FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(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, 1999
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 0-19166
PAINEWEBBER PREFERRED YIELD FUND, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1130506
----------------------- ---------------------------------
(State of organization) (IRS 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 Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
----- -----
Exhibit Index Appears on Page 10
Page 1 of 11 Pages
<PAGE>
PaineWebber Preferred Yield Fund, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1999
Table of Contents
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statement of Net Assets in Liquidation as of
June 30, 1999 and December 31, 1998 3
Statement of Changes in Net Assets in Liquidation
for the Six Months Ended June 30, 1999 4
Notes to Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Exhibit Index 10
Signature 11
2
<PAGE>
PAINEWEBBER PREFERRED YIELD FUND, L.P.
STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
ASSETS
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
Cash and cash equivalents $3,946,894 $3,198,407
Rents and other receivables, net 113,446 163,529
Equipment on operating leases, at liquidation value - 1,567,365
---------- ----------
Total Assets $4,060,340 $4,929,301
========== ==========
LIABILITIES AND NET ASSETS
LIABILITIES:
Accounts payable and accrued liabilities $ 627,799 $ 731,971
Accrued liquidation expenses 283,456 341,750
Payables to affiliates 122,895 246,884
Accrued interest payable - 6,275
Discounted lease rentals - 969,404
---------- ----------
Total Liabilities 1,034,150 2,296,284
---------- ----------
NET ASSETS: 3,026,190 2,633,017
---------- ----------
Total Liabilities and Net Assets $4,060,340 $4,929,301
========== ==========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PAINEWEBBER PREFERRED YIELD FUND, L.P.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FOR THE SIX MONTHS ENDED JUNE 30, 1999
March 31, December 31,
1999 1998
---------- ------------
Net assets in liquidation $2,638,368 $2,633,017
Income from liquidating activities:
Interest income 31,999 62,734
Gain on sale of equipment 96,933 96,933
Other income 276,183 276,397
---------- ----------
405,115 436,064
Expenses from liquidating activities:
Interest 14,596 39,514
General and administrative 2,697 3,377
---------- ----------
17,293 42,891
Increase in net assets in liquidation 387,822 393,173
---------- ----------
Net assets in liquidation $3,026,190 $3,026,190
========== ==========
Net assets in liquidation, allocated to
Class A limited partners $2,495,699
Net assets in liquidation, per weighted
average Class A unit (142,128) $ 17.56
==========
4
<PAGE>
PAINEWEBBER PREFERRED YIELD FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
As a result of the sale of substantially all of the Partnership's assets,
the General Partners approved a plan of liquidation in 1998 and commenced
liquidation as of December 31, 1998. Accordingly, the Partnership changed
its basis of accounting from the going-concern basis to the liquidation
basis effective December 31, 1998. The liquidation basis of accounting
presents assets at the amounts expected to be realized in liquidation and
liabilities at amounts expected to be paid to creditors. Adjustments for
changes in estimated liquidating values are recognized currently. The
accompanying unaudited financial statements do not include all of the
information and footnotes necessary for a presentation of complete
financial statements as required by generally accepted accounting
principles for annual financial statements. The accompanying financial
statements are unaudited, but in the opinion of the General Partners, all
adjustments to assets and liabilities considered necessary for the
presentation of amounts at net realizable or estimated liquidating values
have been included. These values are based upon management's best estimates
of their liquidation value at June 30, 1999. Such values could differ
substantially from amounts ultimately realized in the future as the
Partnership completes its plan of liquidation. The Managing General Partner
has sold the remaining equipment effective June 30, 1999, therefore
dissolution will occur in the third quarter 1999. Liquidation expenses were
accrued in December 1998 based on the expectation that liquidation would
occur in 1999. In the third quarter of 1999, after the establishment of a
reserve for current and contingent liabilities, the General Partner will
allocate remaining cash plus accounts receivable for distribution according
to the liquidation provision of the Partnership Agreement. The statement of
net assets in liquidation at December 31, 1998, was derived from the
audited financial statements included in the Partnership's Annual Report on
Form 10-K. For further information, including the estimated liquidating
values assigned by the Partnership and significant accounting policies,
refer to the financial statements of PaineWebber Preferred Yield Fund, 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, 1998, previously
filed with the Securities and Exchange Commission.
2. TRANSACTIONS WITH AFFILIATES
Management Fees to General Partners
-----------------------------------
The General Partners receive a quarterly fee in an amount equal to 2.0% of
gross rentals for Full Payout Leases, as defined in the Partnership
Agreement, and 5.0% of gross rentals for other leases (payable 55% to the
Managing General Partner and 45% to the Administrative General Partner) as
compensation for services rendered in connection with the management of the
equipment. At June 30, 1999, management fees of $106,813 are included in
payables to affiliates.
Accountable General and Administrative Expenses
-----------------------------------------------
The General Partners are entitled to reimbursement of certain expenses
incurred on behalf of the Partnership. In accordance with the plan of
liquidation effective December 31, 1998, the Partnership recorded accrued
liquidation expenses which included future estimated general and
administrative expenses reimbursable to the Managing General Partner.
During the six months ended June 30, 1999, the Partnership paid accrued
liquidation expenses in the amount of $20,830 for general and
administrative expenses incurred by the Managing General Partner on behalf
of the Partnership. As of June 30, 1999, $16,082 of general and
administrative expenses had not been reimbursed to the Managing General
Partner, and are included in payables to affiliates.
5
<PAGE>
PAINEWEBBER PREFERRED YIELD FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
3. CASH AND CASH EQUIVALENTS
The Partnership invests working capital and cash flow from operations prior
to its distribution to the partners in short-term highly liquid
investments. These investments are recorded at cost which approximates fair
market value. For purposes of the statement of net assets in liquidation,
the Partnership considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
4. NON-RECOURSE DISCOUNTING OF RENTALS
The Partnership assigned the rentals from certain leases to financial
institutions at fixed interest rates on a non-recourse basis. In return for
such future lease payments, the Partnership received the discounted value
of the rental payments in cash. The notes were collateralized by the lease,
the related lease payments and the underlying equipment. Cash proceeds from
such financings were recorded on the balance sheet as discounted lease
rental liability. As lessees made payments to the financial institutions,
interest expense was recorded and the outstanding balance of discounted
lease rentals was reduced. The discounted lease rental liability was fully
satisfied, effective June 30, 1999, due to the sale of all remaining
equipment.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
I. RESULTS OF OPERATIONS
The following discussions should be read in conjunction with the audited
financial statements of the Partnership and the Notes thereto. This report
contains, in addition to historical information, forward- looking
statements that include risks and other uncertainties. The Partnership's
actual results may differ materially from those anticipated in these
forward-looking statements. Factors that might cause such a difference
include those discussed below, as well as general economic and business
conditions, competition and other factors discussed elsewhere in this
report. The Partnership undertakes no obligation to release publicly any
revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
anticipated or unanticipated events.
The Partnership adopted a plan of liquidation effective December 31, 1998,
and accordingly, is using the liquidation basis of accounting. The
remaining equipment under operating lease was sold in the second quarter of
1999. A gain of $96,933 was realized on the sale. A portion of the proceeds
from the sale were used to satisfy the remaining balance of the discounted
lease rental since the lease was financed with non-recourse debt. Interest
expense incurred on the loan had been recorded monthly. The balance of the
proceeds were included in the calculation of cash available for the final
liquidating distribution.
The Partnership's income from liquidating activities during the quarter
ended June 30, 1999 was realized from a reclassification to income of a
liability account for non-lease related cash received in prior periods, and
from interest income from cash equivalents.
Interest expense for the six months ended June 30, 1999 is comprised of
interest expense incurred in connection with the discounting of the
remaining lease with an unaffiliated lender. Interest expense associated
with the remaining discounted lease rental decreased as principle was
repaid. As discussed above in the second paragraph, the balance of the
discounted lease rental was repaid to the lender as part of the sale of the
Partnership's remaining equipment.
General and administrative expenses for the six months ended June 30, 1999
consisted primarily of state tax fees.
Cash and cash equivalents have increased for the six months ended June 30,
1999 as compared to the six months ended June 30, 1998 primarily due to
proceeds of $674,509 received for the sale of the Partnership's remaining
equipment, over and above the associated discounted lease rental pay-off
obligation. In addition, the Partnership received rental payments for
equipment subsequent to the date of sale to a third party. The Partnership
remits these amounts to the new owners on a monthly basis. Included in
accounts payable and accrued liabilities at June 30, 1999 are approximately
$272,000 of rents payable to the new owners.
II. LIQUIDITY AND CAPITAL RESOURCES
Rent and other receivables, net of the allowance for doubtful accounts,
decreased $50,083 from $163,529 at December 31, 1998 to $113,446 at June
30, 1999 primarily due to the collection of amounts related to property
taxes from the lessee.
7
<PAGE>
tem 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations, continued
-------------
II. LIQUIDITY AND CAPITAL RESOURCES
Distributions may be characterized for tax, accounting and economic
purposes as a return of capital, a return on capital or both. The portion
of each distribution by a partnership, which exceeds its net income for the
fiscal period, may be deemed a return of capital. A final distribution will
be declared and recorded by the Partnership for the quarter ended September
30, 1999. The General Partner anticipates that the cash and accounts
receivable balance remaining after the final distribution will be
sufficient to satisfy the Partnership's remaining liabilities. All
anticipated liquidation expenses were accrued at December 31, 1998. In
estimating the amount of such liquidation expenses, the General Partner
considered the current as well as contingent liabilities incidental to the
liquidation of the Partnership. Excess cash, if any, remaining after
settlement of liabilities, will be distributed to the partners after three
years in accordance with the allocation provision of the Partnership
Agreement.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act
---------------------------------------------------------------------------
of 1995
-------
The statements contained in this report which are not historical facts may
be deemed to contain forward- looking statements with respect to events,
the occurrence of which involve risks and uncertainties, and are subject to
factors that could cause actual future results to differ both adversely and
materially from currently anticipated results, including, without
limitation, the realizability of recorded estimates and the ultimate
outcome of any contract disputes. Certain specific risks associated with
particular aspects of the Partnership's business are discussed under
Results of Operations in this report and under Results of Operations in the
1998 Form 10-K when and where applicable.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Partnership adopted the liquidation basis of accounting as of December
31, 1998 and all assets and liabilities were stated at anticipated
liquidation value. Consequently the Partnership has no market risk
exposure.
8
<PAGE>
PAINEWEBBER PREFERRED YIELD FUND, L.P.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) The Partnership did not file any reports on Form 8-K during the three
months ended June 30, 1999.
9
<PAGE>
Item No. Exhibit Index
27 Financial Data Schedule
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PaineWebber Preferred Yield Fund, L.P. (Registrant)
By: CAI Equipment Leasing II Corporation
A General Partner
Date: August 16, 1999 By: /s/Anthony M. DiPaolo
-------------------------------------------
Anthony M. DiPaolo
Senior Vice President, Treasurer and Chief
Administrative Officer
11
<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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,946,894
<SECURITIES> 0
<RECEIVABLES> 113,446
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,060,340
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,026,190
<TOTAL-LIABILITY-AND-EQUITY> 4,060,340
<SALES> 0
<TOTAL-REVENUES> 436,064
<CGS> 0
<TOTAL-COSTS> 42,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,514
<INCOME-PRETAX> 393,173
<INCOME-TAX> 0
<INCOME-CONTINUING> 393,173
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 393,173
<EPS-BASIC> 17.56
<EPS-DILUTED> 17.56
</TABLE>
