UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 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.
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Registrant
California 68-0293258
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State of Jurisdiction I.R.S. Employer Identification No.
2401 Kerner Boulevard, San Rafael, California 94901-5527
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Address of Principal Executive Offices Zip Code
Registrant's telephone number, including area code: (415) 485-4500
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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
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1,552,476 Units of Limited Partnership Interest were outstanding as of September
30, 2000.
Transitional small business disclosure format:
Yes No X
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Page 1 of 10
<PAGE>
Part I. Financial Information
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Item 1. Financial Statements
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $ 6,244 $ 4,309
Accounts receivable (net of allowance for losses
on accounts receivable of $173 and $311 at
September 30, 2000 and December 31, 1999,
respectively) 444 292
Notes receivable (net of allowance for losses on
notes receivable of $59 and $70 at September 30,
2000 and December 31, 1999, respectively) 5,969 7,085
Net investment in financing leases (net of
allowance for early terminations of $51 and $52
at September 30, 2000 and December 31, 1999,
respectively) 5,015 5,182
Equipment on operating leases and held for lease (net
of accumulated depreciation of $1,099 and $1,649
at September 30, 2000 and December 31, 1999,
respectively) 254 354
Capitalized acquisition fees (net of accumulated
amortization of $2,559 and $2,335 at September 30,
2000 and December 31, 1999, respectively) 456 511
Marketable securities 211 2,337
Other assets 61 104
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Total Assets $18,654 $20,174
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 953 $ 900
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Total Liabilities 953 900
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Partners' Capital
General Partner 94 59
Limited Partners, 2,500,000 units authorized,
1,603,335 units issued and 1,552,476 and
1,565,029 units outstanding at September 30,
2000 and December 31, 1999, respectively 17,396 16,878
Accumulated other comprehensive income 211 2,337
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Total Partners' Capital 17,701 19,274
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Total Liabilities and Partners' Capital $18,654 $20,174
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The accompanying notes are an integral part of these statements.
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<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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
INCOME
Earned income, financing leases $ 202 $ 231 $ 555 $ 742
Interest income, notes receivable 426 482 1,068 1,106
Rental income 87 158 283 435
Gain on sale of equipment 17 136 259 259
Gain on sale of securities 479 7 2,354 282
Other income 99 56 283 129
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Total Income 1,310 1,070 4,802 2,953
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EXPENSES
Depreciation 25 123 90 506
Amortization of acquisition fees 74 79 223 278
Lease related operating expenses 1 4 25 51
Management fees to General Partner 61 54 194 176
Reimbursed administrative costs to
General Partner 80 54 219 187
Provision for (recovery of) losses
on receivables (3) 202 226 336
Interest expense -- 3 -- 25
Legal expense 34 49 161 159
General and administrative expenses 15 29 58 72
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Total Expenses 287 597 1,196 1,790
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NET INCOME 1,023 473 3,606 1,163
Other comprehensive income:
Unrealized gains (losses) on
securities:
Unrealized holding gains arising
during period 41 221 228 309
Less: reclassification adjustment
for gains included in net
income (479) (7) (2,354) (282)
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Other comprehensive income (438) 214 (2,126) 27
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COMPREHENSIVE INCOME $ 585 $ 687 $ 1,480 $ 1,190
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .63 $ .27 $ 2.22 $ .66
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ .60 $ .60 $ 1.80 $ 1.78
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ 50 $ 43 $ 152 $ 125
Limited Partners 973 430 3,454 1,038
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$ 1,023 $ 473 $ 3,606 $ 1,163
======= ======= ======= =======
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)
Nine Months Ended
September 30,
2000 1999
---- ----
Operating Activities:
--------------------
Net income $ 3,606 $ 1,163
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 90 506
Amortization of acquisition fees 223 278
Gain on sale of equipment (259) (259)
Gain on sale of securities (2,354) (282)
Equity in losses from joint ventures, net -- 38
Provision for (recovery of) early termination,
financing leases (9) 152
Provision for losses on accounts receivable 71 59
Provision for losses on notes receivable 164 125
Increase in accounts receivable (223) (56)
Decrease in accounts payable and accrued expenses (2) (128)
Decrease in other assets 43 7
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Net cash provided by operating activities 1,350 1,603
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Investing Activities:
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Principal payments, financing leases 2,124 3,577
Principal payments, notes receivable 2,976 2,385
Proceeds from sale of equipment 491 283
Proceeds from sale of securities 2,354 282
Distributions from joint ventures -- 62
Investment in financing leases (2,170) (2,603)
Investment in notes receivable (2,024) (2,711)
Payment of acquisition fees (113) (117)
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Net cash provided by investing activities 3,638 1,158
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Financing Activities:
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Payments of principal, notes payable -- (1,045)
Redemptions of capital (129) (41)
Distributions to partners (2,924) (2,908)
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Net cash used in financing activities (3,053) (3,994)
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Increase (decrease) in cash and cash equivalents 1,935 (1,233)
Cash and cash equivalents, beginning of period 4,309 4,536
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Cash and cash equivalents, end of period $ 6,244 $ 3,303
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Supplemental Cash Flow Information:
Cash paid for interest expense $ -- $ 25
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.
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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.
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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 September 30, 2000, the Partnership has
investments in notes receivable, before allowance for losses, of $6,028,000 of
which $226,000 is considered to be impaired. The impaired loans of $226,000 are
net of specific write-downs of $381,000. The Partnership has an allowance for
losses of $59,000 as of September 30, 2000. The average recorded investment in
impaired loans during the nine months ended September 30, 2000 and 1999 was
approximately $276,000 and $475,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
2000 1999
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(Amounts In Thousands)
Beginning balance $ 70 $ 602
Provision for losses 164 125
Write downs (175) (276)
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Ending balance $ 59 $ 451
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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 1,558,501 and 1,572,152 for the nine
months ended September 30, 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
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of Operations.
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Results of Operations
Phoenix Leasing American Business Fund, L.P. (the Partnership) reported
net income of $1,023,000 and $3,606,000 during the three and nine months ended
September 30, 2000, as compared to net income of $473,000 and $1,163,000 during
the same periods in 1999. The increase in net income for the three and nine
months ended September 30, 2000, is primarily due to an increase in gain on sale
securities and by decreases in a majority of the expense items.
The Partnership reported a gain on sale of securities of $479,000 and
$2,354,000 for the three and nine months ended September 30, 2000, respectively,
compared to $7,000 and $282,000 for the same periods 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 $2,354,000 and $282,000 from the sale of these securities during the
nine months ended September 30, 2000 and 1999, respectively. In addition, at
September 30, 2000, the Partnership owns shares of stock and stock warrants in
emerging growth companies that are publicly traded with an unrealized gain of
approximately $211,000. These stock warrants contain certain restrictions, but
are generally exercisable within one year.
Earned income from financing leases and rental income decreased. The
decrease in earned income from financing leases for the three and nine months
ended September 30, 2000 of $29,000 and $187,000, respectively, compared to the
same periods 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 $5
million at September 30, 2000, as compared to $6 million at September 30, 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 the investment of the excess cash flows of the Partnership in new
leasing and financing transactions. During 2000, the Partnership made new
investments in financing leases of $2.2 million, compared to $2.6 million in
1999.
Rental income decreased by $71,000 and $152,000 for the three and nine
months ended September 30, 2000, compared to the same period in 1999. Rental
income for the three and nine months ended September 30, 1999 was higher 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.
Total expenses decreased by $310,000 and $594,000 during the three and
nine months ended September 30, 2000, respectively, as compared to the same
period in 1999. The decrease in total expenses for the three and nine months
ended September 30, 2000, compared to the same period in the previous year, is
due to a decrease in nearly all of the items comprising total expenses, with
depreciation expense contributing the largest decrease. This decrease in
deprecation is the result of the continued decrease in the size of the equipment
portfolio. Depreciation expense decreased $98,000 and $416,000 during the three
7
<PAGE>
and nine months ended September 30, 2000, respectively, compared to 1999. This
decrease is due to a decline in the amount of depreciable equipment owned by the
Partnership, as well as, an increasing portion of the equipment owned by the
Partnership becoming fully depreciated.
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 $6,450,000 during the nine months ended September 30, 2000, as
compared to $7,565,000 during the same period in 1999. This decrease is
reflective of the decrease in payments received from financing leases, as
previously discussed in the Results of Operations.
During the nine months ended September 30, 2000, the Partnership
invested $2,170,000 in financing leases and $2,024,000 in notes receivable, as
compared to investments of $2,603,000 in financing leases and $2,711,000 in
notes receivable during the same period in 1999.
The Partnership owned equipment held for lease with an original cost of
$2,226,000 and a net book value of $2,000 at September 30, 2000, as compared to
$2,708,000 and $96,000, respectively, at September 30, 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 nine months ended
September 30, 2000, as compared to $1,045,000 during the nine months ended
September 30, 1999.
The cash distributed to partners during the nine months ended September
30, 2000 was $2,924,000, as compared to $2,908,000 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
$2,807,000 and $2,793,000 in cash distributions during the nine months ended
September 30, 2000 and 1999, respectively. The total cumulative cash
distributions to limited partners as of September 30, 2000 was $20,141,000, as
compared to $16,395,000 at September 30, 1999. The General Partner received
$117,000 and $115,000 during the nine months ended September 30, 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.
8
<PAGE>
PHOENIX LEASING AMERICAN BUSINESS FUND, L.P.
September 30, 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").
The Ash complaint 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.
Defendants recently answered the complaint and discovery has commenced. The
plaintiffs' depositions have been taken, and plaintiffs recently took
depositions of defendants.
The Berger complaint relates to alleged misrepresentations made in
connection with the offering of Cash Distribution V. Defendants have answered
the complaint and discovery has commenced. A class has been certified. The
plaintiffs' depositions have been taken, and plaintiffs recently took
depositions of defendants.
On August 28, 2000, the Ash and Berger actions were consolidated (the
"Consolidated Action") pursuant to stipulation by both parties. Plaintiffs
recently served a first request for production in the Consolidated Action;
defendants will respond to the first request for production on November 22,
2000.
The Companies intend to vigorously defend the Consolidated Action.
Item 2. Changes in Securities. Inapplicable
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Item 3. Defaults Upon Senior Securities. Inapplicable
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Item 4. Submission of Matters to a Vote of Securities Holders. Inapplicable
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Item 5. Other Information. Inapplicable
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Item 6. Exhibits and Reports on 8-K:
---------------------------
a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None.
9
<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
---- ----- ---------
November 13, 2000 Senior Vice President /S/ GARY W. MARTINEZ
----------------- and a Director of --------------------
Phoenix Leasing Associates III, Inc. (Gary W. Martinez)
November 13, 2000 Vice President, Finance, /S/ ANDREW N. GREGSON
----------------- Treasurer and a Director of ---------------------
Phoenix Leasing Associates III, Inc. (Andrew N. Gregson)
10
