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, 1999
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
----- -----
1,572,904 Units of Limited Partnership Interest were outstanding as of March 31,
1999.
Transitional small business disclosure format:
Yes No X
----- -----
Page 1 of 11
<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,
1999 1998
---- ----
ASSETS
Cash and cash equivalents $ 3,685 $ 4,536
Accounts receivable (net of allowance for losses on
accounts receivable of $304 and $306 at March 31,
1999 and December 31, 1998, respectively) 378 363
Notes receivable (net of allowance for losses on notes
receivable of $643 and $602 at March 31, 1999 and
December 31, 1998, respectively) 7,577 7,765
Net investment in financing leases (net of allowance for
early terminations of $215 and $231 at March 31, 1999
and December 31, 1998, respectively) 7,027 7,898
Equipment on operating leases and held for lease (net of
accumulated depreciation of $1,689 and $1,790 at
March 31, 1999 and December 31, 1998, respectively) 301 166
Capitalized acquisition fees (net of accumulated
amortization of $2,062 and $1,961 at March 31, 1999
and December 31, 1998, respectively) 609 647
Other assets 428 401
------- -------
Total Assets $20,005 $21,776
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 769 $ 939
Notes payable 205 1,125
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Total Liabilities 974 2,064
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Partners' Capital
General Partner 49 47
Limited Partners, 2,500,000 units authorized,
1,603,335 units issued and 1,572,904 and
1,573,129 units outstanding at March 31, 1999
and December 31, 1998, respectively 18,748 19,476
Accumulated other comprehensive income 234 189
------- -------
Total Partners' Capital 19,031 19,712
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Total Liabilities and Partners' Capital $20,005 $21,776
======= =======
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
1999 1998
---- ----
INCOME
Earned income, financing leases $ 264 $ 498
Interest income, notes receivable 314 385
Rental income 96 340
Gain on sale of equipment 59 140
Other income 54 47
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Total Income 787 1,410
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EXPENSES
Depreciation and amortization 156 190
Amortization of acquisition fees 102 135
Lease related operating expenses 26 26
Management fees to General Partner 61 89
Reimbursed administrative costs to General Partner 66 84
Interest expense 19 83
Provision for losses on receivables 68 88
General and administrative expenses 70 70
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Total Expenses 568 765
------- -------
NET INCOME 219 645
Other comprehensive income:
Unrealized gains on securities:
Unrealized holding gains arising during period 45 98
Less: reclassification adjustment for gains
included in net income -- (7)
------- -------
Other comprehensive income 45 91
------- -------
COMPREHENSIVE INCOME $ 264 $ 736
======= =======
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .12 $ .38
======= =======
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ .58 $ .55
======= =======
ALLOCATION OF NET INCOME:
General Partner $ 38 $ 42
Limited Partners 181 603
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$ 219 $ 645
======= =======
The accompanying note 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,
1999 1998
---- ----
Operating Activities:
- --------------------
Net income $ 219 $ 645
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 156 190
Amortization of acquisition fees 102 135
Equity in losses (earnings) from joint ventures, net 12 (5)
Gain on sale of equipment (59) (140)
Gain on sale of securities -- (7)
Provision for early termination, financing leases 27 46
Provision for losses on notes receivable 41 42
Decrease (increase) in accounts receivable (15) 89
Decrease in accounts payable and accrued expenses (224) (70)
Decrease in other assets 3 48
------- -------
Net cash provided by operating activities 262 973
------- -------
Investing Activities:
- --------------------
Principal payments, financing leases 1,472 2,024
Principal payments, notes receivable 813 1,041
Distributions from joint ventures 3 21
Proceeds from sale of equipment 78 160
Proceeds from sale of securities -- 7
Investment in financing leases (938) (458)
Investment in notes receivable (666) (343)
Payment of acquisition fees (10) (101)
------- -------
Net cash provided by investing activities 752 2,351
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Financing Activities:
- --------------------
Payments of principal, notes payable (920) (1,238)
Redemptions of capital (3) (7)
Distributions to partners (942) (904)
------- -------
Net cash used in financing activities (1,865) (2,149)
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Increase (decrease) in cash and cash equivalents (851) 1,175
Cash and cash equivalents, beginning of period 4,536 1,666
------- -------
Cash and cash equivalents, end of period $ 3,685 $ 2,841
======= =======
Supplemental Cash Flow Information:
Cash paid for interest expense $ 19 $ 71
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.
The Partnership Agreement stipulates the methods by which income will
be allocated to the General Partner and the limited partners. Such allocations
will be made using income or loss calculated under Generally Accepted Accounting
Principles for book purposes, which varies from income or loss calculated for
tax purposes.
The calculation of items of income and loss for book and tax purposes
may result in book basis capital accounts that vary from the tax basis capital
accounts. The requirement to restore any deficit capital balances by the General
Partner will be determined based on the tax basis capital accounts. At
liquidation of the Partnership, the General Partner's remaining book basis
capital account will be reduced to zero through the allocation of income or
loss.
Note 2. Reclassification.
----------------
Reclassification - Certain 1998 amounts have been reclassified to
conform to the 1999 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 March 31, 1999, the Partnership has
investments in notes receivable, before allowance for losses, of $8,220,000 of
which $482,000 is considered to be impaired. The Partnership has an allowance
for losses of $643,000 as of March 31, 1999. The average recorded investment in
impaired loans during the three months ended March 31, 1999 and 1998 was
approximately $482,000 and $64,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
1999 1998
---- ----
(Amounts In Thousands)
Beginning balance $602 $315
Provision for losses 41 42
Write downs - -
---- ----
Ending balance $643 $357
==== ====
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 1,572,956 and 1,578,371 for the three
months ended March 31, 1999 and 1998, 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.
6
<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 $219,000 during the three months ended March 31, 1999, as compared
to net income of $645,000 during the same period in 1998. The decrease in net
income for the three months ended March 31, 1999 is primarily due to a decrease
in earned income from financing leases and rental income as compared to the same
period in the previous year.
Total revenues decreased by $623,000 for the three months ended March
31, 1999, as compared to the same period in 1998. The primary factor
contributing to the decline in total revenues for the three months ended March
31, 1999, compared to the same period in 1998, is the decreases in earned income
from financing leases and rental income. The decrease in earned income from
financing leases for the three months ended March 31, 1999 of $234,000, compared
to the same period in 1998, is a result of a decline in the Partnership's
investment in financing leases. The Partnership's net investment in financing
leases was $7 million at March 31, 1999, as compared to $11.9 million at March
31, 1998. 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 in
part is offset by a continuous investment of the excess cash flows of the
Partnership in new leasing and financing transactions over the life of the
Partnership.
Rental income decreased by $244,000 for the three months ended March
31, 1999, compared to the same period in 1998. Rental income for the three
months ended March 31, 1998 was higher than usual as a result of financing
leases reaching the end of their contractual term and being renewed on a month
to month basis as well as lessees of financing leases exercising their option to
renew their lease for a fixed term in order to purchase the equipment. The
increase in rental income was also a result of settlements from defaulted
leases.
The decrease in gain on sale of equipment of $81,000 for the three
months ended March 31, 1999, compared to the same period in 1998, also
contributed to the decline in total revenues for the period. The Partnership
received proceeds from the sale of equipment of $78,000 for the three months
ended March 31, 1999, compared to $160,000 for the three months ended March 31,
1998. The Partnership sold equipment with an aggregate original cost of $3.4
million for the three months ended March 31, 1999, compared to $3.3 million for
the same period in 1998. At March 31, 1999, the Partnership owned equipment with
an aggregate original cost of $22.4 million, as compared to the $32 million of
equipment owned at March 31, 1998.
Total expenses decreased by $197,000 for the three months ended March
31, 1999, as compared to the same period in the prior year, due to decreases in
depreciation and amortization and interest expense. The decrease in depreciation
and amortization of $34,000 for the three months ended March 31, 1999, as
compared to the same period in 1998, is 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
$64,000 for the three months ended March 31, 1999, as compared to the same
7
<PAGE>
period in the previous year, is a result of a decline in the Partnership's
outstanding debt. As of March 31, 1999, the Partnership's outstanding notes
payable balance was $205,000 compared to $2.8 million as of March 31, 1998.
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 generated from leasing and financing
activities of $2,547,000 during the three months ended March 31, 1999, as
compared to $4,038,000 during the same period in 1998. 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, 1999, the Partnership invested
$938,000 in financing leases and $666,000 in notes receivable, as compared to
investments of $458,000 in financing leases and $343,000 in notes receivable
during the same period in 1998.
The Partnership owned equipment held for lease with an original cost of
$3,765,000 and a net book value of $301,000 at March 31, 1999, as compared to
$2,942,000 and $616,000 respectively at March 31, 1998. 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 $920,000 on its
outstanding debt during the three months ended March 31, 1999, as compared to
$1,238,000 during the three months ended March 31, 1998.
The cash distributed to partners during the three months ended March
31, 1999 was $942,000, as compared to $904,000 during the same period in 1998.
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 $906,000
and $868,000 in cash distributions during the three months ended March 31, 1999
and 1998, respectively. The total cumulative cash distributions to limited
partners as of March 31, 1999 was $14,508,000, as compared to $11,002,000 at
March 31, 1998. The General Partner received $36,000 during the three months
ended March 31, 1999 and 1998. The Partnership plans to make distributions to
partners during 1999 at a slightly higher rate than in 1998.
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.
Impact of the Year 2000 Issue
ReSource/Phoenix, Inc. ("ReSource/Phoenix"), an affiliate of the parent
to the General Partner does all local computer processing for the General
Partner. And as such Resource/Phoenix manages the Year 2000 project on behalf of
the General Partner.
8
<PAGE>
Resource/Phoenix has a Year 2000 project plan in place. The Year 2000
project team has identified risks, and has implemented remediation procedures
for its Year 2000 issues. ReSource/Phoenix has budgeted for the necessary
changes, built contingency plans, and has progressed along the scheduled
timeline. Installation of all remediation changes to software and hardware is
planned to be completed by September 15, 1999.
Costs incurred by the Partnership will be expensed as incurred and are
not currently anticipated to be material to the Partnership's financial position
or results of operations.
The Partnership's customers consist of lessees and borrowers. The
Partnership does not have exposure to any individual customer that would
materially impact the Partnership should the customer experience a significant
Year 2000 problem, however, cumulative exposure to multiple individual customers
could materially impact the Partnership should multiple customers experience a
significant Year 2000 problem.
9
<PAGE>
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
March 31, 1999
Part II. Other Information.
-----------------
Item 1. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing Incorporated, Phoenix Leasing Associates, II and III LP., Phoenix
Securities Inc. and Phoenix American Incorporated (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of a constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Marin Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and refiled them in a separate lawsuit
making similar allegations (the"Sacramento Action").
Plaintiffs have amended the Marin Action twice. Defendants have not yet
answered the complaint and may file a demurrer to dismiss the claims. Discovery
has not commenced. The Companies intend to vigorously defend the Complaint.
In February 1999, plaintiffs requested a transfer of the Sacramento
Action to Marin County. The Court granted that request, and the case was
transferred in March 1999. Defendants have not yet responded to the Complaint.
Discovery has not commenced. The Companies intend to vigorously defend the
Complaint.
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.
10
<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, 1999 Senior Vice President /S/ GARY W. MARTINEZ
- ------------ and a Director of --------------------
Phoenix Leasing Associates III, Inc. (Gary W. Martinez)
May 13, 1999 Chief Financial Officer, /S/ HOWARD SOLOVEI
- ------------ Treasurer and a Director of --------------------
Phoenix Leasing Associates III, Inc. (Howard Solovei)
May 13, 1999 Senior Vice President, /S/ BRYANT J. TONG
- ------------ Financial Operations of --------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Associates III, Inc.
11
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,685
<SECURITIES> 234
<RECEIVABLES> 8,902
<ALLOWANCES> 947
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,990
<DEPRECIATION> 1,689
<TOTAL-ASSETS> 20,005
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,031
<TOTAL-LIABILITY-AND-EQUITY> 20,005
<SALES> 0
<TOTAL-REVENUES> 787
<CGS> 0
<TOTAL-COSTS> 568
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 68
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 219
<INCOME-TAX> 0
<INCOME-CONTINUING> 219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 219
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
</TABLE>
