Item 1. BUSINESS
General Development of Business -
The Registrant is a Florida limited partnership (the "Partnership") composed of Cypress Equipment Management Corporation II, a California corporation and a wholly-owned subsidiary of Cypress Leasing Corporation, as the Managing General Partner; RJ Leasing - 2, Inc., a Florida corporation and a second-tier subsidiary of Raymond James Financial, Inc., as the Administrative General Partner; Raymond James Partners, Inc., a Florida corporation and a wholly-owned subsidiary of Raymond James Financial, Inc., as the other General Partner; and purchasers of partnership units as Limited Partners.
Financial Information about Industry Segments -
The Registrant is engaged in only one industry segment, to acquire transportation, manufacturing, industrial and other capital equipment (the "Equipment") and lease the Equipment to third parties.
Narrative Description of Business -
The Partnership's business is to acquire and lease equipment, primarily through full payout and operating leases expected to generate income over the useful life of the Equipment, and to generate cash distributions to the Limited Partners from leasing revenues and proceeds from the sale or other disposition of the Equipment owned by the Partnership.
The Registrant has no direct employees. The General Partners have full and exclusive discretion in management and control of the Partnership.
The equipment leasing industry is highly competitive and offers to users an alternative to the purchase of nearly every type of equipment. In seeking lessees, the Partnership will compete with manufacturers of equipment who provide leasing programs and with established leasing companies and equipment brokers. In addition, there are numerous other potential investors, including limited partnerships, organized and managed similarly to the Partnership, seeking to purchase equipment subject to leases, some of which have greater financial resources and more experience than the Partnership or the General Partners.
Item 2.
Item 2. PROPERTIES
The Registrant commenced operations in June 1992, and as of December 31, 2001, the original cost of Equipment owned by the Partnership was $680,825. Equipment and related information consist of the following:
EQUIPMENT
LEASE
MATURITIES
AT 12/31/01
ACQUISITION
COST
FUTURE REVENUE
OF REMAINING
LEASE TERM AT
12/31/01
-------------
Machine Tools
TOTAL
--------------
March 2002-
September 2004
-----------
680,825
----------
$ 680,825
===========
-------------
192,000
-----------
$ 192,000
===========
The lessees and the percentages of total equipment owned are as follows:
Percentage of All
Equipment Owned
----------------
Alliant Techsystems, Inc. 100%
----------------
100%
================
The Partnership paid $3,118,969 for the right to obtain title to a specialty tug and barge on December 30, 2002, at the expiration of the lease. This item was written down to $2,410,000 during the year ended December 31, 2001 to its lower end market value. This was due to the current legal proceedings.
The Partnership is also a 50% partner in one other partnership with a current net investment of $143,690.
Item 3.
Item 3. LEGAL PROCEEDINGS
As of December 31, 2001 there are legal proceedings pending. With respect to the transaction in which Energy Ammonia Transport Company is the charter party and IMC Corporation is guarantor, the Fund has declared an event of default due to the deferral of maintenance on the tug and barge, and has filed a complaint in Federal Court seeking damages. The charter party has denied that an event of default has occurred and has filed a counterclaim alleging that the declaration of the default represents tortious interference and is seeking damages.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through the solicitation
of proxies or otherwise during the fourth quarter of 2001.
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 holders:
Number of Record Holders
Title of Each Class as of December 31, 2001
Units of Limited Partnership Interest 1,967
General Partner Interests 3
Item 6.
Item 6. SELECTED FINANCIAL DATA
Total Revenues
$ 134,626
$1,016,493
$ 7,684,923
$ 8,736,573
$ 6,606,199
Net Income(Loss)
$(1,154,625)
$ (378,833)
$11,551,809
$ 4,560,365
$ 1,479,260
Total Assets
$ 3,345,951
$5,774,872
$14,553,255
$33,822,260
$47,348,906
Notes Payable
$ 1,722,341
$1,607,824
$ 1,500,921
$ 6,497,730
$19,084,905
Distributions to Limited Partners Per Weighted Average Limited Partnership Unit Outstanding
$ 34.65
$ 167.67
$ 750.98
$ 150.00
$ 100.00
Earnings (Loss)Per Weighted Average Limited Partnership Unit Outstanding
$ (31.34)
$ (10.28)
$ 313.59
$ 123.80
$ 40.16
The selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this report. This statement is not covered by the auditor's opinion included elsewhere in this report.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Partnership is beginning to wind down its operations. The Partnership has sold significant assets, as discussed below. The remaining assets include: two sets of machine tools on lease to third parties; a 50% interest in a partnership which leases and sells intermodal marine containers and chassis; and a deposit for the right to obtain title to a specialty tug and barge on December 31, 2002, at the expiration of the lease.
Rental income decreased from $485,966 for the year ended December 31, 2000, to $111,007 for the year ended December 31, 2001. Interest income also decreased during the year ended December 31, 2001 as compared to the prior year because of lower average balances of cash for investment and lower interest rates.
Interest expense increased from $106,903 for the year ended December 31, 2000, to $114,517 for the year ended December 31, 2001. This increase resulted from increased expenses for a balloon loan. Depreciation expense decreased for year ended December 31, 2001 versus the same period in 2000 because the Partnership had a lower depreciable basis of equipment as a result of sales of rental equipment during the year ended December 31, 2000. Management fee expense decreased from $59,853 for the year ended December 31, 2000, to $8,765 for the year ended December 31, 2001 due to decreased rental revenues. General and Administrative expenses decreased from $202,831 for the year ended December 31, 2000, to $199,233 for the year ended December 31, 2001. There were $152,760 of legal expenses for the period ending December 31, 2001.
The 4% incentive management fee was earned with the August 10, 1999, distribution as each Limited Partner has received cumulative cash distributions equal to his capital contribution. The 19% incentive management fee was earned in total with the April 2000 distribution as all Limited Partners began receiving cumulative cash distributions equal to payout plus an amount equal to 8% of adjusted capital contributions per annum cumulative from each limited partner's closing date. Incentive management fees decreased from $638,690 for the year ended December 31, 2000 to $381,266 for the year ended December 31, 2001 due to decreased distributions for the year end December 31, 2001. Equipment resale fee expense decreased from $151,752 for the year ended December 31, 2000 to $0 for the year ended December 31, 2001 as no equipment was sold during the year ended December 31, 2001. The Equipment resale fee was deferred without interest until the Limited Partners began receiving cumulative cash distributions equal to payout plus an amount equal to 8% of adjusted capital contributions per annum cumulative from each limited partner's closing date. The first equipment resale fees were paid to the general partner concurrently with the April 2000 distribution.
During the year ended December 31, 2001, no rental equipment was sold. During the year ended December 31, 2000, rental equipment with a book value of $4,270,386 was sold for $4,973,406 less expenses of sale of $277,177, resulting in a gain on sale of $425,843.
During the year ended December 31, 2001, there was no activity in Equipment Held for Sale. During the year ended December 31, 2000, Equipment Held for Sale with a book value of $2,932,078 was sold for $3,364,691 less $454,869 of sales related expenses resulting in a net loss on sale of $22,256.
During the year ended December 31, 2001, the Partnership had other income of $6,242 from the sale of aircraft parts. During the year ended December 31, 2000, the Partnership had other income of $50,000 in the form of a settlement from a direct financing lease that had been previously written off.
During the year ended December 31, 2001, the Partnership had a loss of $708,969 in the write down of Deposit on Equipment. Due to the appraisals it was decided to write down the equipment to a lower end market value.
Depreciation expense decreased $247,100 for the year ended December 31, 2001 versus the year ended December 31, 2000, due to an average depreciable basis of equipment of $680,825 during 2001 versus an average of $ 4,829,000 during 2000.
The net effect of the above revenue and expense items resulted in a net loss of $1,154,625 for the year ended December 31, 2001, compared to a net loss of $378,833 for the year ended December 31, 2000.
Notes payable increased $114,517 during the year ended December 31, 2001, due to deferred interest of $114,517.
Liquidity and Capital Resources
The primary sources of funds for the year ended December 31, 2001, were $111,007 from rental income and $333,858 in distributions from other partnerships. These sources and cash available were used primarily for $1,276,416 of distributions. As of December 31, 2001, the Partnership had $443,913 of Cash and Cash Equivalents.
In the opinion of the General Partners there are no material trends, favorable or unfavorable, in the Partnership's capital resources and the resources will be sufficient to meet the Partnership's needs for the foreseeable future.
Short-term liquidity requirements consist of funds needed to meet administrative expenses. Cash from 2002 operations and Cash and Cash Equivalents at December 31, 2001, will fund these short-term needs.
In the opinion of the General Partners, the Partnership has sufficient funds or sources of funds to remain liquid for the expected life of the Partnership. The General Partners are not aware of any trends that significantly affect the Partnership's liquidity.
The cash balance at December 31, 2001, was $443,913. The Partnership had a net loss of $1,154,625 and after adjusting for depreciation and amortization and the changes in operating assets and liabilities, net cash used in operating activities was $594,077. Cash provided by investing activities totaled $331,858. Cash used in financing activities was primarily to make distributions of $1,276,416.
Actual cash distributions were $1,276,416 in 2001 and $6,176,224 in 2000.
The Partnership anticipates that funds from operations in 2002 and cash reserves will be adequate to cover all 2002 operating contingencies.
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Cypress Equipment Fund II, Ltd.
We have audited the accompanying balance sheets of Cypress Equipment Fund II, Ltd. as of December 31, 2001 and 2000, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 Cypress Equipment Fund II, Ltd. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 10, the Partnership is winding down its operation.
SPENCE, MARSTON, BUNCH, MORRIS & CO.
Certified Public Accountants
Clearwater, Florida
June 12, 2002
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CYPRESS EQUIPMENT FUND II, LTD.
BALANCE SHEETS
DECEMBER 31,
----
----
ASSETS
Rental Equipment, at Cost
Less: Accumulated Depreciation
Deposit on Equipment
Investment In Partnership
Rent and Sales Proceeds Receivable
Accounts Receivable
Cash and Cash Equivalents
Total Assets
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable
Payable to: General Partners
Others
Unearned Revenue
Total Liabilities
Partners' Equity (Deficit):
Limited Partners (36,469 units outstanding at December 31, 2001 and 2000)
General Partners
Total Partners' Equity
Total Liabilities and Partners' Equity
$ 680,825
(343,659)
-----------
337,166
2,410,000
143,690
11,182
443,913
----------
$ 3,345,951
==========
$ 1,722,341
2,022
19,069
----------
1,743,940
----------
1,904,921
(302,910)
----------
1,602,011
----------
$ 3,345,951
==========
$ 680,825
(291,787)
-----------
389,038
3,118,969
278,317
6,000
1,982,548
----------
$ 5,774,872
==========
$ 1,607,824
50,107
83,381
----------
1,741,820
----------
4,311,651
(278,599)
----------
4,033,052
----------
$ 5,774,872
==========
The accompanying notes are an integral part
of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
----
----
----
Revenues:
Rental Income
Other Income
Interest Income
Gain on Sale of Rental Equipment
Gain (Loss) on Sale of Rental
Equipment Held for Sale
Recovery on Write Down
Total Revenues
Operating Expenses:
Management Fees-General Partners
Incentive Management Fee -
General Partner
Equipment Resale Fee -
General Partner
General & Administrative:
Affiliate
Other
Interest Expense
Depreciation and Amortization
Write Down of Assets
Total Operating Expenses
Net Income (Loss) Before Equity in Income of Partnership
Equity in Partnership
Gain on Sale of Investment in Partnership
Net Income (Loss)
Allocation of Net Income (Loss):
Limited Partners
General Partners
Net Income (Loss) per $1,000 Limited Partnership Unit Outstanding
Number of Limited Partnership Units
$ 111,007
6,242
17,377
----------
134,626
----------
8,765
381,266
21,856
199,237
114,517
51,872
708,969
----------
1,486,482
----------
(1,351,856)
197,231
----------
$(1,154,625)
==========
$(1,143,079)
(11,546)
----------
$(1,154,625)
==========
$ (31.34)
==========
36,469
==========
$ 485,966
76,940
425,843
(22,256)
50,000
----------
1,016,493
----------
59,893
638,690
151,752
38,771
202,831
106,903
298,972
----------
1,497,812
----------
(481,319)
102,486
----------
$ (378,833)
==========
$ (375,045)
(3,788)
----------
$ (378,833)
==========
$ (10.28)
==========
36,469
==========
$3,066,577
245,807
307,191
4,065,348
----------
7,684,923
----------
65,351
516,477
1,970,078
54,517
872,992
225,651
1,531,154
861,681
----------
6,097,901
----------
1,587,022
662,349
9,302,438
-----------
$11,551,809
===========
$11,436,291
115,518
-----------
$11,551,809
===========
$ 313.59
===========
36,469
===========
The accompanying notes are an integral part
of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Limited
Partners'
Equity
--------
General
Partners'
Deficit
--------
Total
Partners'
Equity
--------
Balance at December 31, 1998
Net Income - 1999
Distributions - 1999
Balance at December 31, 1999
Net Loss - 2000
Distributions - 2000
Balance at December 31, 2000
Net Loss - 2001
Distributions - 2001
Balance at December 31, 2001
$ 26,752,336
11,436,291
(27,387,474)
-----------
10,801,153
(375,045)
(6,114,457)
------------
4,311,651
(1,143,079)
(1,263,651)
-----------
$ 1,904,921
===========
$ (51,922)
115,518
(276,640)
---------
(213,044)
(3,788)
(61,767)
---------
(278,599)
(11,546)
(12,765)
----------
$(302,910)
==========
$ 26,700,414
11,551,809
(27,664,114)
-----------
10,588,109
(378,833)
(6,176,224)
-----------
4,033,052
(1,154,625)
(1,276,416)
-----------
$ 1,602,011
===========
The accompanying notes are an integral part
of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
Non-Cash Activities:
Notes Payable in 1999 were increased by $148,721 the amount of Deferred Interest on Notes Payable.
In 1999, an option was exercised decreasing Options and increasing Equipment Held for Sale by $672,437.
In 1999, Leased Equipment with a cost of $1,812,694 and a net book value of $688,043 was transferred to Equipment Held for Sale.
In 1999, the Investment in a Direct Financing Lease was written down to $0.
Notes Payable in 2000 were increased by $106,903 the amount of Deferred Interest on Notes Payable.
Notes Payable in 2001 were increased by $114,517 the amount of Deferred Interest on Notes Payable.
In 2001, the Deposit on Equipment was written down to $2,410,000.
The accompanying notes are an integral part
of these financial statements.
Cypress Equipment Fund II, Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - ORGANIZATION
Cypress Equipment Fund II, Ltd., (the "Partnership"), a Florida limited partnership, was formed November 13, 1991, for the purpose of acquiring and leasing transportation, manufacturing, industrial and other capital equipment. The Partnership was funded with limited partner capital contributions and commenced operations on June 22, 1992. The Partnership will terminate on December 31, 2015, or sooner, in accordance with the terms of the Limited Partnership Agreement.
Cypress Equipment Management Corporation II, a California corporation and a wholly-owned subsidiary of Cypress Leasing Corporation, is the Managing General Partner; RJ Leasing - 2, Inc., a Florida corporation and a second-tier subsidiary of Raymond James Financial, Inc., is the Administrative General Partner; and Raymond James Partners, Inc., a Florida corporation and a wholly-owned subsidiary of Raymond James Financial, Inc., is the other General Partner.
Cash distributions, subject to payment of the equipment management fees and incentive management fees, and profits and losses of the Partnership shall be allocated 99% to the Limited Partners and 1% to the General Partners. Once each Limited Partner has received cumulative cash distributions equal to his capital contributions, an incentive management fee equaling 4% of cash available for distributions will be paid to the General Partners. When each Limited Partner has received cumulative cash distributions equal to his capital contributions plus an amount equal to 8% of adjusted capital contributions per annum, an incentive management fee equaling 23% of cash available for distributions will be paid to the General Partners.
As of December 31, 2001, the Partnership has received Limited and General Partner capital contributions of $36,469,000 and $2,000, respectively.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Partnership utilizes the accrual basis of accounting whereby revenues are recognized when earned and expenses are recognized as obligations are incurred.
Cash and Cash Equivalents
It is the Partnership's policy to include all money market funds and Repurchase Agreements in Cash and Cash Equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Partnership to concentrations of credit risk consist principally of cash investments. The cash investments are placed in high credit quality financial institutions and in a money market mutual fund that is managed by a wholly owned subsidiary of Raymond James Financial, Inc. The Partnership receives rental income exclusively from lessees. Management does not believe that significant credit risk exists in relation to these accounts at December 31, 2001.
The Partnership maintains deposits in excess of federally insured limits. Statement of Financial Accounting Standards No. 105 requires disclosure regardless of the degree of risk.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates that affect certain reported amounts and disclosures. These estimates are based on management's knowledge and experience. Accordingly, actual results could differ from these estimates.
Offering and Commission Costs
Offering and commission costs are charged against Limited Partners' Equity upon admission of Limited Partners.
Leases
The Partnership accounts for qualifying leases in accordance with the operating method. Under the operating method of accounting, the leased equipment is recorded as an asset at cost and depreciated on the declining balance method using a ten to forty year life. Rental income is recognized ratably over the term of the leases.
Write-Down of Assets
The Fund reviews the carrying value of its equipment at least annually in relation to expected future market conditions for the purpose of assessing the recoverability of the recorded amounts. If projected undiscounted cash flows (future lease revenue plus residual values) are less than the carrying value of the equipment, a loss on revaluation is recorded. In addition to equipment the Fund also reviews the carrying value of other assets. The Fund reviews the values of the underlying equipment in these other assets. Write downs of $861,681 and $708,969 were required in 1999 and 2001. There were no write-downs required during 2000.
Investment In Partnership
The Partnership accounts for its investment in partnership using the equity method of accounting because the Partnership does not have a majority control of the major operating and financial policies of the partnership in which it invests. Under the equity method, the investment is carried at cost, adjusted for the Partnership's share of income or loss of the partnership in which it has invested, and additional investments and cash distributions from the partnership.
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.
Per Unit Computations
Per unit computations are based on 36,469 of $1,000 limited partnership units outstanding for 2001, 2000, and 1999, respectively.
Reclassifications
For comparability, the 1999 figures have been reclassified, where appropriate, to conform with the financial statement presentation used in 2001.
NOTE 3 - RELATED PARTY TRANSACTIONS
General Partners
The General Partners have contributed a total of $2,000 to the Partnership.
In accordance with the terms of the Limited Partnership Agreement, the Administrative and Managing General Partners were paid or had accrued acquisition fees of $0, $0, and $43,525 for services related to locating and leasing equipment (2.85% of the purchase price); equipment management fees of $8,765, $59,893, and $65,351, (5% of gross rentals from rental equipment subject to operating leases, 2% of gross rentals from rental equipment subject to full payout leases, or 1% of gross rentals from rental equipment subject to operating leases for which the Administrative and Managing General Partners arrange for and actively supervise the performance of services); incentive management fees of $381,266, $638,690, and $516,477 resale fees of $0, $151,752, and $1,970,078 in 2001, 2000, and 1999, respectively. Gross rentals for purposes of calculating equipment management fees include cash revenues received by the Partnership subsequent to the date of purchase including cash revenues that relate to periods prior to the date of purchase. General Partner distributions were $12,765, $61,767, and $276,640 for 2001, 2000, and 1999, respectively.
Affiliates of the General Partner
The following amounts were paid or accrued to affiliates of the General Partners: $21,856 in 2001, $38,771 in 2000, and $54,517 in 1999 for reimbursement of general and administrative expenses on an accountable basis.
NOTE 4 - LEASES
The initial lease terms of the equipment are generally 5 to 25 years. Future minimum rentals to be received from the operating leases at December 31, 2001, are as follows:
Year Ending
December 31, Amount
------------ ----------
2002 $ 76,500
2003 66,000
2004 49,500
2005 0
2006 0
Thereafter 0
--------
$192,000
========
NOTE 5 - DEPOSIT ON EQUIPMENT
During 1996 the Partnership paid $3,109,549 for the right to obtain title to certain equipment on December 31, 2002, at the expiration of the lease. The partnership has reviewed the appraisals of the underlying values of this asset. Upon review of these appraisals the Partnership wrote this transaction down to $2,410,000 during 2001.
NOTE 6 - INVESTMENT IN PARTNERSHIP
During 1997 the Partnership acquired a 50% interest in a Limited Partnership which purchased intermodal marine containers and chassis for approximately $1.7 million. These containers and chassis are on lease to Transamerica Leasing for a term of three years.
The following is a summary of the Investment in Partnership:
NOTE 7 - NOTES PAYABLE
Notes payable consist of the following:
December 31,2001
----------
December 31, 2000
----------
Non-recourse note payable secured
by residual proceeds after lease termination in 2002 with fixed interest rate of 7%. Interest is
added to principal.
$1,722,341
---------
$1,607,824
---------
TOTAL
$1,722,341
=========
$1,607,824
=========
The aggregate amounts of principal payments due in the years after December 31, 2001 are : 2001 - $0; 2002 - $0; 2003 - $1,722,341.
NOTE 8 - TAXABLE INCOME
The Partnership's taxable income/(loss) differs from financial income primarily due to depreciation which is recorded under the Modified Accelerated Cost Recovery System (MACRS). The following is reconciliation between net income as reported and Partnership income (loss) for tax purposes:
----
----
----
Net income (loss) per financial statements
Tax gain in excess of (less than) financial gain on sale of equipment
(Additional) less tax depreciation
Write-down of Equipment
Write-down of Deposit on Equipment
Other Adjustments
Additional taxable gains (losses) from Investment in Partnerships
Partnership income (loss) for tax purposes
$(1,154,625)
(8,926)
(811,680)
708,969
----------
$(1,266,262)
==========
$ (378,833)
1,939,535
(27,484)
(50,000)
----------
$ 1,483,218
==========
$11,551,809
1,850,896
36,803
861,681
(106,514)
1,625,173
-----------
$15,819,848
===========
NOTE 9 - MAJOR LESSEE INFORMATION
Two leases accounted for $66,000 and $45,007 of the rental income for the year ended December 31, 2001. Three leases accounted for $300,000, $131,966, and $54,000 of the rental income for the year ended December 31, 2000. Four leases accounted for $1,485,940, $507,870, $349,563 and $287,500 of rental income for the year ended December 31, 1999.
NOTE 10 - OTHER
The Partnership is beginning to wind down its operations. Dissolution will occur after the Partnership's last asset is sold. This will probably occur in 2003.
NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (unaudited)
Year 2001 Quarter 1 Quarter 2 Quarter 3 Quarter 4
3/31/2001 6/30/2001 9/30/2001 12/31/2001
Total
Revenues $ 44,032 $ 30,357 $ 31,773 $ 28,464
Net Income
(Loss) (407,258) $ (47,062) $ 65,758 $ (766,063)
Distributions
To Limited
Partners Per
Weighted
Average
Limited
Partnership
Unit
Outstanding $ 34.65 $ 0 $ 0 $ 0
Earnings
(Loss) Per
Weighted
Average
Limited
Partnership
Unit
Outstanding $ (11.06) $ (1.28) $ 1.79 $ (20.79)
Year 2000 Quarter 1 Quarter 2 Quarter 3 Quarter 4
3/31/2000 6/30/2000 9/30/2000 12/31/2000
Total
Revenues $ 697,528 $ 79,467 $(288,696) $ 528,194
Net Income
(Loss) $ 58,620 $(350,253) $(514,440) $ 427,240
Distributions
To Limited
Partners Per
Weighted
Average
Limited
Partnership
Unit
Outstanding $ 127.94 $ 24.32 $ 7.70 $ 7.70
Earnings
(Loss) Per
Weighted
Average
Limited
Partnership
Unit
Outstanding $ 1.59 $ (9.51) $ (13.97) $ 11.60
NOTE 12 - SUBSEQUENT EVENTS
On April 29, 2002, the Partnership sold equipment with an original cost of $252,988 for $69,000.00.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
As of December 31, 2001 there are legal proceedings pending. With respect to the transaction in which Energy Ammonia Transport Company is the charter party and IMC Corporation is guarantor, the Fund has declared an event of default due to the deferral of maintenance on the tug and barge, and has filed a complaint in Federal Court seeking damages. The charter party has denied that an event of default has occurred and has filed a counterclaim alleging that the declaration of the default represents tortious interference and is seeking damages.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or officers. The Partnership's affairs are managed and controlled by the General Partners. The General Partners make all decisions regarding acquisitions, financing and refinancing, leases and sales of equipment.
Information regarding the officers and directors of the General Partner is listed within the section captioned "Management" consisting of pages 29 through 32 of the Prospectus which are incorporated herein by reference.
Item 11.
Item 11. Executive Compensation
The Partnership has no directors or officers. See Item 13 for compensation to the General Partners and affiliates.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The General Partners of Cypress Equipment Fund II, Ltd., as purchasers of Partnership units, own 0 units of the outstanding securities of the Partnership as of December 31, 2000. Directors and officers of the General Partners of Cypress Equipment Fund II, Ltd. own 0 units of the outstanding securities of the Partnership as of December 31, 2001.
The Registrant is a Limited Partnership and therefore does not have voting securities. To the knowledge of the Partnership, no person owns of record, or beneficially, more than 5% of the Partnership's outstanding units.
Item 13.
Item 13. Certain Relationships and Related Transactions
The Partnership has no officers or directors. However, under the terms of the public offering, various kinds of compensation and fees are payable to the General Partners and their affiliates during the organization and operations of the Partnership. The amounts and kinds of compensation and fees are described on pages 19 through 23 of the Prospectus under the caption "Management Compensation", which is incorporated herein by reference. See Note 3 of Notes to Financial Statements in Item 8 of this Annual Report on Form 10-K for amounts accrued or paid to the General Partners and their affiliates during the years ended December 31, 2001, 2000, and 1999.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
a. (1) Financial Statements - see accompanying index to
financial statements, Item 8.
All other schedules are omitted because they are not
applicable or not required, or because the required information
is shown in the financial statements or in the notes thereto.
(2) Exhibit Index -
Table
Number Page
2 Plan of liquidation, organization,
arrangement, liquidation, or
succession ***
3 Articles of incorporation and by-laws *
4 Instruments defining the rights of
security holders, including
debentures *
9 Voting Trust Agreement ***
10 Material Contracts ***
11 Computation of per share earnings ***
12 Computation of ratios ***
13 Annual report to security holders ***
18 Letter re: change in accounting
principles ***
19 Previously unfiled documents ***
22 Subsidiaries of the Registrant ***
23 Published report regarding matters
submitted to vote of security holders ***
24 Consents of experts and counsel ***
25 Power of Attorney *
28 Additional Exhibits
28.01 OPTION AGREEMENT dated as of
February 1, 1993 between BLC
Corporation ("Optionor")and
Cypress Equipment Fund II, Ltd.
("Optionee") **
28.02 TRUST AGREEMENT dated as of
February 1, 1993 between First
Security Bank of Utah,
National Association ("Owner-
Trustee") and BLC Corporation
("Trustor") **
28.03 SECURITY AGREEMENT-TRUST DEED dated
as of February 1, 1993 between First
Security Bank of Utah, National
Association as Owner-Trustee under
BLC Trust No. 92-1 and State Street
Bank and Trust Company of
Connecticut, National Association **
28.04 SECURITY AGREEMENT-TRUST DEED
SUPPLEMENT NO. 1 dated February,
1993, between First Security Bank of
Utah, National Association ("Owner-
Trustee") under BLC Trust No. 92-1
and State Street Bank and Trust
Company of Connecticut, National
Association ("Security Trustee") **
28.05 NOTE PURCHASE AGREEMENT dated as of
February 1, 1993 re: BLC Trust No.
92.1 among BLC Corporation (Trustor"),
First Security Bank of Utah, National
Association ("Owner-Trustee"), Hitachi
Credit America Corporation ("Note
Purchaser") and State Street Bank and
Trust Company of Connecticut, National
Association ("Security Trustee") **
28.06 ACKNOWLEDGEMENT OF ASSIGNMENT AND
AGREEMENT dated as of February 25,
1993 among Southern Pacific
Transportation Company, BLC
Corporation, First Security Bank of
Utah, National Association and State
Street Bank and Trust Company of
Connecticut, National Association **
28.07 BILL OF SALE executed as of February
24, 1993 between BLC Corporation and
First Security Bank of Utah, National
Association **
28.08 PURCHASE AND SALE AGREEMENT dated as
of June 22, 1993 by and between BLC
Corporation and Cypress Equipment
Fund II, Ltd. re: BLC Trust No. 92-1. **
28.09 ASSIGNMENT AND ASSUMPTION AGREEMENT
made and entered into as of June 22,
1993 by BLC Corporation, a Utah
corporation ("Assignor") and Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Assignee") **
28.10 TRANSFER AND ASSUMPTION AGREEMENT
("Agreement"), entered into as of
June 19, 1993 by and between Twenty-
Sixth HFC Leasing Inc., a Delaware
Corporation ("Assignor") and Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Assignee") **
28.11 EQUIPMENT LEASE dated as of June 1,
1980 between The Connecticut Bank and
Trust Company, As Trustee under
I.C.G. Trust No. 80-4 ("Lessor") and
Illinois Central Gulf Railroad
Company ("Lessee") **
28.12 SECURITY AGREEMENT-TRUST DEED dated
as of June 1, 1980 from The
Connecticut Bank and Trust Company,
As Trustee under I.C.G. Trust No.80-4
("Debtor") to Mercantile-Safe
Deposit and Trust Company ("Secured
Party")
**
28.13 TRUST AGREEMENT dated as of June 1,
1980 between The Connecticut Bank and
Trust Company ("Trustee") and Twenty-
Sixth HFC Leasing Corporation
("Trustor") **
28.14 ESCROW AGREEMENT 902 dated December
31, 1994 by and among Continental
Bank, N.A. (the "Transferor"),
Cypress Equipment Fund II, Ltd. (the
"Transferee") and Continental Bank,
National Association, Corporate Trust
Services (the "Escrow Agent"). **
28.15 TRANSFER AGREEMENT 902 dated as of
December 31, 1994 between Continental
Bank, N.A. (the "Transferor"), and
Cypress Equipment Fund II, Ltd. (the
"Transferee").
**
28.16 TRANSFEROR'S INTERESTS ASSIGNMENT AND
ASSUMPTION AGREEMENT 902 dated
December 31, 1994 between Continental
Bank, N.A. (the "Transferor"), and
Cypress Equipment Fund II, Ltd. (the
"Transferee"). **
28.17 ASSIGNMENT AND ASSUMPTION AGREEMENT
902 dated December 31, 1994 between
The Kinsman Marine Transit Company
(the "Assignor") and Pringle Transit
Company (the "Assignee"). **
28.18 KINSMAN AGREEMENT dated as of
December 31, 1994 by The Kinsman
Marine Transit Company. **
28.19 REVOLVING CREDIT AGREEMENT dated
December 31, 1994 by and between
Cypress Equipment Fund II, Ltd.
("Borrower") and First Union National
Bank of Florida ("Lender"). **
28.20 SECURITY AGREEMENT dated December 31,
1994 by and between Cypress Equipment
Fund II, Ltd. ("Debtor") and First
Union National Bank of Florida
("Secured Party"). **
28.21 COLLATERAL ASSIGNMENT OF RIGHTS UNDER
TRUST AGREEMENT dated December 31,
1994 by and between Cypress Equipment
Fund II, Ltd. ("Assignor") and First
Union National Bank of Florida
("Assignee"). **
28.22 LEASE AGREEMENT dated as of March 30,
1988 between Capital Associates
International, Inc. ("Lessor") and
Comair, Inc. ("Lessee"). **
28.23 PURCHASE AGREEMENT ("Agreement")
dated as of August 31, 1994, by and
between Capital Associates
International, Inc. ("Seller") and
First Security Bank of Utah, National
Association not in its individual
capacity but as owner trustee
pursuant to that certain Trust dated
August 31, 1994 between itself and
Cypress Equipment Fund II ("Buyer"). **
28.24 BILL OF SALE dated August 31, 1994
between Capital Associates
International, Inc. ("Seller") and
First Security Bank of Utah, National
Association not in its individual
capacity but as owner trustee
pursuant to that certain Trust dated
August 31, 1994 between itself and
Cypress Equipment Fund II, Ltd.
("Buyer").
**
28.25 TRUST AGREEMENT dated as of August
31, 1994 between Cypress Equipment
Fund II, Ltd. ("Owner Participant")
and First Security Bank of Utah,
National Association ("Owner
Trustee"). **
28.26 ASSIGNMENT OF LEASE dated August 31,
1994, between Capital Associates
International, Inc. ("Assignor")and
First Security Bank of Utah not in
its individual capacity but as owner
trustee pursuant to that certain
Trust dated August 31, 1994 between
itself and Cypress Equipment Fund II
("Assignee"). **
28.27 SECURITY AGREEMENT dated as of August
31, 1994 between First Security Bank
of Utah, National Association, solely
as Owner Trustee under Trust
Agreement dated as of August 31, 1994
and not in its individual capacity
("Trustee") and First Union National
Bank of Florida, a national banking
association ("Secured Party"). **
28.28 TRUST AGREEMENT dated as of April 1,
1970 among Union Bank ("Trustor") and
W. H. Ruskaup and Ben Maushardt
("Trustees") and United States
Leasing International, Inc. ("Agent
for Trustees"). **
28.29 LEASE OF RAILROAD EQUIPMENT dated as
of April 1, 1970 among W. H. Ruskaup
and Ben Maushardt ("Trustees") and
United States Leasing International,
Inc. ("Agent for Trustees") and Union
Carbide Corporation ("Lessee"). **
28.30 ASSIGNMENT AGREEMENT (Residual
Interest) dated as of September 30,
1994 by and between United States
Leasing International, Inc., a
Delaware corporation ("Assignor")
and Cypress Equipment Fund II, Ltd.
("Assignee"). **
28.31 TRANSFER AND ASSUMPTION AGREEMENT
dated as of September 30, 1994, by
and between Union Bank, a California
state chartered bank ("Assignor")and
Cypress Equipment Fund II, Ltd.
("Assignee). **
28.32 AGREEMENT TO ACQUIRE AND LEASE dated
as of April 1, 1970 among W. H.
Ruskaup and Ben Maushardt
("Trustees") and United States
Leasing International, Inc. ("Agent")
and Union Carbide Corporation
("Lessee"). **
28.33 SECURITY AGREEMENT - TRUST DEED dated
as of June 1, 1970 from W. H. Ruskaup
and Ben Maushardt ("Debtor") to Wells
Fargo Bank, N.A. ("Secured Party"). **
28.34 PURCHASE AGREEMENT made as of July
25, 1994, by and among Trust Company
for USL, Inc., an Illinois trust
company as successor trustee to W.H.
Ruskaup and Ben Maushardt, and United
States Leasing International, Inc. as
agent for successor trustee
("Seller") and Cypress Equipment Fund
II, L.P., a Florida limited
partnership, with its principal place
of business at 880 Carillon Parkway,
St. Petersburg, Florida 33716 as the
beneficial owner of the Trust Estate
("Beneficial Owner") and Union
Carbide Corporation, a New York
corporation ("Purchaser"), with its
principal place of business at 39 Old
Ridgebury Rd., E-1, Danbury,
Connecticut 06817 **
28.35 PURCHASE AGREEMENT dated as of
February 1, 1995, between Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Seller"), and
Helm-Atlantic Associates Limited
Partnership, a Delaware limited
partnership ("Purchaser"). (This
Purchase Agreement pertains to
seventeen (17) of the nineteen (19)
sold locomotives.) **
28.36 ASSIGNMENT AND ASSUMPTION AGREEMENT
dated as of June 1, 1995, by and
between Cypress Equipment Fund II,
Ltd., a Florida limited partnership
("Seller"), and Helm-Atlantic
Associates Limited Partnership, a
Delaware limited partnership
("Purchaser"). **
28.37 ASSIGNMENT OF LEASE dated as of June
1, 1995, by and between Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Seller"), and
Helm-Atlantic Associates Limited
Partnership, a Delaware limited
partnership ("Purchaser"). **
28.38 PURCHASE AGREEMENT dated as of
February 1, 1995, between Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Seller"), and
Helm-Atlantic Associates Limited
Partnership, a Delaware limited
partnership ("Purchaser"). (This
Purchase Agreement pertains to two
(2) of the nineteen (19) sold
locomotives.) **
28.39 Purchase Agreement dated as of April
17, 1995, between Varilease
Corporation, a Michigan corporation
("Seller"), and Cypress Equipment
Fund II, Ltd., a Florida limited
partnership ("Buyer"). **
28.40 Bill of Sale and Assignment dated
April 28, 1995, between Varilease
Corporation, a Michigan corporation
("Seller"), and Cypress Equipment
Fund II, Ltd., a Florida limited
partnership ("Buyer"). **
28.41 Consent and Agreement dated April 28,
1995, between IBJ Schroder Leasing
Corporation, a New York corporation
("Schroder"), and Cypress Equipment
Fund II, Ltd. ("Cypress").
**
28.42 Escrow Agreement dated April 17,
1995, between Varilease Corporation,
a Michigan corporation ("Seller"),
Cypress Equipment Fund II, Ltd., a
Florida limited partnership
("Buyer"), and Griffinger, Freed,
Heinemann, Cook & Foreman ("Escrow
Agent"). **
28.43 Bill of Sale and Assignment
(Remaining Interest) dated January 1,
1996, between Varilease Corporation,
a Michigan corporation ("Seller"),
and Cypress Equipment Fund II, Ltd.,
a Florida limited partnership
("Buyer"). **
28.44 Assignment and Assumption Agreement,
dated as of December 30, 1996 (this
"Agreement"), between NTFC Capital
Corporation, a Delaware corporation
(the "Seller"), and Cypress
Equipment Fund, II, Ltd., a Florida
limited partnership (the "Buyer"). **
28.45 Amended and Restated Purchase
Agreement No. 2 dated as of March
13, 1996, between NTFC Capital
Corporation (formerly named Northern
Telecom Acceptance Corporation), the
Seller, and Cypress Equipment Fund
II, Ltd, the Buyer. **
28.46 Promissory Note for Value Received
dated as of December 30, 1996,
between Cypress Equipment Fund II,
Ltd., a Florida limited partnership
("Maker") promises and agrees to pay
to the order of NTFC Capital
Corporation, its successors, assigns
or any subsequent holder of this
Note (the "Holder") at its offices
located at 220 Athens Way,
Nashville, Tennessee, 37228-1314,or
at such other place as may be
designated in writing by Holder, in
lawful money of the United States of
America in immediately available
funds, the principal amount of Two
Million Six Hundred Eight Three
Thousand Four Hundred Thirty Five
($2,683,435) together with interest
thereon and other amounts due as
provided below. **
28.47 Amended and Restated Security
Agreement ("Security Agreement"),
dated as of March 13, 1996, and made
by Cypress Equipment Fund II, Ltd.,
a Florida limited partnership, with
offices located at One Sansome
Street, Suite 1900, San Francisco,
California, 94104, 415-951-4605
(facsimile) (the "Debtor"), in favor
of NTFC Capital Corporation, a
Delaware corporation, with offices
located at 220 Athens Way, Nashville,
Tennessee 37228 ("Secured Party"). **
28.48 Participation Agreement dated as of
July 15, 1982 among Federal Paper
Board Company, Inc., Lessee,
Riegelwood, Inc., Secured Note
Issuer, The Bank of New York,
individually and as Owner Trustee,
North Carolina National Bank, as
Indenture Trustee, Teachers
Insurance and Annuity Association of
America, Sun Life Assurance Company
of Canada, Sun Life Assurance
Company of Canada (U.S.), The North
Atlantic Life Insurance Company of
America, and Northern Life Insurance
Company, Loan Participants, and EFH
Leasing Corporation, BNY Leasing,
Inc., and Northern Telecom
Acceptance Corporation, as Owner
Participants. **
28.49 Bill of Sale dated the 13th of May,
1999, Between State Street Bank and
Trust Company ("Seller"); not in its
individual capacity but solely as
successor Trustee under a certain
Trust Agreement dated as of December
30, 1970, between Edward C. Laber and
Jane S. Kubiak as Trustees and
Pennsylvania Power and Light Company
(now PP&L, Inc.); Access Turbine
Corporation ("Seller"); and Cypress
Equipment Fund II, Ltd. ("Seller")
and PP&L, Inc. ("Buyer"). **
28.50 Purchase Agreement, dated as of July
15, 1999, is between Cypress Equipment
Fund II, Ltd., a Florida limited
partnership, and its Successors and
permitted assigns (the "Seller"), and
ICX Corporation, an Ohio corporation,
and its successors and permitted assigns
(the"Buyer"). **
28.51 ASSIGNMENT AND ASSUMPTION AGREEMENT,
dated July 29, 1999 (this "Agreement"),
between Cypress Equipment Fund II, Ltd.,
a Florida limited partnership (the
"Seller"), and ICX Corporation, an Ohio
corporation (the"Buyer"). **
28.52 This AMENDMENT NO. 2 TO LEASE, dated as
of July 15, 1999 (this "Amendment"), is
entered into by and between THE BANK OF
NEW YORK, a New York banking corporation,
not in its individual capacity, but Solely
as trustee under the Trust Agreement, as
lessor ("Lessor") and International Paper
Company, a New York corporation, as
successor by Merger to Federal Paper
Board Company, Inc., a New York corporation,
as lessee ("Lessee"). **
28.53 This Purchase and Sale Agreement is entered
into as of January 7, 2000 by and between
Cypress Equipment Fund II, Ltd., a Florida
limited partnership ("Seller") and GATX
Third Aircraft Corporation, a Delaware
Corporation ("Buyer"). **
28.54 This Purchase and Sale Agreement is
entered into as of February 4, 2000 by
and between Cypress Equipment Fund II,
Ltd., a Florida limited partnership
("Seller") and GATX Third Aircraft
Corporation, a Delaware Corporation
("Buyer"). **
28.55 Offer to Purchase Agreement between
Aviation Services of American ("Buyer")
and Cypress Equipment Fund II, Ltd.,
Owner AC703 ("Seller") dated May 29,
2000.
28.56 This Purchase and Sale Agreement (this
"Agreement") is made and entered into
this the 29th day of December, by and
between First Security Bank NA, not in
its own capacity, but solely as Owner
Trustee for the Cypress Equipment Fund
II, Ltd. ("Seller") and Inter Air Lease
LLC, a Delaware Limited Liability
Corporation, (hereafter "Buyer").
29 Information from reports furnished
to state insurance regulatory
authorities ***
* Included with Form S-1, Registration No. 33-
27741 previously filed with the Securities
and Exchange Commission.
** Included with Form 8-K, as amended, previously
filed with the Securities and Exchange Commission.
*** Exhibits were omitted as not required, not applicable,
or the information required to be shown therein is
included elsewhere in this report.
b. Reports filed on Form 8-K - None.
c. Exhibits filed with this report - None.
SIGNATURES
Pursuant to the requirements 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.
Cypress Equipment Fund II, Ltd.
Date: July 8, 2002 By: /s/J. Davenport Mosby, III
J. Davenport Mosby, III
President
RJ Leasing - 2, Inc.
A General Partner
Date: July 8, 2002 By: /s/Stephen R. Harwood
Stephen R. Harwood
President
Cypress Equipment Management Corp. II
Date: July 8, 2002 By: /s/Alex A. Najjar
Alex A. Najjar
Executive Vice President
Cypress Equipment Management Corp. II
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.
Cypress Equipment Fund II, Ltd.
ATTEST:
By: /s/ Stephen R. Harwood By: /s/ J. Davenport Mosby, III
Stephen R. Harwood J. Davenport Mosby, III
President President
Cypress Equipment Management Corp. II RJ Leasing - 2, Inc.