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, 2000
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
----- -----
1,561,372 Units of Limited Partnership Interest were outstanding as of March 31,
2000.
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,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $ 5,490 $ 4,309
Accounts receivable (net of allowance for losses on
accounts receivable of $271 and $311 at March 31,
2000 and December 31, 1999, respectively) 286 292
Notes receivable (net of allowance for losses on notes
receivable of $113 and $70 at March 31, 2000 and
December 31, 1999, respectively) 7,022 7,085
Net investment in financing leases (net of allowance
for early terminations of $77 and $52 at March 31,
2000 and December 31, 1999, respectively) 4,680 5,182
Equipment on operating leases and held for lease
(net of accumulated depreciation of $1,248 and
$1,649 at March 31, 2000 and December 31, 1999,
respectively) 298 354
Capitalized acquisition fees (net of accumulated
amortization of $2,400 and $2,335 at March 31,
2000 and December 31, 1999, respectively) 488 511
Marketable securities 1,385 2,337
Other assets 60 104
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Total Assets $19,709 $20,174
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 855 $ 900
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Total Liabilities 855 900
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Partners' Capital
General Partner 74 59
Limited Partners, 2,500,000 units authorized,
1,603,335 units issued and 1,561,372 and
1,565,029 units outstanding at March 31, 2000
and December 31, 1999, respectively 17,395 16,878
Accumulated other comprehensive income 1,385 2,337
------- -------
Total Partners' Capital 18,854 19,274
------- -------
Total Liabilities and Partners' Capital $19,709 $20,174
======= =======
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,
2000 1999
---- ----
INCOME
Earned income, financing leases $ 173 $ 264
Interest income, notes receivable 306 314
Rental income 169 155
Gain on sale of securities 1,251 --
Other income 83 54
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Total Income 1,982 787
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EXPENSES
Depreciation 21 156
Amortization of acquisition fees 65 102
Lease related operating expenses 14 26
Management fees to General Partner 68 61
Reimbursed administrative costs to General Partner 94 66
Provision for losses on receivables 90 68
Interest expense -- 19
Legal expense 94 50
General and administrative expenses 23 20
------- -------
Total Expenses 469 568
------- -------
NET INCOME 1,513 219
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains arising during period 299 45
Less: reclassification adjustment for
gains included in net income (1,251) --
------- -------
Other comprehensive income (loss) (952) 45
------- -------
COMPREHENSIVE INCOME $ 561 $ 264
======= =======
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .93 $ .12
======= =======
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ .60 $ .58
======= =======
ALLOCATION OF NET INCOME:
General Partner $ 54 $ 38
Limited Partners 1,459 181
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$ 1,513 $ 219
======= =======
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,
2000 1999
---- ----
Operating Activities:
- --------------------
Net income $ 1,513 $ 219
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21 156
Amortization of acquisition fees 65 102
Equity in losses from joint ventures, net -- 12
Gain on sale of equipment (58) (59)
Gain on sale of securities (1,251) --
Provision for early termination, financing leases 3 27
Provision for losses on notes receivable 87 41
Decrease (increase) in accounts receivable 6 (15)
Decrease in accounts payable and accrued expenses (55) (224)
Decrease in other assets 44 3
------- -------
Net cash provided by operating activities 375 262
------- -------
Investing Activities:
- --------------------
Principal payments, financing leases 771 1,472
Principal payments, notes receivable 763 813
Distributions from joint ventures -- 3
Proceeds from sale of equipment 65 78
Proceeds from sale of securities 1,251 --
Investment in financing leases (244) (938)
Investment in notes receivable (787) (666)
Payment of acquisition fees (32) (10)
------- -------
Net cash provided by investing activities 1,787 752
------- -------
Financing Activities:
- --------------------
Payments of principal, notes payable -- (920)
Redemptions of capital (3) (3)
Distributions to partners (978) (942)
------- -------
Net cash used in financing activities (981) (1,865)
------- -------
Increase (decrease) in cash and cash equivalents 1,181 (851)
Cash and cash equivalents, beginning of period 4,309 4,536
------- -------
Cash and cash equivalents, end of period $ 5,490 $ 3,685
======= =======
Supplemental Cash Flow Information:
- ----------------------------------
Cash paid for interest expense $ -- $ 19
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 1999 amounts have been reclassified to
conform to the 2000 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, 2000, the Partnership has
investments in notes receivable, before allowance for losses, of $7,135,000 of
which $284,000 is considered to be impaired. The impaired loans of $284,000 are
net of specific write-downs of $477,000. The Partnership has an allowance for
losses of $113,000 as of March 31, 2000. The average recorded investment in
impaired loans during the three months ended March 31, 2000 and 1999 was
approximately $284,000 and $301,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
2000 1999
---- ----
(Amounts In Thousands)
Beginning balance $ 70 $602
Provision for losses 87 41
Write downs (44) -
---- ----
Ending balance $113 $643
==== ====
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 1,564,090 and 1,572,956 for the three
months ended March 31, 2000 and 1999, 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 $1,513,000 during the three months ended March 31, 2000, as
compared to net income of $219,000 during the same period in 1999. The increase
in net income for the three months ended March 31, 2000 is primarily due to an
increase in gain on sale of securities offset by decreases in earned income from
financing leases and interest income from notes receivable.
The Partnership reported a gain on sale of securities of $1,251,000 for
the three months ended March 31, 2000, compared to $0 in 1999. The securities
sold for 2000 consisted of common stock received through the exercise of stock
warrants granted to the Partnership as part of financing agreements with
emerging growth companies that are publicly traded. The Partnership received
proceeds of $1,251,000 from the sale of these securities during the three months
ended March 31, 2000. In addition, at March 31, 2000, the Partnership owns
shares of stock and stock warrants in emerging growth companies that are
publicly traded with an unrealized gain of approximately $1,385,000. These stock
warrants contain certain restrictions, but are generally exercisable within one
year.
The decrease in earned income from financing leases for the three
months ended March 31, 2000 of $91,000, compared to the same period in 1999, is
a result of a decline in the Partnership's investment in financing leases. The
Partnership's net investment in financing leases was $4.7 million at March 31,
2000, as compared to $7 million at March 31, 1999. 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. During 2000, the Partnership made
new investments in financing leases of $244,000, compared to $938,000 in 1999.
Interest income from notes receivable decreased by $8,000 for the three
months ended March 31, 2000, compared to 1999. The decrease in interest income
from notes receivable is attributable to the decline in net investment in notes
receivable; however this decrease was offset by new investments made in notes
receivable during 2000 and 1999. The Partnership made new investments in notes
receivable of $787,000 and $666,000 for the three months ended March 31, 2000
and 1999, respectively.
Total expenses decreased by $99,000 for the three months ended March
31, 2000, as compared to the same period in the prior year, due to decreases in
depreciation and interest expense. The decrease in depreciation of $135,000 for
the three months ended March 31, 2000, as compared to the same period in 1999,
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 $19,000 for the three months ended March 31,
2000, as compared to the same period in the previous year, is a result of the
Partnership's outstanding debt being paid off as of December 31, 1999.
7
<PAGE>
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 $1,909,000 during the three months ended March 31, 2000, as
compared to $2,547,000 during the same period in 1999. This decrease is
reflective of the decrease in payments received from financing leases and notes
receivable, as previously discussed in the Results of Operations.
During the three months ended March 31, 2000, the Partnership invested
$244,000 in financing leases and $787,000 in notes receivable, as compared to
investments of $938,000 in financing leases and $666,000 in notes receivable
during the same period in 1999.
The Partnership owned equipment held for lease with an original cost of
$2,622,000 and a net book value of $0 at March 31, 2000, as compared to
$3,765,000 and $301,000, respectively at March 31, 1999. 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's outstanding debt was repaid as of December 31, 1999;
therefore no payments of principal were made during the three months ended March
31, 2000, as compared to $920,000 during the three months ended March 31, 1999.
The cash distributed to partners during the three months ended March
31, 2000 was $978,000, as compared to $942,000 during the same period in 1999.
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 $939,000
and $906,000 in cash distributions during the three months ended March 31, 2000
and 1999, respectively. The total cumulative cash distributions to limited
partners as of March 31, 2000 was $18,273,000, as compared to $14,508,000 at
March 31, 1999. The General Partner received $39,000 and $36,000 during the
three months ended March 31, 2000 and 1999, respectively. The Partnership plans
to make distributions to partners during 2000 at the same rate as in 1999.
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
The General Partner has appointed ResourcePhoenix.com. (RPC), an
affiliate of the General Partner, to manage its Year 2000 project.
RPC has a Year 2000 project plan in place and a "Y2K Project Team" has
been appointed. The team has identified risks, and has implemented remediation
procedures for its Year 2000 issues. RPC has budgeted for the necessary changes,
built contingency plans, and has progressed along the scheduled timeline.
8
<PAGE>
Installation of all remediation changes to critical software and hardware was
completed on November 5, 1999. As of April 30, 2000, RPC has not encountered any
material year 2000 problems with the hardware and software systems used in our
operations. In addition, none of RPC's critical vendors have reported any
material year 2000 problems nor have they experienced any decline in service
levels from such vendors.
RPC will continue to monitor internal and external issues related to
year 2000.
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.
9
<PAGE>
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
March 31, 2000
Part II. Other Information.
-----------------
Item 1. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint (the "Complaint") was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Inc. (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 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 "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and re-filed them in a separate lawsuit
making similar allegations (the "Ash Action").
In the Ash action, Plaintiffs have filed a fourth amended complaint
which includes six causes of action: breach of fiduciary duty, constructive
fraud, judicial dissolution of Cash Distribution Fund IV, judicial dissolution
of Cash Distribution Fund V, accounting and alter ego. The court sustained
Defendant's demurrers to the first four claims and Defendants have recently
answered the complaint concerning the remaining claims.
The Berger complaint relates to alleged misrepresentations made in
connection with the offering of Cash Distribution Fund V. Defendants have
answered the complaint and discovery has commenced. A class has been certified.
The Plaintiff's deposition has been taken and no other depositions are
scheduled.
The Companies intend to vigorously defend both actions.
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 12, 2000 Senior Vice President /S/ GARY W. MARTINEZ
- -------------- and a Director of --------------------
Phoenix Leasing Associates III, Inc. (Gary W. Martinez)
May 12, 2000 Vice President, Finance, /S/ ANDREW N. GREGSON
- -------------- Treasurer and a Director of ---------------------
Phoenix Leasing Associates III, Inc. (Andrew N. Gregson)
11
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,490
<SECURITIES> 1,385
<RECEIVABLES> 7,692
<ALLOWANCES> 384
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,546
<DEPRECIATION> 1,248
<TOTAL-ASSETS> 19,709
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,854
<TOTAL-LIABILITY-AND-EQUITY> 19,709
<SALES> 0
<TOTAL-REVENUES> 1,982
<CGS> 0
<TOTAL-COSTS> 469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,513
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,513
<EPS-BASIC> .93
<EPS-DILUTED> 0
</TABLE>
