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 March 31, 1998
--------------------------------------------------
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
March 31, 1998
Table of Contents
-----------------
PAGE
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements (Unaudited)
Balance Sheets - March 31, 1998 and December 31, 1997 3
Statements of Income - Three Months Ended
March 31, 1998 and 1997 4
Statement of Partners' Capital - January 1, 1997 -
March 31, 1998 5
Statements of Cash Flows - Three Months Ended
March 31, 1998 and 1997 6
Notes to Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 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 SHEETS
ASSETS
(Unaudited)
March 31, December 31,
1998 1997
----------- ------------
Cash and cash equivalents $ 4,876,357 $ 4,676,747
Accounts receivable 767,758 383,407
Receivable from related party - 10,000
Net investment in direct finance leases 4,645,387 4,602,977
Leased equipment, net 52,890,259 46,488,309
----------- -----------
Total assets $63,179,761 $56,161,440
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 2,029,097 $ 411,814
Payables to affiliates 39,322 58,722
Rents received in advance 815,443 817,900
Distributions payable to partners 498,221 433,396
Discounted lease rentals 20,085,189 17,633,047
----------- -----------
Total liabilities 23,467,272 19,354,879
----------- -----------
Partners' capital:
General partner - -
Limited partners:
Class A 39,247,565 36,374,010
Class B 464,924 432,551
----------- -----------
Total partners' capital 39,712,489 36,806,561
----------- -----------
Total liabilities and partners' capital $ 63,179,761 $ 56,161,440
============ ============
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
----------------------------
1998 1997
----------- -------------
REVENUE:
Operating lease rentals $ 4,322,162 $ 1,505,846
Direct finance lease income 88,347 28,122
Equipment sales margin 27,095 -
Interest income 64,797 49,978
----------- -----------
Total revenue 4,502,401 1,583,946
----------- -----------
EXPENSES:
Depreciation and amortization 3,482,767 1,191,594
Direct services from general partner 26,349 22,172
Management fees paid to general partner 87,493 30,113
General and administrative 41,169 35,877
Interest on discounted lease rentals 318,702 148,888
----------- -----------
Total expenses 3,956,480 1,428,644
----------- -----------
NET INCOME $ 545,921 $ 155,302
=========== ===========
NET INCOME ALLOCATED:
To the general partner $ 19,778 $ 16,540
To the Class A limited partners 520,820 137,348
To the Class B limited partner 5,323 1,414
----------- -----------
$ 545,921 $ 155,302
=========== ===========
Net income per weighted average Class A
limited partner unit outstanding $ 1.07 $ 0.70
=========== ===========
Weighted average Class A limited partner
units outstanding 485,290 197,329
=========== ===========
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 Three Months Ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Class A
Limited Class A Class B
General Partners Limited Limited
Partner Units Partners Partner Total
------- -------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Partners' capital, January 1, 1998 $ - 455,953 $ 36,374,010 $ 432,551 $ 36,806,561
Capital contributions - 43,367 4,336,754 40,000 4,376,754
Volume discount - - (68,895) - -
Commissions and offering costs on
sale of Class A limited partner units (6,771) (411) (601,385) - (677,051)
Redemptions - - (39,662) - (39,662)
Net income 19,778 - 520,820 5,323 545,921
Distributions declared to partners (13,007) - (1,274,077) (12,950) (1,300,034)
--------- ------- ------------- ----------- ------------
Partners' capital, March 31, 1998 $ - 498,909 $ 39,247,565 $ 464,924 $ 39,712,489
========= ======= ============= ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------
March 31, March 31,
1998 1997
-------------- ------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,649,234 $ 1,530,312
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment on operating leases from affiliate (9,522,061) (8,687,400)
Investment in direct finance leases, acquired from affiliate (370,226) (464,890)
-------------- ------------
Net cash used in investing activities (9,892,287) (9,152,290)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Class A capital contributions 4,336,754 8,027,905
Proceeds from Class B capital contributions 40,000 80,000
Proceeds from discounted lease rentals 3,994,817 -
Principal payments on discounted lease rentals (1,976,985) (616,084)
Redemptions of Class A limited partner units (39,662) -
Commissions paid to affiliate in connection
with the sale of Class A limited partner units (434,326) (802,791)
Non-accountable organization and offering expenses
reimbursement paid to the general partner in connection
with the sale of Class A limited partner units (242,725) (355,703)
Distributions to partners (1,235,210) (449,032)
-------------- ------------
Net cash provided by financing activities 4,442,663 5,884,295
-------------- ------------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 199,610 (1,737,683)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,676,747 3,286,072
-------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,876,357 $ 1,548,389
============== ============
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 318,702 $ 148,888
Supplemental disclosure of noncash investing and
financing activities:
Discounted lease rentals assumed in equipment acquisitions 434,310 16,673,062
Reduction in Partner's capital accounts for commissions and
costs payable to affiliates - 22,554
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
---------------------
The accompanying unaudited financial statements have 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 of normal recurring adjustments) considered
necessary for a fair presentation have been included. The balance sheet at
December 31, 1997 was derived from the audited financial statements
included in the Partnership's 1997 Form 10-K. For further information,
refer to the financial statements of Capital Preferred Yield Fund-IV, L.P.
(the "Partnership"), and the related notes, included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1997 (the "1997
Form 10-K"), previously filed with the Securities and Exchange Commission.
2. Transactions With the General Partner and Affiliates
----------------------------------------------------
SALES COMMISSIONS AND OFFERING COSTS
Under the terms of the Partnership Agreement, 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 three months
ended March 31, 1998, the Partnership incurred commissions and fees of
$433,676 including $362,775 that were paid to participating broker-dealers.
As provided in the Partnership Agreement, the general partner earned
$173,470 as reimbursement for expenses incurred during the three months
ended March 31, 1998 in connection with the organization of the Partnership
and the offering of Class A limited partner units.
As provided in the Prospectus, a volume discount, equal to 1.0% of the
purchase price per unit for all purchases of $500,000 or more, was granted
during the three months ended March 31, 1998 in the amount of $68,895.
7
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
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. The Partnership recorded $26,349 ($10,673 of
which was paid in April 1998) of direct services from the general partner
for the three months ended March 31, 1998.
PAYABLE TO AFFILIATES:
Payable to affiliates consists of direct services and management fees due
to the general partner and its affiliates.
EQUIPMENT PURCHASES
During the three months ended March 31, 1998, the Partnership acquired the
equipment described below from Capital Associates International, Inc.:
<TABLE>
<CAPTION>
Total
Acquisition Equipment
Cost of Fees and Purchase
Lessee Equipment Description Equipment Reimbursements Price
---------------------------- ----------------------------------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Advanced Micro Wafer fabrication $2,048,294 $ 70,973 $ 2,119,267
Alliant Techsystems, Inc. Lathes 143,867 4,985 148,852
Alliant Techsystems, Inc. Sweeper/Scrubber 20,818 721 21,539
Brown-Strauss Steel Div Forklift 95,526 3,310 98,836
Busy Beaver Building Centers Retail furniture fixtures & equipment 236,536 8,279 244,815
CH2M Hill, Inc. Office furniture fixtures & equipment 115,119 3,989 119,108
Consolidated Diesel Reach trucks 12,570 436 13,006
Consolidated Diesel Copier 49,088 1,701 50,789
Consolidated Diesel Projector 6,649 230 6,879
Consolidated Diesel Lift truck 19,235 666 19,901
Furr's SuperMarkets Restaurant furniture fixtures & equipment 406,623 14,232 420,855
General Motors Lawn mower 16,085 557 16,642
General Motors Corp. Sweeper 99,203 3,437 102,640
General Motors Corp. Sweeper/Scrubber 231,872 8,034 239,906
General Motors Corp. Tractor 57,844 2,004 59,848
Georgetown Steel Hyster forklift 48,867 1,693 50,560
Glassmaster Company Machine tools 566,785 19,837 586,623
ICI Americas, Inc. Dell computers 17,300 599 17,899
ICI Americas, Inc. Material handler 76,750 2,659 79,409
ICI Americas, Inc. Scissor lift 8,300 288 8,588
8
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
EQUIPMENT PURCHASES, continued
Total
Acquisition Equipment
Cost of Fees and Purchase
Lessee Equipment Description Equipment Reimbursements Price
---------------------------- ----------------------------------------- ---------- -------------- ----------
International Paper Company Boom lift $ 35,934 $ 1,245 $ 37,179
International Paper Company Forklift 38,783 1,344 40,127
New York State Electric PC's/Networking 292,311 10,231 302,542
Owens Corning Fiberglass PC's/Networking 2,150,797 75,278 2,226,075
Owens Corning Fiberglass Peripheral - printers 104,925 3,672 108,597
Pharmacia Iovision Inc. Microscopic equipment 159,650 5,532 165,182
Polo Ralph Lauren PC's 367,426 12,860 380,286
Red Mountain Mining Inc. Forklifts 422,968 14,804 437,772
Teleflex Inc. PC's/Networking 166,992 5,845 172,836
Things Remembered Point-of-sale equipment 809,665 28,338 838,003
Thomson Industries, Inc. Machine tools 40,360 1,398 41,758
Thomson Industries, Inc. Thread grinder 89,770 3,111 92,881
Thomson Industries, Inc. Drilling machine 324,066 11,229 335,295
Universal Forest Products Forklift 47,580 1,649 49,229
Versar PC's 84,712 2,935 87,647
WPM Inc. Construction equipment 444,399 15,556 459,955
---------- ---------- -----------
Totals $9,857,669 $ 343,657 $10,201,326
========== ========== ===========
</TABLE>
As of March 31, 1998, the general partner had identified approximately
$3.4 million of equipment that satisfied the Partnership's investment
criteria and is expected to be acquired during the remainder of 1998.
9
<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
- ---------------------
Presented below are schedules (prepared solely to facilitate the discussion of
results of operations that follows) showing condensed statements of income
categories and analyses of changes in those condensed categories derived from
the Statements of Income:
Condensed
Statements of Income
for the Three Months The Effect on
Ended March 31, Net Income of
----------------------- Changes Between
1998 1997 Periods
---------- ---------- ---------------
Leasing margin $ 609,040 $ 193,486 $ 415,554
Equipment sales margin 27,095 - 27,095
Interest income 64,797 49,978 14,819
Management fees paid to general partner (87,493) (30,113) (57,380)
Direct services from general partner (26,349) (22,172) (4,177)
General and administrative expenses (41,169) (35,877) (5,292)
--------- --------- ---------
Net income $ 545,921 $ 155,302 $ 390,619
========= ========= =========
LEASING MARGIN
Leasing margin consists of the following:
Three Months Ended
March 31,
---------------------------
1998 1997
----------- -----------
Operating lease rentals $ 4,322,162 $ 1,505,846
Direct finance lease income 88,347 28,122
Depreciation (3,482,767) (1,191,594)
Interest expense on discounted lease rentals (318,702) (148,888)
----------- -----------
Leasing margin $ 609,040 $ 193,486
=========== ===========
Leasing margin ratio 14% 13%
=========== ===========
10
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Results of Operations, continued
- ---------------------
LEASING MARGIN, continued
All components of leasing margin increased due to growth in the Partnership's
lease portfolio. As the lease portfolio increases in size, it is expected that
the leasing margin ratio will also vary due to changes in the portfolio,
including, among other things, the mix of operating leases versus direct finance
leases, the average maturity of leases comprising the portfolio, the average
residual value of leases in the portfolio, and the amount of discounted lease
rentals financing the portfolio.
The ultimate profitability of the Partnership's leasing transactions is
dependent in part on interest rates at the time the leases are originated, as
well as future equipment values and on-going lessee creditworthiness. Because
leasing is an alternative to financing equipment purchases with debt, lease
rates tend to rise and fall with interest rates (although lease rate movements
generally lag interest rate changes in the capital markets).
EQUIPMENT SALES MARGIN
Equipment sales margin consists of the following:
Three Months Ended
March 31, 1998
------------------
Equipment sales revenue $ 98,747
Cost of equipment sales (71,652)
--------
Equipment sales margin $ 27,095
========
INTEREST INCOME
Interest income increased due to an increase in invested cash from sales of
Class A limited partnership units pending the Partnership's initial acquisition
of equipment.
EXPENSES
Management fees, direct services from general partner and general and
administrative expenses increased due to growth in the Partnership's lease
portfolio.
11
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
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 for sale to investors. The Partnership reached its limit of $50 million in
unit sales on February 9, 1998.
A summary of the Partnership's offering activities from the commencement of
operations to March 31, 1998 is presented below:
Class A limited partnership units sold 500,000
============
Gross offering proceeds $ 50,000,000
Sales commissions (5,000,000)
Organization and offering expenses (2,000,000)
Due diligence expenses (154,531)
------------
Net offering proceeds $ 42,845,469
============
Class B limited partner (CAII) cash contribution $ 500,000
=============
A summary of the Partnership's offering activities for the three months ended
March 31, 1998 is presented below:
Class A limited partnership units sold 43,367
===========
Gross offering proceeds $ 4,336,754
Sales commissions (433,676)
Organization and offering expenses (173,470)
Due diligence expenses (1,010)
-----------
Net offering proceeds $ 3,728,598
===========
Class B limited partner (CAII) cash contribution $ 40,000
===========
The Partnership funds its operating activities principally with cash from rents,
discounted lease rentals (non-recourse debt), interest income and sales of
off-lease equipment. 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.
12
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Liquidity & Capital Resources, continued
- -----------------------------
During the three months ended March 31, 1998, the Partnership acquired equipment
subject to leases with a total purchase price of $10,201,326 (including $434,310
of discounted lease rentals). As of March 31, 1998, the general partner had
identified approximately $3.4 million of additional equipment that satisfied the
Partnership's acquisition criteria and is expected to be acquired during the
remainder of 1998.
During the three months ended March 31, 1998, the Partnership declared
distributions to the Class A limited partners of $1,274,077 ($488,864 of which
was paid during April 1998). A 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
for accounting purposes. 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 three months ended March
31, 1998, approximately 58% of the cash distributions paid to the partners of
the Partnership 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 the remainder of 1998, to (1) meet current
operating requirements, (2) fund cash distributions to both the Class A and
Class B limited partners at annualized rates of 10.5% (portions of which are
expected to constitute returns of capital), 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 March 31, 1998.
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: May 14, 1998 By: /s/Anthony M. DiPaolo
---------------------
Anthony M. DiPaolo
Senior Vice President
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,876,357
<SECURITIES> 0
<RECEIVABLES> 767,758
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 52,890,259
<DEPRECIATION> 0
<TOTAL-ASSETS> 63,179,761
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,712,489
<TOTAL-LIABILITY-AND-EQUITY> 63,179,761
<SALES> 0
<TOTAL-REVENUES> 4,502,401
<CGS> 0
<TOTAL-COSTS> 3,956,480
<OTHER-EXPENSES> 113,842
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 318,702
<INCOME-PRETAX> 545,921
<INCOME-TAX> 0
<INCOME-CONTINUING> 545,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 545,921
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
