 4,746
(Increase) Decrease in
Prepaid Expenses 12,873 75,681
Increase (Decrease) in
Interest Payable 0 (45,982)
Increase (Decrease) in
Payable to:
General Partners (1,993,303) (34,325)
Other (201,898) (229,681)
Increase (Decrease) in
Unearned Revenue (18,000) (4,751)
Net Cash Provided by ------------ ------------
Operating Activities 673,432 10,960,825
------------ ------------
Cash Flows from Investing
Activities:
Distributions Received 91,855 1,294,514
Proceeds from Sale of Equipment 3,395,246 1,010,089
(Purchase) Sale of Options 0 1,469,819
Proceeds of Option Casualties 0 5,733
(Purchase)of Equipment Held
for Sale 0 (1,571,598)
Sale of Investment in
Partnership 0 15,843,672
Net Cash Provided By ----------- -----------
Investing Activities 3,487,101 18,052,229
----------- -----------
Cash Flows from Financing
Activities:
Payment of Notes Payable 0 (4,708,863)
(Increase) Decrease in
Deferred Debt Costs and
Trustee Fees (1,500) (2,999)
Distributions to Limited
Partners (5,833,646) (26,687,270)
Distributions to General
Partners (58,929) (269,567)
----------- -----------
Net Cash (Used In)
Provided by Financing
Activities (5,894,075) (31,668,699)
----------- -----------
(Decrease) in Cash and Cash
Equivalents (1,733,542) (2,655,644)
Cash and Cash Equivalents at
Beginning of Period 2,680,389 3,702,451
----------- -----------
Cash and Cash Equivalents at End
of Period $ 946,847 $ 1,046,807
=========== ===========
Supplemental Cash Flow Information:
Interest Paid $ 0 $ 123,888
============ ===========
Non-Cash Activities:
Notes Payable in 1999 were increased by $120,050, the amount of Deferred
Interest on Notes Payable.
Notes Payable in 2000 were increased by $79,250, 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, 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 nine months ended September 30, 2000, 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 nine months ended September 30, 2000:
Equipment Management Fees $ 51,623
Incentive Management Fees 553,966
General and Administrative Costs 23,776
General Partners' Distributions 58,929
Resale Fees 120,491
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
$946,847 at September 30, 2000, represents cash of $567,561, a repurchase
agreement of $248,000 and money market mutual funds of $131,286.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended September 30, 2000, Compared to Nine Months Ended
September 30, 1999.
Rental income decreased to $382,964 for the nine months ended
September 30, 2000, from $2,567,114 for the nine month period ended
September 30, 1999. This decrease was primarily due to equipment coming
off lease or being sold in the intervening period. Interest income
decreased to $68,267 for the nine months ended September 30, 2000, as
compared to $222,649 for the nine months ended September 30, 1999. This
decrease was primarily due to a decreased average balance of cash for
investment. During the nine months ended September 30, 2000, rental
equipment with a book value of $3,326,002 was sold for net proceeds of
$3,395,246 resulting in a gain on sale of $69,244. During the nine months
ended September 30, 2000, the partnership sold equipment held for sale with
a book cost of $4,056,729 for net proceeds of $2,899,901 resulting in a
loss on sale $32,176. 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.
Incentive management fees increased from $487,007 for the nine months
ended September 30, 1999 to $553,966 for the nine months ended September
30, 2000. The 4% incentive management fee was earned with the August 10,
1999 distribution, as each Limited Partner has received cash distributions
equal to his capital contributions. Equipment resale fees increased from $0
for the nine months ended September 30, 1999 to $120,491 for the nine
months ended September 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 $79,250 for the nine months ended
September 30, 2000, as compared to $195,751 for the nine months ended
September 30, 1999. This decrease was due to an average lower level of
debt. Depreciation expense decreased for the nine months ended September
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 $806,073 for the nine months ended September 30, 2000, compared
to a net income of $6,384,806 for the nine months ended September 30, 1999,
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. This resulted in
a net loss of $806,073 for the nine months ended September 30, 2000 as
compared to a net income of $16,207,212 for the nine months ended September
30, 1999.
During the nine months ended September 30, 2000, the Partnership did
not incur any additional borrowing and made $0 of principal payments on
notes.
Three Months Ended September 30, 2000, Compared to Three Months Ended
September 30, 1999.
Rental income decreased to $109,655 for the three months ended
September 30, 2000 as compared to rental income of $917,649 for the three
months ended September 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 September 30, 2000, as
compared to the three months ended September 30, 1999. This was due to a
lower level of cash available for investment.
Interest expense decreased to $26,718 for the three months ended
September 30, 2000, as compared to $41,931 for the three months ended
September 30, 1999. This decrease was due to an average lower level of
debt. Depreciation expense decreased for the three months ended September
30, 2000 versus 1999. This decrease was primarily due to equipment coming
off lease or being sold in the intervening period.
During the three months ended September 30, 2000, the partnership sold
equipment held for sale with a book value of $688,043 for net proceeds of
$283,428 resulting in a loss on sale of $404,615.
During the three months ended September 30, 2000, incentive management
fees were $84,724 as compared to $487,007 for the three months ended
September 30, 1999. 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.
Equipment resale fees increased from $0 for the three months ended
September 30, 1999 to $7,500 for the three months ended September 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.
The net effect of the above revenue and expense items resulted in a
net loss of $514,440 for the three months ended September 30, 2000,
compared to a net loss of $344,468 for the three months ended September 30,
1999 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. This resulted
in a net loss of $514,440 for the three months ended September 30, 2000 as
compared to a net income of $9,076,886 for the three months ended September
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
September 30, 2000, future rental income, interest income, and sales
proceeds.
For the nine months ended September 30, 2000, the Partnership had a
net loss of $806,073. 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 $673,432. Cash
provided by investing activities consisted of $3,395,246 from the proceeds
of the sales of rental equipment and distributions from the investment in
partnerships of $91,855. Cash used in financing activities was to pay cash
distributions to limited and general partners of $5,892,575. In total,
during the nine months ending September 30, 2000, Cash and Cash Equivalents
decreased $1,733,542 from operating activities, investing activities and
financing activities, resulting in an ending Cash and Cash Equivalent
balance as of September 30, 2000, of $946,847.
In the opinion of the General Partners, the Partnership will have,
through Cash and Cash Equivalents at September 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: October 19, 2000 By: /s/J. Davenport Mosby, III
J. Davenport Mosby, III
President
RJ Leasing - 2, Inc.
A General Partner
Date: October 19, 2000 By: /s/Stephen R. Harwood
Stephen R. Harwood
President
Cypress Equipment Management Corp. II
Date: October 19, 2000 By: /s/Alex A. Najjar
Alex A. Najjar
Executive Vice President
Cypress Equipment Management Corp. II
