Page 1 of 9
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 June 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 ____
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Page 2 of 9
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)
June 30, December 31,
1996 1995
------- -------
ASSETS
Cash and cash equivalents $ 5,427 $ 2,757
Accounts receivable (net of allowance
for losses on accounts receivable of $103
at June 30, 1996 and December 31, 1995) 160 217
Notes receivable (net of allowance for losses
on notes receivable of $144 at June 30, 1996
and December 31, 1995) 4,621 4,963
Equipment on operation leases and held for lease
(net of accumulated depreciation of $731 and
$373 at June 30, 1996 and December 31, 1995,
respectively) 955 341
Net investment in financing leases (net of allowance
for early terminations of $236 and $50 at June 30,
1996 and December 31, 1995, respectively) 22,964 24,643
Capitalized acquisition fees (net of accumulated
amortization of $659 and $404 at June 30, 1996
and December 31, 1995, respectively) 1,151 1,200
Other assets 871 1,859
------- -------
Total Assets $36,149 $35,980
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,040 $ 1,169
Notes payable 12,702 14,494
------- -------
Total Liabilities 13,742 15,663
------- -------
Partners' Capital
General Partner 19 3
Limited Partners, 2,500,000 units authorized,
1,391,225 and 1,199,457 units issued and
1,382,045 and 1,197,927 units outstanding at
June 30, 1996 and December 31, 1995, respectively 22,303 19,316
Unrealized gain on available-for-sale securities 85 998
------- -------
Total Partners' Capital 22,407 20,317
------- -------
Total Liabilities and Partners' Capital $36,149 $35,980
======= =======
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Rental income $ 383 $ 10 $ 642 $ 25
Earned income, financing leases 903 782 1,836 1,501
Interest income, notes receivable 190 132 411 241
Gain on sale of securities 564 -- 1,196 --
Other income 65 71 127 132
------ ------ ------ ------
Total Income 2,105 995 4,212 1,899
------ ------ ------ ------
EXPENSES
Depreciation and amortization 458 20 785 38
Amortization of acquisition fees 116 61 254 111
Lease related operating expenses 39 5 69 10
Management fees to General Partner 90 50 194 92
Reimbursed administrative costs to
General Partner 93 104 148 193
Interest expense 286 321 594 644
Provision for losses on receivables 93 50 186 50
General and administrative expenses 34 36 83 71
------ ------ ------ ------
Total Expenses 1,209 647 2,313 1,209
------ ------ ------ ------
NET INCOME $ 896 $ 348 $1,899 $ 690
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .62 $ .35 $ 1.41 $ .79
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 1.01 $ .51 $ 1.54 $ 1.01
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 62 $ 20 $ 98 $ 37
Limited Partners 834 328 1,801 653
------ ------ ------ ------
$ 896 $ 348 $1,899 $ 690
====== ====== ====== ======
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1996 1995
------ ------
Operating Activities:
Net income $1,899 $ 690
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 785 38
Amortization of acquisition fees 254 111
Equity in earnings from joint ventures, net (21) (22)
Gain on sale of equipment (65) --
Gain on sale of securities (1,196) --
Provision for early termination,
financing leases 186 --
Provision for losses on accounts receivable -- 50
Decrease (increase) in accounts receivable 57 (29)
Increase (decrease) in accounts payable
and accrued expenses 29 (236)
Decrease (increase) in other assets 24 (33)
------ ------
Net cash provided by operating activities 1,952 569
------ ------
Investing Activities:
Principal payments, financing leases 3,805 2,428
Principal payments, notes receivable 1,148 349
Distributions from joint ventures 43 28
Proceeds from sale of equipment 720 --
Proceeds from sale of securities 1,212 --
Investment in financing leases (4,335) (4,361)
Investment in notes receivable (806) (1,853)
Investment in securities (16) --
Payment of acquisition fees (401) (261)
------ ------
Net cash provided (used) by investing activities 1,370 (3,670)
------ ------
Financing Activities:
Partners' contributions 3,835 6,260
Proceeds from notes payable 1,000 2,000
Payments of principal, notes payable (2,792) (2,204)
Syndication costs (539) (895)
Redemptions of capital (112) (29)
Distributions to partners (2,044) (860)
------ ------
Net cash provided (used) by financing activities (652) 4,272
------ ------
Increase in cash and cash equivalents 2,670 1,171
Cash and cash equivalents, beginning of period 2,757 2,172
------ ------
Cash and cash equivalents, end of period $5,427 $3,343
====== ======
Supplemental Cash Flow Information:
- ----------------------------------
Cash paid for interest expense $ 554 $ 619
The accompanying notes are an integral part of these statements.
<PAGE>
Page 5 of 9
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.
The activity in the allowance for losses on notes receivable during the
six months ended June 30, is as follows:
1996 1995
------ ------
(Amounts in Thousands)
Beginning balance $ 144 $ 66
Provision for losses - -
Write downs - -
------ ------
Ending balance $ 144 $ 66
====== ======
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 1,275,983 and 824,579 for the six months
ended June 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 six months ended June 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 June 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 June 30, 1996.
<PAGE>
Page 6 of 9
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
June 30, 1996, 1,391,225 units of limited partnership interest of the Program
had been sold to date, resulting in total capital contributions of $27,824,500.
The Partnership reported net income of $896,000 during the three months
ended June 30, 1996, as compared to net income of $348,000 during the same
period in 1995. During the six months ended June 30, 1996, the Partnership
reported net income of $1,899,000, as compared to net income of $690,000 during
the six months ended June 30, 1995.
Total revenues increased during both the three and six months ended
June 30, 1996, as compared to the same period in 1995. Total revenues are
comprised primarily of earned income from financing leases and gain on the sale
of securities. Earned income from financing leases increased by $121,000 and
$335,000 during the three and six months ended June 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 $22,964,000 at June 30,
1996, as compared to $21,357,000 at June 30, 1995. Revenues will continue to
increase as the Partnership continues to make additional investments in
equipment leasing and financing transactions during the public offering stage.
The increase in rental income for the three and six months ended June 30, 1996,
as compared to the same periods in 1995, is attributable to proceeds received
for the early termination of several leases.
The gain on the sale of securities of $564,000 and $1,196,000 during
the three and six months ended June 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 June 30, 1996, the Partnership had remaining investments
in stock warrants of public companies with unrealized gains of $85,000. These
stock warrants contain certain restrictions, but are generally exercisable
within one year.
Total expenses are comprised primarily of interest expense on
outstanding borrowings and depreciation and amortization. Interest expense
decreased by $35,000 and $50,000 during the three and six months ended June 30,
1996, respectively, as compared to the same periods in 1995. The increase in
depreciation expense is attributable to the early termination of certain
financing leases that have been reclassified to equipment upon their early
termination. The increase in the amortization of acquisition fees is
attributable to an increase in the equipment lease portfolio. These fees are
depreciated over the estimated useful life of the equipment acquired. The
Partnership reported increases in most other expense categories. Expenses are
expected to increase as the Partnership's portfolio increases during the public
offering period.
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 $6,905,000 during the six months ended June 30, 1996, as compared to
$3,346,000 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
$3,835,000 and paid syndication costs of $539,000 during the six months ended
June 30, 1996, as compared to capital contributions of $6,260,000 and
syndication costs of $895,000 during the six months ended June 30, 1995.
The Partnership combined these funds with proceeds from borrowings to
invest in equipment leases and notes receivable. As of June 30, 1996, the
Partnership had acquired leased equipment with an aggregate original cost of
$38.1 million and invested $7.4 million in notes receivable (including its pro
rata interest in joint ventures), as compared to investments of $26.4 million in
leased equipment and $4.6 million in notes receivable at June 30, 1995.
<PAGE>
Page 7 of 9
The equipment owned by the Partnership at June 30, 1996 is leased under
financing leases to approximately 309 lessees in 44 states. The loans funded by
the Partnership consisted of twenty eight 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 2.84%. The average term of all loans funded by the Partnership was 43 months
and the weighted average interest rate was 15.89%. 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 June 30, 1996, the Partnership had repaid approximately $9,589,000 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 June 30, 1996, the Partnership had borrowed
approximately $3 million under this loan agreement, approximately $708,333 of
which had been repaid. At June 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
$2,792,000 and $2,204,000 during the six months ended June 30, 1996 and 1995,
respectively.
The cash distributed to partners during the six months ended June 30,
1996 was $2,044,000, as compared to $860,000 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 $1,964,000 and
$829,000 in cash distributions during the six months ended June 30, 1996 and
1995, respectively. The General Partner received $80,000 and $31,000 during the
six months ended June 30, 1996 and 1995, respectively.
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 8 of 9
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
June 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: None
(27) Financial Data Schedule
b) Reports on 8-K: None
<PAGE>
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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
Corporate General Partner
BY: PHOENIX LEASING ASSOCIATES III, INC.,
a Nevada corporation
Corporate General Partner
Date Title Signature
---- ----- ---------
August 13, 1996 Senior Vice President /S/ PARITOSH K. CHOKSI
- --------------- Chief Financial Officer ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Associates III, Inc.
August 13, 1996 Senior Vice President, /S/ BRYANT J. TONG
- --------------- Financial Operations ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Associates III, Inc.
August 13, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,427
<SECURITIES> 0
<RECEIVABLES> 5,028
<ALLOWANCES> 247
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,686
<DEPRECIATION> 731
<TOTAL-ASSETS> 36,149
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,407
<TOTAL-LIABILITY-AND-EQUITY> 36,149
<SALES> 0
<TOTAL-REVENUES> 4,212
<CGS> 0
<TOTAL-COSTS> 2,313
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 186
<INTEREST-EXPENSE> 594
<INCOME-PRETAX> 1,899
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,899
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 0
</TABLE>
