UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarter Ended September 30, 2002
Commission File Number 0-21256
Cypress Equipment Fund II, Ltd.
(Exact name of Registrant as specified in its charter)
Florida 59-3082723
(State or other jurisdiction of (I.R.S. Employer No.
incorporation or organization)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (727) 567-1000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Number of Units at
Title of Each Class September 30, 2002
Units of Limited Partnership
Interest: $1,000 per unit 36,469
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 2001 Form 10-K, filed with the
Securities and Exchange Commission on July 9, 2002
Parts III and IV - Form S-1 Registration Statement
and all amendments and supplements thereto
File No. 33-44119
PART I - Financial Information
Item 1. Financial Statements
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
BALANCE SHEETS
|
September 30, |
December 31, |
|
|
|
(Unaudited) |
(Audited) |
The accompanying notes are an integral
part of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
|
2002 |
2001 |
|
|
Revenues: |
(6,077) - ---------- $ (607,675) ========== $ (16.50) ========== 36,469 ========== |
(3,886) - ---------- $ (388,562) ========== $ (10.55) ========== 36,469 ========== |
The accompanying notes are an integral
part of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
|
2002 |
2001 |
|
|
Revenues: |
|
|
The accompanying notes are an integral
part of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
|
2002 |
20001 |
|
|
Cash Flows from Operating Activities: |
|
|
Non-Cash Activities:
Notes Payable in 2002 were increased by $90,941, the amount of Deferred Interest on Notes Payable.
Notes Payable in 2001 were increased by $84,895, the amount of Deferred Interest on Notes Payable.
The accompanying notes are an integral part
of these financial statements.
CYPRESS EQUIPMENT FUND II, LTD.
(a Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 2002
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. The Partnership has received Limited and General Partner capital contributions of $36,469,000 and $2,000, respectively.
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 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.
NOTE 2 - NOTES PAYABLE
A significant amount of the rental equipment acquired by the Partnership is pledged at time of purchase as collateral for the notes payable.
During the nine months ended September 30, 2002, there was no additional borrowing or payments.
NOTE 3 - COMPENSATION AND REIMBURSEMENTS TO GENERAL PARTNERS AND AFFILIATES
The General Partners and their affiliates are entitled to the following types of compensation and reimbursements for costs and expenses incurred for the Partnership for the nine months ended September 30, 2002:
Equipment Management Fees $ 3,951
General and Administrative Costs 7,152
NOTE 4 - BASIS OF PREPARATION
The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the financial statements and notes thereto included with the Partnership's Form 10-K for the year ended December 31, 2001. In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to summarize fairly the Partnership's financial position and results of operations. The results of operations for the period may not be indicative of the results to be expected for the year.
NOTE 5 - CASH AND CASH EQUIVALENTS
It is the Partnership's policy to include short-term investments with an original maturity of three months or less in Cash and Cash Equivalents. These short-term investments are comprised of money market mutual funds and a repurchase agreement. All of the Partnership's securities included in Cash and Cash Equivalents are considered held-to-maturity. The balance of $202,914 at September 30, 2002, represents cash of $15,413, and money market mutual funds of $187,501.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2002, Compared to Nine Months Ended September 30, 2001.
Rental income decreased to $60,000 for the nine months ended September 30, 2002, from $84,007 for the nine month period ended September 30, 2001. This decrease was primarily due to equipment coming off lease or being sold in the intervening period. Interest income decreased to $1,778 for the nine months ended September 30, 2002, as compared to $16,093 for the nine months ended September 30, 2001. This decrease was primarily due to a decreased average balance of cash for investment and lower interest rates. During the nine months ended September 30, 2002, rental equipment with a book value of $119,719 was sold for $69,000 less expenses of sale of $1,270 resulting in a loss on sale of $51,989. During the nine months ended September 30, 2001, the Partnership did not sell any equipment.
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 2001 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 $381,266 for the nine months ended September 30, 2001 to $0 for the nine months ended September 30, 2002, since no further distributions, on which incentive management fees are based, have been made.
Interest expense was comparable the nine months ended September 30, 2002, as compared to the nine months ended September 30, 2001. Depreciation expense decreased for the nine months ended September 30, 2002 versus 2001, due to a lower average depreciable basis of equipment. General and Administrative Expenses increased from $86,623 for the nine months ended September 30, 2001 to $502,061 for the nine months ended September 30, 2002. This was primarily due to increased legal costs associated with the deposit for the right to obtain title for a specialty tug and barge on December 31, 2002.
The net effect of the above revenue and expense items resulted in a net loss of $618,697 for the nine months ended September 30, 2002, compared to a net loss of $513,119 for the nine months ended September 30, 2001, before Equity in Income of Partnership. For the nine months ended September 30, 2002 Equity in Income of Partnership was $11,022 compared to $124,557 for the nine months ended September 30, 2001. This resulted in a net loss of $607,675 for the nine months ended September 30, 2002, as compared to a net loss of $388,562 for the nine months ended September 30, 2001.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None.
b) Reports on Form 8-K -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: March 6, 2003 By: /s/Stephen R. Harwood
Stephen R. Harwood
President of the Managing Partner
Cypress Equipment Management Corp. II
Date: March 6, 2003 By: /s/ Carol Georges
Carol Georges
Director of Accounting
Partnership Administration
Raymond James and Associates
CERTIFICATIONS*
I, Stephen R. Harwood, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cypress Equipment Fund II, Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information include in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 6, 2003 By: /s/Stephen R. Harwood
Stephen R. Harwood
President of the Managing Partner
Cypress Equipment Management Corp. II
I, Carol Georges, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cypress Equipment Fund II, Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information include in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 6, 2003 By: /s/ Carol Georges
Carol Georges
Director of Accounting
Partnership Administration
Raymond James and Associates