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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 June 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 _____
1,580,378 Units of Limited Partnership Interest were outstanding as of June 30,
1997.
Transitional small business disclosure format:
Yes _____ No __X__
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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,
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 2,164 $ 5,134
Accounts receivable (net of allowance for
losses on accounts receivableof $124 and
$134 at June 30, 1997 and December 31,
1996, respectively) 312 323
Notes receivable (net of allowance for
losses on notes receivable of $266 and
$241 at June 30, 1997 and December 31,
1996, respectively) 7,617 4,643
Net investment in financing leases (net of
allowance for early terminations of $385
and $404 at June 30, 1997 and December 31,
1996, respectively) 18,553 22,732
Capitalized acquisition fees (net of
accumulated amortization of $1,210 and
$902 atJune 30, 1997 and December 31,
1996, respectively) 1,062 1,111
Other assets 768 854
------- -------
Total Assets $30,476 $34,797
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 1,305 $ 1,125
Notes payable 6,890 9,765
------- -------
Total Liabilities 8,195 10,890
------- -------
Partners' Capital
General Partner 18 17
Limited Partners, 2,500,000 units
authorized, 1,603,335 units issued
and 1,580,378 and 1,588,681 units
outstanding at June 30, 1997 and
December 31, 1996, respectively 21,971 23,662
Unrealized gain on marketable securities
available-for-sale 292 228
------- -------
Total Partners' Capital 22,281 23,907
------- -------
Total Liabilities and Partners' Capital $30,476 $34,797
======= =======
The accompanying notes are an integral part of these statements.
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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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Earned income, financing leases $ 982 $1,069 $1,799 $2,127
Interest income, notes receivable 230 190 513 411
Gain on sale of securities -- 564 -- 1,196
Other income 104 65 198 127
------ ------ ------ ------
Total Income 1,316 1,888 2,510 3,861
------ ------ ------ ------
EXPENSES
Depreciation and amortization 360 241 707 434
Amortization of acquisition fees 136 116 308 254
Lease related operating expenses 58 39 108 69
Management fees to General Partner 81 90 182 194
Reimbursed administrative costs to General Partner 115 93 218 148
Interest expense 175 286 372 594
Provision for losses on receivables 215 93 215 186
General and administrative expenses 80 34 152 83
------ ------ ------ ------
Total Expenses 1,220 992 2,262 1,962
------ ------ ------ ------
NET INCOME $ 96 $ 896 $ 248 $1,899
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .04 $ .62 $ .11 $ 1.41
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .55 $ 1.01 $ 1.10 $ 1.54
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 38 $ 62 $ 75 $ 98
Limited Partners 58 834 173 1,801
------ ------ ------ ------
$ 96 $ 896 $ 248 $1,899
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
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PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1997 1996
---- ----
Operating Activities:
Net income $ 248 $ 1,899
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 707 434
Amortization of acquisition fees 308 254
Equity in earnings from joint ventures, net (14) (21)
Gain on sale of equipment (20) (65)
Gain on sale of securities - (1,196)
Provision for early termination,
financing leases 136 186
Provision for losses on notes receivable 79 -
Decrease in accounts receivable 11 57
Increase in accounts payable and
accrued expenses 37 29
Decrease in other assets 93 24
--------- ----------
Net cash provided by operating activities 1,585 1,601
--------- ----------
Investing Activities:
Principal payments, financing leases 5,044 4,156
Principal payments, notes receivable 1,658 1,148
Distributions from joint ventures 40 43
Proceeds from sale of equipment 100 720
Proceeds from sale of securities - 1,212
Investment in financing leases (1,758) (4,335)
Investment in notes receivable (4,711) (806)
Investment in securities - (16)
Payment of acquisition fees (116) (401)
---------- -----------
Net cash provided by investing activities 257 1,721
--------- ----------
Financing Activities:
Partners' contributions - 3,835
Proceeds from notes payable - 1,000
Payments of principal, notes payable (2,875) (2,792)
Syndication costs - (539)
Redemptions of capital (119) (112)
Distributions to partners (1,818) (2,044)
---------- -----------
Net cash used by financing activities (4,812) (652)
---------- -----------
Increase (decrease) in cash and
cash equivalents (2,970) 2,670
Cash and cash equivalents, beginning
of period 5,134 2,757
--------- ----------
Cash and cash equivalents, end of period $ 2,164 $ 5,427
========= ==========
Supplemental Cash Flow Information:
Cash paid for interest expense $ 348 $ 554
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 June 30, 1997, the recorded investment in notes that are considered
to be impaired was $47,000 for which there was no allowance. The average
recorded investment in impaired loans during the six months ended June 30, 1997
was approximately $57,000.
The activity in the allowance for losses on notes receivable during the
six months ended June 30, is as follows:
1997 1996
---- ----
(Amounts in Thousands)
Beginning balance $ 241 $ 144
Provision for losses 79 -
Write downs (54) -
------- ------
Ending balance $ 266 $ 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 1,585,695 and 1,275,983 for the six
months ended June 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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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 as of June 30, 1997.
The Partnership reported net income of $96,000 and $248,000 during the
three and six months ended June 30, 1997, respectively, as compared to net
income of $896,000 and $1,899,000 during the same periods in 1996. The decrease
in net income is primarily due to a decrease in gain on sale of securities.
Total revenues decreased by $572,000 and $1,351,000 during the three
and six months ended June 30, 1997, as compared to the same periods in 1996 due
to the absence of a gain on the sale of securities and a decrease in earned
income from financing 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, was due to the
exercise and sale of stock warrants held by the Partnership. There was no
comparable sales of stock warrants during the period ended June 30, 1997. The
Partnership has been granted stock warrants as part of its lease or financing
agreements with certain emerging growth companies. As of June 30, 1997, the
Partnership had remaining investments in stock warrants with unrealized gains of
$292,000. These stock warrants contain certain restrictions, but are generally
exercisable within one year.
Earned income from financing leases decreased by $87,000 and $328,000
during the three and six months ended June 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 $18,553,000 at June 30,
1997, as compared to $22,964,000 at June 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.
Total expenses increased by $228,000 and $300,000 for the three and six
months ended June 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 six months ended June 30, 1997, compared to the same periods in
1996. The increase in depreciation and amortization of $119,000 and $273,000 for
the three and six months ended June 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. Additionally, the
Partnership booked additional allowance for losses on receivables of $215,000
for the quarter ended June 30, 1997, compared to $93,000 for the same period in
1996, which also contributed to increasing total expenses for the period.
The decrease in interest expense of $111,000 and $222,000 during the
three and six months ended June 30, 1997, respectively, as compared 1996,
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partially offset the increase in expenses attributable to the factors previously
discussed. The decrease in interest expense is a result of a decline in the
Partnership's outstanding debt. As of June 30, 1997, the Partnership's
outstanding notes payable balance is $6,890,000 compared to $12,702,000 as of
June 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 $8,287,000 during the six months ended June 30, 1997, as compared to
$6,905,000 during the same period in 1996. This increase is reflective of the
increase in the Partnership's portfolio of leases and notes receivable.
As of June 30, 1997, the Partnership had acquired leased equipment
with an aggregate original cost of $44 million and invested $13 million in notes
receivable (including its pro rata interest in joint ventures), as compared to
investments of $38 million in leased equipment and $7 million in notes
receivable at June 30, 1996.
The Partnership owned equipment held for lease with an original cost of
$2,502,000 and a net book value of $455,000 at June 30, 1997, as compared to
$1,635,000 and $766,000 respectively at June 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
$14.5 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 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 June 30, 1997, the Partnership had borrowed
$3 million under this loan agreement, approximately $1.5 million of which has
been repaid.
Payments of the Partnership's borrowings discussed above are payable
monthly. The Partnership made payments of principal of $2,875,000 on its
outstanding debt during the six months ended June 30, 1997, as compared to
$2,792,000 during the six months ended June 30, 1996.
The cash distributed to partners during the six months ended June 30,
1997 was $1,818,000, as compared to $2,044,000 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 $1,745,000
and $1,964,000 in cash distributions during the six months ended June 30, 1997
and 1996, respectively. The total cumulative cash distributions to limited
partners as of June 30, 1997 was $8,395,000, as compared to $4,495,000 at June
<PAGE>
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30, 1996. The General Partner received $73,000 and $80,000 during the six months
ended June 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.
June 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:
One report, dated June 16, 1997, on Form 8-K was filed during
the quarter ending June 30, 1997, pursuant to Item 4 and Item 7 of that form. No
financial statements were filed as part of that report.
<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, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- --------------- and a Director of ----------------------
Phoenix Leasing Associates III, Inc. (Gary W. Martinez)
August 13, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- --------------- Senior Vice President, ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Associates III, Inc.
August 13, 1997 Senior Vice President, /S/ BRYANT J. TONG
- --------------- Financial Operations of ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Associates III, Inc.
August 13, 1997 Partnership Controller of /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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,164
<SECURITIES> 0
<RECEIVABLES> 8,319
<ALLOWANCES> 390
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,476
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,281
<TOTAL-LIABILITY-AND-EQUITY> 30,476
<SALES> 0
<TOTAL-REVENUES> 2,510
<CGS> 0
<TOTAL-COSTS> 2,262
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 215
<INTEREST-EXPENSE> 372
<INCOME-PRETAX> 248
<INCOME-TAX> 0
<INCOME-CONTINUING> 248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 248
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
