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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 September 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.
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(Exact name of registrant as specified in its charter)
Delaware 84-1130506
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(State of organization) (IRS Employer Identification No.)
7175 West Jefferson Avenue, Suite 4000
Lakewood, Colorado 80235
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(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_____ .
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Exhibit Index Appears on Page 10
Page 1 of 11 Pages
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PaineWebber Preferred Yield Fund, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 1999
Table of Contents
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Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statement of Net Assets in Liquidation as of
<S> <C>
September 30, 1999 and December 31, 1998 3
Statement of Changes in Net Assets in Liquidation
for the Three and Nine Months Ended September 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
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2
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PAINEWEBBER PREFERRED YIELD FUND, L.P.
STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
ASSETS
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<CAPTION>
September 30, December 31,
1999 1998
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(Unaudited)
<S> <C> <C>
Cash and cash equivalents $1,195,881 $3,198,407
Rents and other receivables, net 105,978 163,529
Receivable from related party 139,999 -
Equipment on operating leases, at liquidation value - 1,567,365
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Total Assets $1,441,858 $4,929,301
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LIABILITIES AND NET ASSETS
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LIABILITIES:
<S> <C> <C>
Accounts payable and accrued liabilities $1,020,176 $ 731,971
Accrued liquidation expenses 188,404 341,750
Payables to affiliates 139,897 246,884
Accrued interest payable - 6,275
Discounted lease rentals - 969,404
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Total Liabilities 1,348,477 2,296,284
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NET ASSETS: 93,381 2,633,017
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Total Liabilities and Net Assets $1,441,858 $4,929,301
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The accompanying notes are an integral part of these financial statements.
3
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PAINEWEBBER PREFERRED YIELD FUND, L.P.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
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<CAPTION>
Three months ended, Nine months ended
September 30, September 30,
1999 1999
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<S> <C> <C>
Net assets in liquidation $3,026,190 $2,633,017
Income from liquidating activities:
Interest income 21,015 83,747
Gain on sale of equipment - 96,933
Other income - 276,397
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21,015 457,079
Expenses from liquidating activities:
Interest - 39,514
General and administrative - 3,377
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- 42,891
Distributions to General and Limited Partners 2,953,824 2,953,824
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(Decrease) in net assets in liquidation (2,932,809) (2,539,636)
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Net assets in liquidation $ 93,381 $ 93,381
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Net assets in liquidation, allocated to Class A limited partners $ 93,381
Net assets in liquidation, per weighted average Class A unit (142,128) $ 0.66
==========
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4
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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 September 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.
Liquidation expenses were accrued in December 1998 based on the expectation
that liquidation occurred in 1999. In the third quarter of 1999, after the
establishment of a reserve for current and contingent liabilities, the
General Partner allocated 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 September 30, 1999, management fees of $95,956 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 nine months ended September 30, 1999, the Partnership paid accrued
liquidation expenses in the amount of $25,000 for general and administrative
expenses incurred by the Managing General Partner on behalf of the
Partnership. As of September 30, 1999, $43,941 of general and administrative
expenses had not been reimbursed to the Managing General Partner, and are
included in payables to affiliates.
5
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PAINEWEBBER PREFERRED YIELD FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
Receivable from Related Party
The General Partner collects rental payments from lesses who remit directly
to the General Partner for equipment subsequent to the date of sale to a
third party. The rental payments are then transferred to the Partnership,
eliminating the receivable from related party balance. At the end of
September 1999, $139,999 in rents were transferred to the Partnership
subsequent to the end of the quarter. These rents are included in Accounts
Payable and Accrued Liabilities at September 30, 1999 of approximately
$481,000 of rents payable to the buyers of the equipment.
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
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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 has been recorded monthly. The balance of the proceeds
were included in the calculation of cash available for the the final
liquidating distribution.
The Partnership's income from liquidating activities during the nine months
ended September 30, 1999 was realized from write-off of a contingent
liabilty and interest income from cash equivalents.
Interest expense for the nine months ended September 30, 1999 is comprised
of interest expense incurred in connection with the discounting of the
remaining lease with an unaffiliated lender. 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 nine months ended September 30,
1999 consisted primarily of state tax fees.
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 September 30, 1999 are approximately $481,000 of rents
payable to the new owners.
II. LIQUIDITY AND CAPITAL RESOURCES
Rent and other receivables, net of the allowance for doubtful accounts,
decreased $57,551 from $163,529 at December 31, 1998 to $105,978 at
September 30, 1999 primarily due to the collection of amounts related to
property taxes from the lessee.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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 was 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
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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 September 30, 1999.
9
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Item No. Exhibit Index
27 Financial Data Schedule
10
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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: November 22, 1999 By: /s/Dana T. Martin
---------------------------------------------
Dana T. Martin
Assistant Vice President, Principal Financial
Officer and Chief Administrative Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,195,881
<SECURITIES> 0
<RECEIVABLES> 245,977
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,441,858
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 93,381
<TOTAL-LIABILITY-AND-EQUITY> 1,441,858
<SALES> 0
<TOTAL-REVENUES> 457,079
<CGS> 0
<TOTAL-COSTS> 42,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,514
<INCOME-PRETAX> (2,539,636)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,539,636)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,539,636)
<EPS-BASIC> 0.66
<EPS-DILUTED> 0.66
</TABLE>
