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 0-11168
-------
PHOENIX LEASING INCOME FUND 1981
- --------------------------------------------------------------------------------
Registrant
California 94-2735708
- --------------------- ----------------------------------
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
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 1981
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
June 30, December 31,
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 600 $ 1,127
Accounts receivable (net of allowance for
losses on accounts receivable of $1
and $4 at June 30, 1996 and December
31, 1995, respectively) 18 6
Notes receivable 11 11
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$350 and $360 at June 30, 1996 and December 31,
1995, respectively) 2 13
Investment in joint ventures 151 165
Other assets 34 32
------- -------
Total Assets $ 816 $ 1,354
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 45 $ 48
------- -------
Total Liabilities 45 48
------- -------
Partners' Capital
General Partners -- 2
Limited Partners, 25,000 units authorized, 20,883
units issued and 18,762 units outstanding at
June 30, 1996 and December 31, 1995 768 1,318
Unrealized gains (losses) on available-for-sale
securities 3 (14)
------- -------
Total Partners' Capital 771 1,306
------- -------
Total Liabilities and Partners' Capital $ 816 $ 1,354
======= =======
The accompanying notes are an integral
part of these statements.
Page 3 of 11
PHOENIX LEASING INCOME FUND 1981
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 $ 26 $ 53 $ 46 $ 75
Equity in earnings from joint ventures, net 29 37 54 58
Interest income, notes receivable -- 129 -- 129
Other income 14 23 23 37
----- ----- ---- -----
Total Income 69 242 123 299
----- ----- ---- -----
EXPENSES
Depreciation 6 6 11 12
Management fees to General Partner 3 40 5 43
Liquidation fees to General Partner (7) -- 60 70
Provision for losses on receivables -- (53) -- (53)
General and administrative expenses -- 14 25 24
----- ----- ---- -----
Total Expenses 2 7 101 96
----- ----- ---- -----
NET INCOME $ 67 $ 235 $ 22 $ 203
===== ===== ==== =====
NET INCOME PER LIMITED
PARTNERSHIP UNIT $3.21 $11.07 $.66 $9.11
===== ===== ==== =====
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $-- $-- $29.99 $29.99
===== ===== ====== ======
ALLOCATION OF NET INCOME (LOSS):
General Partners $ 7 $ 27 $ 10 $ 32
Limited Partners 60 208 12 171
----- ----- ---- -----
$ 67 $ 235 $ 22 $ 203
===== ===== ==== =====
The accompanying notes are an integral
part of these statements.
Page 4 of 11
PHOENIX LEASING INCOME FUND 1981
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1996 1995
---- ----
Operating Activities:
Net income $ 22 $ 203
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 11 12
Equity in earnings from joint ventures, net (54) (58)
Provision for losses on notes receivable -- (53)
Decrease (increase) in accounts receivable (12) 20
Decrease in accounts payable and accrued expenses (3) (46)
Gain on sale of securities (5) --
Decrease (increase) in other assets (4) 5
------- -------
Net cash provided (used) by operating activities (45) 83
------- -------
Investing Activities:
Principal payments, financing leases -- 2
Principal payments, notes receivable -- 475
Proceeds from sale of equipment -- 1
Proceeds from sale of securities 24 --
Distributions from joint ventures 68 93
------- -------
Net cash provided by investing activities 92 571
------- -------
Financing Activities:
Distributions to partners (574) (563)
------- -------
Net cash used by financing activities (574) (563)
------- -------
Increase (decrease) in cash and cash equivalents (527) 91
Cash and cash equivalents, beginning of period 1,127 1,509
------- -------
Cash and cash equivalents, end of period $ 600 $ 1,600
======= =======
The accompanying notes are an integral
part of these statements.
Page 5 of 11
PHOENIX LEASING INCOME FUND 1981
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 is $11,000
for which there is no allowance. The average recorded investment in impaired
loans during the six months ended June 30, 1996 was approximately $11,000.
Note 5. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income and distributions per limited partnership unit were based
on the limited partner's share of net income and distributions, and the weighted
average number of units outstanding of 18,762 for the six months ended June 30,
1996 and 1995. For purposes of allocating income (loss) and distributions to
each individual limited partner, the Partnership allocates net income (loss) and
distributions based upon each respective limited partner's ending capital
account balance. The use of this method accurately reflects each limited
partner's participation in the partnership including reinvestment through the
Capital Accumulation Plan. As a result the calculation of net income (loss) and
distributions per limited partnership unit is not indicative of per unit income
(loss) and distributions due to reinvestments through the Capital Accumulation
Plan.
Page 6 of 11
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 $ 734 $1,217 $1,416 $2,137
Gain on sale of equipment 295 298 543 875
Other income 35 49 76 109
------ ------ ------ ------
Total income 1,064 1,564 2,035 3,121
------ ------ ------ ------
EXPENSES
Depreciation 84 113 173 460
Lease related operating expenses 422 800 886 1,534
Management fees to General Partner 36 62 68 126
General and administrative expenses 2 4 8 11
------ ------ ------ ------
Total expenses 544 979 1,135 2,131
------ ------ ------ ------
Net income $ 520 $ 585 $ 900 $ 990
====== ====== ====== ======
Financing Joint Ventures
The aggregate combined statements of operations of the financing 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
Interest income - notes receivable $ 6 $21 $24 $ 48
Other income 16 62 18 67
--- --- --- ----
Total income 22 83 42 115
--- --- --- ----
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EXPENSES
Management fees to General Partner 1 4 1 5
General and administrative expenses 2 5 7 12
--- --- --- ---
Total expenses 3 9 8 17
--- --- --- ---
Net income $19 $74 $34 $98
=== === === ===
Foreclosed Cable System Joint Ventures
The aggregate combined statements of operations of the foreclosed cable
systems 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
Subscriber revenue $ 149 $143 $ 283 $ 289
Other income 3 1 6 3
----- ---- ----- -----
Total income 152 144 289 292
----- ---- ----- -----
EXPENSES
Depreciation and amortization $ 50 $ 48 $ 99 $ 103
Program services 48 39 92 90
Management fees to an affiliate of the
General Partner 7 6 13 13
General and administrative expenses 40 32 93 65
Provision for losses on accounts receivable 1 2 3 3
----- ---- ----- -----
Total expenses 146 127 300 274
----- ---- ----- -----
Net income before income taxes 6 17 (11) 18
Income tax benefit (expense) (3) 8 -- (8)
----- ---- ----- -----
Net income (loss) $ 3 $ 25 $ (11) $ 10
===== ==== ===== =====
Page 8 of 11
PHOENIX LEASING INCOME FUND 1981
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The Partnership reported net income of $67,000 for the three months
ended June 30, 1996, as compared to net income of $235,000 for the same period
in the preceding year. During the six months ended June 30, 1996 the Partnership
reported net income of $22,000, as compared to net income of $203,000 during the
same period in 1995. The decrease in net income during both periods in 1996, as
compared to 1995, is attributable to a decrease in total revenues.
Total revenues decreased by $173,000 and $176,000 during the three and
six months ended June 30, 1996, respectively, as compared to the same periods in
the prior year. A majority of the decrease in total revenues is a decline of
$129,000 in interest income earned from notes receivable. During the quarter
ended June 30, 1995, the Partnership received a settlement payment on a
defaulted note receivable from a cable television system operator. The amount of
the settlement that exceeded the net carrying value of this note was recognized
as interest income.
In addition to the decrease in interest income, the Partnership also
experienced a small decrease in rental income of $27,000 and $29,000 during the
three and six months ended June 30, 1996, respectively, as compared to the same
periods in 1995. The reduction in rental income is reflective of a decrease in
the size of the equipment portfolio as a result of the ongoing liquidation of
equipment. Because the Partnership is in its liquidation stage, it is not
expected to acquire any additional equipment. As a result, rental revenues are
expected to continue 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 of $553,000 compared to $624,000
at June 30, 1995.
Total expenses decreased by $5,000 for the three months ended June 30,
1996 but increased $5,000 for the six months ended June 30, 1996, as compared to
the same periods in 1995. The increase is primarily attributable to an
adjustment to the provision for losses on receivables of $53,000 made during
1995. This downward adjustment to the provision for losses on receivables, which
resulted in the recognition of income, was made upon the settlement of a
defaulted note receivable during the second quarter of 1995, as previously
discussed. Most other expense items decreased during the three and six months
ended June 30, 1996, as compared to the same period in 1995.
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
released at lower rental rates and eventually liquidated.
The earnings from joint ventures decreased by $8,000 and $4,000 for the
three and six months ended June 30, 1996, compared to the same period in 1995,
due to a decrease in rental revenues. The joint ventures also reported decreases
in expenses, however the decrease in revenues exceeded the decrease in expenses.
Page 9 of 11
Liquidity and Capital Resources
The Partnership reported net cash used by equipment leasing and
financing operations of $45,000 during the six months ended June 30, 1996, as
compared to net cash provided by equipment leasing and financing operations of
$560,000 during the same period in 1995. During the six months ended June 30,
1995 the Partnership received a settlement of a defaulted note receivable,
causing a large increase in the cash generated by equipment leasing and
financing operations.
Distributions from joint ventures decreased by $25,000 during the six
months ended June 30, 1996, due to a decrease in revenues reported by these
joint ventures. This decrease was offset by an increase of $24,000 in proceeds
from the sale of marketable securities. The proceeds from the sale of marketable
securities was attributable to the sale of a portion of the Partnership's
investment in Storage Technology common stock.
As of June 30, 1996, the Partnership owned equipment being held for
lease with a purchase price of $16,000 and a net book value of $0, compared to
$75,000 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 distributions of $563,000 and $563,000
for the periods ended June 30, 1996 and 1995, respectively. As a result, the
cumulative distributions to the Limited Partners are $20,661,000 and $19,539,000
as of June 30, 1996 and 1995, respectively. The General Partner received cash
distributions of $11,000 and $0 during the six months ended June 30, 1996 and
1995. The General Partner also received payment of certain management and
liquidation fees.
As the Partnership's asset portfolio continues to decline as a result
of the ongoing liquidation of assets, it is expected that the cash generated
from operations will also decline. Due to the decrease in cash generated by
leasing and financing activities, distributions are being made annually. The
January 1996 annual distribution was made at approximately the same rate as the
January 1995 distribution. The Partnership will reach the end of its term on
December 31, 1996 and is therefore currently in the process of liquidating its
remaining assets and liabilities. Upon termination, the Partnership will make a
final distribution to partners of any remaining cash.
The Partnership's term will expire on December 31, 1996. As a result,
the General Partner is currently in the process of liquidating the remaining
assets. The General Partner is in the process of evaluating the remaining assets
of the Partnership in order to liquidate them through public auction. Once the
assets have been liquidated, the Partnership will make a final distribution to
the partners. The General Partner plans to complete the liquidation of the
Partnership by December 31, 1996.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's ongoing
operational expenses.
Page 10 of 11
PHOENIX LEASING INCOME FUND 1981
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 1981
(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)