SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
--------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ------------------------
Commission file number 33-80849
---------------------------------------------------------
Capital Preferred Yield Fund-IV, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1331690
- ----------------------- ------------------------------------
(State of organization) (I.R.S. Employer Identification No.)
7175 West Jefferson Avenue, Suite 4000
Lakewood, Colorado 80235
- --------------------------------------- ----------
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 980-1000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 .
--- ---
Exhibit Index Appears on Page 14
Page 1 of 15 Pages
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Quarterly Report on Form 10-Q
For the Quarter Ended
September 30, 1996
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (Unaudited)
Balance Sheet - September 30, 1996 3
Statements of Income - For the three months ended
September 30, 1996 and for the period from the
Commencement of Operations (April 16, 1996) to
September 30, 1996 4
Statement of Partner's Capital - For the period from
the Commencement of Operations (April 16, 1996) to
September 30, 1996 5
Statement of Cash Flows - For the period from the
Commencement of Operations (April 16, 1996) to
September 30, 1996 6
Notes to Financial Statements 7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
2
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
BALANCE SHEET
(Unaudited)
ASSETS
September 30,
1996
-------------
Cash and cash equivalents $2,086,100
Accounts receivable, net 68,551
Receivable from affiliates 4,000
Net investment in direct finance leases 126,110
Leased equipment, net 4,442,562
----------
Total assets $6,727,323
==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued liabilities $ 42,802
Payable to affiliates 44,444
Rents received in advance 9,128
Distributions payable to partners 59,006
----------
Total liabilities 155,380
----------
PARTNERS' CAPITAL:
General partner -
Limited Partners:
Class A 6,503,169
Class B 68,774
----------
Total partners' capital 6,571,943
----------
Total liabilities and partners' capital $6,727,323
==========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
STATEMENTS OF INCOME
(Unaudited)
For the period from
the Commencement
of Operations
September 30, (April 16, 1996) to
1996 September 30, 1996
------------- -------------------
REVENUE:
Operating lease rentals $ 190,847 $ 247,586
Direct finance lease income 3,230 3,230
Interest income 14,727 19,806
--------- ---------
Total revenue 208,804 270,622
--------- ---------
EXPENSES:
Depreciation and amortization 148,914 177,197
Direct services from general partner 17,036 23,891
Management fees paid to general partner 3,210 3,971
General and administrative 35,881 36,622
--------- ---------
Total expenses 205,041 241,681
--------- ---------
NET INCOME $ 3,763 $ 28,941
========= =========
NET INCOME (LOSS) ALLOCATED:
To the general partner $ 8,896 $ 12,658
To the Class A limited partners (5,088) 16,109
To the Class B limited partner (45) 174
--------- ---------
$ 3,763 $ 28,941
========= =========
Net income (loss) per weighted
average Class A limited partner
unit outstanding $ (.11) $ .39
========= =========
Weighted average Class A limited
partner units outstanding 47,746 41,214
========= =========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
STATEMENT OF PARTNERS' CAPITAL
For the period from commencement of operations (April 16, 1996)
to September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
General Limited Limited
Partner Partners Partner Total
------- -------- ------- -----
<S> <C> <C> <C> <C>
Capital contributions $ - $ 7,743,042 $ 70,000 $ 7,813,042
Commissions and offering costs on
sale of Class A limited partner units (11,220) (1,110,748) - (1,121,968)
Net income 12,658 16,109 174 28,941
Distributions to partners (1,438) (145,234) (1,400) (148,072)
--------- ----------- --------- ------------
Partners' capital, September 30, 1996 $ - $ 6,503,169 $ 68,774 $ 6,571,943
========= =========== ======== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
STATEMENT OF CASH FLOWS
(Unaudited)
For the period from the
Commencement of Operations
(April 16, 1996) to
September 30, 1996
--------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 176,445
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment on operating leases
from affiliate (4,621,028)
Investment in direct finance leases, acquired
from affiliate (134,706)
-----------
Net cash used in investing activities (4,755,734)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Class A capital contributions 7,743,042
Proceeds from Class B capital contributions 70,000
Commissions paid to affiliate in connection
with the sale of Class A limited partner units (756,205)
Non-accountable organization and offering expenses
reimbursement paid to the general partner in
connection with the sale of Class A limited
partner units (302,382)
Distributions to partners (89,066)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,665,389
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,086,100
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -
-----------
Cash and cash equivalents at end of period $ 2,086,100
===========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO BALANCE SHEET
(Unaudited)
1. Basis of Presentation:
---------------------
The accompanying unaudited balance sheet has been prepared in accordance
with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and
disclosures required by generally accepted accounting principles for annual
financial statements. In the opinion of the general partner, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. For further
information, refer to the balance sheet of Capital Preferred Yield Fund-IV,
L.P. (the "Partnership"), and the related notes, included in the
Partnership's registration statement on Form S-1, as of December 31, 1995,
previously filed with the Securities and Exchange Commission.
2. Summary of Significant Accounting Policies:
------------------------------------------
Partnership Allocations:
Cash Distributions:
------------------
During the Reinvestment Period (as defined in the Partnership Agreement),
available cash is distributed to the partners as follows:
First, 1.0% to the general partner and 99.0% to the Class A limited
partners until the Class A limited partners receive annual,
non-compounded cumulative distributions equal to 10.5% of their
contributed capital.
Second, 1.0% to the general partner and 99.0% to the Class B limited
partner until the Class B limited partner receives annual
non-compounded cumulative distributions equal to 10.5% of its
contributed capital.
Third, any remaining available cash will be reinvested or distributed
to the partners as specified in the Partnership Agreement.
After the Reinvestment Period (as defined in the Partnership Agreement),
available cash will be distributed to the partners as follows:
First, in accordance with the first and second allocations during the
Reinvestment Period as described above.
7
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO BALANCE SHEET
(Unaudited)
2. Summary of Significant Accounting Policies, continued:
------------------------------------------
Second, 99.0% to the Class A limited partners and 1.0% to the general
partner, until the Class A limited partners achieve Payout (as defined
in the Partnership Agreement).
Third, 99.0% to the Class B limited partner and 1.0% to the general
partner, until the Class B limited partner achieves Payout (as defined
in the Partnership Agreement).
Fourth, 99.0% to the Class A and Class B limited partners (as a class)
and 1.0% to the general partner, until the Class A and Class B limited
partners achieve 170% recovery (i.e., receive cash distributions equal
to 170% of their capital contributions).
Thereafter, 90% to the Class A and Class B limited partners (as a class)
and 10% to the general partner.
Profits and Losses:
------------------
There are several special allocations that precede the general allocations
of profits and losses to the partners. The most significant special
allocations are as follows:
First, commissions and expenses paid in connection with the sale of
Class A limited partner units are allocated 1.0% to the general partner
and 99.0% to the Class A limited partner.
Second, depreciation relating to Partnership equipment and any losses
resulting from the sale of equipment are generally allocated 1.0% to
the general partner and 99.0% to the limited partners (shared
99.0%/1.0% by the Class A and Class B limited partners, respectively)
until the cumulative amount of such depreciation and such losses
allocated to each limited partner equals such limited partner's
contributed capital reduced by commissions and expenses allocated to
such partner. Thereafter, gain on sale of equipment, if any, will be
allocated to the general partner in an amount equal to the sum of
depreciation and loss on sale of equipment previously allocated to the
general partner.
Third, notwithstanding anything in the Partnership Agreement to the
contrary, and before any other allocation is made, items of income and
gain for the current period shall be allocated, as quickly as possible,
to the general partner to the extent of any deficit balance existing in
the general partner's capital account as of the close of the
immediately preceding period, in order to restore the balance in the
general partner's capital account to zero.
8
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO BALANCE SHEET
(Unaudited)
2. Summary of Significant Accounting Policies, continued:
------------------------------------------
After giving effect to special allocations, profits (as defined in the
Partnership Agreement), are first allocated in proportion to, and to the
extent of, any previous losses, in reverse chronological order and
priority. Any remaining profits are allocated in the same order and
priority as cash distributions.
After giving effect to special allocations, losses (as defined in the
Partnership Agreement), are allocated in proportion to, and to the extent
of, any previous profits in reverse chronological order and priority. Any
remaining losses are allocated 1.0% to the general partner and 99.0% to the
limited partners (shared 99.0%/1.0% by the Class A and Class B limited
partners, respectively).
INCOME TAXES
No provision for income taxes has been made in the financial statements
since taxable income or loss is recorded in the tax returns of the
individual partners.
CASH EQUIVALENTS
The Partnership considers short-term, highly liquid investments that are
readily convertible to known amounts of cash to be cash equivalents.
Cash equivalents consist of $1,628,000 of overnight government securities
held by a bank at September 30, 1996. Cash equivalents have original
maturities of 90 days or less.
NET INCOME (LOSS) PER CLASS A LIMITED PARTNER UNIT
Net income (loss) per Class A limited partner unit is computed by dividing
the net income (loss) allocated to the Class A limited partners by the
weighted average number of Class A limited partner units outstanding during
the period.
3. Transactions With the General Partner and Affiliates
----------------------------------------------------
SALES COMMISSIONS AND OFFERING COSTS
Under the terms of the Partnership Agreement, CAI Securities Corporation,
an affiliate of the general partner, is entitled to receive sales
commissions and wholesaling fees equal to 10% of the Class A limited
partners' capital contributions, up to 9% of which is paid to participating
broker-dealers. During the period from the commencement of operations
(April 16, 1996) to September 30, 1996, CAI Securities Corporation earned
commissions and fees in the amount of $774,304 ($18,099 of which will be
paid in the fourth quarter), $662,422 of which was paid to participating
broker-dealers.
9
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO BALANCE SHEET
(Unaudited)
3. Transactions With the General Partner and Affiliates, continued:
----------------------------------------------------
As provided in the Partnership Agreement, the general partner earned
$309,622 ($7,240 of which will be paid in the fourth quarter) as
reimbursement for expenses incurred during the period from April 16, 1996
to September 30, 1996 in connection with the organization of the
Partnership and the offering of Class A limited partner units for sale to
the public.
DIRECT SERVICES:
The general partner and its affiliates provide accounting, investor
relations, billing, collecting, asset management, and other administrative
services to the Partnership. The Partnership reimburses the general partner
for these services performed on its behalf as permitted under the terms of
the Partnership Agreement. A total of $23,891 of expenses were incurred by
the general partner through September 30, 1996, $5,000 of which will be
paid in the fourth quarter.
PAYABLE TO AFFILIATES:
Payable to affiliates consists of sales commissions, wholesaling fees,
organization and offering expense reimbursements with respect to Class A
limited partner units sold and amounts relating to general and
administrative expenses during the period ended September 30, 1996 due to
the general partner and its affiliates.
4. During the period ending September 30, 1996, the Partnership purchased from
Capital Associates International, Inc. ("CAII"), the Class B limited
partner and an affiliate of the general partner, the equipment under lease
listed below. The Partnership purchased the equipment at cost to CAII,
including reimbursement of other acquisition costs and acquisition fees as
provided for in the Partnership Agreement.
<TABLE>
<CAPTION>
Acquisition Total
Equipment Cost of Fees and Equipment
Lessee Description Equipment Reimbursements Purchase Price
-------------------------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
General Motors Corporation Forklifts $ 4,549 $ 158 $ 4,707
General Motors Corporation Forklifts 80,638 2,794 83,432
General Motors Corporation Forklifts 170,982 5,925 176,907
General Motors Corporation Forklifts 28,764 997 29,761
General Motors Corporation Forklifts 27,795 963 28,758
General Motors Corporation Forklifts 205,011 7,104 212,115
General Motors Corporation Forklifts 49,904 1,729 51,633
General Motors Corporation Forklifts 144,568 5,009 149,577
10
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO BALANCE SHEET
(Unaudited)
4. (continued)
Acquisition Total
Equipment Cost of Fees and Equipment
Lessee Description Equipment Reimbursements Purchase Price
-------------------------- ----------- ----------- -------------- --------------
General Motors Corporation Loader $ 80,897 $ 2,803 $ 83,700
Staples Copiers 229,777 7,962 237,739
Staples Copiers 246,081 8,527 254,608
USS/Kobe Steel Forklifts 35,334 1,224 36,558
International Paper Company Networking equipment 122,043 4,229 126,272
Universal Forest Products Forklifts 34,323 1,189 35,512
General Motors Corporation Forklifts 37,350 1,294 38,644
Universal Forest Products Forklifts 34,323 1,189 35,512
Universal Forest Products Forklifts 21,246 736 21,982
Addison Wesley Longman IBM Notebooks 496,392 17,200 513,592
Louisiana Workers Comp Computer equipment 116,055 4,021 120,076
General Motors Corporation Material handling 108,935 3,775 112,710
General Motors Corporation Material handling 113,319 3,927 117,246
Xerox Forklifts 14,015 486 14,501
General Motors Powertrain Scrubber 6,208 215 6,423
General Motors Corporation Material handling 108,164 3,748 111,912
General Motors Corporation Material handling 21,327 739 22,066
Medtronic Copier 14,140 490 14,630
General Motors Corporation Material handling 12,987 450 13,437
International Paper Forklifts 862,897 29,899 892,796
USS/Kobe Steel Forklifts 83,000 2,876 85,876
Home Depot Forklifts 647,037 22,420 669,457
Ball Foster Glass Wrapper 230,958 8,003 238,961
Ball Foster Glass Lift trucks 59,342 2,012 61,354
General Motors Trailer 37,182 1,288 38,470
Ball Foster Glass Wrapping equipment 99,023 3,431 102,454
Alliant Techsystems Phone system 11,942 414 12,356
----------- --------- -----------
$ 4,596,508 $ 159,226 $ 4,755,734
=========== ========= ===========
</TABLE>
As of September 30, 1996, the general partner had identified approximately $3.5
million of equipment expected to be placed under lease that satisfied the
Partnership's investment criteria, $324,000 of which was purchased by the
Partnership from CAII during October 1996. The Partnership expects to acquire
the remainder of the identified equipment from CAII with the available cash from
operations and the net proceeds from the sale of additional Class A limited
partner units.
11
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
The Partnership commenced operations on April 16, 1996 and reported net income
of $28,941 or $.39 per weighted average Class A limited partner unit, for the
period from April 16, 1996 to September 30, 1996.
The Partnership reported net income of $3,763, or a net loss of $.11 per
weighted average Class A limited partner unit, for the period from June 30, 1996
through September 30, 1996. The loss per weighted average Class A limited
partner unit results from the allocation of profits and losses among the general
partner and limited partners as specified in the Partnership Agreement and
discussed in Note 2 above.
The ultimate profitability of the Partnership's leasing transactions is
dependent in part on the general level of interest rates because leasing is an
alternative to financing equipment purchases with debt. Lease rates therefore
tend to rise and fall with interest rates although lease rate movements
generally lag behind interest rate movements. The amount of future distributions
to the partners will depend, in part, on future interest rates.
A comparison of current operating results to the corresponding period of the
prior year cannot be made since the Partnership did not commence operations
until April 16, 1996.
Liquidity & Capital Resources
- -----------------------------
The Partnership was formed on December 18, 1995. On April 16, 1996, the
Partnership commenced offering 500,000 Class A limited partner units at $100 per
unit. On June 3, 1996, the Partnership held its initial closing, receiving gross
offering proceeds of $1,200,000 from the sale of 12,000 Class A limited partner
units. The Partnership intends to continue offering Class A limited partner
units for sale and admitting additional Class A limited partners through April
15, 1998. A summary of the Partnership's offering activities from the
commencement of operations to September 30, 1996 is presented below:
Class A limited partner units sold 77,430
===========
Gross offering proceeds $ 7,743,042
Sales commissions (774,304)
Organization and offering expenses (309,622)
Due diligence expenses (38,042)
-----------
Net offering proceeds $ 6,621,074
===========
Class B limited partner (CAII) cash contribution $ 70,000
===========
12
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity & Capital Resources, continued
- -----------------------------
Available cash and cash reserves of the Partnership are invested in short-term
government securities, pending the acquisition of equipment or distribution to
the partners.
During the period from April 16, 1996 through September 30, 1996, the
Partnership purchased equipment under lease having a total equipment purchase
price of $4,755,734. As of September 30, 1996, the general partner had
identified approximately $3.5 million of equipment expected to be placed under
lease that satisfied the Partnership's investment criteria, $324,000 of which
was purchased by the Partnership from CAII during October 1996. The Partnership
expects to acquire the remainder of the identified equipment from CAII with the
available cash from operations and the net proceeds from the sale of additional
Class A limited partner units during the remainder of 1996.
During the period from April 16, 1996 through September 30, 1996, the
Partnership declared distributions to the partners of $144,050 ($59,005 of which
was paid during October 1996). A substantial portion of such distributions is
expected to constitute a return of capital. Distributions may be characterized
for tax, accounting and economic purposes as a return of capital, a return on
capital or a portion of both. The portion of each cash distribution by a
partnership which exceeds its net income for the fiscal period may be deemed a
return of capital. However, the total percentage of a partnership's return on
capital over its life will only be determined after all residual cash flows
(which include proceeds from the re-leasing and sale of equipment) have been
realized at the termination of the Partnership. For the period from April 16,
1996 through September 30, 1996, approximately 89% of the cash distributions to
the partners constituted a return of capital for accounting purposes. This
percentage may not be reflective of the percentage of distributions that
constitutes a return of capital at any subsequent point in time.
The general partner believes that the Partnership will generate sufficient cash
flows from operations during 1996, to (1) meet current operating requirements,
(2) enable it to fund cash distributions to both the Class A and Class B limited
partners at annualized rates of 10.5% (substantial portions of which are
expected to constitute returns of capital), of their capital contributions, and
(3) reinvest in additional equipment under leases, provided that suitable
equipment can be identified and acquired.
13
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is not a party to any material legal proceedings
outside the ordinary course of its business.
Item 6. Exhibits and Reports on Form 8-K
(a) None.
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended September 30, 1996.
14
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITAL PREFERRED YIELD FUND-IV, L.P.
By: CAI Equipment Leasing V Corp.
Dated: November 4, 1996 By: /s/ John E. Christensen
-----------------------
John E. Christensen
Senior Vice President,
Chief Administrative Officer and Director
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the balance
sheets and statements of income and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,086,100
<SECURITIES> 0
<RECEIVABLES> 68,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,442,562
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,727,323
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,571,943
<TOTAL-LIABILITY-AND-EQUITY> 6,727,323
<SALES> 0
<TOTAL-REVENUES> 270,622
<CGS> 0
<TOTAL-COSTS> 241,681
<OTHER-EXPENSES> 27,862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 28,941
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,941
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
