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 June 30, 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 15
Page 1 of 16 Pages
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Quarterly Report on Form 10-Q
For the Quarter Ended
June 30, 1998
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (Unaudited)
Balance Sheets - June 30, 1998 and December 31, 1997 3
Statements of Income - Three and Six Months Ended
June 30, 1998 and 1997 4
Statement of Partners' Capital - Three and Six Months Ended
June 30, 1998 and 1997 5
Statements of Cash Flows - Six Months Ended
June 30, 1998 and 1997 6
Notes to Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
2
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
BALANCE SHEETS
ASSETS
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
Cash and cash equivalents $ 610,726 $ 4,676,747
Accounts receivable 687,101 383,407
Receivable from related party 300,176 10,000
Equipment held for sale or re-lease 120,388 -
Net investment in direct finance leases 4,803,748 4,602,977
Leased equipment, net 53,375,777 46,488,309
----------- -----------
Total assets $59,897,916 $56,161,440
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 392,444 $ 411,814
Payables to affiliates 219,361 58,722
Rents received in advance 916, 454 817,900
Distributions payable to partners 9,352 433,396
Discounted lease rentals 19,793,690 17,633,047
----------- -----------
Total liabilities 21,331,301 19,354,879
----------- -----------
Partners' capital:
General partner - -
Limited partners:
Class A 38,110,797 36,374,010
Class B 455,818 432,551
----------- -----------
Total partners' capital 38,566,615 36,806,561
----------- -----------
Total liabilities and partners' capital $59,897,916 $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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Operating lease rentals $4,848,638 $2,842,519 $9,170,800 $4,348,365
Direct finance lease income 46,986 72,160 135,333 100,282
Equipment sales margin 52,890 - 79,985 -
Interest income 26,441 45,829 91,238 95,807
---------- ---------- ---------- ----------
Total revenue 4,974,955 2,960,508 9,477,356 4,544,454
---------- ---------- ---------- ----------
Expenses:
Depreciation 3,942,243 2,305,959 7,425,010 3,497,553
Direct services from general partner 47,278 19,238 73,627 41,410
Management fees paid to general partner 110,146 60,585 197,639 90,698
General and administrative 49,196 36,748 90,365 72,625
Provision for losses 25,000 - 25,000 -
Interest on discounted lease rentals 389,704 359,961 708,406 508,849
---------- ---------- ---------- ----------
Total expenses 4,563,567 2,782,491 8,520,047 4,211,135
---------- ---------- ---------- ----------
Net income $ 411,388 $ 178,017 $ 957,309 $ 333,319
========== ========== ========== ==========
Net income allocated:
To the general partner $ 14,067 $ 17,933 $ 33,845 $ 34,473
To the Class A limited partners 393,302 158,454 914,122 295,802
To the Class B limited partner 4,019 1,630 9,342 3,044
---------- ---------- ---------- ----------
$ 411,388 $ 178,017 $ 957,309 $ 333,319
========== ========== ========== ==========
Net income per weighted average Class A
limited partner unit outstanding $ .79 $ .58 $ 1.86 $ 1.26
========== ========== ========== ==========
Weighted average Class A limited partner
units outstanding 497,640 271,648 491,500 234,694
========== ========== ========== ==========
</TABLE>
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 and Six Months Ended June 30, 1998 and 1997
(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
Commissions and offering costs on
sale of Class A limited partner units (6,771) - (670,280) - (677,051)
Redemptions - (411) (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
--------- -------- ------------ ---------- ------------
Commissions and offering costs on
sale of Class A limited partner units (746) - (73,876) - (74,622)
Redemptions - (1,705) (150,772) - (150,772)
Net income 14,067 - 393,302 4,019 411,388
Distributions declared to partners (13,321) - (1,305,422) (13,125) (1,331,868)
--------- -------- ------------ ---------- ------------
Partners' capital, June 30, 1998 $ - 497,204 $ 38,110,797 $ 455,818 $ 38,566,615
========= ======== ============ ========== ============
Partners' capital, January 1, 1997 $ - 154,503 $ 12,878,374 $ 146,243 $ 13,024,617
Capital contributions - 80,279 8,027,905 80,000 8,107,905
Commissions and offering costs on
sale of Class A limited partner units (11,525) - (1,140,936) - (1,152,461)
Net income 16,540 - 137,348 1,414 155,302
Distributions declared to partners (5,015) - (523,821) (5,338) (534,174)
--------- -------- ------------ ---------- ------------
Partners' capital, March 31, 1997 - 234,782 19,378,870 222,319 19,601,189
--------- -------- ------------ ---------- ------------
Capital contributions $ - 76,471 7,642,162 80,000 7,722,162
Volume discount - - - - -
Commissions and offering costs on
sale of Class A limited partner units (11,007) - (1,089,675) - (1,100,682)
Redemptions - (80) (7,274) - (7,274)
Net income 17,933 - 158,454 1,630 178,017
Distributions declared to partners (6,926) - (714,599) (7,262) (728,787)
--------- -------- ------------ ---------- ------------
Partners' capital, June 30, 1997 $ - 311,173 $ 25,367,938 $ 296,687 $ 25,664,625
========= ======== ============ ========== ============
</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>
Six Months Ended
-----------------------------
June 30, June 30,
1998 1997
------------ ------------
<S> <C> <C>
Net cash provided by operating activities $ 8,990,088 $ 3,812,110
------------ ------------
Cash flows from investing activities:
Purchases of equipment on operating leases from affiliate (12,188,475) (13,968,184)
Investment in direct finance leases, acquired from affiliate (952,964) (536,466)
------------ ------------
Net cash used in investing activities (13,141,439) (14,504,650)
------------ ------------
Cash flows from financing activities:
Proceeds from Class A capital contributions 4,336,754 15,670,067
Proceeds from Class B capital contributions 40,000 160,000
Proceeds from discounted lease rentals 3,994,817 3,695,735
Principal payments on discounted lease rentals (4,288,189) (2,159,424)
Redemptions of Class A limited partner units (190,434) (7,274)
Commissions paid to affiliate in connection
with the sale of Class A limited partner units (434,326) (1,573,007)
Non-accountable organization and offering expenses
reimbursed to the general partner in connection
with the sale of Class A limited partner units (317,346) (677,944)
Distributions to partners (3,055,946) (1,099,277)
------------ ------------
Net cash provided by financing activities 85,330 14,008,876
------------ ------------
Net increase (decrease) in cash and cash equivalents (4,066,021) 3,316,336
Cash and cash equivalents at beginning of period 4,676,747 3,286,072
------------ ------------
Cash and cash equivalents at end of period $ 610,726 $ 6,602,408
============ ============
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 708,406 $ 508,849
Supplemental disclosure of noncash investing and
financing activities:
Discounted lease rentals assumed in equipment acquisitions 2,454,015 16,673,062
Reduction in Partner's capital accounts for commissions and
costs payable to affiliates 751,673 2,253,143
</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.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
("Statement 130"), which requires comprehensive income to be displayed
prominently within the financial statements. Comprehensive income is
defined as all recognized changes in equity during a period from
transactions and other events and circumstances except those resulting from
investments by owners and distributions to owners. Net income and items
that previously have been recorded directly in equity are included in
comprehensive income. Statement 130 affects only the reporting and
disclosure of comprehensive income but does not affect recognition or
measurement of income. Statement 130 is effective for fiscal years
beginning after December 15, 1997, with earlier application permitted. The
Partnership adopted Statement 130 in the first quarter of 1998. The
adoption did not have an impact on its financial reporting.
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 six months ended
June 30, 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
$248,451 as reimbursement for expenses incurred during the six months ended
June 30, 1998 in connection with the organization of the Partnership and
the offering of Class A limited partner units, $74,622 of which is included
in payable to affiliates.
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 six months ended June 30, 1998 totaling $68,895.
7
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
(Unaudited)
2. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
DIRECT SERVICES FROM GENERAL PARTNER:
The general partner and an affiliate 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 $73,627 of direct
services from the general partner for the six months ended June 30, 1998.
Of that amount $9,931 is included in payables to affiliates.
MANAGEMENT FEES PAID TO GENERAL PARTNER:
In accordance with the Partnership Agreement the general partner earns a
management fee in connection with its management of the equipment,
calculated as a percentage of the monthly gross rentals received, and paid
monthly in arrears. The Partnership recorded a management fee of $197,639
for the six months ended June 30, 1998. Of that amount $35,170 is included
in payables to affiliates.
GENERAL AND ADMINISTRATIVE EXPENSES:
The general partner and an affiliate are reimbursed for the actual cost of
administrative expenses paid on behalf of Partnership per the terms of the
Partnership Agreement. At June 30, 1998, $99,638 of reimbursable expenses
are included in payables to affiliates.
RECEIVABLE FROM RELATED PARTY:
The general partner collects and applies rental payments to the lessee's
account with the Partnership, for those lessees who remit directly to the
general partner. The rental payments are then transferred to the
Partnership, eliminating the receivable from related party balance. At the
end of June 1998, $300,176 in rents were applied by the general partner
that were transferred to the Partnership in July 1998.
EQUIPMENT PURCHASES
During the six months ended June 30, 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. PBX 668,822 23,175 691,997
8
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
(Unaudited)
2. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
EQUIPMENT PURCHASES, continued
Total
Acquisition Equipment
Cost of Fees and Purchase
Lessee Equipment Description Equipment Reimbursements Price
---------------------------- --------------------- ------------ -------------- ------------
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 FF&E 236,536 8,279 244,815
CH2M Hill, Inc. Office FF&E 115,119 3,989 119,108
CMC Industries Solder machine 1,100,000 38,115 1,138,115
Consolidated Diesel Reach trucks 12,570 436 13,006
Consolidated Diesel Boom lift 33,750 1,169 34,919
Consolidated Diesel Copier 53,388 1,850 55,238
Consolidated Diesel Forklifts 19,235 666 19,901
Consolidated Diesel Projector 6,649 230 6,879
Conair Forklifts 47,282 1,638 48,920
Dupont Yard tractor 63,756 2,209 65,965
E-Trade Office FF&E 939,273 32,546 971,819
Fingerhut Corp. Proofing system 40,000 1,386 41,386
Furr's SuperMarkets Restaurant FF&E 406,623 14,232 420,855
GEICO Personal computers 1,480,186 51,288 1,531,474
General Motors Corp. Forklift 19,864 688 20,552
General Motors Corp. Lawn mower 16,085 557 16,642
General Motors Corp. Material handler 26,347 913 27,260
General Motors Corp. Scrubber 84,598 2,931 87,529
General Motors Corp. Sweeper 99,203 3,437 102,640
General Motors Corp. Sweeper/scrubber 231,871 8,035 239,906
General Motors Corp. Tractor 57,844 2,004 59,848
Georgetown Steel Forklifts 48,867 1,693 50,560
Glassmaster Company Machine tools 566,786 19,837 586,623
ICI Americas, Inc. Boom lift 47,266 1,638 48,904
ICI Americas, Inc. Personal 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
ICI Americas, Inc. Scrubber 29,640 1,027 30,667
International Paper Company Boom lift 35,934 1,245 37,179
International Paper Company Forklifts 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 75,281 2,226,078
Owens Corning Fiberglass Peripherals-printers 104,925 3,672 108,597
Pharmacia Iovision, Inc. Microscopic equipment 159,650 5,532 165,182
Polo Ralph Lauren Personal computers 367,427 12,860 380,287
Prairie International Tractor 443,220 15,358 458,578
Red Mountain Mining, Inc. Forklifts 422,968 14,804 437,772
Rohr Forklifts 23,886 828 24,714
Teleflex, Inc. PC's/networking 166,992 5,845 172,837
9
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
(Unaudited)
2. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
EQUIPMENT PURCHASES, continued
Total
Acquisition Equipment
Cost of Fees and Purchase
Lessee Equipment Description Equipment Reimbursements Price
---------------------------- --------------------- ------------ -------------- ------------
Things Remembered Point-of-sale $ 809,665 $ 28,338 $ 838,003
Thomson Industries, Inc. Drilling machine 324,066 11,229 335,295
Thomson Industries, Inc. Machine tools 40,360 1,398 41,758
Thomson Industries, Inc. Thread grinder 251,060 8,699 259,759
Universal Forest Products Forklifts 47,580 1,649 49,229
Versar Personal computers 84,712 2,935 87,647
WPM Inc. Construction equipment 444,398 15,554 459,952
------------ --------- ------------
$ 15,071,149 $ 524,305 $ 15,595,454
============ ========= ============
</TABLE>
As of June 30, 1998, the general partner had identified approximately
$500,000 of equipment that satisfied the Partnership's investment criteria
and is expected to be acquired during the remainder of 1998.
10
<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:
<TABLE>
<CAPTION>
Condensed Statements Condensed Statements
of Income for The Effect on of Income for The Effect on
the Three Months Net Income the Six Months Net Income
Ended June 30, of Changes Ended June 30, of Changes
--------------------------- Between -------------------------- Between
1998 1997 Periods 1998 1997 Periods
------------ ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 563,677 $ 248,759 $ 314,918 $ 1,172,717 $ 442,245 $ 730,472
Equipment sales margin 52,890 - 52,890 79,985 - 79,985
Interest income 26,441 45,829 (19,388) 91,238 95,807 (4,569)
Management fees paid to general partner (110,146) (60,585) (49,561) (197,639) (90,698) (106,941)
Direct services from general partner (47,278) (19,238) (28,040) (73,627) (41,410) (32,217)
General and administrative (49,196) (36,748) (12,448) (90,365) (72,625) (17,740)
Provision for losses (25,000) - (25,000) (25,000) - (25,000)
----------- --------- --------- ----------- ---------- -----------
Net income $ 411,388 $ 178,017 $ 233,371 $ 957,309 $ 333,319 $ 623,990
=========== ========= ========= =========== ========== ===========
</TABLE>
LEASING MARGIN
Leasing margin consists of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating lease rentals $ 4,848,638 $ 2,842,519 $ 9,170,800 $ 4,348,365
Direct finance lease income 46,986 72,160 135,333 100,282
Depreciation (3,942,243) (2,305,959) (7,425,010) (3,497,553)
Interest on discounted lease rentals (389,704) (359,961) (708,406) (508,849)
----------- ----------- ----------- -----------
Leasing margin $ 563,677 $ 248,759 $ 1,172,717 $ 442,245
=========== =========== =========== ===========
Leasing margin ratio 12% 9% 13% 10%
== = == ==
</TABLE>
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.
11
<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
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).
INTEREST INCOME
Interest income decreased due to a decrease in invested cash. Interest income
varies due to (1) the amount of cash available for investment (pending
distribution or equipment purchases) and (2) the interest rate on such invested
cash.
EXPENSES
Management fees, direct services from general partner and general and
administrative expenses increased due to growth in the Partnership's lease
portfolio.
PROVISION FOR LOSSES
The remarketing of equipment for an amount greater than its book value is
reported as equipment sales margin (if the equipment is sold) or leasing margin
(if the equipment is re-leased). The realization of less than the carrying value
of equipment (which is typically not known until remarketing subsequent to the
initial lease termination has occurred) is recorded as provision for losses.
Residual values are established equal to the estimated value to be received from
the equipment following termination of the lease. In estimating such values, the
Partnership considers all relevant facts regarding the equipment and the lessee,
including, for example, the likelihood that the lessee will re-lease the
equipment. The nature of the Partnership's leasing activities is that it has
credit exposure and residual value exposure and, accordingly, in the ordinary
course of business, it will incur losses from those exposures. The Partnership
performs on-going quarterly assessments of its assets to identify any
other-than-temporary losses in value. The Partnership recorded a provision for
loss of $25,000 for the three months ended June 30, 1998 related primarily to
lessees returning equipment to the Partnership.
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
- -----------------------------
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 June 30, 1998 is presented below:
Class A limited partnership units sold 500,000
============
Gross offering proceeds $ 50,000,000
Sales commissions (5,000,000)
Non-accountable organization and offering expenses reimbursement (2,000,000)
Due diligence expenses (229,152)
------------
Net offering proceeds $ 42,770,848
============
Class B limited partner (CAII) cash contribution $ 500,000
============
A summary of the Partnership's offering activities for the six months ended June
30, 1998 is presented below:
Class A limited partnership units sold 43,367
============
Gross offering proceeds $ 4,336,754
Sales commissions (433,676)
Non-accountable organization and offering expenses reimbursement (173,470)
Due diligence expenses (75,631)
------------
Net offering proceeds $ 3,653,977
============
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.
13
<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 six months ended June 30, 1998, the Partnership acquired equipment
subject to leases with a total purchase price of $15,595,454 (including
$2,454,015 of discounted lease rentals). As of June 30, 1998, the general
partner had identified approximately $500,000 of additional equipment that
satisfied the Partnership's acquisition criteria and is expected to be acquired
during the remainder of 1998.
During the six months ended June 30, 1998, the Partnership declared and paid
distributions to the Class A limited partners of $2,579,499. 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 six months ended June 30, 1998, approximately 64% 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.
YEAR 2000 ISSUES
An affiliate provides accounting and other administrative services, including
data processing services to the Partnership. The affiliate has conducted a
comprehensive review of its computer systems to identify systems that could be
affected by the Year 2000 issue. The Year 2000 issue results from computer
programs being written using two digits rather than four to define the
applicable year. Certain computer programs which have time-sensitive software
could recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in major system failures or miscalculations. Certain of the
affiliates's software have already been updated to software which correctly
accounts for the Year 2000. In addition, the affiliate is engaged in a system
conversion, whereby the affiliates's main lease tracking and accounting software
is being replaced with new systems which will account for the Year 2000
correctly. The general partner does not expect any other changes required for
the Year 2000 to have a material effect on the financial position or results of
operations of the Partnership. In addition, the general partner does not expect
any Year 2000 issues relating to customers and vendors will have a material
effect on its financial position or results of operations of the Partnership.
Costs incurred by the Partnership to address the Year 2000 issue have been
immaterial.
14
<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 June 30, 1998.
15
<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: August 13, 1998 By: /s/Anthony M. DiPaolo
--------------------------------
Anthony M. DiPaolo
Senior Vice President
16
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 610,726
<SECURITIES> 0
<RECEIVABLES> 987,277
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 53,375,777
<DEPRECIATION> 0
<TOTAL-ASSETS> 59,897,916
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 38,566,615
<TOTAL-LIABILITY-AND-EQUITY> 59,897,916
<SALES> 79,958
<TOTAL-REVENUES> 9,477,356
<CGS> 0
<TOTAL-COSTS> 8,520,047
<OTHER-EXPENSES> 271,266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 708,406
<INCOME-PRETAX> 957,309
<INCOME-TAX> 0
<INCOME-CONTINUING> 957,309
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 957,309
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.86
</TABLE>
