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.
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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.
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.
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.
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PART II
Item 5.
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.
Item 6. Selected Financial Data.
The above selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this report.
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Item 7.
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.
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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.
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Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHOENIX LEASING GROWTH FUND 1982
YEAR ENDED DECEMBER 31, 1996
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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
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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.
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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.
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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.
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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.
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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.
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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
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An analysis of the Partnership's investment in equipment joint ventures is as follows:
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 ------ ------ ------
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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:
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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.
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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:
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 ==== ======
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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
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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) - ----
Assets $ 829 $ 837 $ (8) Liabilities 1,887 1,214 673
- ----
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
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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) - ----
Assets Cash and cash equivalents $ 658 $ 658 Securities, available-for-sale 67 67
- ----
Assets Cash and cash equivalents $1,078 $1,078 Securities, available-for-sale 60 60
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Item 9.
Item 9. Disagreements on Accounting and Financial Disclosure Matters.
None.
PART III
Item 10.
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:
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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.
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.
Item 12.
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:
Item 13.
Item 13. Certain Relationships and Related Transactions.
None.
Page 27 of 29
PART IV
Item 14.
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.
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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