Page 1 of 10
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 June 30, 1997
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
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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
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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 _____
16,521 Units of Limited Partnership Interest were outstanding as of June 30,
1997.
Transitional small business disclosure format:
Yes _____ No __X__
Page 2 of 10
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,
ASSETS 1997 1996
---- ----
Cash and cash equivalents $ 347 $ 369
Accounts receivable -- 17
Notes receivable (net of allowance for
losses on notes receivable of $274 at
June 30, 1997 and December 31, 1996) 525 525
Equipment on operating leases and held for
lease (net of accumulated depreciation of
$15 at June 30, 1997 and December 31, 1996) -- --
Investment in joint ventures 35 44
Other assets 6 4
----- -----
Total Assets $ 913 $ 959
===== =====
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 24 $ 39
----- -----
Total Liabilities 24 39
----- -----
Partners' Capital
General Partners (29) (26)
Limited Partners, 20,000 units authorized and
issued, 16,521 units outstanding at June 30,
1997 and December 31, 1996 917 945
Unrealized gains on available-for-sale securities 1 1
----- -----
Total Partners' Capital 889 920
----- -----
Total Liabilities and Partners' Capital $ 913 $ 959
===== =====
The accompanying notes are an integral part of these statements.
Page 3 of 10
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,
1997 1996 1997 1996
---- ---- ---- ----
INCOME
Rental income $ 2 $ 1 $ 3 $ 4
Equity in earnings from joint ventures, net 10 9 13 16
Interest income - notes receivable -- -- 4 --
Interest income 5 6 10 12
Other income 1 1 9 2
------ ------ ------ ------
Total Income 18 17 39 34
------ ------ ------ ------
EXPENSES
Lease related operating expenses -- -- 1 --
Management fees to General Partner -- -- 1 1
Liquidation fees to General Partner -- 1 -- 22
Legal expense 26 58 55 59
Provision for losses on receivables -- 1 -- --
General and administrative expenses 6 8 13 18
------ ------ ------ ------
Total Expenses 32 68 70 100
------ ------ ------ ------
NET LOSS $ (14) $ (51) $ (31) $ (66)
====== ====== ====== ======
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (.77) $(2.74) $(1.66) $(3.71)
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ -- $ 9.95
====== ====== ====== ======
ALLOCATION OF NET LOSS:
General Partners $ (2) $ (6) $ (4) $ (5)
Limited Partners (12) (45) (27) (61)
------ ------ ------ ------
$ (14) $ (51) $ (31) $ (66)
====== ====== ====== ======
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING INCOME FUND 1977
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1997 1996
---- ----
Operating Activities:
Net loss $ (31) $ (66)
Adjustments to reconcile net loss to net
cash used by operating activities:
Gain on sale of equipment (1) (1)
Equity in earnings from joint ventures, net (13) (16)
Gain on sale of securities -- (1)
Decrease in accounts receivable 17 --
Increase (decrease) in accounts payable
and accrued expenses (15) 50
Increase in other assets (2) (1)
----- -----
Net cash used by operating activities (45) (35)
----- -----
Investing Activities:
Proceeds from sale of equipment 1 1
Proceeds from sale of securities -- 2
Distributions from joint ventures 22 30
----- -----
Net cash provided by investing activities 23 33
----- -----
Financing Activities:
Distributions to partners -- (164)
----- -----
Net cash used by financing activities -- (164)
----- -----
Decrease in cash and cash equivalents (22) (166)
Cash and cash equivalents, beginning of period 369 595
----- -----
Cash and cash equivalents, end of period $ 347 $ 429
===== =====
The accompanying notes are an integral part of these statements.
Page 5 of 10
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 1996 amounts have been reclassified to
conform to the 1997 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, 1997 and 1996, the recorded
investment in notes that are considered to be impaired was $798,000 for which
the related allowance for losses was $274,000 and $92,000, respectively. The
average recorded investment in impaired loans during the six months ended June
30, 1997 and 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:
1997 1996
---- ----
(Amounts in Thousands)
Beginning balance $ 274 $ 92
Provision for losses - -
Write downs - -
--------- ---------
Ending balance $ 274 $ 92
========= =========
Note 5. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net loss and distributions per limited partnership unit were based on
the limited partners' share of net loss and distributions, and the weighted
average number of units outstanding of 16,521 for the six month periods ended
June 30, 1997 and 1996.
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Note 6. Investment in Joint Ventures.
Equipment Joint Ventures
The aggregate combined financial information of the equipment joint
ventures is presented below:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 2,304 $ 2,700
Liabilities 425 372
Partners' Capital 1,879 2,328
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 466 $ 678 $ 952 $ 1,251
Expenses 252 305 461 642
Net Income 214 373 491 609
Financing Joint Ventures
The aggregate combined financial information of the financing
joint ventures is presented below:
June 30, December 31,
1997 1996
---- ----
(Amounts in Thousands)
Assets $ 10 $ 17
Liabilities - -
Partners' Capital 10 17
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ - $ 18 $ 6 $ 20
Expenses - 1 1 1
Net Income - 17 5 19
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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
$14,000 and $31,000 for the three and six months ended June 30, 1997,
respectively, as compared to a net loss of $51,000 and $66,000 during the same
periods in 1996. The improvement in earnings for the three months ended June 30,
1997, compared to the prior year, is a result of a reduction in legal expenses.
The improvement in earnings for the six months ended June 30, 1997 is
attributable to the absence of liquidation fees as compared to $22,000 in the
prior year.
Total revenues increased by $1,000 and $5,000 for the three and six months
ended June 30, 1997, respectively, compared to the same periods in 1996. The
improvement in total revenues for the six months ended June 30, 1997, as
compared to the same period in 1996, is due to the recognition of interest
income from notes receivable of $4,000. During the six months ended June 30,
1997, the Partnership received a disbursement of proceeds which were held in
escrow for a note receivable which was paid off in 1995. In 1995, a portion of
the proceeds from the payoff of this note receivable was placed in escrow to
cover unanticipated liabilities which may have arisen after the payoff.
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. The Partnership will reach the end of its term on December 31, 1997,
at which time it will liquidate its remaining assets, pay its remaining
liabilities and distribute the remaining cash, if any, to the limited partners.
At June 30, 1997, the Partnership owned equipment with an aggregate original
cost, excluding the Partnership's pro rata interest in joint ventures, of
$31,000 at June 30, 1997, compared to $47,000 at June 30, 1996.
Total expenses decreased by $36,000 and $30,000 for the three and six
months ended June 30, 1997, respectively, compared to the same periods in 1996.
The decline in total expenses experienced during the quarter ended June 30,
1997, compared 1996, is a result of a decrease in legal expenses of $32,000.
However, legal expenses remained relatively the same for the six months ended
June 30, 1997 as compared to the same period in 1996. The Partnership's legal
expenses are primarily related to a default on the Partnership's one remaining
outstanding note receivable.
The decline in total expenses of $30,000 for the six months ended June 30,
1997, compared to the same period in 1996, is primarily due to the absence of
liquidation fees to the General Partner compared to $22,000 in the prior year.
The absence of liquidation fees to the General Partner is a result of no further
distribution to partners being made until the termination of the Partnership.
Distributions in excess of the General Partner's capital account are considered
to be liquidation fees.
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. Earnings from joint
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ventures are $10,000 and $13,000 for the three and six months ended June 30,
1997, respectively, compared to $9,000 and $16,000 during the same periods in
1996. The slight decrease in earnings from joint ventures for the six months
ended June 30, 1997, as compared to 1996, is a result of one equipment joint
venture experiencing a decline in rental income and a decreased gain on sale of
equipment.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from its contractual
obligations with lessees and borrowers for fixed terms at fixed payment amounts.
The Partnership also has investments in equipment leasing and financing joint
ventures in which it receives a share of the profits and receives cash
distributions. 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 $45,000 for the six months ended June 30, 1997, as compared to $35,000 for
the same period in 1996. This increase in net cash used is due to a decrease in
accounts payable and accrued expenses. This is partially offset by the absence
of liquidation fees to the General Partner and a decrease in accounts
receivable.
Distributions from joint ventures decreased by $8,000 for the six months
ended June 30, 1997, compared to the same period in 1996. The decline in
distributions is attributable to the closure of one equipment joint venture, and
a decline in rental income and proceeds from sale of equipment in another
equipment joint venture.
The Partnership owned equipment held for lease with a purchase price of
$31,000 and a net book value of $0 at June 30, 1997 and 1996. 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 $0 and $164,000 in cash distributions during
the six months ended June 30, 1997 and 1996, respectively. As a result, the
cumulative cash distributions to the Limited Partners are $28,604,000 as of June
30, 1997 and 1996. The General Partner did not receive cash distributions during
the six months ended June 30, 1997 and 1996. Accordingly, the General Partner
did not receive any payments of liquidation fees during the six months ended
June 30, 1997, but did receive a payment of liquidation fees of $22,000 during
the six months ended June 30, 1996. Due to the decrease in the cash generated by
leasing operations, the Partnership is no longer making quarterly cash
distributions to Partners. Distributions were being made on an annual basis with
the annual distribution date being January 15. However, since the Partnership is
closing this year the next distribution to partners is expected to be made at
the termination of the Partnership. The amount of the distribution will be
dependent upon the amount of cash available after the Partnership liquidates its
remaining assets and liabilities. The Partnership will reach the end of its term
on December 31, 1997.
The General Partner is entitled to 11.688% of all cash distributions.
Distributions in excess of the General Partners' capital account are
characterized as liquidation fees. The total liquidation fee paid to the General
Partner will not exceed 11.688% of the sum of the net contributed capital and
cumulative net profits and losses. The fee represents an expense of the
Partnership and is specially allocated to the Limited Partners.
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.
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PHOENIX LEASING INCOME FUND 1977
June 30, 1997
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 10 of 10
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, 1997 Senior Vice President /S/ GARY W. MARTINEZ
----------------- and a Director of ----------------------
Phoenix Leasing Incorporated (Gary W. Martinez)
General Partner
August 13, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
----------------- Senior Vice President, ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
August 13, 1997 Senior Vice President, /S/ BRYANT J. TONG
----------------- Financial Operations of ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
August 13, 1997 Partnership Controller of /S/ MICHAEL K. ULYATT
----------------- Phoenix Leasing Incorporated ----------------------
General Partner (Michael K. Ulyatt)