Page 1 of 11
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period from ______________ to______________.
Commission file number 0-25278
-------
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
- --------------------------------------------------------------------------------
Registrant
California 68-0293258
- --------------------- ----------------------------------
State of Jurisdiction I.R.S. Employer Identification No.
2401 Kerner Boulevard, San Rafael, California 94901-5527
- --------------------------------------------------------------------------------
Address of Principal Executive Offices Zip Code
Registrant's telephone number, including area code: (415) 485-4500
--------------
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
preceding requirements for the past 90 days.
Yes _X_ No ___
<PAGE>
Page 2 of 11
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 7,286 $ 2,757
Accounts receivable (net of allowance for
losses on accounts receivable of $134
and $103 at September 30, 1996 and
December 31, 1995, respectively) 200 217
Notes receivable (net of allowance for
losses on notes receivable of $144 at
September 30, 1996 and December 31, 1995) 4,395 4,963
Net investment in financing leases (net of
allowance for early terminations of
$323 and $50 at September 30, 1996 and
December 31, 1995, respectively) 23,223 24,984
Capitalized acquisition fees (net of
accumulated amortization of $769 and
$404 at September 30, 1996 and
December 31, 1995, respectively) 1,117 1,200
Other assets 759 1,859
------- -------
Total Assets $36,980 $35,980
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,008 $ 1,169
Notes payable 11,202 14,494
------- -------
Total Liabilities 12,210 15,663
------- -------
Partners' Capital
General Partner 20 3
Limited Partners, 2,500,000 units
authorized, 1,562,243 and 1,199,457 units
issued and 1,550,589 and 1,197,927 units
outstanding at September 30, 1996 and
December 31, 1995, respectively 24,701 19,316
Unrealized gain on available-for-sale securities 49 998
------- -------
Total Partners' Capital 24,770 20,317
------- -------
Total Liabilities and Partners' Capital $36,980 $35,980
======= =======
The accompanying notes are an integral part of these statements.
<PAGE>
Page 3 of 11
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
INCOME
Earned income, financing leases $1,020 $ 784 $3,147 $2,310
Interest income, notes receivable 182 138 593 379
Gain on sale of securities -- -- 1,196 --
Other income 106 76 233 209
------ ------ ------ ------
Total Income 1,308 998 5,169 2,898
------ ------ ------ ------
EXPENSES
Depreciation and amortization 291 49 724 87
Amortization of acquisition fees 110 68 364 180
Lease related operating expenses 28 6 98 16
Management fees to General Partner 73 52 268 143
Reimbursed administrative costs to
General Partner 57 78 208 271
Interest expense 260 291 854 935
Provision for losses on receivables 123 25 308 75
General and administrative expenses 42 29 121 101
------ ------ ------ ------
Total Expenses 984 598 2,945 1,808
------ ------ ------ ------
NET INCOME $ 324 $ 400 $2,224 $1,090
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .16 $ .35 $ 1.57 $ 1.14
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .51 $ .51 $ 2.05 $ 1.52
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 33 $ 25 $ 132 $ 62
Limited Partners 291 375 2,092 1,028
------ ------ ------ ------
$ 324 $ 400 $2,224 $1,090
====== ====== ====== ======
The accompanying notes are an integral part of these statements.
<PAGE>
Page 4 of 11
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
---- ----
Operating Activities:
Net income $ 2,224 $ 1,090
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 724 87
Amortization of acquisition fees 364 180
Equity in earnings from joint ventures, net (30) (34)
Gain on sale of equipment (68) --
Gain on sale of securities (1,196) --
Provision for early termination,
financing leases 273 --
Provision for losses on accounts receivable 36 75
Increase in accounts receivable (19) (120)
Decrease in accounts payable and
accrued expenses (26) (309)
Decrease in other assets 73 24
------- -------
Net cash provided by operating activities 2,355 993
------- -------
Investing Activities:
Principal payments, financing leases 6,239 3,816
Principal payments, notes receivable 1,537 629
Distributions from joint ventures 64 43
Proceeds from sale of equipment 720 --
Proceeds from sale of securities 1,212 --
Investment in financing leases (6,082) (5,078)
Investment in notes receivable (970) (2,313)
Investment in securities (16) --
Payment of acquisition fees (478) (316)
------- -------
Net cash provided (used) by investing activities 2,226 (3,219)
------- -------
Financing Activities:
Partners' contributions 7,256 8,760
Proceeds from notes payable 1,000 2,000
Payments of principal, notes payable (4,292) (3,348)
Syndication costs (1,027) (1,281)
Redemptions of capital (150) (29)
Distributions to partners (2,839) (1,421)
------- -------
Net cash provided (used) by financing activities (52) 4,681
------- -------
Increase in cash and cash equivalents 4,529 2,455
Cash and cash equivalents, beginning of period 2,757 2,172
------- -------
Cash and cash equivalents, end of period $ 7,286 $ 4,627
======= =======
Supplemental Cash Flow Information:
Cash paid for interest expense $ 818 $ 898
The accompanying notes are an integral part of these statements.
<PAGE>
Page 5 of 11
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. General.
The accompanying unaudited condensed financial statements have been
prepared by the Partnership in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Although management believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes included in the Partnership's Financial Statement, as filed with the
SEC in the latest annual report on Form 10-K.
Note 2. Reclassification.
Reclassification - Certain 1995 amounts have been reclassified to
conform to the 1996 presentation.
Note 3. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the financial statements of the Partnership.
Note 4. Notes Receivable.
Impaired Notes Receivable. At September 30, 1996, the recorded
investment in notes that are considered to be impaired under Statement No. 114
is $23,000 for which there is no allowance. The average recorded investment in
impaired loans during the nine months ended September 30, 1996 was approximately
$8,000.
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1996 1995
---- ----
(Amounts in Thousands)
Beginning balance $144 $ 66
Provision for losses -- --
Write downs -- --
---- ----
Ending balance $144 $ 66
==== ====
<PAGE>
Page 6 of 11
Note 5. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income and distributions per limited partnership unit were based on
the limited partners' share of net income and distributions and the weighted
average number of units outstanding of 1,336,372 and 898,432 for the nine months
ended September 30, 1996 and 1995, respectively. For purposes of allocating
income (loss) to each individual limited partner, the Partnership allocates net
income (loss) based upon each respective limited partner's net capital
contributions.
Note 6. Notes Payable.
During the nine months ended September 30, 1996, the Partnership drew
down $1,000,000 of the $6,000,000 credit line entered into on November 15, 1994
(as previously discussed in Note 7 to the Partnership's December 31, 1995 annual
report on Form 10-K). The Partnership had an available credit line of
approximately $3 million at September 30, 1996. On June 25, 1996, the bank
agreed to extend the commitment termination date from June 30, 1996 to December
31, 1996. As a result, the weighted average interest rate of the Partnership's
debt with two banks is 8% at September 30, 1996.
<PAGE>
Page 7 of 11
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Phoenix Leasing American Business Fund, L.P. (the Partnership) became
effective with the Securities and Exchange Commission on October 9, 1993 and met
its minimum investment requirements of $1,200,000 on January 27, 1994. As of
September 30, 1996, 1,562,243 units of limited partnership interest of the
Partnership had been sold to date, resulting in total capital contributions of
$31,244,860. The Partnership concluded its public offering on October 6, 1996.
The Partnership reported net income of $324,000 during the three months
ended September 30, 1996, as compared to net income of $400,000 during the same
period in 1995. During the nine months ended September 30, 1996, the Partnership
reported net income of $2,224,000, as compared to net income of $1,090,000
during the nine months ended September 30, 1995.
Total revenues increased during both the three and nine months ended
September 30, 1996, as compared to the same periods in 1995. Total revenues
during both periods were comprised primarily of income from equipment leases and
interest income from notes receivable. Additionally, the Partnership reported
revenues from the sale of securities during the nine months ended September 30,
1996. The increase in earned income from financing leases increased during the
three and nine months ended September 30, 1996, respectively, as compared to the
same periods in 1995. The increase in earned income from financing leases is
directly attributable to the Partnership's new investments made in equipment
leasing and financing transactions during both years. The Partnership's net
investment in financing leases was $23,223,000 at September 30, 1996, as
compared to $20,686,000 at September 30, 1995. Revenues will continue to
increase as the Partnership continues to make additional investments in
equipment leasing and financing transactions.
The gain on the sale of securities of $1,196,000 during the nine months
ended September 30, 1996, is due to the exercise and sale of stock warrants held
by the Partnership. The Partnership has been granted stock warrants as part of
its lease or financing agreements with certain emerging growth companies. As of
September 30, 1996, the Partnership had remaining investments in stock warrants
of public companies with unrealized gains of approximately $49,000. These stock
warrants contain certain restrictions, but are generally exercisable within one
year.
Total expenses are comprised primarily of interest expense on
outstanding borrowings, depreciation and amortization. Interest expense
decreased by $31,000 and $81,000 during the three and nine months ended
September 30, 1996, respectively, as compared to the same periods in 1995. The
increase in depreciation expense during the three and nine months ended
September 30, 1996, as compared to the same periods in 1995, is attributable to
payment defaults of certain financing leases that have been reclassified to
equipment and are being depreciated over their remaining estimated useful life.
The increase in the amortization of acquisition fees is attributable to an
increase in the equipment lease and note portfolio. These fees are depreciated
over the estimated useful life of the equipment acquired and notes funded. The
Partnership reported increases in most other expense categories.
<PAGE>
Page 8 of 11
Liquidity and Capital Resources
During the public offering stage, the Partnership's primary source of
liquidity comes from capital contributions and borrowings. As another source of
liquidity, the Partnership has entered into contractual obligations with lessees
and borrowers for fixed terms at fixed payment amounts. The future liquidity of
the Partnership is dependent upon the payment of the Partnership's contractual
obligations from its lessees and borrowers.
The Partnership reported net cash from leasing and financing activities
of $10,131,000 during the nine months ended September 30, 1996, as compared to
$5,438,000 during the same period in 1995. This increase is reflective of the
increase in the Partnership's portfolio of leases and notes receivable.
The Partnership received capital contributions from investors of
$7,256,000 and incurred organizational and offering costs of $1,027,000 during
the nine months ended September 30, 1996, as compared to capital contributions
of $8,760,000 and organizational and offering costs of $1,281,000 during the
nine months ended September 30, 1995.
The Partnership combined these funds with proceeds from borrowings to
invest in equipment leases and notes receivable. As of September 30, 1996, the
Partnership had acquired leased equipment with an aggregate original cost of
$39.9 million and invested $7.6 million in notes receivable (including its pro
rata interest in joint ventures), as compared to investments of $27 million in
leased equipment and $5.1 million in notes receivable at September 30, 1995.
As of September 30, 1996, the Partnership reported equipment being held
for lease with an original cost of $2,440,000 and a net book value of
$1,301,000, as compared to equipment being held for lease with an original cost
of $386,000 and a net book value of $308,000 at September 30, 1995,
respectively. The General Partner, on behalf of the Partnership, is actively
engaged in the remarketing and sales of the Partnership's equipment as it comes
available.
The equipment owned by the Partnership at September 30, 1996 is leased
under financing leases to approximately 310 lessees in 44 states. The loans
funded by the Partnership consisted of thirty loans in twelve states. The
average initial term of all leases entered into was 49 months and the average
net monthly payment as a percentage of the cost of the equipment placed in
service was 2.86%. The average term of all loans funded by the Partnership was
45 months and the weighted average interest rate was 16.17%. The Partnership
plans to reinvest the cash generated by operating and financing activities in
new leasing and financing transactions over the life of the Partnership.
The Partnership negotiated a $20 million term line of credit from a
bank in November 1993 for the purchase of equipment and other property subject
to lease and is to be repaid in 48 equal monthly installments of principal and
interest at a variable rate. The $20 million term line of credit was fully
utilized by the Partnership prior to its expiration date of November 30, 1995.
As of September 30, 1996, the Partnership had repaid approximately $10.8 million
of this loan.
The Partnership entered into a second line of credit in the amount of
$6 million on November 15, 1994 with another bank. This credit line is for the
purchase of equipment and other personal property assets subject to lease with
interest tied to the lender's prime rate. On June 25, 1996, the bank agreed to
an extension of the commitment termination date under the agreement from June
30, 1996 to December 31, 1996. As of September 30, 1996, the Partnership had
<PAGE>
Page 9 of 11
borrowed approximately $3 million under this loan agreement, approximately
$958,000 of which had been repaid. At September 30, 1996, the unused portion of
this credit line was $3 million.
Payments of the Partnership's borrowings discussed above are payable
monthly. The Partnership made payments of principal on its outstanding debt of
$4,292,000 and $3,348,000 during the nine months ended September 30, 1996 and
1995, respectively.
The cash distributed to partners during the nine months ended September
30, 1996 was $2,839,000, as compared to $1,421,000 during the same period in
1995. In accordance with the partnership agreement, the limited partners are
entitled to 96% of the cash available for distribution and the General Partner
is entitled to four percent. As a result, the limited partners received
$2,729,000 and $1,370,000 in cash distributions during the nine months ended
September 30, 1996 and 1995, respectively. As of September 30, 1996, the
cumulative cash distributions made to limited partners was $5,260,000, as
compared to $1,924,000 at September 30, 1995. The General Partner received
$110,000 and $51,000 during the nine months ended September 30, 1996 and 1995,
respectively. The Partnership plans to make distributions to partners during
1997 at the same rate as the current distribution.
On April 15, 1996, the Partnership made a special distribution, in
addition to the regular distribution, to partners of record as of March 31,
1996. The amount of this distribution was approximately 2.5% of the partners'
original contribution. This special distribution was made as the result of
proceeds received from the sale of marketable securities.
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses and debt service.
<PAGE>
Page 10 of 11
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
September 30, 1996
Part II. Other Information.
---------------------------
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults Upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Securities Holders. Inapplicable
Item 5. Other Information. Inapplicable
Item 6. Exhibits and Reports on 8-K:
a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None
<PAGE>
Page 11 of 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P
-------------------------------------------
(Registrant)
BY: PHOENIX LEASING ASSOCIATES III, L.P.
a California limited partnership,
General Partner
BY: PHOENIX LEASING ASSOCIATES III, INC.,
a Nevada corporation,
Corporate General Partner
Date Title Signature
---- ----- ---------
November 12, 1996 Senior Vice President /S/ PARITOSH K. CHOKSI
- ----------------- Chief Financial Officer ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Associates III, Inc.
November 12, 1996 Senior Vice President, /S/ BRYANT J. TONG
- ----------------- Financial Operations ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Associates III, Inc.
November 12, 1996 Senior Vice President /S/ GARY W. MARTINEZ
- ----------------- and a Director of ----------------------
Phoenix Leasing Associates III, Inc. (Gary W. Martinez)
November 12, 1996 Partnership Controller /S/ MICHAEL K. ULYATT
- ----------------- Phoenix Leasing Incorporated ----------------------
(Parent Company) (Michael K. Ulyatt)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,286
<SECURITIES> 0
<RECEIVABLES> 4,873
<ALLOWANCES> 278
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,980
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 24,770
<TOTAL-LIABILITY-AND-EQUITY> 36,980
<SALES> 0
<TOTAL-REVENUES> 5,169
<CGS> 0
<TOTAL-COSTS> 2,945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 308
<INTEREST-EXPENSE> 854
<INCOME-PRETAX> 2,224
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,224
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 0
</TABLE>
