-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AdaM6Refd7L1qQmQehr8iGf53a13DyFLWwLMxhDFoV98lJ+nk4AyHjPDXKl5YYHy s8+k5WGcB2DNsXgdipQ6hg== 0000948524-97-000016.txt : 19970329 0000948524-97-000016.hdr.sgml : 19970329 ACCESSION NUMBER: 0000948524-97-000016 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHOENIX LEASING GROWTH FUND 1982 CENTRAL INDEX KEY: 0000356225 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 942735710 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11170 FILM NUMBER: 97566568 BUSINESS ADDRESS: STREET 1: 2401 KERNER BLVD CITY: SAN RAFAEL STATE: CA ZIP: 94901 BUSINESS PHONE: 4154854500 10-K 1 DECEMBER 31, 1996 10K Page 1 of 29 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - ----- ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1996 Commission File Number 0-11170 PHOENIX LEASING GROWTH FUND 1982 - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) California 94-2735710 - ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 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 ------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ________ 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 ___ As of December 31, 1996, 40,343 Units of Limited Partnership interest were outstanding. No market exists for the Units of Partnership interest and therefore there exists no aggregate market value at December 31, 1996. DOCUMENTS INCORPORATED BY REFERENCE: NONE Page 2 of 29 PHOENIX LEASING GROWTH FUND 1982 1996 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS Page PART I Item 1. Business............................................... 3 Item 2. Properties............................................. 4 Item 3. Legal Proceedings...................................... 4 Item 4. Submission of Matters to a Vote of Security Holders.... 4 PART II Item 5. Market for the Registrant's Securities and Related Security Holder Matters................................ 5 Item 6. Selected Financial Data................................ 5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 6 Item 8. Financial Statements and Supplementary Data............ 8 Item 9. Disagreements on Accounting and Financial Disclosure Matters................................................ 25 PART III Item 10. Directors and Executive Officers of the Registrant..... 25 Item 11. Executive Compensation................................. 26 Item 12. Security Ownership of Certain Beneficial Owners and Management......................................... 26 Item 13. Certain Relationships and Related Transactions......... 26 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................................ 27 Signatures........................................................... 28 Page 3 of 29 PART I Item 1. Business. Summary of Business Activities. Phoenix Leasing Growth Fund 1982, a California limited partnership (the "Partnership"), was organized on September 11, 1980. The Partnership was registered with the Securities and Exchange Commission with an effective date of February 1, 1982 and shall continue to operate until its termination date unless dissolved sooner due to the sale of substantially all of the assets of the Partnership or a vote of the Limited Partners. The Partnership will terminate on December 31, 1997. The General Partner is Phoenix Leasing Incorporated, a California corporation. The General Partner or its affiliates also is or has been a general partner in several other limited partnerships formed to invest in capital equipment and other assets. The initial public offering was for 44,000 units of limited partnership interest at a price of $1,000 per unit. The Partnership sold 41,798 units for a total capitalization of $41,798,000. Of the proceeds received through the offering, the Partnership has incurred $4,856,000 in organizational and offering expenses. From the initial formation of the Partnership through December 31, 1996, the total investments in equipment leases and financing transactions (loans), including the Partnership's pro rata interest in investments made by joint ventures, approximate $103,077,000. The average initial firm term of contractual payments from equipment subject to lease was 30.90 months, and the average initial net monthly payment rate as a percentage of the original purchase price was 3.11%. The average initial firm term of contractual payments from loans was 66.3 months. The Partnership's principal objective is to produce current income and to build and maintain a balanced portfolio of assets through the investment and financing in various types of capital equipment including computer peripherals, terminal systems, small computer systems, communications equipment, IBM-software compatible mainframes, office systems and telecommunications equipment and to lease such equipment and products to third parties pursuant to either Operating Leases or Full Payout Leases. The Partnership has incurred debt to finance the purchase of equipment, but the aggregate amount of outstanding debt for all equipment will not exceed, at any time, the aggregate amount of net proceeds of this offering. The principal markets for the types of equipment in which the Partnership has invested in have been and will be (1) major corporations and other large organizations seeking to reduce the cost of their peripheral equipment and large computer systems, (2) major corporations with numerous operating locations seeking to improve the timeliness and responsiveness of their data processing systems, and (3) small organizations interested in improving the efficiency of their overall operations by moving from manually operated to small computer-based management systems. In addition to acquiring equipment for lease to third parties, the Partnership either directly or through the investment in joint ventures, has provided limited financing to certain emerging growth companies, cable television system operators, manufacturers and their lessees with respect to equipment leased directly by such manufacturers to third parties. The Partnership maintains a security interest in the assets financed and in the receivables due under any lease or rental agreement relating to such assets. Such security interests will give the Partnership the right, upon default, to obtain possession of the assets. Competition. The equipment leasing industry is highly competitive. Leases are offered on a wide variety of equipment ranging from construction equipment to entire manufacturing facilities. The equipment leasing industry offers to users an alternative to the purchase of nearly every type of equipment. The General Partner intends to concentrate the Partnership's activities, however, in markets in which the General Partner has expertise. The computer equipment industry is extremely competitive. Competitive factors include pricing, technological innovation and methods of financing (including use of various short-term and long-term financing plans, as well as the outright purchase of equipment). There is strong competition in non-computer related equipment markets in which the Partnership will engage as well. There is, however, no single dominant company or factor in those other markets. Page 4 of 29 Other. A brief description of the type of assets in which the Partnership has invested as of December 31, 1996, together with information concerning the uses of assets is set forth in Item 2. Item 2. Properties. The Partnership is engaged in the equipment leasing and financing industry and as such, does not own or operate any principal plants, mines or real property. The primary assets held by the Partnership are its investments in leases and loans either directly or through its investment in joint ventures. As of December 31, 1996, the Partnership owns equipment and has outstanding loans to borrowers with an aggregate original cost of $3,084,000. The equipment and loans have been made to customers located throughout the United States. The following table summarizes the type of equipment owned or financed by the Partnership, including its pro rata interest in joint ventures, at December 31, 1996. Percentage of Asset Types Purchase Price(1) Total Assets ----------- ----------------- ------------ (Amounts in Thousands) Financing of Solar Systems $2,351 76% Reproduction 476 16 Telecommunications 250 8 Small Computer Systems 7 -- ------ ---- TOTAL $3,084 100% ====== ==== (1) These amounts include the Partnership's pro rata interest in equipment joint ventures of $476,000 and financing joint ventures of $2,351,000 at December 31, 1996. Item 3. Legal Proceedings. The Partnership is not a party to any pending legal proceedings which would have a material adverse impact on its financial position. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of Limited Partners, through the solicitation of proxies or otherwise, during the year covered by this report. Page 5 of 29 PART II Item 5. Market for the Registrant's Securities and Related Security Holder Matters. (a) The Registrant's limited partnership interests are not publicly traded. There is no market for the Registrant's limited partnership interests and it is unlikely that any will develop. (b) Approximate number of equity security investments: Number of Unit Holders Title of Class as of December 31, 1996 ---------------------------------- ----------------------- Limited Partners 3,516 Item 6. Selected Financial Data.
1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (Amounts in Thousands Except for Per Unit Amounts) Total Income $ 266 $ 475 $ 877 $ 606 $ 522 Net Income (Loss) 201 437 763 301 (757) Total Assets 829 1,453 2,637 3,171 4,351 Distributions to Partners 807 1,222 1,211 1,211 1,213 Net Income (Loss) per Limited Partnership Unit 4.95 10.73 18.73 7.39 (18.75) Distributions per Limited Partnership Unit 20.01 30.31 30.02 30.02 30.05
The above selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this report. Page 6 of 29 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Phoenix Leasing Growth Fund 1982 (the Partnership) reported net income of $201,000 for the year ended December 31, 1996, as compared to net income of $437,000 and $763,000 during 1995 and 1994, respectively. The decline in net income experienced in 1996, as compared to 1995, is attributable to a decrease in rental income of $160,000 and an increase in provision for losses on receivables of $61,000. The decline in net income for the year ended December 31, 1995 was due to the absence of a settlement compared to a settlement of $337,000 during 1994. Total revenues decreased by $209,000 and $402,000 for the year ended December 31, 1996 and 1995, respectively, as compared to the prior year. The decrease in earnings for 1996 and 1995, compared to the prior year, is primarily attributable to a decrease in rental income of $160,000 and $51,000, respectively. The decline in rental income is reflective of 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 December 31, 1996, the partnership owned equipment, excluding its investment in equipment joint ventures, with an aggregate original cost of $257,000 compared to $737,000 at December 31, 1995 and $1,706,000 at December 31, 1994. The absence of interest income from notes receivable during 1996 is a result of the Partnership receiving payoffs from its two remaining notes receivable, both considered to be impaired, during the year ended December 31, 1995. Prior to the payoff, the Partnership had not been recognizing interest income on these notes due to their impaired status. As a result of the payoff of these two notes, the Partnership recognized $21,000 in interest income from notes receivable and reversed $69,000 of the provision for losses on notes receivable in 1995. Total revenues for the year ended December 31, 1994 were higher than usual mainly due to the receipt of settlements from two manufacturers of equipment with whom the Partnership had entered into contractual agreements for the purchase of leased equipment. The combined settlements totaled $337,000 which was composed of cash, common stock, receivables, assigned rents from a pool of leased equipment, and credits for goods and services. Another factor which contributed to increasing total revenues during 1994 was the gain on sale of equipment. The gain on sale of equipment during 1994 was attributable to the sale of equipment back to the original manufacturer, in which the Partnership was released from all obligations to such manufacturer including an outstanding note payable and accrued interest of $84,000. Total expenses increased by $27,000 during 1996, as compared to 1995, but decreased by $76,000 during 1995, compared to 1994. The increase in total expenses for 1996, as compared to 1995, is primarily due to the increase in provision for losses on receivables of $61,000 for the year ended December 31, 1996, compared to 1995. During 1995, the Partnership reversed $69,000 in provision for losses on notes receivable, as previously discussed. Such a transaction did not occur during 1996. In part, the increase in provision for losses on receivables experienced during 1996, is offset by decreases in most other expense items. The decline in total expenses experienced during 1995, compared to 1994, was due to the absence of depreciation expense. The absence of depreciation expense for the year ended December 31, 1995, as compared to $33,000 in 1994, was due to the remaining equipment portfolio having been fully depreciated. Most other expense items also experienced a decrease during the year ended December 31, 1995, compared to 1994. Inflation affects the Partnership in relation to the current cost of equipment placed on a lease and the residual values realized when the equipment comes off-lease and is sold. During the last several years inflation has been low, thereby having very little impact upon the Partnership. 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 decline as the portfolios are re-leased at lower rental rates and eventually liquidated. Page 7 of 29 Earnings from joint ventures decreased by $5,000 for the year ended December 31, 1996, compared to 1995, and increased by $74,000 for the year ended December 31, 1995, as compared to the same period in the previous year. The decrease in earnings for 1996 is due to a decline in revenues from several equipment joint ventures as a result of a majority of the equipment joint ventures being in the liquidation stage. The increase in earnings from joint ventures during 1995 was primarily attributable to two equipment joint ventures. The increase in earnings from one equipment joint venture during 1995 was due to a decline in depreciation expense and lease related operating expenses. The increase in earnings from the second equipment joint venture during 1995 was due to this joint venture having been formed in October of 1994. As a result, there were no comparable earnings from this joint venture during the year ended December 31, 1994. Liquidity and Capital Resources The Partnership reported net cash used by leasing and financing activities of $58,000, $47,000 for the year ended December 31, 1996 and 1995, respectively, compared to net cash provided of $454,000 for the year ended December 31, 1994. The increase in net cash used for the year ended December 31, 1996 is attributable to the absence of principal payments from notes receivable and the payment of liquidation fees to the General Partner. During 1995, the Partnership received payoffs from the Partnership's remaining notes receivable. The payment of liquidation fees to the General Partner during 1995 exceeded the payoffs received from the notes receivable. The Partnership did not make a payment of liquidation fees in 1994. Cash distributions from joint ventures increased by $36,000 and $129,000 for the years ended December 31, 1996 and 1995, respectively, compared to the previous year. The increase in cash distributions in 1996 is due to the increase in cash available for distribution from the Partnership's only foreclosed cable system joint venture as a result of the sale of its cable television system during the first quarter of 1996. The increase during 1995 was primarily attributable to a new investment made in a newly formed equipment joint venture during the fourth quarter of 1994. In addition, one equipment joint venture experienced an increase in cash available as a result of a decline in lease related operating expenses. During the year ended December 31, 1996, the Partnership sold a portion of its investment in common stock receiving proceeds of $49,000. As of December 31, 1996, the Partnership owned equipment held for lease with a purchase price of $257,000 and a net book value of $0, as compared to $662,000 and $0, respectively, at December 31, 1995 and $699,000 and $0, respectively, at December 31, 1994. 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 cash distributions of $807,000 , $1,222,000 and $1,211,000 during the year ended December 31, 1996, 1995 and 1994, respectively. As a result, the cumulative cash distributions to the limited partners are $38,467,000, $37,660,000 and $36,438,000 as of December 31, 1996, 1995 and 1994, respectively. The General Partner did not receive cash distributions for the years ended December 31, 1996, 1995 and 1994. Distributions to partners are being made annually on January 15. The distribution amount distributed on January 15, 1997 was lower than the January 15, 1996 distribution. Cash generated from leasing and financing operations has been and is anticipated to continue to be sufficient to meet the Partnership's continuing operational expenses. The Partnership is currently in its liquidation stage and currently has no obligation, commitments or plans to purchase more equipment. It's the General Partner's intention to continue the Partnership's payments of liquidation fees only to the extent of cash available for such payments after taking into consideration the Partnership's cash requirements to cover its operating costs over the next years. Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ from those anticipated by some of the statements made above. Limited Partners are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) the Partnership's plans are subject to change at any time at the discretion of the General Partner of the Partnership, (ii) future technological developments in the industry in which the Partnership operates, (iii) competitive pressure on pricing or services, (iv) substantial customer defaults or cancellations, (v) changes in business conditions and the general economy, (vi) changes in government regulations affecting the Partnership's core businesses and (vii) the ability of the Partnership to sell its remaining assets. Page 8 of 29 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PHOENIX LEASING GROWTH FUND 1982 YEAR ENDED DECEMBER 31, 1996 Page 9 of 29 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Phoenix Leasing Growth Fund 1982: We have audited the accompanying balance sheets of Phoenix Leasing Growth Fund 1982 (a California limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Phoenix Leasing Growth Fund 1982 as of December 31, 1996 and 1995, and the results of its operations, and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 14, subsection (a) 2 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. San Francisco, California, ARTHUR ANDERSEN LLP January 17, 1997 Page 10 of 29 PHOENIX LEASING GROWTH FUND 1982 BALANCE SHEETS (Amounts in Thousands Except for Unit Amounts)
December 31, 1996 1995 ---- ---- ASSETS Cash and cash equivalents $ 658 $ 1,078 Accounts receivable (net of allowance for losses on accounts receivable of $0 at December 31, 1996 and 1995) 1 27 Equipment on operating leases and held for lease (net of accumulated depreciation and obsolescence reserves of $114 and $578 at December 31, 1996 and 1995, respectively) -- -- Investment in joint ventures 99 283 Securities, available-for-sale 67 60 Other assets 4 5 ------- ------- Total Assets $ 829 $ 1,453 ======= ======= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) Liabilities: Accounts payable and accrued expenses $ 71 $ 68 Liquidation fees payable to General Partner 1,816 1,881 ------- ------- Total Liabilities 1,887 1,949 ------- ------- Partners' Capital (Deficit): General Partner (408) (410) Limited Partners, 44,000 units authorized, 41,798 units issued and 40,343 units outstanding at December 31, 1996 and 1995 (671) (63) Unrealized gains (losses) on available-for-sale securities 21 (23) ------- ------- Total Partners' Capital (Deficit) (1,058) (496) ------- ------- Total Liabilities and Partners' Capital (Deficit) $ 829 $ 1,453 ======= ======= The accompanying notes are an integral part of these statements.
Page 11 of 29 PHOENIX LEASING GROWTH FUND 1982 STATEMENTS OF OPERATIONS (Amounts in Thousands Except for Per Unit Amounts) For the Years Ended December 31, 1996 1995 1994 ---- ---- ---- INCOME Rental income $ 5 $ 165 $ 216 Gain on sale of equipment -- 12 92 Equity in earnings from joint ventures, net 212 217 143 Interest income, notes receivable -- 21 6 Settlements -- -- 337 Other income 49 60 83 ----- ------ ------ Total Income 266 475 877 ----- ------ ------ EXPENSES Depreciation -- -- 33 Lease related operating expenses -- 9 8 Management fees to General Partner 5 25 30 Provision for (recovery of) losses on receivables 2 (59) (31) General and administrative expenses 58 63 74 ----- ------ ------ Total Expenses 65 38 114 ----- ------ ------ NET INCOME $ 201 $ 437 $ 763 ===== ====== ====== NET INCOME PER LIMITED PARTNERSHIP UNIT $4.95 $10.73 $18.73 ===== ====== ====== ALLOCATION OF NET INCOME: General Partner $ 2 $ 4 $ 8 Limited Partners 199 433 755 ----- ------ ------ $ 201 $ 437 $ 763 ===== ====== ====== The accompanying notes are an integral part of these statements. Page 12 of 29 PHOENIX LEASING GROWTH FUND 1982 STATEMENTS OF PARTNERS' CAPITAL (Amounts in Thousands Except for Unit Amounts)
General Unrealized Partner's Limited Partners' Gains Total Amount Units Amount (Losses) Amount ------ ----- ------ -------- ------ Balance, December 31, 1993 $ (422) 40,343 $ 1,182 $ -- $ 760 Distributions to partners ($30.02 per limited partnership unit) -- -- (1,211) -- (1,211) Adjustment to unrealized losses on available-for-sale securities -- -- -- (14) (14) Net income 8 -- 755 -- 763 ------- ------- ------- ------- ------- Balance, December 31, 1994 (414) 40,343 726 (14) 298 Distributions to partners ($30.31 per limited partnership unit) -- -- (1,222) -- (1,222) Net income 4 -- 433 -- 437 Change in unrealized losses on marketable securities available-for-sale -- -- -- (9) (9) ------- ------- ------- ------- ------- Balance, December 31, 1995 (410) 40,343 (63) (23) (496) Distributions to partners ($20.01 per limited partnership unit) -- -- (807) -- (807) Net income 2 -- 199 -- 201 Change in unrealized gains on available-for-sale securities -- -- -- 44 44 ------- ------- ------- ------- ------- Balance, December 31, 1996 $ (408) 40,343 $ (671) $ 21 $(1,058) ======= ======= ======= ======= ======= The accompanying notes are an integral part of these statements.
Page 13 of 29 PHOENIX LEASING GROWTH FUND 1982 STATEMENTS OF CASH FLOWS (Amounts in Thousands) For the Years Ended December 31, 1996 1995 1994 ---- ---- ---- Operating Activities: Net income $ 201 $ 437 $ 763 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation -- -- 33 Gain on sale of equipment -- (12) (92) Gain on sale of securities (12) -- -- Equity in earnings from joint ventures, net (212) (217) (143) Provision for (recovery of) early termination, financing leases -- (1) (1) Provision for (recovery of) losses on notes receivable -- (69) -- Provision for (recovery of) losses on accounts receivable 2 11 (30) Settlements -- -- (195) Decrease (increase) in accounts receivable 24 (4) 19 Increase (decrease) in accounts payable and accrued expenses (62) (390) 44 Decrease in other assets 1 13 -- ------- ------- ------- Net cash provided (used) by operating activities (58) (232) 398 ------- ------- ------- Investing Activities: Principal payments, financing leases -- 1 52 Principal payments, notes receivable -- 184 4 Proceeds from sale of equipment -- 12 15 Proceeds from available-for-sale securities 49 -- -- Distributions from joint ventures 396 360 231 Purchase of equipment -- -- (124) Investment in joint ventures -- -- (29) ------- ------- ------- Net cash provided by investing activities 445 557 149 ------- ------- ------- Financing Activities: Payments of principal, notes payable -- -- (32) Distributions to partners (807) (1,222) (1,211) ------- ------- ------- Net cash used by financing activities (807) (1,222) (1,243) ------- ------- ------- Decrease in cash and cash equivalents (420) (897) (696) Cash and cash equivalents, beginning of period 1,078 1,975 2,671 ------- ------- ------- Cash and cash equivalents, end of period $ 658 $ 1,078 $ 1,975 ======= ======= ======= The accompanying notes are an integral part of these statements. Page 14 of 29 PHOENIX LEASING GROWTH FUND 1982 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 Note 1. Organization and Partnership Matters. Phoenix Leasing Growth Fund 1982, a California limited partnership (the "Partnership"), was formed on September 11, 1980, to invest in capital equipment of various types and to lease such equipment to third parties on either a long-term or short-term basis. Minimum investment requirements were met April 28, 1982, at which time the Partnership commenced operations. The Partnership has also made investments in joint ventures with affiliated partnerships managed by the General Partner for the purpose of spreading the risks of financing or acquiring certain capital equipment leased to third parties (see Note 6). For financial reporting purposes, as more specifically described in the Partnership Agreement, income in any quarter will be allocated, before liquidation and redemption fees, 15% to Phoenix Leasing Incorporated (the "General Partner") and 85% to the Limited Partners subject to the following limitations. To the extent that income for any quarter, when added to income for all prior accounting periods, does not exceed losses for all prior accounting periods, such income shall be allocated, before liquidation and redemption fees, 1% to the General Partner and 99% to the Limited Partners. Income shall be allocated, before liquidation and redemption fees, 1% to the General Partner and 99% to the Limited Partners in any quarter subsequent to a quarter in which the General Partner was allocated, before liquidation and redemption fees, 1% of losses, to the extent of previously allocated Partnership losses. A loss in any quarter shall be allocated, before liquidation and redemption fees, 1% to the General Partner and 99% to the Limited Partners. As an alternative to receiving cash distributions, Limited Partners may have participated in the Capital Accumulation Plan, whereby the Limited Partners' cash distributions were reinvested and accumulated in the respective Limited Partner's capital account. Effective January 1, 1988, the Capital Accumulation Plan was discontinued. Limited Partners who elected to participate in the Capital Accumulation Plan are now receiving cash distributions. In the event the General Partner has a deficit balance in its capital account at the time of partnership liquidation, it will be required to contribute the amount of such deficit to the Partnership. The General Partner has acquired 63 units of Limited Partnership interest. As compensation for management services, the General Partner receives a fee, payable quarterly, in an amount equal to 6% of the Partnership's gross revenues for the quarter from which such payment is being made, which revenues shall include rental and note receipts, maintenance fees, proceeds from the sale of equipment and other income. In consideration for the services and activities performed by the General Partner in connection with the disposition of the Partnership's equipment, the General Partner receives liquidation fees equal to 15% of the "Net Capital Contribution" of the Limited Partners with respect to all Partnership interests other than those interests which have been previously redeemed and accordingly were subject to the 15% redemption fee. For financial reporting purposes, the Partnership began to recognize the liquidation fee in the second year of operations when the General Partner began its activities of liquidating portions of the equipment portfolio. The original firm terms of the initial leases (generally 24 months) began to expire at this point in time. The present value of the liquidation fee was recognized using the interest method and accreted to the face amount over a period of approximately eight years in order to properly match the liquidation fee expense with the activities of the General Partner in connection with ongoing portfolio liquidations. The liquidation fees have been fully accrued as of December 31, 1992. The Partnership began to pay the liquidation fees to the General Partner in 1990. It's the General Partner's intention to continue the Partnership's payments of liquidation fees only to the extent of cash available for such payments after taking into consideration the Partnership's cash requirements to cover its operating costs over the remaining life of the partnership. Page 15 of 29 Note 2. Summary of Significant Accounting Policies. Leasing Operations. The Partnership's leasing operations consisted of both financing and operating leases. The financing method of accounting for leases records as unearned income at the inception of the lease, the excess of net rentals receivable and estimated residual value at the end of the lease term over the cost of equipment leased. Unearned income is credited to income monthly over the term of the lease on a declining basis to provide an approximate level rate of return on the unrecovered cost of the investment. Initial direct costs of consummating new leases are capitalized and included in the cost of the equipment. Under the operating method of accounting for leases, the leased equipment is recorded as an asset at cost and depreciated on a straight-line basis over the estimated useful life, ranging up to seven years. Rental income for the year is determined on the basis of rental payments due for the period under the terms of the lease. Maintenance, repairs and minor renewals of the leased equipment are charged to expense. Portfolio Valuation Methodology. The Partnership uses the portfolio method of accounting for the net realizable value of the Partnership's equipment portfolio. Credit and Collateral. The Partnership's activities have been concentrated in the equipment leasing and financing industry. A credit evaluation is performed by the General Partner for all leases and loans made, with the collateral requirements determined on a case-by-case basis. The Partnership's loans are generally secured by the equipment or assets financed and, in some cases, other collateral of the borrower. In the event of default, the Partnership has the right to foreclose upon the collateral used to secure such loans. Investment in Joint Ventures. Investments in net assets of the equipment, financing and foreclosed cable systems joint ventures reflect the Partnership's equity basis in the ventures. Under the equity method of accounting, the original investment is recorded at cost and is adjusted periodically to recognize the Partnership's share of earnings, losses, cash contributions and cash distributions after the date of acquisition. Investment in Available-for-Sale Securities. The Partnership has investments in stock in public companies that have been determined to be available for sale that are on the accompanying Balance Sheets. Available-for-sale securities are stated at their fair market value, with the unrealized gains and losses reported in a separate component of partners' capital. Cash and Cash Equivalents. Cash and cash equivalents includes deposits at banks, investments in money market funds and other highly liquid short-term investments with original maturities of less than 90 days. Non Cash Investing Activities. During the year ended December 31, 1995, the Partnership received a final distribution of marketable securities from one of its investments in joint ventures. The market value of the marketable securites at the distribution date was $11,000. During the year ended December 31, 1994, the Partnership contributed equipment and other investments received through a settlement to a joint venture. The amount of such contribution was $247,000. Non cash transactions included in Other Assets during the year ended December 31, 1994 consist of common stock valued at $72,000 received pursuant to a settlement (see Note 8) and an unrealized loss on marketable securities of $14,000. Financial Accounting Pronouncements. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the entity would estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss for long-lived assets and identifiable intangibles that an entity expects to hold and use should be based on the fair value of the asset. Statement No. 121 is effective for financial statements for fiscal years beginning after December 15, 1995. At January 1, 1996, the adoption of Statement No. 121 did not materially impact the Partnership's financial position or results of operations. Reclassification. Certain 1995 and 1994 amounts have been reclassified to conform to the 1996 presentation. Page 16 of 29 Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 3. Accounts Receivable. Accounts Receivable consist of the following at December 31: 1996 1995 ---- ---- (Amounts in Thousands) Lease payments $ 1 $21 Property tax -- 6 --- --- Total $ 1 $27 === === Note 4. Notes Receivable. The Partnership's notes receivable from cable television system operators provided for a monthly payment rate in an amount that is less than the contractual interest rate. The difference between the payment rate and the contractual interest rate was added to the principal and therefore deferred until the maturity date of the note. Upon maturity of the note, the original principal and deferred interest was due and payable in full. Although the contractual interest rates may be higher, due to a high degree of uncertainty relating to the collection of the entire amount of contractually owed interest, the Partnership limited the amount of interest recognized on the Partnership's performing notes receivable to cable television system operators to the amount of the payments received, thereby deferring the recognition of a portion of the deferred interest until such time as management believed it would be realized. Generally, notes receivable were classified as impaired and the accrual of interest on such notes were discontinued when the contractual payment of principal or interest had become 90 days past due or management had serious doubts about further collectibility of the contractual payments. Any payments received subsequent to the placement of the note receivable on to impaired status would generally be applied towards the reduction of the outstanding note receivable balance, which may have included previously accrued interest as well as principal. Once the principal and accrued interest balance was reduced to zero, the remaining payments were applied to interest income. The average recorded investment in impaired loans during the year ended December 31, 1996 and 1995 was approximately $0 and $84,000, respectively. During the quarter ended June 30, 1995, the Partnership received a settlement on one of its remaining notes receivable from a cable television system operator which was considered to be impaired. The Partnership received a partial recovery of $56,000 as a settlement which was applied towards the $87,000 outstanding note receivable balance. The remaining balance of $31,000 was written-off through its related allowance for loan losses. The related allowance for loan losses for this note receivable was provided for in a previous year in an amount equal to the carrying value of the note. Upon receipt of the settlement of this note receivable, the Partnership reduced the allowance for loan losses by $53,000 during the quarter ended June 30, 1995. This reduction in the allowance for loan losses was recognized as income during the period. The Partnership received a settlement on its one remaining note receivable during the quarter ended September 30, 1995. This note receivable was from a cable television operator which was impaired. The Partnership received $141,000 as a settlement for this note receivable of which $120,000 was applied towards the outstanding note receivable balance and the remaining $21,000 applied towards interest income. There was an allowance for losses on notes receivable of $16,000 for this note receivable. Due to the receipt of a settlement which exceeded the net carrying value of the note receivable, this allowance was recognized as income. Page 17 of 29 The activity in the allowance for losses on notes receivable during the years ended December 31, is as follows: 1996 1995 ---- ---- (Amounts in Thousands) Beginning balance $-- $ 100 Provision for (recovery of) losses -- (69) Write downs -- (31) --- ----- Ending balance $-- $-- === ===== Note 5. Equipment on Operating Leases and Held for Lease. Equipment on lease consists primarily of computer peripheral equipment and small computer systems subject to operating leases. At December 31, 1996, the Partnership's remaining equipment was being held for lease. The net book value of equipment held for lease at December 31, 1996 and 1995 amounted to $0. The Partnership has entered into direct lease arrangements with certain lessees. Generally, it is the responsibility of the lessee to provide maintenance on leased equipment. The General Partner administers the equipment portfolio of leases acquired through the direct leasing program. Administration includes the collection of rents from the lessees and remarketing of the equipment. The Partnership has agreements with some of the manufacturers of its equipment whereby such manufacturers undertake to remarket off-lease equipment on a best efforts basis. These agreements permit the Partnership to assume the remarketing function directly if certain conditions contained in the agreements are not met. For their remarketing services, the manufacturers are paid a percentage of net monthly rentals. Certain manufacturers are entitled to additional fees after the Partnership has recovered certain amounts. Note 6. Investment in Joint Ventures. Equipment Joint Ventures The Partnership owns a limited or general partnership interest in equipment joint ventures. These investments are accounted for using the equity method of accounting. The other partners of the ventures are entities organized and managed by the General Partner. The purpose of the equipment joint ventures is the acquisition and leasing of various types of equipment. Phoenix Leasing Growth Fund 1982 has participated in the following equipment joint ventures: Weighted Joint Venture Percentage Interest ------------- ------------------- Arroyo Joint Venture VIII(1) 40.00% Arroyo Joint Venture XVI(3) 35.72 Arroyo Joint Venture XVII(1) 28.35 PLI Limited Partnership Fund A(2) 25.24 ACRO Joint Venture, Residential(3) 30.90 Leveraged Joint Venture 1986(2) 23.44 Leveraged Joint Venture 1987-1(1) 19.75 Leveraged Joint Venture 1987-2 17.91 Leveraged Joint Venture 1987-3 9.73 Leveraged Joint Venture 1990-1 15.88 Xerox Graphics Joint Venture(1) 16.67 Phoenix Joint Venture 1994-1 5.37 (1) Closed during 1994 (2) Closed during 1995 (3) Closed during 1996 Page 18 of 29 An analysis of the Partnership's investment in equipment joint ventures is as follows:
Net Investment Net Investment at Beginning Equity in at End Date of Period Contributions Earnings Distributions of Period - ---- --------- ------------- -------- ------------- --------- (Amounts in Thousands) Year Ended December 31, 1994 $ 89 $ 276 $124 $169 $320 ==== ======= ==== ==== ==== Year Ended December 31, 1995 $320 $ -- $191 $342 $169 ==== ======= ==== ==== ==== Year Ended December 31, 1996 $169 $ -- $131 $207 $ 93 ==== ======= ==== ==== ====
The aggregate combined financial information of the equipment joint ventures as of December 31 and for the years then ended is presented as follows: COMBINED BALANCE SHEETS ASSETS December 31, 1996 1995 ---- ---- (Amounts in Thousands) Cash and cash equivalents $ 432 $ 644 Accounts receivable 1,443 1,776 Operating lease equipment 525 1,021 Other assets 512 691 ------ ------ Total Assets $2,912 $4,132 ====== ====== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 786 $ 973 Partners' capital 2,126 3,159 ------ ------ Total Liabilities and Partners' Capital $2,912 $4,132 ====== ====== COMBINED STATEMENTS OF OPERATIONS INCOME For the Years Ended December 31, 1996 1995 1994 ---- ---- ---- (Amounts in Thousands) Rental income $2,609 $3,923 $3,293 Gain on sale of equipment 850 1,769 1,312 Other income 141 742 259 ------ ------ ------ Total Income 3,600 6,434 4,864 ------ ------ ------ Page 19 of 29 EXPENSES Depreciation $ 332 1,188 1,257 Lease related operating expenses 1,460 2,961 2,778 Management fee to the General Partner 119 289 235 Interest expense -- -- 1 Other expenses 126 272 88 ------ ------ ------ Total Expenses 2,037 4,710 4,359 ------ ------ ------ Net Income $1,563 $1,724 $ 505 ====== ====== ====== As of December 31, 1996 and 1995, the Partnership's pro rata interest in the equipment joint ventures' net book value of off-lease equipment was $2,000 and $6,000, respectively. The General Partner earns a management fee of 6% of the Partnership's respective interest in gross revenues of each equipment joint venture. Revenues subject to management fees at the joint venture level are not subject to management fees at the Partnership level. Financing Joint Ventures The Partnership owns a limited partnership interest in financing joint ventures which are combined for reporting purposes into Phoenix Funding Partnership (PFP). The Partnership's current investment in PFP's consists of two financing joint ventures. The purpose of the financing joint ventures is to provide, on a limited basis, financing to manufacturers and their lessees for equipment leased directly by manufacturers to third parties. All loans to manufacturers are interest bearing and are secured by equipment. The Partnership accounts for its investment in the PFP using the equity method of accounting. PFP periodically reviews the probability of recovering the outstanding note balances. Such reviews address, among other things, current cash receipts, costs of collection efforts, the current economic situation and potential uncollectible receivables. If the review indicates that future cash receipts, net of anticipated future expenses, does not exceed the outstanding note balances, PFP provides a reserve for any anticipated loan loss as appropriate. Due to a high degree of uncertainty relating to the collection of the entire amount of contractually owed principal and interest over the lives of the notes receivable, the PFP loan portfolios apply all cash receipts (principal and interest) to the outstanding note balances. Under this method, interest income will not be recognized until the outstanding note balances are recovered. The following information summarizes the Partnership's respective interest in the original loan proceeds of the funding partnership. Weighted Joint Venture Percentage Interest ------------- ------------------- Phoenix Funding Partnership 14.33% An analysis of the Partnership's investment account in financing joint ventures is as follows: Page 20 of 29
Net Investment Net Investment at Beginning Equity in at End Date of Period Contributions Earnings Distributions of Period - ---- --------- ------------- -------- ------------- --------- (Amounts in Thousands) Year Ended December 31, 1994 $46 $- $ 8 $45 $9 === == === === == Year Ended December 31, 1995 $ 9 $- $17 $21 $5 === == === === == Year Ended December 31, 1996 $ 5 $- $ 9 $ 8 $6 === == === === ==
The aggregate combined financial information of the financing joint ventures as of December 31 and for the years then ended is presented as follows: COMBINED BALANCE SHEETS ASSETS December 31, 1996 1995 ---- ---- (Amounts in Thousands) Cash and cash equivalents $38 $28 --- --- Total Assets $38 $28 === === LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 4 $ 5 Partners' capital 34 23 --- --- Total Liabilities and Partners' Capital $38 $28 === === COMBINED STATEMENTS OF OPERATIONS INCOME For the Years Ended December 31, 1996 1995 1994 ---- ---- ---- (Amounts in Thousands) Interest income $ 46 $ 73 $ 86 Other income 30 77 17 ---- ---- ---- Total Income 76 150 103 ---- ---- ---- EXPENSES Management fee to the General Partner 2 8 19 Other expenses 11 19 43 ---- ---- ---- Total Expenses 13 27 62 ---- ---- ---- Net Income $ 63 $123 $ 41 ==== ==== ==== The General Partner earns a management fee of 6% of the Partnership's respective interest in gross payments received for each financing joint venture. Revenues subject to a management fee at the joint venture level are not subject to management fees at the Partnership level. Page 21 of 29 Foreclosed Cable Systems Joint Ventures The Partnership owns an interest in foreclosed cable systems joint ventures, along with other partnerships managed by the General Partner and its affiliates. The Partnership foreclosed upon nonperforming outstanding notes receivable to cable television operators to whom the Partnership, along with other affiliated partnerships managed by the General Partner, had extended credit. The partnerships' notes receivables were exchanged for interests (their capital contribution), on a pro rata basis, in newly formed joint ventures owned by the partnerships and managed by the General Partner. Title to the cable television systems is held by the joint ventures. These investments are accounted for using the equity method of accounting. The foreclosed cable systems joint ventures owned by the Partnership, along with their percentage ownership is as follows: Percentage Joint Venture Ownership ------------- --------- Phoenix Black Rock Cable J.V.(1) 6.65% (1) Cable system sold and joint venture closed during 1996. An analysis of the Partnership's net investment in foreclosed cable systems joint ventures at December 31, is as follows:
Net Investment Net Investment at Beginning Equity in at End Date of Period Contributions Earnings Distributions of Period - ---- --------- ------------- -------- ------------- --------- (Amounts in Thousands) Year Ended December 31, 1994 $114 $-- $11 $ 17 $108 ==== ==== === ==== ==== Year Ended December 31, 1995 $108 $-- $ 9 $ 8 $109 ==== ==== === ==== ==== Year Ended December 31, 1996 $109 $-- $72 $181 $-- ==== ==== === ==== ====
The aggregate combined financial information of the foreclosed cable systems joint ventures as of December 31 and for the years then ended is presented as follows: BALANCE SHEETS ASSETS December 31, 1996 1995 ---- ---- (Amounts in Thousands) Cash and cash equivalents $-- $ 258 Accounts receivable -- 31 Property, plant and equipment -- 1,449 Other assets -- 1 ---- ------ Total Assets $-- $1,739 ==== ====== Page 22 of 29 LIABILITIES AND PARTNERS' CAPITAL Accounts payable $-- $ 90 Partners' capital -- 1,649 ---- ------ Total Liabilities and Partners' Capital $-- $1,739 ==== ====== STATEMENTS OF OPERATIONS INCOME For the Years Ended December 31, 1996 1995 1994 ---- ---- ---- (Amounts in Thousands) Subscriber revenue $ 50 $ 680 $ 658 Gain on sale of cable system 1,185 -- -- Other income 9 8 3 ------ ------ ------ Total Income 1,244 688 661 ------ ------ ------ EXPENSES Depreciation and amortization 13 154 150 Program services 12 181 154 General and administrative expenses 19 185 155 Management fees to an affiliate of the General Partner 121 31 29 Provision for losses on accounts receivable -- 7 7 ------ ------ ------ Total Expenses 165 558 495 ------ ------ ------ Net Income $1,079 $ 130 $ 166 ====== ====== ====== Phoenix Cable Management Inc. (PCMI), an affiliate of the General Partner, provided day to day management services in connection with the operation of the foreclosed cable systems joint ventures. The foreclosed cable systems joint ventures paid a management fee equal to four and one-half percent of the System's monthly gross revenue for these services. Revenues subject to a management fee at the joint venture level were not subject to management fees at the Partnership level. Note 7. Accounts Payable and Accrued Expenses. Accounts payable and accrued expenses consist of the following at December 31: 1996 1995 ---- ---- (Amounts in Thousands) Equipment lease operations $-- $ 2 General Partner and affiliates 1 -- Other 70 66 --- --- Total $71 $68 === === Note 8. Settlements. On July 1, 1991, Phoenix Leasing Incorporated, as General Partner to the Partnership and sixteen other affiliated partnerships, filed suit in the Superior Court for the County of Marin, Case No. 150016, against Xerox Corporation, a corporation with which the General Partner had entered into contractual agreements for the acquisition and administration of leased equipment. The lawsuit was settled out of court, effective as of October 28, 1994 pursuant to the terms of a Confidential Settlement Agreement and Mutual Page 23 of 29 Release. The settlement agreement generally provides for compensation payable to the Partnership and its affiliates in cash and kind, including the assignment by Xerox of certain goods and services. The agreement further provides for the sale by Xerox to the Partnership and its affiliates of equipment subject to lease. The suit has been dismissed with prejudice on the merits. The Partnership's pro rata share of the Xerox settlement was $203,000, which consists of cash of $80,000, and assigned monthly rentals and credits for goods and services valued at $123,000. In addition, the Partnership purchased additional leased equipment at an aggregate cost of $124,000. The Partnership, along with sixteen other affiliated partnerships managed by the General Partner, contributed its share of the assigned monthly rentals, credits for goods and services and purchased equipment leases to a joint venture, in exchange for an interest in the joint venture. Storage Technology Corporation (STC), a major manufacturer of equipment purchased by the Partnership, filed for protection from creditors under Chapter 11 of the Federal Bankruptcy Code on October 14, 1984. On June 18, 1987, STC's plan of reorganization was approved and the Partnership received a settlement. On August 31, 1994, the United States Bankruptcy Court for the District of Colorado ordered a final distribution from the Disputed Claims Reserve which was provided for in the Debtors' Joint Plan of Reorganization. On December 23, 1994, the Partnership received its pro rata share of the final distribution from the Disputed Claims Reserve valued at $134,000. The final distribution consisted of cash of $62,000 and common stock valued at $72,000. Note 9. 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. The net difference between the tax basis and the reported amounts of the Partnership's assets and liabilities are as follows at December 31: Reported Amounts Tax Basis Net Difference ---------------- --------- -------------- (Amounts in Thousands) 1996 - ---- Assets $ 829 $ 837 $ (8) Liabilities 1,887 1,214 673 1995 - ---- Assets $1,453 $1,488 $ (35) Liabilities 1,949 1,211 738 Note 10. Related Entities. The General Partner serves in the capacity of general partner in other partnerships, all of which are engaged in the equipment leasing and financing business. The General Partner incurs certain expenses, such as data processing and equipment remarketing costs, for which it is reimbursed by the Partnership. Equipment remarketing costs are incurred as the General Partner remarkets certain equipment on behalf of the Partnership. The expenses incurred by the General Partner are reimbursed at the lower of the actual costs or an amount equal to 90% of the fair market value for such services. The equipment remarketing costs reimbursed to the General Partner were $0, $1,000 and $1,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Note 11. 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 40,343 for the years ended December 31, 1996, 1995 and 1994. For purposes of allocating income (loss) and distributions Page 24 of 29 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. Note 12. Subsequent Events. In January 1997, cash distributions of $404,000 were made to the Limited Partners. Note 13. Fair Value of Financial Instruments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Cash and Cash Equivalents The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of these instruments. Securities, Available-for-Sale The fair values of investments in available-for-sale securities are estimated based on quoted market prices. The estimated fair values of the Partnership's financial instruments are as follows at December 31,: Carrying Amount Fair Value ------ ---------- (Amounts in Thousands) 1996 - ---- Assets Cash and cash equivalents $ 658 $ 658 Securities, available-for-sale 67 67 1995 - ---- Assets Cash and cash equivalents $1,078 $1,078 Securities, available-for-sale 60 60 Page 25 of 29 Item 9. Disagreements on Accounting and Financial Disclosure Matters. None. PART III Item 10. Directors and Executive Officers of the Registrant. The registrant is a limited partnership and, therefore, has no executive officers or directors. The general partner of the registrant is Phoenix Leasing Incorporated, a California corporation. The directors and executive officers of Phoenix Leasing Incorporated (PLI) are as follows: GUS CONSTANTIN, age 59, is President, Chief Executive Officer and a Director of PLI. Mr. Constantin received a B.S. degree in Engineering from the University of Michigan and a Master's Degree in Management Science from Columbia University. From 1969 to 1972, he served as Director, Computer and Technical Equipment of DCL Incorporated (formerly Diebold Computer Leasing Incorporated), a corporation formerly listed on the American Stock Exchange, and as Vice President and General Manager of DCL Capital Corporation, a wholly-owned subsidiary of DCL Incorporated. Mr. Constantin was actively engaged in marketing manufacturer leasing programs to computer and medical equipment manufacturers and in directing DCL Incorporated's IBM System/370 marketing activities. Prior to 1969, Mr. Constantin was employed by IBM as a data processing systems engineer for four years. Mr. Constantin is an individual general partner in four active partnerships and is an NASD registered principal. Mr. Constantin is the founder of PLI and the beneficial owner of all of the common stock of Phoenix American Incorporated. PARITOSH K. CHOKSI, age 43, is Senior Vice President, Chief Financial Officer, Treasurer and a Director of PLI. He has been associated with PLI since 1977. Mr. Choksi oversees the finance, accounting, information services and systems development departments of the General Partner and its Affiliates and oversees the structuring, planning and monitoring of the partnerships sponsored by the General Partner and its Affiliates. Mr. Choksi graduated from the Indian Institute of Technology, Bombay, India with a degree in Engineering. He holds an M.B.A. degree from the University of California, Berkeley. GARY W. MARTINEZ, age 46, is Senior Vice President and a Director of PLI. He has been associated with PLI since 1976. He manages the Asset Management Department, which is responsible for lease and loan portfolio management. This includes credit analysis, contract terms, documentation and funding; remittance application, change processing and maintenance of customer accounts; customer service, invoicing, collection, settlements and litigation; negotiating lease renewals, extensions, sales and buyouts; and management information reporting. From 1973 to 1976, Mr. Martinez was a Loan Officer with Crocker National Bank, San Francisco. Prior to 1973, he was an Area Manager with Pennsylvania Life Insurance Company. Mr. Martinez is a graduate of California State University, Chico. BRYANT J. TONG, age 42, is Senior Vice President, Financial Operations of PLI. He has been with PLI since 1982. Mr. Tong is responsible for investor services and overall company financial operations. He is also responsible for the technical and administrative operations of the cash management, corporate accounting, partnership accounting, accounting systems, internal controls and tax departments, in addition to Securities and Exchange Commission and other regulatory agency reporting. Prior to his association with PLI, Mr. Tong was Controller-Partnership Accounting with the Robert A. McNeil Corporation for two years and was an auditor with Ernst & Whinney (succeeded by Ernst & Young) from 1977 through 1980. Mr. Tong holds a B.S. in Accounting from the University of California, Berkeley, and is a Certified Public Accountant. CYNTHIA E. PARKS, age 41, is Vice President, General Counsel, and Assistant Secretary of PLI. Prior to joining PLI in 1984, she was with GATX Leasing Corporation, and had previously been Corporate Counsel for Stone Financial Companies, and an Assistant Vice President of the Bank of America, Bank Amerilease Group. She has a bachelor's degree from Santa Clara University, and earned her J.D. from the University of San Francisco School of Law. Neither the General Partner nor any Executive Officer of the General Partner has any family relationship with the others. Phoenix Leasing Incorporated or its affiliates and the executive officers of the General Partner serve in a similar capacity to the following affiliated limited partnerships: Page 26 of 29 Phoenix Leasing American Business Fund, L.P. Phoenix Leasing Cash Distribution Fund V, L.P. Phoenix Income Fund, L.P. Phoenix High Tech/High Yield Fund Phoenix Leasing Cash Distribution Fund IV Phoenix Leasing Cash Distribution Fund III Phoenix Leasing Cash Distribution Fund II Phoenix Leasing Income Fund VII Phoenix Leasing Income Fund VI and Phoenix Leasing Income Fund 1977 Item 11. Executive Compensation. Set forth is the information relating to all direct remuneration paid or accrued by the Registrant during the last year to the General Partner.
(A) (B) (C) (D) Cash and cash- Aggregate of Name of Individual Capacities in equivalent forms contingent forms or persons in group which served of remuneration of remuneration - ------------------- ------------ --------------------------------------------- --------------- (C1) (C2) Securities or property Salaries, fees, directors' insurance benefits or fees, commissions, and reimbursement, personal bonuses benefits ------------------------- ----------------------- (Amounts in Thousands) Phoenix Leasing Incorporated General Partner $5(1) $0 $0 = = = (1) consists of management fees.
Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) No person owns of record, or is known by the Registrant to own beneficially, more than five percent of any class of voting securities of the Registrant. (b) The General Partner of the Registrant owns the equity securities of the Registrant set forth in the following table:
(1) (2) (3) Title of Class Amount Beneficially Owned Percent of Class -------------- ------------------------- ---------------- General Partner Interest Represents a 15% Interest in the 100% Registrant's Profits and Distributions Limited Partner Interest 63 units .16%
Item 13. Certain Relationships and Related Transactions. None. Page 27 of 29 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Page No. -------- (a) 1. Financial Statements: Report of Independent Public Accountants 9 Balance Sheets as of December 31, 1996 and 1995. 10 Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994. 11 Statements of Partners' Capital for the Years Ended December 31, 1996, 1995 and 1994. 12 Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994. 13 Notes to the Financial Statements 14-24 2. Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts and Reserves All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or notes thereto. (b) Reports on Form 8-K: No reports on Form 8-K were filed for the quarter ended December 31, 1996. (c) Exhibits 21. Additional Exhibits: a) Balance Sheets of Phoenix Leasing Incorporated E21 1-12 b) Financial Statements for Significant Subsidiaries Phoenix Black Rock Cable J.V. E21 13-19 27. Financial Data Schedule. Page 28 of 29 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 GROWTH FUND 1982 (Registrant) BY: PHOENIX LEASING INCORPORATED, A CALIFORNIA CORPORATION GENERAL PARTNER Date: March 25, 1997 By: /S/ GUS CONSTANTIN -------------- ------------------------- Gus Constantin, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /S/ GUS CONSTANTIN President, Chief Executive Officer and a March 25, 1997 - ----------------------- Director of Phoenix Leasing Incorporated -------------- (Gus Constantin) General Partner /S/ PARITOSH K. CHOKSI Chief Financial Officer, March 25 1997 - ----------------------- Senior Vice President, -------------- (Paritosh K. Choksi) Treasurer and a Director of Phoenix Leasing Incorporated General Partner /S/ BRYANT J. TONG Senior Vice President, March 25, 1997 - ----------------------- Financial Operations of -------------- (Bryant J. Tong) (Principal Accounting Officer) Phoenix Leasing Incorporated General Partner /S/ GARY W. MARTINEZ Senior Vice President and a Director of March 25, 1997 - ----------------------- Phoenix Leasing Incorporated -------------- (Gary W. Martinez) General Partner /S/ MICHAEL K. ULYATT Partnership Controller March 25, 1997 - ----------------------- of Phoenix Leasing Incorporated -------------- (Michael K. Ulyatt) Corporate General Partner Page 29 of 29 PHOENIX LEASING GROWTH FUND 1982 SCHEDULE II (Amounts in Thousands) SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F Classification Balance at Charged to Charged to Deductions Balance at Beginning of Expense Revenue End of Period Period - ------------------------------------- ------------- ---------- ----------- ------------ ------------ Year ended December 31, 1994 Allowance for losses on accounts receivable $ 48 $ 0 $30 $12 $ 6 Allowance for early termination of financing leases 2 0 1 0 1 Allowance for losses on notes receivable 100 0 0 0 100 ---- --- --- --- ---- Totals $150 $ 0 $31 $12 $107 ==== === === === ==== Year ended December 31, 1995 Allowance for losses on accounts receivable $ 6 $11 $ 0 $17 $ 0 Allowance for early termination of financing leases 1 0 1 0 0 Allowance for losses on notes receivable 100 0 69 31 0 ---- --- --- --- ---- Totals $107 $11 $70 $48 $ 0 ==== === === === ==== Year ended December 31, 1996 Allowance for losses on accounts receivable $ 0 $ 2 $ 0 $ 2 $ 0 ---- --- --- --- ---- Totals $ 0 $ 2 $ 0 $ 2 $ 0 ==== === === === ====
EX-21 2 Exhibit 21 - Page 1 of 19 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Phoenix Leasing Incorporated: We have audited the accompanying consolidated balance sheets of Phoenix Leasing Incorporated (a California corporation) and Subsidiaries as of June 30, 1996 and 1995. These consolidated balance sheets are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated balance sheets based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated balance sheets are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated balance sheets. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated balance sheet presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated balance sheets referred to above present fairly, in all material respects, the financial position of Phoenix Leasing Incorporated and Subsidiaries as of June 30, 1996 and 1995, in conformity with generally accepted accounting principles. San Francisco, California, ARTHUR ANDERSON LLP September 4, 1996 Exhibit 21 - Page 2 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS June 30, 1996 1995 ---- ---- Cash and cash equivalents $ 3,767,098 $ 4,100,325 Investments in marketable securities 1,287,323 7,298,771 Trade accounts receivable, net of allowance for doubtful accounts of $31,246 and $237,458 at June 30, 1996 and 1995, respectively 989,030 913,437 Receivables from Phoenix Leasing Partnerships and other affiliates 3,955,935 3,975,262 Notes receivable from related party 8,767,694 5,574,452 Equipment inventory 2,240,448 -- Equipment subject to lease 17,792,847 17,044,686 Investments in Phoenix Leasing Partnerships 1,773,887 1,577,419 Property and equipment, net of accumulated depreciation of $11,398,438 and $10,457,763 at June 30, 1996 and 1995, respectively 6,933,608 7,669,302 Other assets 3,011,229 2,366,983 ----------- ----------- TOTAL ASSETS $50,519,099 $50,520,637 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY LIABILITIES: Short-term lines of credit $ 1,750,000 $ -- Warehouse lines of credit 16,930,044 17,644,012 Payables to affiliates 2,155,626 5,832,765 Accounts payable and accrued expenses 3,205,932 2,829,490 Deferred revenue 328,676 1,059,736 Long-term debt 620,899 229,390 Deficit in investments in Phoenix Leasing Partnerships 761,214 1,164,445 ----------- ----------- TOTAL LIABILITIES 25,752,391 28,759,838 ----------- ----------- Minority Interests in Consolidated Subsidiaries 27,615 37,639 ----------- ----------- Commitments and Contingencies (Note 14) SHAREHOLDER'S EQUITY: Common stock, without par value, 30,000,000 shares authorized, 5,433,600 issued and outstanding at June 30, 1996 and 1995, respectively 20,369 20,369 Additional capital 11,466,920 5,508,800 Retained earnings 13,251,804 16,193,991 ----------- ----------- TOTAL SHAREHOLDER'S EQUITY 24,739,093 21,723,160 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $50,519,099 $50,520,637 =========== ===========
Exhibit 21 - Page 3 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 1. Summary of Significant Accounting Policies: a. Organization - Phoenix Leasing Incorporated and subsidiaries (the Company), a wholly owned subsidiary of Phoenix American Incorporated (PAI), is engaged in the organization and management of partnerships which specialize in the purchase and lease of primarily high-technology and data processing equipment. The partnerships purchase equipment directly from equipment vendors for lease to financial, commercial and industrial businesses and governmental agencies. The partnerships also finance transactions in the areas of microcomputers and emerging growth companies. The Company has also engaged in similar leasing activities for its own account. The Company also provides ongoing equipment maintenance services for end-users of high-technology data processing equipment and graphic plotters. b. Principles of Consolidation - The consolidated financial statements include the accounts of Phoenix Leasing Incorporated and its wholly or majority-owned subsidiaries and subsidiaries over which the Company exerts control. All significant intercompany accounts and transactions have been eliminated in consolidation. Except as otherwise explained below, minority interests in the net assets and net income or loss of majority-owned subsidiaries are allocated on the basis of the proportionate ownership interests of the minority owners. Four of the consolidated subsidiaries are California limited partnerships (the Partnerships) which are general partners of four of the Phoenix Leasing Partnerships. As of June 30, 1996, the Company held a 50% general partner ownership interest in two of the Partnerships and a 62.5% interest in one and a 70% interest in the fourth. Under the terms of the partnership agreements, profits and losses attributable to acquisition fees paid to the Partnerships from Phoenix Leasing Partnerships are allocated to the limited partner (the minority owner in the Partnerships) in proportion to the limited partner's ownership interest. All remaining profits and losses are allocated to the Company. Distributions to the partners are made in accordance with the terms of the partnership agreement. The limited partner of each of the Partnerships is Lease Management Associates, Inc., a Nevada corporation controlled by an officer of the Company, who is the owner of PAI. c. Management, Acquisition and Incentive Fee Income - As of June 30, 1996, the Company is the corporate general partner in 13 actively operating limited partnerships and manager of 9 actively operating joint ventures, all of which own and lease equipment. Eight of the partnership agreements provide for payment of management fees based on partnership revenues and acquisition fees when the partnerships' assets are acquired. Five of the limited partnership agreements provide for payment of management fees and liquidation fees (see discussion later in this footnote). Most of the joint venture agreements provide for payment of management fees based on joint venture revenues. These partnerships and the joint ventures are collectively referred to as the "Phoenix Leasing Partnerships." d. Investments - Investments in Phoenix Leasing Partnerships reflect the Company's equity basis in the Phoenix Leasing Partnerships. Under the equity method of accounting the original investment is recorded at cost and is adjusted periodically to recognize the Company's share of earnings, losses and distributions after the date of acquisition. The Company has adopted the equity method of accounting on the basis of its control and significant influence over the Phoenix Leasing Partnerships. Exhibit 21 - Page 4 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 1. Summary of Significant Accounting Policies (continued): e. Liquidation Fee Income - The Company earns liquidation fees not to exceed 15% of the net contributed capital from seven of the partnerships in consideration for the services and activities performed in connection with the disposition of the partnerships' assets. Management of the Company concluded that the total liquidation fees to be earned over the life of these partnerships may not be fully realizable. Accordingly, the Company recognizes liquidation fee income when the fees are paid by the partnerships. The Company received and recognized $1,062,046 and $3,221,000 in liquidation fees from these partnerships during the years ended June 30, 1996 and 1995, respectively. In three other partnerships, cash distributions received in excess of the allocated cumulative net profits represent a liquidation fee which cannot exceed, in the aggregate, 7.792% of the net contributed capital. f. Lease Accounting - The Company's leasing operations consist of both financing and operating leases. The finance method of accounting for leases records as unearned income, at the inception of the lease, the excess of net rentals receivable and estimated residual value over the cost of the leased equipment. Unearned income is amortized monthly over the term of the lease on a declining basis to provide an approximate level rate of return on the unrecovered cost of the investment. Initial direct costs of originating new leases are capitalized and amortized over the initial lease term. Under the operating method of accounting for leases, the leased equipment is recorded as an asset, at cost, and is depreciated on a straight-line basis over its estimated useful life, ranging up to six years. Rental income represents the rental payments due during the period under the terms of the lease. The Company is the lessor in leveraged lease agreements under which computer equipment having an estimated useful life of 5 years was leased for periods from 4-5 years. The Company is the equity participant and equipment owner. A portion of the purchase price was furnished by third-party financing in the form of long-term debt that provides no recourse to the Company and is secured by a first lien on the financed equipment. g. Property and Equipment - Property and equipment which the Company holds for its own use are recorded at cost and depreciated on a straight-line basis over estimated useful lives ranging up to 45 years. h. Income Taxes - The Company is included in consolidated and combined tax returns filed by PAI. i. Deferred Revenue - Deferred revenue is the result of selling maintenance contracts which provide service over a specific period of time. Deferred revenue is amortized on a straight-line basis over the service period not to exceed 5 years. j. Investments in Marketable Securities - Investments in marketable securities, are stated at cost and consist primarily of United States government obligations. Interest is recognized when earned. k. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Exhibit 21 - Page 5 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 1. Summary of significant Accounting Policies (continued): l. Reclassification - Certain 1995 balances have been reclassified to conform to the 1996 presentation. Note 2. Receivables from Phoenix Leasing Partnerships and Other Affiliates: Receivables from Phoenix Leasing Partnerships and other affiliates consist of the following for the years ended June 30: 1996 1995 ---- ---- Management fees $ 416,149 $ 330,158 Acquisition fees 74,099 102,994 Other receivables from Phoenix Leasing Partnerships 3,458,687 3,535,110 Other receivables from corporate affiliates 7,000 7,000 ---------- ---------- $3,955,935 $3,975,262 ========== ========== Note 3. Investments in Phoenix Leasing Partnerships: The Company records its investments in Phoenix Leasing Partnerships under the equity method of accounting. The ownership interest percentages vary, ranging from .5% up to 25%. As general partner, the Company has complete authority in, and responsibility for, the overall management and control of each partnership, which includes responsibility for supervising partnership acquisition, leasing, remarking and sale of equipment. Distributions of cash from the partnerships are made at the discretion of the general partner; historically, a significant portion of the partnerships' earnings has been distributed annually. A shareholder of PAI and officers of the Company also have general and limited partner interests in several of the partnerships. The activity in the investments in Phoenix Leasing Partnerships for the years ended June 30 are as follows: 1996 1995 ---- ---- Balance, beginning of year $ 412,974 $(1,120,980) Additional investments 830,085 688,615 Equity in earnings 2,093,488 2,412,056 Cash distributions (2,323.874) (1,566,717) ----------- ----------- Balance, end of year $ 1,012,673 $ 412,974 =========== =========== The Company's total investments in Phoenix Leasing Partnerships are comprised of investments in certain partnerships which are subject to fluctuations due to partnerships' performances and timing of cash distributions. At times the investment in those partnerships will be a deficit. Certain of the partnership agreements require the Company to restore any deficit in its capital account to zero at the dissolution of the partnership. This deficit is a result of cash distributions received and losses allocated to the Company. The Company has determined that in certain partnerships it will be Exhibit 21 - Page 6 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 3. Investments in Phoenix Leasing Partnerships (continued): unlikely that the deficit investment will reverse and as a result during the year ended June 30, 1993 the Company elected to make capital contributions prior to partnership dissolution totaling $2,028,733. As of April 1, 1992, the Company elected to forgo any future cash distributions from, and will not record its share of future earnings generated from the operations of, one of these partnerships. The Company has deferred any future cash distributions from two other partnerships. The Company believes that it would be likely that any future cash distributions received from these partnerships would have to be paid back at the dissolution of the partnerships. The Company will continue to record fee income earned from the management of, and acquisition of equipment for these partnerships. The aggregate positive investment and aggregate deficit investment balances are presented separately on the balance sheets as of June 30, 1996 and 1995. The partnerships own and lease equipment. All debt of the partnerships is secured by the equipment and is without recourse to the general partners. The unaudited financial statements of the partnerships reflect the following combined, summarized financial information as of June 30, 1996 and for the twelve months then ended: Assets $182,995,000 Liabilities 29,989,000 Partners' Capital 153,006,000 Revenue 46,353,000 Net Income 18,826,000 Note 4. Equipment Subject to Lease: Equipment subject to lease includes the Company's investments in leveraged leases, investments in financing leases, operating leases and notes receivable. Equipment subject to lease consists of the following at June 30: 1996 1995 ---- ---- Equipment on lease, net of accumulated depreciation of $258,102 $ 92,008 $ -- Leverage leases 1,589,772 1,696,703 Equipment held for resale 305,840 -- Investment in financing leases 12,036,604 13,284,177 Operating leases 207,793 -- Notes receivable 3,560,830 2,063,806 ----------- ----------- $17,792,847 $17,044,686 =========== =========== Leverage Leases: The Company's net investment in leveraged leases is composed of the following elements at June 30: Exhibit 21 - Page 7 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 4. Equipment Subject to Lease (continued): 1996 1995 ---- ---- Rental receivable (net of principal and interest on the nonrecourse debt) $ -- $ -- Estimated residual value of leased assets 2,498,233 2,759,783 Less: Unearned and deferred income (908,461) (1,063,080) ----------- Investment in leveraged leases 1,589,772 1,696,703 Less: Deferred taxes arising from leveraged leases (2,651,124) (2,960,190) ----------- Net investment in leveraged leases $(1,061,352) $(1,263,487) =========== =========== Investment in Financing Leases: The Company has entered into direct lease arrangements with companies engaged in the development of technologies and other growth industry businesses operating in different industries located throughout the United States. Generally, it is the responsibility of the lessee to provide maintenance on leased equipment. The Company's net investment in financing leases consists of the following at June 30: 1996 1995 ---- ---- Minimum lease payments to be received $ 16,089,868 $ 17,731,628 Less: unearned income (4,053,263) (4,447,451) ------------ ------------ Net investment in financing leases $ 12,036,605 $ 13,284,177 ============ ============ Minimum rentals to be received on noncancellable financing leases for the years ended June 30, are as follows: 1997 $ 4,161,068 1998 4,171,699 1999 4,248,885 2000 2,367,834 2001 1,080,674 Thereafter 59,708 -------------- Total $ 16,089,868 =========== Notes Receivable: Notes receivable for the years ended June 30, are as follows: 1996 1995 ---- ---- Notes receivable from emerging growth and other companies with stated interest ranging from 10% to 22.6% per annum receivable in installments ranging from 36 to 85 months collateralized by the equipment financed $3,560,830 $2,063,806 ========== ========== Exhibit 21 - Page 8 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 5. Sale of Leased Assets and Notes Receivable: The Company acquires leased or financed equipment with the intent to subsequently sell those assets to a trust which issues lease backed certificates. As of June 30, 1996, the Company has acquired $15,805,227 is such leased or financed equipment which is included in equipment subject to lease. The Company uses proceeds from its two warehouse lines of credit to purchase or finance this equipment. During the holding period the Company recognizes the revenues generated from these leases or notes and the interest expense related to the drawdowns from the warehouse lines of credit. On November 29, 1995, the Company entered into an agreement to sell certain assets and notes receivables with a net carrying value of $27,337,402 to a trust for the purpose of the trust issuing lease backed certificates in exchange for cash proceeds. The Company recognized a gain on this transaction of $459,632. The leased backed certificates are recourse only to the assets used to collateralize the obligation. Under the terms of the agreement, the Company will continue to acquire and sell additional assets to the trust over the twelve month period beginning November 30, 1995 and ending November 28, 1996. During the period November 30, 1995 through June 30, 1996, the Company sold additional assets to the trust for $4,807,746. These assets had a net carrying value of $4,225,596, resulting in a gain of $582,150. Note 6. Property and Equipment: Major classes of property and equipment at June 30 are as follows: 1996 1995 ---- ---- Land $ 1,077,830 $ 1,077,830 Buildings 7,352,608 7,345,648 Office furniture, fixtures and equipment 8,573,547 8,259,319 Other 843,450 766,975 ------------ ------------ 17,847,435 17,449,772 Less accumulated depreciation and amortization (11,398,438) (10,457,763) Inventory held for resale 484,611 677,293 ------------ ------------ Net Property and Equipment $ 6,933,608 $ 7,669,302 ------------ ------------ PAI owns its headquarters building in San Rafael, California. The Company paid $7,749,476 to purchase the land and construct the building. The cost of construction was paid for with a combination of $2,749,476 in cash from the Company's operations and a $5,000,000 advance from PAI. The $5,000,000 advance is included as a reduction in receivable from Phoenix Leasing Partnerships and other affiliates. PAI has pledged the market value of the building as security for a $5,000,000 Industrial Revenue Bond ("IDB") which PAI has with the City of San Rafael, California. The principal of the IDB is payable in a lump sum payment on October 1, 2004. The Company paid $248,325 and $206,798 in interest payments related to the IDB during the year ended June 30, 1996 and 1995, respectively. As of June 30, 1996, a portion of the Company's headquarters has been leased to third parties. The remaining lease term is for less than one year and the minimum lease payments receivable are as follows: 1997 $370,093 ======== Exhibit 21 - Page 9 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 7. Investments in Marketable Securities: In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115 - Accounting for Certain Investments in Debt and Equity Securities (SFAS 115). The Company adopted this statement on July 1, 1994. This pronouncement prescribes specific accounting treatment for investments based on their classification as either held-to-maturity securities (HTM), available-for-sale securities (AFS) or trading securities, as defined in the statement. As of June 30, 1996, all securities held by the Company are classified as AFS and are reported at their amortized cost of $1,287,323, which approximates fair value. This value includes Class C Equipment Investment Trust Certificates (Class C Shares) valued at $1,248,843 and equities valued at $38,479. As of June 30, 1995, all securities are classified as HTM and are reported at amortized cost of $7,298,771, which approximated fair value. Gross unrealized gains and gross unrealized losses on such securities as of June 30, 1996 and 1995 were immaterial. As of June 30, 1996, none of the securities held by the Company had specified contractual maturities. Contractual maturities of securities held as of June 30, 1995, are as follows: 1995 ---- Held-To-Maturity Securities Due in one year or less $4,202,115 Due after one through five years 3,096,656 ---------- Total $7,298,771 ========== During fiscal year 1996, the Company sold $3,000,000 in face value of U.S. Treasury Notes, which were classified as HTM as of June 30, 1995. As a result of the sale, the Company changed the classification of all of its U.S. Treasury Notes from HTM to AFS in accordance with SFAS No. 115. The sale resulted in an immaterial gain, and proceeds were used for general corporate purposes. Note 8. Fair Value of Financial Instruments: Marketable Securities The carrying amounts of marketable securities reported in the balance sheets approximate their fair values. Leases, Notes Receivable, and Debt The fair values of the Company's leases, notes receivable, and debt are estimated based on the market prices of similar instruments or on the current market interest rates for instruments with similar terms, maturities, and risks. The estimated fair values of the Company's leases, notes receivable, and debt approximate the carrying amounts reported in the balance sheets. Note 9. Short-Term and Warehouse Lines of Credit: To provide interim financing for equipment and working capital needs, the Company executes lines of credit which consist of short-term notes with banks with interest rates equal to the prime rate or the banks' index rate. All lines of credit are renewable annually at the banks' option. Exhibit 21 - Page 10 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 9. Short-Term and Warehouse Lines of Credit (continued): As of June 30, 1996, the Company, through PAI, had access to one short-term line of credit totaling $2.5 million. of which $750,000 was available for borrowing at June 30, 1996. Draw downs under this credit line are secured by the Company's receivable from Phoenix Leasing Partnerships. In addition, the Company has two secured short-term warehouse lines of credit totaling $37.5 million, which are used to provide interim financing for the acquisition of equipment and the financing of notes receivable. As of June 30, 1996, $16.9 million of these lines have been drawn down. The draw downs under these lines are collateralized by investments in financing leases and notes receivable included in equipment subject to lease. The interest rate is tied to the IBOR (Eurodollar) rate. The initial commitment period for these lines of credit is 18 months and may be extended to 36 months at the discretion of the bank. Principal payments are based on the lesser of the aggregate payments received by the Company on its leases and notes receivable or the aggregate principal and interest amount outstanding on the payment date of the credit line. In connection with the Company's lines of credit, various financial ratios and other covenants must be maintained. The Company has guaranteed its right, title and interest in certain of its assets and the future receipts from these assets in order to secure payment and performance of these credit lines. Additional information relating to the Company's short-term bank lines follows: 1996 1995 ---- ---- Balance at June 30 $18,680,044 $17,644,012 Maximum amount outstanding 32,111,837 17,644,012 Average amount outstanding 13,828,284 2,522,340 Weighted average interest rate during the period 7.56% 7.9% Note 10. Long-Term Debt: Long-term debt consists of the following at June 30: 1996 1995 ---- ---- Mortgage payable at varying interest rates with an initial rate of 8.75% secured by a first deed of trust on real property with a cost of $250,000. Note is amortized over 83 months with monthly payments of $559 with a final payments of $122,151 $154,238 $160,944 Note payable to a bank, collateralized by the assets of Phoenix Leasing Liquidation Corporation, a subsidiary of the Company, with a variable rate of interest tied to the bank's prime rate payable in 30 consecutive monthly installments 466,661 -- Exhibit 21 - Page 11 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 10. Long-Term Debt (continued): Note payable at 9.75% secured by computer equipment with a cost of $668,994. Note is amortized over 46 months with monthly payments of $16,887 -- 68,446 -------- -------- Total long-term debt $620,899 $229,390 ======== ======== The aggregate long-term debt maturities for the fiscal years ended June 30, are as follows: 1997 $ 440,034 1998 40,039 1999 6,706 2000 6,706 2001 5,588 2002 and thereafter 121,826 ------------- Total. $ 620,899 ============ Note 11. Profit Sharing Plan: The Company has a profit sharing plan covering substantially all employees who meet certain age and service requirements. Contributions to the plan by the Company are made at the discretion of the board of directors. The profit sharing expense was $600,000 for the years ended June 30, 1996 and 1995, respectively. Note 12. Leased Facilities: The Company leases office and warehouse space in various parts of the country and had annual rental expense of approximately $417,000 and $402,000 for the years ended June 30, 1996 and 1995, respectively. Note 13. Transactions with Related Parties: The Company provides an interest bearing line of credit totaling $8,000,000 to PAI's controlling shareholder which is secured by common stock of Phoenix Precision Graphics, Inc. (an unaffiliated Nevada corporation). As of June 30, 1996 and 1995, $6,646,209 and $4,837,814 of this line of credit has been drawn down and is included in notes receivable from related party. As of June 30, 1996 and 1995, Phoenix Precision Graphics is in a start-up mode and has cumulative losses of $9,120,711 and $5,959,708, respectively. The Company provides an interest bearing line of credit to PAI's controlling shareholder, which is secured by common stock of Phoenix Fiberlink Inc. (an unaffiliated Nevada Corporation). As of June 30, 1996 and 1995, $2,121,484 and $736,638 of this line of credit has been drawn down and is included in notes receivable from related party. The Company earned a management fee from an affiliate of $556,453 and $678,947 for the years ended June 30, 1996 and 1995, respectively. This management fee is included in Portfolio management fees. The Company paid an affiliate an asset management fee of $305,770 and $1,026,714 for the years ended June 30, 1996 and 1995, respectively. These asset management fees are included in equipment lease operations, maintenance, remarking and administrative fees. Exhibit 21 - Page 12 of 19 PHOENIX LEASING INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 Note 14. Commitments and Contingencies: The Company has entered into agreements which contain specific purchase commitments. The Company may satisfy these commitments by purchasing equipment for its own account or by assigning equipment purchases to its affiliated partnerships. At June 30, 1996 the Company anticipates being able to satisfy its future obligations under the agreements and intends to assign most of the purchases under the agreements to its affiliated partnerships. The Company enters into commitments to purchase and sell high-technology equipment on behalf of a corporate affiliate. The Company is reimbursed for these services. The Company is party to legal actions which arise as part of the normal course of its business. The Company believes, after consultation with counsel, that it has meritorious defenses in these actions, and that the liability, if any, will not have a material adverse effect on the financial position of the Company. Exhibit 21 - Page 13 of 19 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Venturers of Phoenix Black Rock Cable J. V. We have audited the accompanying balance sheet of Phoenix Black Rock Cable J. V. (a California general partnership) as of December 31, 1996 and the related statements of operations, venturers' capital and cash flows for the year then ended. These financial statements are the responsibility of the Joint Venture's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Phoenix Black Rock Cable J. V. as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP San Francisco, California January 17, 1997 Exhibit 21 - Page 14 of 19 PHOENIX BLACK ROCK CABLE J. V. BALANCE SHEET ASSETS December 31, 1996 ---- Total Assets $ -- ====== LIABILITIES AND VENTURERS' CAPITAL Total Liabilities $ -- ------ Venturers' Capital: -- Total Liabilities and Venturers' Capital $ -- ====== Exhibit 21 - Page 15 of 19 PHOENIX BLACK ROCK CABLE J. V. STATEMENT OF OPERATIONS For the Year Ended December 31, 1996 ------------ INCOME Gain on sale of cable system $1,184,850 Cable subscriber revenue 50,457 Interest income 8,674 ---------- Total Income 1,243,981 EXPENSES Depreciation and amortization 12,968 Program service 11,850 Management fees 120,756 General and administrative expenses 19,178 ---------- Total Expenses 164,752 ---------- NET INCOME $1,079,229 ========== Exhibit 21 - Page 16 of 19 PHOENIX BLACK ROCK CABLE J. V. STATEMENTS OF VENTURERS' CAPITAL
Capital Retained Cash Contributions Earnings Distributions Total ------------- -------- ------------- ----- Balance, December 31, 1995 $1,994,650 $ 404,151 $ (750,000) $ 1,648,801 Cash distributions -- -- (2,728,030) (2,728,030) Net income -- 1,079,229 -- 1,079,229 ---------- ---------- ----------- ----------- Balance, December 31, 1996 $1,994,650 $1,483,380 $(3,478,030) $ -- ========== ========== =========== ===========
Exhibit 21 - Page 17 of 19 PHOENIX BLACK ROCK CABLE J. V. STATEMENT OF CASH FLOW For the Year Ended December 31, 1996 ---- OPERATING ACTIVITIES: Net income $ 1,079,229 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 12,968 Gain on sale of cable system (1,184,850) Decrease in other assets 620 Decrease in accounts receivable 617 Decrease in subscriber prepayments and deposits (116) Decrease in accounts payable and accrued expenses (22,401) ----------- Net cash used in operating activities (113,933) ----------- INVESTING ACTIVITIES: Purchase of cable systems and equipment (607) Proceeds from sale of cable systems 2,588,503 ----------- Net cash provided by investing activities 2,587,896 ----------- FINANCING ACTIVITIES: Payments to affiliates (3,793) Cash distribution to venturers (2,728,030) ----------- Net cash used in financing activities (2,731,823) ----------- Decrease in cash and cash equivalents (257,860) Cash and cash equivalents, beginning of period 257,860 ----------- Cash and cash equivalents, end of period $ -- =========== Exhibit 21 - Page 18 of 19 PHOENIX BLACK ROCK CABLE J. V. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 Note 1. Organization. Phoenix Black Rock Cable J. V. (the "Joint Venture") was formed under the laws of California on January 10, 1992 by several affiliated Limited Partnerships (the "Venturers") managed by Phoenix Leasing Incorporated to own and operate the Black Rock Cable Television System located in the States of Nevada and California that was acquired through foreclosure on a defaulted note receivable. Income or loss is allocated to each Venturer based upon their respective interest in the Joint Venture. Distributions are made in the same manner. The cable television system is located in the counties of Clark and Nye in the State of Nevada and in the county of Inyo in the State of California. The cable television system consists of headend equipment in five locations and 156 miles of plant passing, approximately 2,900 homes and approximately 1,820 cable subscribers. The cable television system serves the communities of Parumph, Beatty and Blue Diamond in Nevada and Cow Creek and Grapevine in California. It operates under one non-exclusive franchise agreement with the county of Nye in Nevada and a National Park Service Permit for Death Valley, California. Phoenix Cable Management Inc. (PCMI) provides day to day management services in connection with the operation of the cable system. The cable system pays a management fee equal to four and one-half percent of the System's monthly gross revenue for these services. Note 2. Summary of Significant Accounting Policies. Property, Cable Systems and Equipment Depreciation of property, cable systems and equipment was provided using the straight-line method over the following estimated service lives: Distribution systems 13 years Headend equipment 13 years Equipment and tools 13 years Vehicles and other 5 years Replacements, renewals and improvements were capitalized, and maintenance and repairs were charged to expense as incurred. Intangible Assets Costs assigned to intangible assets were amortized using the straight-line method over the following estimated useful lives: Franchise rights 10 years Subscriber lists 8 years Revenue Recognition Services were billed monthly in advance. Revenue was deferred and recognized as the services were provided. Exhibit 21 - Page 19 of 19 Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 3. Sale of Cable System. On January 17, 1996, Phoenix Black Rock Cable J. V. sold its cable television system receiving net proceeds of $2,588,503 resulting in a net gain of $1,184,850. At the time of the sale of the system, the cable system had approximately 1,820 subscribers. Note 4. Accounts Receivable. The activity of the allowance for doubtful accounts receivable is as follows: December 31, 1996 ---- Beginning balance $ 6,464 Recovery of losses (6,464) ------- Ending balance $ -- ======= Note 5. Income Taxes. Federal and state income tax regulations provide that taxes on the income or loss of the Joint Venture are reportable by the Venturers on their individual income tax return. Accordingly, no provision for such taxes has been made in the accompanying financial statements. Note 6. Related Entities. The Joint Venture is sponsored and funded by various partnerships managed by Phoenix Leasing Incorporated (PLI). PLI serves in the capacity of the general partner and managing venturer in other joint ventures. EX-27 3
5 1,000 YEAR DEC-31-1996 DEC-31-1996 658 67 1 0 0 0 114 114 829 0 0 0 0 0 (1,058) 829 0 266 0 65 0 2 0 201 0 201 0 0 0 201 4.95 0
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