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 March 31, 1998
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
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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
----- -----
1,578,236 Units of Limited Partnership Interest were outstanding as of March 31,
1998.
Transitional small business disclosure format:
Yes No X
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Page 1 of 9
<PAGE>
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)
March 31, December 31,
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 2,841 $ 1,666
Accounts receivable (net of allowance for
losses on accounts receivable of $161
and $194 at March 31, 1998 and December
31, 1997, respectively) 308 397
Notes receivable (net of allowance for
losses on notes receivable of $357 and
$315 at March 31, 1998 and December 31,
1997, respectively) 8,054 8,794
Net investment in financing leases (net of
allowance for early terminations of $357
and $394 at March 31, 1998 and December
31, 1997, respectively) 11,929 13,966
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$1,829 and $1,899 at March 31, 1998 and
December 31, 1997, respectively) 618 388
Capitalized acquisition fees (net of
accumulated amortization of $1,623
and $1,487 at March 31, 1998 and
December 31, 1997, respectively) 839 942
Other assets 411 399
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Total Assets $25,000 $26,552
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 993 $ 1,132
Notes payable 2,777 4,015
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Total Liabilities 3,770 5,147
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Partners' Capital
General Partner 36 30
Limited Partners, 2,500,000 units
authorized, 1,603,335 units issued
and 1,578,236 and 1,578,705 units
outstanding at March 31, 1998 and
December 31, 1997, respectively 21,046 21,318
Unrealized gain on marketable securities
available-for-sale 148 57
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Total Partners' Capital 21,230 21,405
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Total Liabilities and Partners' Capital $25,000 $26,552
======= =======
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
INCOME
Earned income, financing leases $ 498 $ 801
Interest income, notes receivable 385 283
Rental income 340 83
Gain (loss) on sale of equipment 140 (67)
Other income 47 94
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Total Income 1,410 1,194
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EXPENSES
Depreciation and amortization 190 347
Amortization of acquisition fees 135 171
Lease related operating expenses 26 51
Management fees to General Partner 89 101
Reimbursed administrative costs to General Partner 84 104
Interest expense 83 196
Provision for losses on receivables 88 --
General and administrative expenses 70 72
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Total Expenses 765 1,042
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NET INCOME $ 645 $ 152
======= =======
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .38 $ .07
======= =======
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ .55 $ .55
======= =======
ALLOCATION OF NET INCOME:
General Partner $ 42 $ 37
Limited Partners 603 115
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$ 645 $ 152
======= =======
The accompanying notes are an integral part of these statements.
3
<PAGE>
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
Operating Activities:
Net income $ 645 $ 152
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 190 347
Amortization of acquisition fees 135 171
Equity in earnings from joint ventures, net (5) (8)
Loss (gain) on sale of equipment (140) 67
Gain on sale of securities (7) --
Provision for early termination, financing leases 46 --
Provision for losses on notes receivable 42 --
Decrease in accounts receivable 95 2
Increase (decrease) in accounts payable and
accrued expenses (76) 114
Decrease in other assets 48 25
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Net cash provided by operating activities 973 870
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Investing Activities:
Principal payments, financing leases 2,024 2,609
Principal payments, notes receivable 1,041 1,212
Distributions from joint ventures 21 19
Proceeds from sale of equipment 160 67
Proceeds from sale of securities 7 --
Investment in financing leases (458) (691)
Investment in notes receivable (343) (596)
Payment of acquisition fees (101) (18)
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Net cash provided by investing activities 2,351 2,602
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Financing Activities:
Payments of principal, notes payable (1,238) (1,438)
Redemptions of capital (7) (14)
Distributions to partners (904) (910)
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Net cash used by financing activities (2,149) (2,362)
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Increase in cash and cash equivalents 1,175 1,110
Cash and cash equivalents, beginning of period 1,666 5,134
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Cash and cash equivalents, end of period $ 2,841 $ 6,244
======= =======
Supplemental Cash Flow Information:
Cash paid for interest expense $ 71 $ 184
The accompanying notes are an integral part of these statements.
4
<PAGE>
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 1997 amounts have been reclassified to
conform to the 1998 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 March 31, 1998, the recorded investment in notes that are
considered to be impaired was $64,000 for which there was no related allowance
for losses. The average recorded investment in impaired loans during the three
months ended March 31, 1998 and 1997 was approximately $64,000 and $68,000,
respectively.
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
1998 1997
---- ----
(Amounts in Thousands)
Beginning balance $ 315 $ 241
Provision for losses 42 -
Write downs - -
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Ending balance $ 357 $ 241
======= ======
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 1,578,371 and 1,587,990 for the three
months ended March 31, 1998 and 1997, 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.
5
<PAGE>
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) reported
net income of $645,000 during the three months ended March 31, 1998, as compared
to net income of $152,000 during the same period in 1997. The increase in net
income is primarily due to an increase in total revenues and a decrease in total
expenses for the three months ended March 31, 1998, as compared to the same
period in the previous period.
Total revenues increased by $216,000 during the three months ended
March 31, 1998, as compared to the same period in 1997, due to increases in
rental income, gain on sale of equipment and interest income from notes
receivable which was partially offset by a decrease in earned income from
financing leases.
Rental income increased by $257,000 for the three months ended March
31, 1998, compared to 1997, due to lessees reaching the end of their contractual
term and renewing on a month to month basis as well as lessees exercising their
option to renew their lease for a fixed term in order to purchase the equipment.
The increase in rental income is also a result of settlements from defaulted
leases.
The Partnership experienced a gain on sale of equipment of $140,000
during the three months ended March 31, 1998 compared to a loss on sale of
equipment of $67,000 during 1997. The gain on sale of equipment during 1998 is a
result of an increase in sales activity of the Partnership's equipment
portfolio. Correspondingly, proceeds from the sale of equipment also increased.
The Partnership sold equipment with an aggregate original cost of $3.3 million
for the three months ended March 31, 1998, compared to $777,000 for the same
period in 1997. At March 31, 1998, the Partnership owned equipment with an
aggregate original cost of $32 million, as compared to the $39 million of
equipment owned at March 31, 1997.
The increase in interest income from notes receivable of $102,000 for
the three months ended March 31, 1998, compared to 1997, is attributable to new
investments made in notes receivable in 1997 and 1998. The Partnership's net
investment in notes receivable was $8 million at March 31, 1998, as compared to
$4 million at March 31, 1997.
Earned income from financing leases decreased by $303,000 during the
three months ended March 31, 1998, as compared to the same period in 1997. 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 $11.9 million at March 31, 1998, as compared to $20.3
million at March 31, 1997. 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 decreased by $277,000 for the three months ended March
31, 1998, as compared to the same period in the prior year, due to decreases in
depreciation and amortization and interest expense during the three months ended
6
<PAGE>
March 31, 1998, as compared to 1997. The decrease in depreciation and
amortization of $157,000 was due to the continued sale of the lease portfolio as
well as an increasing portion of the equipment owned by the Partnership becoming
fully depreciated. The decrease in interest expense of $113,000 is a result of a
decline in the Partnership's outstanding debt. As of March 31, 1998, the
Partnership's outstanding notes payable balance was $2,777,000 compared to
$8,327,000 as of March 31, 1997.
Partially offsetting the decrease in expenses for the three months
ended March 31, 1998, was an increase in the provision for losses on receivables
of $88,000.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from 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 $4,038,000 during the three months ended March 31, 1998, as compared to
$4,691,000 during the same period in 1997. This decrease is reflective of the
decrease in payments received from financing leases, as previously discussed in
the Results of Operations.
During the three months ended March 31, 1998 the Partnership invested
$458,000 in equipment leases and $343,000 in notes receivable, as compared to
investments of $691,000 in equipment leases and $596,000 in notes receivable
during the same period in 1997. As of March 31, 1998, the Partnership had
acquired leased equipment with an aggregate original cost of $46 million and
invested $16 million in notes receivable (including its pro rata interest in
joint ventures), as compared to investments of $43 million in leased equipment
and $9 million in notes receivable at March 31, 1997.
The Partnership owned equipment held for lease with an original cost of
$2,942,000 and a net book value of $616,000 at March 31, 1998, as compared to
$2,101,000 and $679,000 respectively at March 31, 1997. The General Partner is
actively engaged in remarketing and selling the Partnership's equipment as it
comes available. Until new leases or buyers of equipment can be found, the
equipment will continue to generate depreciation expense without any
corresponding rental income. The effect of this will be a reduction of the
Partnership earnings during the remarketing period.
The Partnership made payments of principal of $1,238,000 on its
outstanding debt during the three months ended March 31, 1998, as compared to
$1,438,000 during the three months ended March 31, 1997.
The cash distributed to partners during the three months ended March
31, 1998 was $904,000, as compared to $910,000 during the same period in 1997.
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 $868,000
and $873,000 in cash distributions during the three months ended March 31, 1998
and 1997, respectively. The total cumulative cash distributions to limited
partners as of March 31, 1998 was $11,002,000, as compared to $7,523,000 at
March 31, 1997. The General Partner received $36,000 and $37,000 during the
three months ended March 31, 1998 and 1997, respectively. The Partnership
anticipates making distributions to partners during 1998 at the same rate as
1997.
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.
7
<PAGE>
.
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
March 31, 1998
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
8
<PAGE>
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
General Partner
Date Title Signature
---- ----- ---------
May 13, 1998 Senior Vice President /S/ GARY W. MARTINEZ
- -------------- and a Director of --------------------
Phoenix Leasing Associates III, Inc. (Gary W. Martinez)
May 13, 1998 Chief Financial Officer, /S/ HOWARD SOLOVEI
- -------------- Treasurer and a Director of --------------------
Phoenix Leasing Associates III, Inc. (Howard Solovei)
May 13, 1998 Senior Vice President, /S/ BRYANT J. TONG
- -------------- Financial Operations of --------------------
(Bryant J. Tong)
(Principal Accounting Officer)
Phoenix Leasing Associates III, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,841
<SECURITIES> 0
<RECEIVABLES> 8,880
<ALLOWANCES> 518
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,447
<DEPRECIATION> 1,829
<TOTAL-ASSETS> 25,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21,230
<TOTAL-LIABILITY-AND-EQUITY> 25,000
<SALES> 0
<TOTAL-REVENUES> 1,410
<CGS> 0
<TOTAL-COSTS> 765
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 88
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 645
<INCOME-TAX> 0
<INCOME-CONTINUING> 645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 645
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
