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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 24, 1999
MERRILL LYNCH PREFERRED CAPITAL TRUST I
(Exact name of Registrant as specified in its certificate of trust)
COMMISSION FILE NO.: 1-7182-01
Delaware 13-7102991
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
World Financial Center
North Tower
New York, New York 10281
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
7-3/4% Trust Originated New York Stock Exchange
Preferred Securities ("TOPrS")
(and the related guarantee)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
MERRILL LYNCH PREFERRED FUNDING I, L.P.
(Exact name of Registrant as specified in its
certificate of limited partnership)
COMMISSION FILE NO.: 1-7182-02
Delaware 13-3917686
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
World Financial Center
North Tower
New York, New York 10281
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
7-3/4% Partnership Preferred New York Stock Exchange
Securities (and the related
guarantee)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have been subject to
such requirements for the past 90 days. Yes |X| No |_|
As of September 24, 1999, no voting stock was held by non-affiliates of the
Registrants.
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<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
<TABLE>
<CAPTION>
MERRILL LYNCH PREFERRED CAPITAL TRUST I
BALANCE SHEETS (unaudited)
(dollars in thousands, except per security amounts)
- -----------------------------------------------------------------------------------------------------------------------
SEPTEMBER 24, 1999 DECEMBER 25, 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Investment in partnership preferred securities $ 283,505 $ 283,505
Income receivable 5,493 5,493
---------- ----------
Total Assets $ 288,998 $ 288,998
========== ==========
LIABILITY AND STOCKHOLDERS' EQUITY
Distributions payable $ 5,493 $ 5,493
---------- ----------
Stockholders' equity:
Preferred securities (7 3/4% Trust Originated Preferred Securities;
11,000,000 authorized, issued, and outstanding; $25 liquidation
amount per security) 275,000 275,000
Common securities (7 3/4% Trust Common Securities;
340,208 authorized, issued, and outstanding;
$25 liquidation amount per security) 8,505 8,505
---------- ----------
Total stockholders' equity 283,505 283,505
---------- ----------
Total Liability and Stockholders' Equity $ 288,998 $ 288,998
========== ==========
</TABLE>
See Note to Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH PREFERRED CAPITAL TRUST I
STATEMENTS OF EARNINGS (unaudited)
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
---------------------------------------
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
------------------ ------------------
<S> <C> <C>
EARNINGS
Income on partnership preferred securities $ 5,493 $ 5,493
========= =========
FOR THE NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
------------------ ------------------
EARNINGS
Income on partnership preferred securities $ 16,479 $ 16,479
========= =========
</TABLE>
See Note to Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH PREFERRED CAPITAL TRUST I
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
------------------ ------------------
<S> <C> <C>
PREFERRED SECURITIES
Balance, beginning and end of period $ 275,000 $ 275,000
---------- ----------
COMMON SECURITIES
Balance, beginning and end of period 8,505 8,505
---------- ----------
UNDISTRIBUTED EARNINGS
Balance, beginning of period - -
Earnings 16,479 16,479
Distributions (10,986) (10,986)
Distributions payable (5,493) (5,493)
---------- ----------
Balance, end of period - -
---------- ----------
Total Stockholders' Equity $ 283,505 $ 283,505
========== ==========
</TABLE>
See Note to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH PREFERRED CAPITAL TRUST I
STATEMENTS OF CASH FLOWS (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings $ 16,479 $ 16,479
--------- ---------
Cash provided by operating activities 16,479 16,479
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (16,479) (16,479)
--------- ---------
Cash used for financing activities (16,479) (16,479)
--------- ---------
NET CHANGE IN CASH - -
CASH, BEGINNING OF PERIOD - -
--------- ---------
CASH, END OF PERIOD $ - $ -
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Preferred and common distributions of $5,328 and $165, respectively, were
accrued at September 24, 1999 and September 25, 1998.
</TABLE>
See Note to Financial Statements
5
<PAGE>
MERRILL LYNCH PREFERRED CAPITAL TRUST I
NOTE TO FINANCIAL STATEMENTS (unaudited)
SEPTEMBER 24, 1999
- -------------------------------------------------------------------------------
BASIS OF PRESENTATION
These unaudited financial statements should be read in conjunction with the
audited financial statements included in the Annual Report on Form 10-K of
Merrill Lynch Preferred Capital Trust I (the "Trust") for the year ended
December 25, 1998. The December 25, 1998 balance sheet was derived from the
audited financial statements. The interim financial statements for the three-
and nine-month periods are unaudited; however, in the opinion of the Regular
Trustees of the Trust, all adjustments, consisting only of normal recurring
accruals necessary for a fair statement of the results of operations, have been
included.
6
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH PREFERRED FUNDING I, L.P.
BALANCE SHEETS (unaudited)
(dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------
SEPTEMBER 24, 1999 DECEMBER 25, 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Cash $ 1 $ 380
Investments:
Affiliate debentures 330,055 330,055
U.S. Treasury bills 3,546 3,486
---------- ----------
Total investments 333,601 333,541
Interest receivable 6,395 6,395
---------- ----------
Total Assets $ 339,997 $ 340,316
========== ==========
LIABILITY AND PARTNERS' CAPITAL
Distributions payable $ 6,395 $ 6,395
---------- ----------
Partners' capital:
Limited partnership interest 283,505 283,505
General partnership interest 50,097 50,416
---------- ----------
Total partners' capital 333,602 333,921
---------- ----------
Total Liability and Partners' Capital $ 339,997 $ 340,316
========== ==========
</TABLE>
See Note to Financial Statements
7
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH PREFERRED FUNDING I, L.P.
STATEMENTS OF EARNINGS (unaudited)
(dollars in thousands)
- -----------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
---------------------------------------
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
------------------ ------------------
<S> <C> <C>
EARNINGS
Interest income:
Affiliate debentures $ 6,395 $ 6,395
U.S. Treasury bills 42 51
---------- ----------
Earnings $ 6,437 $ 6,446
========== ==========
FOR THE NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
------------------ ------------------
EARNINGS
Interest income:
Affiliate debentures $ 19,185 $ 19,185
U.S. Treasury bills 120 153
---------- ----------
Earnings $ 19,305 $ 19,338
========== ==========
</TABLE>
See Note to Financial Statements
8
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH PREFERRED FUNDING I, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (unaudited)
(dollars in thousands)
- ------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
------------------ ------------------
<S> <C> <C>
LIMITED PARTNER'S CAPITAL
Balance, beginning of period $ 283,505 $ 283,505
Net income allocated to limited partner 16,479 16,479
Distributions (10,986) (10,986)
Distributions payable (5,493) (5,493)
---------- ----------
Balance, end of period 283,505 283,505
---------- ----------
GENERAL PARTNER'S CAPITAL
Balance, beginning of period 50,416 50,228
Net income allocated to general partner 2,826 2,859
Distributions (2,243) (1,817)
Distributions payable (902) (902)
---------- ----------
Balance, end of period 50,097 50,368
---------- ----------
TOTAL PARTNERS' CAPITAL $ 333,602 $ 333,873
========== ==========
</TABLE>
See Note to Financial Statements
9
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH PREFERRED FUNDING I, L.P.
STATEMENTS OF CASH FLOWS (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings $ 19,305 $ 19,338
Accretion of U.S. Treasury bills (120) (153)
--------- ---------
Cash provided by operating activities 19,185 19,185
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities (3,479) (3,655)
Maturities of investment securities 3,540 3,669
--------- ---------
Cash provided by investing activities 61 14
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to limited partner (16,479) (16,479)
Distributions to general partner (3,146) (2,720)
--------- ---------
Cash used for financing activities (19,625) (19,199)
--------- ---------
NET CHANGE IN CASH (379) -
CASH, BEGINNING OF PERIOD 380 -
--------- ---------
CASH, END OF PERIOD $ 1 $ -
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Distributions of $6,395 were accrued at September 24, 1999 and
September 25, 1998
</TABLE>
See Note to Financial Statements
10
<PAGE>
MERRILL LYNCH PREFERRED FUNDING I, L.P.
NOTE TO FINANCIAL STATEMENTS (unaudited)
SEPTEMBER 24, 1999
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
These unaudited financial statements should be read in conjunction with the
audited financial statements included in the Annual Report on Form 10-K of
Merrill Lynch Preferred Funding I, L.P. (the "Partnership") for the year ended
December 25, 1998. The December 25, 1998 balance sheet was derived from the
audited financial statements. The interim financial statements for the three-
and nine-month periods are unaudited; however, in the opinion of the General
Partner of the Partnership, all adjustments, consisting only of normal recurring
accruals necessary for a fair statement of the results of operations, have been
included.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Merrill Lynch Preferred Capital Trust I (the "Trust") is a
statutory business trust formed under the Delaware Business Trust Act, as
amended, pursuant to a declaration of trust and the filing of a certificate of
trust with the Secretary of State on November 20, 1996, which was subsequently
amended by an amended and restated declaration of trust dated as of December 11,
1996. The Trust exists for the exclusive purposes of (i) issuing trust
securities, consisting of 7-3/4% Trust Originated Preferred Securities (the
"TOPrS") and trust common securities (the "Trust Common Securities"),
representing undivided beneficial ownership interests in the assets of the
Trust, (ii) investing the gross proceeds of the trust securities in 7-3/4%
Partnership Preferred Securities (the "Partnership Preferred Securities") issued
by Merrill Lynch Preferred Funding I, L.P. (the "Partnership"), and (iii)
engaging in only those other activities necessary or incidental thereto.
The Partnership is a limited partnership formed under the Delaware Revised
Uniform Limited Partnership Act, as amended, pursuant to an agreement of limited
partnership and the filing of a certificate of limited partnership with the
Secretary of State on November 20, 1996, which was subsequently amended by an
amended and restated agreement of limited partnership dated December 17, 1996.
Merrill Lynch & Co., Inc. (the "Company") is the sole general partner of the
Partnership. The Partnership is managed by the general partner and exists for
the exclusive purposes of (i) issuing its partnership interests, consisting of
the Company's general partner interest and the Partnership Preferred Securities,
(ii) investing the proceeds thereof in certain eligible securities of the
Company and wholly owned subsidiaries of the Company (the "Affiliate Investment
Instruments") and certain eligible debt securities, and (iii) engaging in only
those other activities necessary or incidental thereto.
The Registrants' activities are limited to issuing securities and investing the
proceeds as described above. Since the Trust was organized on November 20, 1996,
its activities, as specified in its declaration of trust, have been limited to
the issuance of the TOPrS and the Trust Common Securities, the investing of the
proceeds in the Partnership Preferred Securities, and the payment of
distributions on the TOPrS and the Trust Common Securities in accordance with
their terms. Since the Partnership was organized on November 20, 1996, its
activities, as specified in its agreement of limited partnership, have been
limited to the issuance of the Partnership Preferred Securities, the receipt of
a capital contribution from the Company, as general partner, the investment of
the proceeds in Affiliate Investment Instruments and certain eligible debt
securities, and the payment of distributions on the Partnership Preferred
Securities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
On December 17, 1996, the Trust invested the gross proceeds from the sale of the
Trust Common Securities and the TOPrS in the Partnership Preferred Securities
(the "Trust Assets"). The Partnership, in turn, invested the proceeds from the
sale of the Partnership Preferred Securities and a capital contribution from the
Company in certain Affiliate Investment Instruments and eligible securities (the
"Partnership Assets"). To the extent the Partnership has funds available from
the Partnership Assets, the general partner of the Partnership may declare
distributions to the Trust, as holder of the Partnership Preferred Securities.
The Trust's ability to pay distributions to the holders of the TOPrS is
dependent on its receipt of distributions on the Trust Assets from the
Partnership. Therefore, upon the receipt by the Partnership of payments from the
Partnership Assets and the distribution thereof to the Trust, the Trust will
pass through such payments to the holders of the TOPrS.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
12 Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions
27 Financial Data Schedules*
(b) Reports on Form 8-K
None
- -----------------
* The Financial Data Schedules to be contained in Exhibit 27 are required to be
submitted only in the Registrants' electronic filing of this Form 10-Q by means
of the EDGAR system.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized on the 8th day of
November, 1999.
MERRILL LYNCH PREFERRED CAPITAL TRUST I*
By: /s/ JOHN C. STOMBER
---------------------------------------------
Name: John C. Stomber
Title: Regular Trustee
By: /s/ STANLEY SCHAEFER
---------------------------------------------
Name: Stanley Schaefer
Title: Regular Trustee
MERRILL LYNCH PREFERRED FUNDING I, L.P.*
By: MERRILL LYNCH & CO., INC., as General Partner
By: /s/ JOHN C. STOMBER
---------------------------------------------
Name: John C. Stomber
Title: Senior Vice President and Treasurer
- ------------
* There is no principal executive officer(s), principal financial
officer, controller, principal accounting officer or board of directors of the
Registrants. The Trustees of the Trust (which include the Regular Trustees, the
Property Trustee and the Delaware Trustee) together exercise all powers and
perform all functions with respect to the Trust.
14
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
12 Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions
27 Financial Data Schedules
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
MERRILL LYNCH PREFERRED CAPITAL TRUST I
MERRILL LYNCH PREFERRED FUNDING I, L.P.
COMPUTATION OF RATIOS OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED SECURITIES DISTRIBUTIONS
(dollars in thousands)
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
---------------------------------- ----------------------------------
MERRILL LYNCH MERRILL LYNCH MERRILL LYNCH MERRILL LYNCH
PREFERRED PREFERRED PREFERRED PREFERRED
CAPITAL TRUST I FUNDING I, L.P. CAPITAL TRUST I FUNDING I, L.P.
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Earnings $ 5,493 $ 6,437 $ 5,493 $ 6,446
======== ======== ======== ========
Fixed charges $ - $ - $ - $ -
Preferred securities distribution
requirements 5,328 5,493 5,328 5,493
-------- -------- -------- --------
Total combined fixed charges and
preferred securities distributions $ 5,328 $ 5,493 $ 5,328 $ 5,493
======== ======== ======== ========
Ratio of earnings to combined
fixed charges and preferred
securities distributions 1.03 1.17 1.03 1.17
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 24, 1999 SEPTEMBER 25, 1998
----------------------------------- ----------------------------------
MERRILL LYNCH MERRILL LYNCH MERRILL LYNCH MERRILL LYNCH
PREFERRED PREFERRED PREFERRED PREFERRED
CAPITAL TRUST I FUNDING I, L.P. CAPITAL TRUST I FUNDING I, L.P.
--------------- --------------- --------------- ---------------
Earnings $ 16,479 $ 19,305 $ 16,479 $ 19,338
======== ======== ======== ========
Fixed charges $ - $ - $ - $ -
Preferred securities distribution
requirements 15,984 16,479 15,984 16,479
-------- -------- -------- --------
Total combined fixed charges and
preferred securities distributions $ 15,984 $ 16,479 $ 15,984 $ 16,479
======== ======== ======== ========
Ratio of earnings to combined
fixed charges and preferred
securities distributions 1.03 1.17 1.03 1.17
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001027342
<NAME> MERRILL LYNCH PREFERRED CAPITAL TRUST I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-26-1998
<PERIOD-END> SEP-24-1999
<CASH> 0
<SECURITIES> 283,505
<RECEIVABLES> 5,493
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 288,998
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 288,998
<CURRENT-LIABILITIES> 5,493
<BONDS> 0
0
275,000
<COMMON> 8,505
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 288,998
<SALES> 0
<TOTAL-REVENUES> 16,479
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,479
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,479
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,479
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001027343
<NAME> MERRILL LYNCH PREFERRED FUNDING I, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-26-1998
<PERIOD-END> SEP-24-1999
<CASH> 1
<SECURITIES> 333,601
<RECEIVABLES> 6,395
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 339,997
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 339,997
<CURRENT-LIABILITIES> 6,395
<BONDS> 0
0
283,505
<COMMON> 50,097
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 339,997
<SALES> 0
<TOTAL-REVENUES> 19,305
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,305
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,305
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
