Page 1 of 11
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ------- ACT OF 1934
For the quarterly period ended September 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)
September 30, December 31,
1996 1995
------ ------
ASSETS
Cash and cash equivalents $ 651 $1,127
Accounts receivable (net of allowance for
losses on accounts receivable of $1 and
$4 at September 30, 1996 and December 31,
1995, respectively) -- 6
Notes receivable 11 11
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$352 and $360 at September 30, 1996 and
December 31, 1995, respectively) -- 13
Investment in joint ventures 153 165
Other assets 35 32
------ ------
Total Assets $ 850 $1,354
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 40 $ 48
------ ------
Total Liabilities 40 48
------ ------
Partners' Capital
General Partners -- 2
Limited Partners, 25,000 units authorized,
20,883 units issued and 18,762 units
outstanding at September 30, 1996 and
December 31, 1995 808 1,318
Unrealized gains (losses) on available-for-
sale securities 2 (14)
------ ------
Total Partners' Capital 810 1,306
------ ------
Total Liabilities and Partners' Capital $ 850 $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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Rental income $ 14 $ 21 $ 60 $ 96
Equity in earnings from joint
ventures, net 27 34 81 92
Interest income, notes receivable -- -- -- 129
Other income 11 24 34 61
------ ------ ------ ------
Total Income 52 79 175 378
------ ------ ------ ------
EXPENSES
Depreciation 2 6 13 18
Management fees to General Partner 1 2 6 45
Liquidation fees to General Partner (4) -- 55 70
Recovery of losses on receivables -- -- -- (53)
General and administrative expenses 9 10 35 34
------ ------ ------ ------
Total Expenses 8 18 109 114
------ ------ ------ ------
NET INCOME $ 44 $ 61 $ 66 $ 264
====== ====== ====== ======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 2.10 $ 2.87 $ 2.76 $11.98
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $29.99 $29.99
====== ====== ====== ======
ALLOCATION OF NET INCOME:
General Partners $ 4 $ 7 $ 14 $ 39
Limited Partners 40 54 52 225
------ ------ ------ ------
$ 44 $ 61 $ 66 $ 264
====== ====== ====== ======
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)
Nine Months Ended
September 30,
1996 1995
------ ------
Operating Activities:
Net income $ 66 $ 264
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation 13 18
Gain on sale of marketable securities (5) --
Equity in earnings from joint ventures, net (81) (92)
Recovery of losses on notes receivable -- (53)
Decrease in accounts receivable 6 17
Decrease in accounts payable and accrued expenses (8) (66)
Decrease (increase) in other assets (6) 7
------ ------
Net cash provided (used) by operating activities (15) 95
------ ------
Investing Activities:
Principal payments, financing leases -- 2
Principal payments, notes receivable -- 476
Proceeds from sale of equipment -- 1
Proceeds from sale of marketable securities 24 --
Distributions from joint ventures 93 152
------ ------
Net cash provided by investing activities 117 631
------ ------
Financing Activities:
Distributions to partners (578) (563)
------ ------
Net cash used by financing activities (578) (563)
------ ------
Increase (decrease) in cash and cash equivalents (476) 163
Cash and cash equivalents, beginning of period 1,127 1,509
------ ------
Cash and cash equivalents, end of period $ 651 $1,672
====== ======
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 September 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 nine months ended September 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 nine months ended
September 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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Rental income $ 631 $1,065 $2,047 $3,201
Gain on sale of equipment 159 397 702 1,273
Other income 31 571 107 680
------ ------ ------ ------
Total income 821 2,033 2,856 5,154
------ ------ ------ ------
EXPENSES
Depreciation 81 629 254 1,089
Lease related operating expenses 283 711 1,169 2,245
Management fees to General Partner 33 94 101 220
General and administrative expenses 3 5 11 16
------ ------ ------ ------
Total expenses 400 1,439 1,535 3,570
------ ------ ------ ------
Net income $ 421 $ 594 $1,321 $1,584
====== ====== ====== ======
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Interest income - notes receivable $ 9 $ 14 $ 32 $ 62
Other income 6 7 24 74
------ ------ ------ ------
Total income 15 21 56 136
------ ------ ------ ------
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EXPENSES
Management fees to General Partner 1 2 2 7
General and administrative expenses 2 3 9 15
------ ------ ------ ------
Total expenses 3 5 11 22
------ ------ ------ ------
Net income $ 12 $ 16 $ 45 $ 114
====== ====== ====== ======
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
INCOME
Subscriber revenue $ 142 $ 151 $ 424 $ 440
Other income 14 1 14 4
------ ------ ------ ------
Total income 156 152 438 444
------ ------ ------ ------
EXPENSES
Depreciation and amortization 51 48 149 152
Program services 45 46 138 136
Management fees to an affiliate of the
General Partner 7 7 19 20
Provision for losses on accounts
receivable 1 2 4 4
General and administrative expenses 38 35 125 100
------ ------ ------ ------
Total expenses 142 138 435 412
------ ------ ------ ------
Net income before income taxes 14 14 3 32
Income tax expense (3) (5) (2) (13)
------ ------ ------ ------
Net income $ 11 $ 9 $ 1 $ 19
====== ====== ====== ======
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 $44,000 for the three months ended
September 30, 1996, as compared to net income of $61,000 for the same period in
the preceding year. During the nine months ended September 30, 1996 the
Partnership reported net income of $66,000, as compared to net income of
$264,000 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 $27,000 and $203,000 during the three and nine
months ended September 30, 1996, respectively, as compared to the same periods
in the prior year. The Partnership experienced an overall decrease in all income
items during the three and nine months ended September 30, 1996, when compared
to the same period in 1995. A majority of the decrease in total revenues during
the nine months ended September 30, 1996 is a decline of $129,000 in interest
income earned from notes receivable, as compared to the same period in 1995.
During the nine months ended September 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.
The overall decrease in revenues is attributable to a reduction 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 September 30, 1996, the
Partnership owned equipment with an aggregate original cost of $537,000 compared
to $602,000 at September 30, 1995.
Total expenses decreased by $10,000 and $5,000 for the three and nine
months ended September 30, 1996, respectively, as compared to the same periods
in 1995. Most expense items decreased during the three and nine months ended
September 30, 1996, as compared to the same periods 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
re-leased at lower rental rates and eventually liquidated.
The earnings from joint ventures decreased by $7,000 and $11,000 for the
three and nine months ended September 30, 1996, compared to the same periods 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 $15,000 during the nine months ended September 30, 1996, as
compared to net cash provided by equipment leasing and financing operations of
$573,000 during the same period in 1995. During the nine months ended September
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. There were no such note receivable payoffs during the nine
months ended September 30, 1996.
Distributions from joint ventures decreased by $59,000 during the nine
months ended September 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 September 30, 1996, the Partnership owned equipment being held for
lease with a purchase price of $185,000 and a net book value of $0, compared to
$53,000 and $0, respectively at September 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 for the periods
ended September 30, 1996 and 1995. As a result, the cumulative distributions to
the Limited Partners are $20,661,000 and $19,539,000 as of September 30, 1996
and 1995, respectively. The General Partner received cash distributions of
$15,000 and $0 during the nine months ended September 30, 1996 and 1995. In
addition to cash distributions, the General Partner also received payment of
liquidation fees in the amount of $55,000 and $70,000 during the nine months
ended September 30, 1996 and 1995, respectively.
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'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
September 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:
(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
---- ----- ---------
November 12, 1996 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- --------------------- Senior Vice President ----------------------
and Treasurer of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 12, 1996 Senior Vice President, /S/ BRYANT J. TONG
- --------------------- Financial Operations ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
November 12, 1996 Senior Vice President /S/ GARY W. MARTINEZ
- --------------------- Phoenix Leasing Incorporated ----------------------
General Partner (Gary W. Martinez)
November 12, 1996 Partnership Controller /S/ MICHAEL K. ULYATT
- --------------------- Phoenix Leasing Incorporated ----------------------
General Partner (Michael K. Ulyatt)