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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the quarterly period ended September 30, 1997
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 ___
1,579,878 Units of Limited Partnership Interest were outstanding as of September
30, 1997.
Transitional small business disclosure format:
Yes ___ No _X_
<PAGE>
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<TABLE>
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)
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,435 $ 5,134
Accounts receivable (net of allowance for losses on accounts receivable
of $192 and $134 at September 30, 1997 and December 31, 1996, respectively) 264 323
Notes receivable (net of allowance for losses on notes receivable of $307
and $241 at September 30, 1997 and December 31, 1996, respectively) 8,024 4,643
Net investment in financing leases (net of allowance for early terminations
of $356 and $404 at September 30, 1997 and December 31, 1996, respectively) 15,909 22,732
Capitalized acquisition fees (net of accumulated amortization of $1,356 and
$902 at September 30, 1997 and December 31, 1996, respectively) 972 1,111
Other assets 832 854
------- -------
Total Assets $28,436 $34,797
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,337 $ 1,125
Notes payable 5,452 9,765
------- -------
Total Liabilities 6,789 10,890
------- -------
Partners' Capital
General Partner 20 17
Limited Partners, 2,500,000 units authorized, 1,603,335 units issued and
1,579,878 and 1,588,681 units outstanding at
September 30, 1997 and December 31, 1996, respectively 21,236 23,662
Unrealized gain on marketable securities available-for-sale 391 228
------- -------
Total Partners' Capital 21,647 23,907
------- -------
Total Liabilities and Partners' Capital $28,436 $34,797
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
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<TABLE>
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Earned income, financing leases $ 856 $1,020 $2,656 $3,147
Interest income, notes receivable 353 182 865 593
Gain on sale of securities 5 -- 5 1,196
Other income 49 106 248 233
------ ------ ------ ------
Total Income 1,263 1,308 3,774 5,169
------ ------ ------ ------
EXPENSES
Depreciation and amortization 352 291 1,059 724
Amortization of acquisition fees 146 110 454 364
Lease related operating expenses 30 28 138 98
Management fees to General Partner 88 73 270 268
Reimbursed administrative costs to General Partner 82 55 300 203
Interest expense 147 260 519 854
Provision for losses on receivables 169 123 385 308
General and administrative expenses 70 44 222 126
------ ------ ------ ------
Total Expenses 1,084 984 3,347 2,945
------ ------ ------ ------
NET INCOME $ 179 $ 324 $ 427 $2,224
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .09 $ .16 $ .20 $ 1.57
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .55 $ .51 $ 1.65 $ 2.05
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 37 $ 33 $ 112 $ 132
Limited Partners 142 291 315 2,092
------ ------ ------ ------
$ 179 $ 324 $ 427 $2,224
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
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<TABLE>
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Operating Activities:
Net income $ 427 $ 2,224
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,059 724
Amortization of acquisition fees 454 364
Equity in earnings from joint ventures, net (21) (30)
Gain on sale of equipment (54) (68)
Gain on sale of securities (5) (1,196)
Provision for early termination, financing leases 196 273
Provision for losses on notes receivable 120 --
Provision for losses on accounts receivable 69 36
Increase in accounts receivable (10) (19)
Increase (decrease) in accounts payable and accrued expenses 91 (26)
Decrease in other assets 104 73
------- -------
Net cash provided by operating activities 2,430 2,355
------- -------
Investing Activities:
Principal payments, financing leases 7,581 6,239
Principal payments, notes receivable 2,240 1,537
Distributions from joint ventures 62 64
Proceeds from sale of equipment 193 720
Proceeds from sale of securities -- 1,212
Investment in financing leases (2,107) (6,082)
Investment in notes receivable (5,741) (970)
Investment in securities -- (16)
Payment of acquisition fees (194) (478)
------- -------
Net cash provided by investing activities 2,034 2,226
------- -------
Financing Activities:
Partners' contributions -- 7,256
Proceeds from notes payable -- 1,000
Payments of principal, notes payable (4,313) (4,292)
Syndication costs -- (1,027)
Redemptions of capital (126) (150)
Distributions to partners (2,724) (2,839)
------- -------
Net cash used by financing activities (7,163) (52)
------- -------
Increase (decrease) in cash and cash equivalents (2,699) 4,529
Cash and cash equivalents, beginning of period 5,134 2,757
------- -------
Cash and cash equivalents, end of period $ 2,435 $ 7,286
======= =======
Supplemental Cash Flow Information:
Cash paid for interest expense $ 482 $ 818
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
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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 1996 amounts have been reclassified to
conform to the 1997 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.
At September 30, 1997, the recorded investment in notes that are
considered to be impaired was $47,000, for which the related allowance for
losses is $22,000. The average recorded investment in impaired loans during the
nine months ended September 30, 1997 and 1996 was approximately $54,000 and
$8,000, respectively.
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1997 1996
---- ----
(Amounts in Thousands)
Beginning balance $ 241 $ 144
Provision for losses 120 --
Write downs (54) --
----- -----
Ending balance $ 307 $ 144
===== =====
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 1,583,894 and 1,336,372 for the nine
months ended September 30, 1997 and 1996, 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.
<PAGE>
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Note 6. Subsequent Events.
In October 1997, the Partnership received proceeds from the sale of
securities of $455,000. The securities sold consisted of common stock of an
emerging growth companies. The common stock was received through the exercise of
stock warrants granted to the Partnership as part of a financing agreement.
<PAGE>
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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. The
Partnership concluded its public offering on October 6, 1996 and has sold
1,603,335 units of limited partnership interest, resulting in total capital
contributions of $32,067,000.
The Partnership reported net income of $179,000 and $427,000 during the
three and nine months ended September 30, 1997, respectively, as compared to net
income of $324,000 and $2,224,000 during the same periods in 1996. The decrease
in net income is primarily due to a decrease in earned income from financing
leases. The decline in gain on sale of securities also was a factor in the
decrease in net income for the nine months ended September 30, 1997, compared to
the same period in the previous year.
Total revenues decreased by $45,000 and $1,395,000 during the three and
nine months ended September 30, 1997, as compared to the same periods in 1996,
due to a decrease in earned income from financing leases. Earned income from
financing leases decreased by $164,000 and $491,000 during the three and nine
months ended September 30, 1997, as compared to the same periods in 1996. The
decrease in earned income from financing leases is a result of a decline in the
Partnership's investment in financing leases. The Partnership's net investment
in financing leases was $15.9 million at September 30, 1997, as compared to
$23.2 million at September 30, 1996. The investment in financing leases, as well
as earned income from financing leases, will decrease over the lease term as the
Partnership amortizes income over the life of the lease using the interest
method. This decrease will be offset in part by a continuous investment of the
excess cash flows of the Partnership in new leasing and financing transactions
over the life of the Partnership.
Another factor contributing to the decline in total revenues for the
nine months ended September 30, 1997, compared to 1996, is the decrease in gain
on sale of securities of $1,191,000. The gain on sale of securities recognized
during the nine months ended September 30, 1996 was due to the exercise and sale
of stock warrants held by the Partnership, in which $1,212,000 of proceeds was
received. There was no comparable sales of stock warrants during the period
ended September 30, 1997. The Partnership has been granted stock warrants as
part of its lease or financing agreements with certain emerging growth
companies. As of September 30, 1997, the Partnership had remaining investments
in stock warrants with unrealized gains of $391,000, compared to $228,000 at
September 30, 1996. These stock warrants contain certain restrictions, but are
generally exercisable within one year.
The decrease in earned income from financing leases for the three and
nine months ended September 30, 1997, and the decrease in gain on sale of
securities for the nine months ended September 30, 1997, were partially offset
by an increase in interest income from notes receivable. Interest income from
notes receivable increased by $171,000 and $272,000 for the three and nine
months ended September 30, 1997, compared to the same periods in the previous
year. This increase in interest income is attributable to new investments made
during 1997.
Total expenses increased by $100,000 and $402,000 for the three and
nine months ended September 30, 1997, respectively, as compared to the same
periods in the prior year. The Partnership reported an increase in most expense
items for both the three and nine months ended September 30, 1997, compared to
<PAGE>
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the same periods in 1996. The increase in depreciation and amortization of
$61,000 and $335,000 for the three and nine months ended September 30, 1997,
respectively, as compared to the same periods in the previous year, contributed
the most significant increase to total expenses. The increase in depreciation
expense is due to defaults of certain financing leases that have been
reclassified to equipment and are being depreciated over their remaining
estimated useful life.
The decrease in interest expense of $113,000 and $335,000 during the
three and nine months ended September 30, 1997, respectively, as compared 1996,
partially offset the increase in expenses attributable to the factor previously
discussed. The decrease in interest expense is a result of a decline in the
Partnership's outstanding debt. As of September 30, 1997, the Partnership's
outstanding notes payable balance is $5,452,000 compared to $11,202,000 as of
September 30, 1996.
Liquidity and Capital Resources
During the public offering stage, which concluded on October 6, 1996,
the Partnership's primary source of liquidity has come 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 $12,251,000 during the nine months ended September 30, 1997, as compared to
$10,131,000 during the same period in 1996. This increase is reflective of the
increase in the Partnership's portfolio of leases and notes receivable. During
the nine months ended September 30, 1997, the Partnership has made new
investment in leased equipment of $2,107,000 compared to $6,082,000 in 1996, as
well as new investments in notes receivable of $5,741,000 during 1997 compared
to $970,000 in 1996.
As of September 30, 1997, the Partnership had acquired leased
equipment with an aggregate original cost of $44.4 million and invested $14.1
million in notes receivable (including its pro rata interest in joint ventures),
as compared to investments of $39.9 million in leased equipment and $7.6 million
in notes receivable at September 30, 1996.
The Partnership received proceeds from the sale of equipment of
$193,000 for the nine months ended September 30, 1997, compared to $720,000 for
the same period in the previous year. The net book value of the equipment sold
during the nine months ended September 30, 1997 was $139,000, compared to
$652,000 for the equipment sold in 1996.
The Partnership owned equipment held for lease with an original cost of
$2,515,000 and a net book value of $318,000 at September 30, 1997, as compared
to $2,440,000 and $1,301,000, respectively, at September 30, 1996. The General
Partner is actively engaged, on behalf of the Partnership, in remarketing and
selling the Partnership's off-lease equipment portfolio.
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. This line of credit is to be repaid in 49 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, 1997, the Partnership had repaid approximately
$15.8 million of this loan.
The Partnership entered into a second line of credit in the amount of
<PAGE>
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$6 million on November 15, 1994 with another bank. This credit line was 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, 1997, the Partnership had
borrowed $3 million under this loan agreement, approximately $1.7 million of
which has been repaid.
Payments of the Partnership's borrowings discussed above are payable
monthly. The Partnership made payments of principal of $4,313,000 on its
outstanding debt during the nine months ended September 30, 1997, as compared to
$4,292,000 during the nine months ended September 30, 1996.
The cash distributed to partners during the nine months ended September
30, 1997 was $2,724,000, as compared to $2,839,000 during the same period in
1996. 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
$2,615,000 and $2,729,000 in cash distributions during the nine months ended
September 30, 1997 and 1996, respectively. The total cumulative cash
distributions to limited partners as of September 30, 1997 was $9,265,000, as
compared to $5,260,000 at September 30, 1996. The General Partner received
$109,000 and $110,000 during the nine months ended September 30, 1997 and 1996,
respectively.
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>
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.
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
September 30, 1997
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>
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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
---- ----- ---------
November 12, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- ----------------- and a Director of ---------------------
Phoenix Leasing Associates III, Inc. (Gary W. Martinez)
November 12, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ----------------- Senior Vice President, ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Associates III, Inc.
November 12, 1997 Senior Vice President, /S/ BRYANT J. TONG
- ----------------- Financial Operations of ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Associates III, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,435
<SECURITIES> 0
<RECEIVABLES> 8,787
<ALLOWANCES> 499
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,436
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21,647
<TOTAL-LIABILITY-AND-EQUITY> 28,436
<SALES> 0
<TOTAL-REVENUES> 3,774
<CGS> 0
<TOTAL-COSTS> 3,347
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 385
<INTEREST-EXPENSE> 519
<INCOME-PRETAX> 427
<INCOME-TAX> 0
<INCOME-CONTINUING> 427
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 427
<EPS-PRIMARY> .20
<EPS-DILUTED> 0
</TABLE>
