Page 1 of 11
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
__X__ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
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 0-8868
------
PHOENIX LEASING INCOME FUND 1977
- --------------------------------------------------------------------------------
Registrant
California 94-2446904
- ------------------------------ -----------------------------------
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 ____
Page 2 of 11
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX LEASING INCOME FUND 1977
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
June 30, December 31,
1996 1995
ASSETS ------ ------
Cash and cash equivalents $ 429 $ 595
Accounts receivable (net of allowance for
losses on accounts receivable of $0 and $1
at June 30, 1996 and December 31, 1995,
respectively) -- --
Notes receivable (net of allowance for losses
on notes receivable of $92 at June 30, 1996
and December 31, 1995) 707 707
Equipment on operating leases and held for lease
(net of accumulated depreciation of $15 and $31
at June 30, 1996 and December 31, 1995, respectively) -- --
Investment in joint ventures 50 64
Other assets 4 4
------ ------
Total Assets $1,190 $1,370
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 93 $ 43
------ ------
Total Liabilities 93 43
------ ------
Partners' Capital
General Partners (5) --
Limited Partners, 20,000 units authorized
and issued, 16,521 units outstanding at
June 30, 1996 and December 31, 1995 1,101 1,327
Unrealized gains on available-for-sale securities 1 --
------ ------
Total Partners' Capital 1,097 1,327
------ ------
Total Liabilities and Partners' Capital $1,190 $1,370
====== ======
The accompanying notes are an integral
part of these statements.
Page 3 of 11
PHOENIX LEASING INCOME FUND 1977
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Rental income $ 1 $ 27 $ 4 $ 32
Equity in earnings from joint
ventures, net 9 10 16 18
Interest income, notes receivable -- 108 -- 118
Other income 7 10 14 13
------ ------ ------ ------
Total Income 17 155 34 181
------ ------ ------ ------
EXPENSES
Management fees to General Partner -- 26 1 27
Liquidation fees to General Partner 1 -- 22 22
Provision for losses on receivables 1 7 -- 5
Legal expense 58 2 59 2
General and administrative expenses 8 10 18 19
------ ------ ------ ------
Total Expenses 68 45 100 75
------ ------ ------ ------
NET INCOME (LOSS) $ (51) $ 110 $ (66) $ 106
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $(2.74) $ 5.84 $(3.71) $ 5.49
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ 9.95 $ 9.95
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partners $ (6) $ 13 $ (5) $ 15
Limited Partners (45) 97 (61) 91
------ ------ ------ ------
$ (51) $ 110 $ (66) $ 106
====== ====== ====== ======
The accompanying notes are an integral
part of these statements.
Page 4 of 11
PHOENIX LEASING INCOME FUND 1977
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1996 1995
------ ------
Operating Activities:
Net income (loss) $ (66) $ 106
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Gain on sale of equipment (1) (1)
Equity in earnings from joint ventures, net (16) (18)
Provision for losses on account receivable -- 7
Provision for early termination,
financing leases -- (3)
Decrease in accounts receivable -- 2
Increase (decrease) in accounts payable
and accrued expenses 50 (16)
Gain on sale of securities (1) --
Decrease (increase) in other assets (1) 5
------ ------
Net cash provided (used) by operating activities (35) 82
------ ------
Investing Activities:
Principal payments, financing leases -- 3
Principal payments, notes receivable -- 381
Proceeds from sale of equipment 1 1
Proceeds from sale of securities 2 --
Distributions from joint ventures 30 35
------ ------
Net cash provided by investing activities 33 420
------ ------
Financing Activities:
Distributions to partners (164) (165)
------ ------
Net cash used by financing activities (164) (165)
------ ------
Increase (decrease) in cash and cash equivalents (166) 337
Cash and cash equivalents, beginning of period 595 415
------ ------
Cash and cash equivalents, end of period $ 429 $ 752
====== ======
The accompanying notes are an integral
part of these statements.
Page 5 of 11
PHOENIX LEASING INCOME FUND 1977
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 1995 amounts have been reclassified to
conform to the 1996 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 accompanying financial statements.
Note 4. Notes Receivable.
Impaired Notes Receivable. At June 30, 1996 the recorded investment in
notes that are considered to be impaired under Statement No. 114 was $798,000
for which the related allowance for losses is $92,000. The average recorded
investment in impaired loans during the six months ended June 30, 1996 was
approximately $798,000.
The activity in the allowance for losses on notes receivable during the
six months ended June 30, is as follows:
1996 1995
---- ----
(Amounts in Thousands)
Beginning balance $ 92 $ 92
Provision for losses -- --
Write downs -- --
---- ----
Ending balance $ 92 $ 92
==== ====
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Note 5. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income (loss) 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 16,521 for the six month periods
ended June 30, 1996 and 1995.
Note 6. Investment in Joint Ventures.
Equipment Joint Ventures
The aggregate combined statements of operations of the equipment joint
ventures is presented below:
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Rental income $ 533 $ 840 $ 973 $1,363
Gain on sale of equipment 111 33 205 122
Other income 34 47 73 106
------ ------ ------ ------
Total income 678 920 1,251 1,591
------ ------ ------ ------
EXPENSES
Depreciation 84 114 173 229
Lease related operating expenses 191 381 409 566
Management fees to General Partner 30 42 55 68
General and administrative expenses -- 1 5 5
------ ------ ------ ------
Total expenses 305 538 642 868
------ ------ ------ ------
Net income $ 373 $ 382 $ 609 $ 723
====== ====== ====== ======
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Financing Joint Ventures
The aggregate combined statements of operations of the financing joint
venture is presented below:
COMBINED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Interest income $ 3 $ -- $ 5 $ --
Other income 14 60 14 60
------ ------ ------ ------
Total income 17 60 19 60
------ ------ ------ ------
EXPENSES
Management fees to General Partner -- 3 -- 3
------ ------ ------ ------
Total expenses -- 3 -- 3
------ ------ ------ ------
Net income $ 17 $ 57 $ 19 $ 57
====== ====== ====== ======
Page 8 of 11
PHOENIX LEASING INCOME FUND 1977
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Phoenix Leasing Income Fund 1977 (the Partnership) reported a net loss of
$51,000 and $66,000 for the three and six months ended June 30, 1996, as
compared to net income of $110,000 and $106,000 during the same period in 1995.
The decreased earnings during 1996 is attributable to the decrease in total
revenues.
Total revenues decreased by $138,000 and $147,000 for the three and six
months ended June 30, 1996, as compared to the same periods in 1995. During the
three months ended June 30, 1995, the Partnership received a payment for the
settlement of an outstanding note receivable from a cable television system
operator that had been in default and the Partnership had suspended the accrual
of interest income. The amount received in excess of the net carrying value of
the note has been recognized as interest income. There were no such payments
during 1996.
Rental income decreased during the three and six months ended June 30,
1996, primarily as a result of the majority of the remaining equipment lease
portfolio being off lease. Because the Partnership is in its liquidation stage,
it is not expected that the Partnership will acquire additional equipment. As a
result, revenues from equipment leasing activities are expected to decline as
the portfolio is liquidated and the remaining equipment is re-leased at lower
rental rates. At June 30, 1996, the Partnership owned equipment with an
aggregate original cost, excluding the Partnership's pro rata interest in joint
ventures, of $47,000, as compared to $112,000 at June 30, 1995.
Total expenses increased by $23,000 and $25,000 for the three and six
months ended June 30, 1996, respectively, compared to the same periods in 1995.
The increase is due to an increase in legal expense, which is primarily the
result of an outstanding note receivable from a cable television system operator
that is in default. There was an overall decrease in all other expense
categories, with the largest decrease being the decrease in depreciation
expense. The decrease in depreciation expense for the three and six months ended
June 30, 1996, is due to the equipment portfolio having been fully depreciated.
Joint Ventures
The Partnership has made investments in various equipment and financing
joint ventures along with other affiliated partnerships managed by the General
Partner for the purpose of spreading the risk of investing in certain equipment
leasing and financing transactions. These joint ventures are not currently
making any significant additional investments in new equipment leasing or
financing transactions. As a result, the earnings and cash flow from such
investments are anticipated to continue to decline as the portfolios are
re-leased at lower rental rates and eventually liquidated. Earnings from joint
ventures decreased by $1,000 and $2,000 during the three and six months ended
June 30, 1996, as compared to the same periods in 1995.
Page 9 of 11
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from rental and note
receipts. The Partnership has contractual obligations from lessees and borrowers
for fixed terms at stated amounts. The Partnership also has investments in
equipment leasing and financing joint ventures in which it receives a share of
the profits. The future liquidity of the Partnership will depend upon the
General Partner's success in collecting contractual amounts owed.
The Partnership reported net cash used by leasing and financing activities
of $35,000 for the six months ended June 30, 1996, as compared to the net cash
provided by leasing and financing activities of $466,000 for the six months
ended June 30, 1995. This decrease is due to the majority of the Partnership's
assets having been liquidated. The cash flow was higher during 1995 due to the
payoff of a note receivable from a cable television system operator that had
been in default. At June 30, 1996, the Partnership has one remaining note
receivable from a cable television system operator that is in default and is not
currently providing any cash flows to the Partnership.
Distributions from joint ventures declined for the six months ended June
30, 1996, as compared to the same period in 1995. Distributions from joint
ventures consisted primarily of cash received from the Partnership's investments
in equipment joint ventures during both years.
As of June 30, 1996, the Partnership owned equipment held for lease
with a purchase price of $31,000 and a net book value of $0, compared to $47,000
and $0, respectively, at June 30, 1995. The General Partner is actively engaged,
on behalf of the Partnership, in remarketing and selling the Partnership's
off-lease equipment portfolio.
The Limited Partners received $164,000 and $165,000 in cash distributions
during the six months ended June 30, 1996 and 1995, respectively. As a result,
the cumulative cash distributions to the Limited Partners are $28,604,000 and
$28,121,000 as of June 30, 1996 and 1995, respectively. The General Partner did
not receive cash distributions, but did receive payment of liquidation fees
during the six months ended June 30, 1996 and 1995. Due to the decrease in the
cash generated by leasing operations, the Partnership is no longer making
quarterly cash distributions to Partners. Distributions are now being made on an
annual basis with the annual distribution date being January 15.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's on-going
operational expenses.
Page 10 of 11
PHOENIX LEASING INCOME FUND 1977
June 30, 1996
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: None
(27) Financial Data Schedule
b) Reports on 8-K: None
Page 11 of 11
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 INCOME FUND 1977
--------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
August 13, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- --------------- Senior Vice President ----------------------
and Treasurer of (Paritosh K. Choksi
Phoenix Leasing Incorporated
General Partner
August 13, 1996 Senior Vice President, /S/ BRYANT J. TONG
- --------------- Financial Operations ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
August 13, 1996 Partnership Controller /S/ MICHAEL K. ULYATT
- --------------- Phoenix Leasing Incorporated ----------------------
General Partner (Michael K. Ulyatt)