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, 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 0-21382
----------------------------------------------------------
Capital Preferred Yield Fund-II, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1184628
----------------------- ------------------------------------
(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 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 15
Page 1 of 16 Pages
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
Quarterly Report on Form 10-Q
for the Quarter Ended
June 30, 1999
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (Unaudited)
Balance Sheets - June 30, 1999 and December 31, 1998 3
Statements of Income - Three and Six Months Ended
June 30, 1999 and 1998 4
Statements of Cash Flows - Six Months Ended
June 30, 1999 and 1998 5
Notes to Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
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-II, L.P.
BALANCE SHEETS
ASSETS
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
Cash and cash equivalents $ 809,920 $ 784,867
Accounts receivable, net 135,811 771,076
Receivable from affiliates 42,060 -
Equipment held for sale or re-lease 313,000 285,299
Net investment in direct finance leases 2,381,044 2,865,887
Leased equipment, net 7,037,090 9,637,771
----------- -----------
Total assets $10,718,925 $14,344,900
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 893,632 $ 1,334,422
Payables to affiliates 29,256 2,142
Rents received in advance 99,895 105,332
Distributions payable to partners 184,500 508,106
Discounted lease rentals 3,274,552 4,612,151
----------- -----------
Total liabilities 4,481,835 6,562,153
----------- -----------
Partners' capital:
General partner - -
Limited partners:
Class A 6,064,880 7,601,001
Class B 172,210 181,746
----------- -----------
Total partners' capital 6,237,090 7,782,747
----------- -----------
Total liabilities and partners' capital $10,718,925 $14,344,900
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Operating lease rentals $1,141,089 $1,686,865 $2,279,555 $3,497,671
Direct finance lease income 61,685 98,928 130,079 195,194
Equipment sales margin 103,196 55,503 379,520 235,370
Interest income 8,347 19,509 13,899 49,057
---------- ---------- ---------- ----------
Total revenue 1,314,317 1,860,805 2,803,053 3,977,292
---------- ---------- ---------- ----------
Expenses:
Depreciation 861,871 1,320,252 1,768,559 2,751,836
Management fees paid to general partner 29,447 38,298 65,500 77,658
Direct services from general partner 35,187 31,127 65,901 62,548
General and administrative 54,333 62,300 108,488 114,301
Interest on discounted lease rentals 67,019 124,007 146,197 262,914
Interest on financed operating lease rentals - 34,203 - 69,809
Provision for losses 25,000 100,000 75,000 125,000
---------- ---------- ---------- ----------
Total expenses 1,072,857 1,710,187 2,229,645 3,464,066
---------- ---------- ---------- ----------
Net income $ 241,460 $ 150,618 $ 573,408 $ 513,226
========== ========== ========== ==========
Net income allocated:
To the general partner $ 10,111 $ 17,768 $ 20,989 $ 37,557
To the Class A limited partners 229,007 131,494 546,830 470,839
To the Class B limited partner 2,342 1,356 5,589 4,830
---------- ---------- ---------- ----------
$ 241,460 $ 150,618 $ 573,408 $ 513,226
========== ========== ========== ==========
Net income per weighted average
Class A limited partner unit outstanding $ 1.72 $ 0.98 $ 4.10 $ 3.52
========== ========== ========== ==========
Weighted average Class A
limited partner units outstanding 133,418 133,579 133,432 133,636
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, June 30,
1999 1998
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 3,810,187 $ 5,339,410
----------- -----------
Cash flows from investing activities:
Upgrade of equipment on operating lease from affiliate (4,864) -
Investment in direct financing leases, acquired from affiliate - -
----------- -----------
Net cash used in investing activities (4,864) -
----------- -----------
Cash flows from financing activities:
Principal payments on discounted lease rentals (1,337,599) (1,765,575)
Principal payments on financed operating lease rentals - (382,407)
Distributions to partners (2,434,521) (3,947,097)
Redemptions of Class A limited partner units (8,150) (13,095)
----------- -----------
Net cash used in financing activities (3,780,270) (6,108,174)
----------- -----------
Net increase/(decrease) in cash and cash equivalents 25,053 (768,764)
Cash and cash equivalents at beginning of period 784,867 1,897,763
----------- -----------
Cash and cash equivalents at end of period 809,920 1,128,999
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 146,197 $ 262,914
Interest paid on financed operating lease rentals - 69,809
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited), continued
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, 1998 was derived from the audited financial statements
included in the Partnership's Annual Report on Form 10-K. For further
information refer to the financial statements of Capital Preferred Yield
Fund-II, 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, (the "1998 Form 10-K") previously filed with the Securities and
Exchange Commission.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("Statement
133"). Statement 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. Statement 133 is effective for fiscal years beginning after June 15,
1999, with earlier application permitted. The Partnership adopted Statement
133 in the first quarter of 1999. The General Partner does not expect the
adoption to have an impact on its financial reporting.
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement 133, an Amendment of FASB Statement
133. Statement 137 effectively extends the required application of
Statement 133 to fiscal years beginning after June 15, 2000, with earlier
application permitted. The Partnership adopted Statement 133 in the first
quarter of 1999. The General Partner does not expect the adoption of
Statement 133 or Statement 137 to have an impact on its financial
reporting.
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. At June 30, 1999, management fees of $7,440 are
included in payables to affiliates.
6
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited), continued
1. Basis of Presentation, 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. At June 30, 1999, direct services from the
General Partner in the amount of $21,000 are included in payables to
affiliates.
2. Transactions With the General Partner and Affiliates
----------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
The General Partner and an affiliate are reimbursed for the actual cost of
administrative expenses incurred on behalf of Partnership per the terms of
the Partnership Agreement. At June 30, 1999, administrative expenses in the
amount of $816 are included in payables to affiliates.
RECEIVABLE FROM AFFILIATES
The General Partner collects rents from lessees and applies these rental
payments to the lessee's account with the Partnership. The General Partner
then transfers the collected rental payments to the Partnership,
eliminating the receivable from affiliate balance. At the end of June 30,
1999, $42,060 of rents had been applied by the General Partner that were
transferred to the Partnership in July 1999.
3. Year 2000
---------
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
date-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 affiliate's software has already been
upgraded to correctly account for the Year 2000 issue. The affiliate is
implementing additional upgrades whereby the affiliate's primary lease
tracking and accounting software will account for the Year 2000 correctly.
The affiliate expects that the new upgrades will be fully operational by
December 31, 1999, and therefore expects that it will be fully Year 2000
compliant. The affiliate does not expect any other changes required for the
Year 2000 to have a material effect on its financial position or results of
operations. As such, the affiliate has not developed any specific
contingency plans in the event it fails to complete the upgrades by
December 31, 1999.
7
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited), continued
3. Year 2000, continued
---------
However, should the affiliate be unsuccessful in completing the necessary
upgrades by December 31, 1999, it does not expect there will be a material
adverse effect on the Partnership's financial position or results of
operations. There could be a negative impact on the Partnership's ability
to realize expected cash flows from leased equipment on a timely basis.
While it is expected that the Partnership's ability to ultimately realize
all expected cash flows will not be impacted, delays in collecting cash
flows would have a negative impact on the timing of distributions to
partners. The affiliate does not expect any Year 2000 issues relating to
its customers and vendors to have a material effect on its financial
position or results of operations.
8
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, 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 items of income and expense and
changes in those items derived from the Statements of Income:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ -------------------------
1999 1998 Change 1999 1998 Change
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 273,884 $ 307,331 $ (33,447) $ 494,878 $ 608,306 $ (113,428)
Equipment sales margin 103,196 55,503 47,693 379,520 235,370 144,150
Interest income 8,347 19,509 (11,162) 13,899 49,057 (35,158)
Management fees paid to general partner (29,447) (38,298) 8,851 (65,500) (77,658) 12,158
Direct services from general partner (35,187) (31,127) (4,060) (65,901) (62,548) (3,353)
General and administrative expenses (54,333) (62,300) 7,967 (108,488) (114,301) 5,813
Provision for losses (25,000) (100,000) 75,000 (75,000) (125,000) 50,000
---------- ---------- --------- ---------- ---------- ----------
Net income $ 241,460 $ 150,618 $ 90,842 $ 573,408 $ 513,226 $ 60,182
========== ========== ========= ========== ========== ==========
</TABLE>
The Partnership is in its liquidation stage, as defined in the Partnership
Agreement. The Partnership is not purchasing additional equipment, initial
leases are expiring, and the amount of equipment being remarketed (i.e.,
re-leased, renewed, or sold) is increasing. As a result, both the size of the
Partnership's lease portfolio and the amount of leasing revenue are declining.
LEASING MARGIN
Leasing margin consists of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating lease rentals $ 1,141,089 $ 1,686,865 $ 2,279,555 $ 3,497,671
Direct finance lease income 61,685 98,928 130,079 195,194
Depreciation (861,871) (1,320,252) (1,768,559) (2,751,836)
Interest expense on discounted lease rentals (67,019) (124,007) (146,197) (262,914)
Interest expense on financed operating
lease rentals - (34,203) - (69,809)
----------- ------------ ------------ ------------
Leasing margin $ 273,884 $ 307,331 $ 494,878 $ 608,306
=========== ============ ============ ============
Leasing margin ratio 23% 17% 21% 16%
=========== ============ ============ ============
</TABLE>
9
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, 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 decreased for the three and six months ended
June 30, 1999 compared to the three and six months ended June 30, 1998 due to
portfolio runoff.
Leasing margin ratio varies 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. Leasing margin and the related leasing margin ratio for an
operating lease financed with non-recourse debt increases during the term of the
lease since rents and depreciation are typically fixed while interest expense
declines as the related non-recourse debt principal is repaid.
The ultimate rate of return on leases depends, in part, on interest rates at the
time the leases are originated, 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 Six Months Ended
June 30, June 30,
------------------------ -------------------------
1999 1998 1999 1998
---------- ----------- ----------- -----------
Equipment sales revenue $ 261,607 $ 393,374 $ 1,155,457 $ 1,324,769
Cost of equipment sales (158,411) (337,871) (775,937) (1,089,399)
---------- ---------- ----------- -----------
Equipment sales margin $ 103,196 $ 55,503 $ 379,520 $ 235,370
========== ========== =========== ===========
Equipment sales margin fluctuates based on the composition of equipment
available for sale. Currently, the Partnership is in its liquidation phase (as
defined in the Partnership Agreement). Initial leases are expiring and equipment
is being remarketed (i.e., re-leased or sold to the original lessee or to third
parties). Equipment sold during the six months ended June 30, 1999 included
locomotives with a margin of $154,500, machine tools with a margin of $125,889
and manufacturing equipment with a margin of $74,470. Equipment sold during the
six months ended June 30, 1998 included tractors with a margin of $59,159, glass
packaging equipment with a margin of $93,594, and manufacturing equipment with a
margin of $60,830.
10
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Results of Operations, continued
- ---------------------
INTEREST INCOME
Interest income varies based on the amount of cash available for investment
pending distribution to partners, and the interest rate on such invested cash.
As the Partnership is in its liquidation period, excess cash is being
distributed to the partners. Therefore, interest income decreased for the three
and six months ended June 30, 1999 as compared to the three and six months ended
June 30, 1998.
EXPENSES
Management fees paid to the General Partner decreased for the three and six
months ended June 30, 1999 as compared to the corresponding period in 1998
primarily due to portfolio run-off. Management fees are calculated as a
percentage of rents collected.
General and administrative expenses and direct services from the General Partner
for the three and six months ended June 30, 1999 were comparable to the
corresponding period in 1998. The primary components of general and
administrative expenses for the three and six months ended June 30, 1999 and
June 30, 1998 were data processing, advertising, audit and tax fees, bank
charges, legal and state income taxes.
PROVISION FOR LOSSES
The remarketing of equipment for an amount greater than its book value is
reported with 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 occurs when the equipment is remarketed
subsequent to initial lease termination) 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 such that it
has credit and residual value exposure and will incur losses from those
exposures in the ordinary course of business. The Partnership performs quarterly
assessments of the estimated residual values of its assets to identify
other-than-temporary losses in value.
The provision for losses recorded during the three and six months ended June 30,
1999 related primarily to lessees returning equipment to the Partnership at
lease maturity, and identification of other-than- temporary losses in value for
assets currently on lease.
11
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Liquidity and Capital Resources
- -------------------------------
The Partnership is in its liquidation stage, as defined in the Partnership
Agreement. The Partnership is not purchasing additional equipment, initial
leases are expiring, and the amount of equipment being remarketed (i.e.,
re-leased, renewed, or sold) is increasing. As a result, both the size of the
Partnership's lease portfolio and the amount of leasing revenue are declining.
The Partnership funds its operating activities principally with cash from rents,
interest income, and sales of off-lease equipment. Available cash and cash
reserves of the Partnership are invested in short-term government securities
pending distributions to the partners.
During the six months ended June 30, 1999, the Partnership declared
distributions to the partners of $2,098,815, ($184,500 of which was paid in July
1999). A substantial portion of such distributions constituted a return of
capital. 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 partners' cash distribution which exceeds its net income for the fiscal
period may be deemed a return of capital for accounting purposes. However, the
total percentage of the partnership's return on capital over its life can only
be determined after all residual cash flows (which include proceeds from the
re-leasing and sale of equipment after initial lease terms expire) have been
realized at the termination of the partnership.
The General Partner believes that the Partnership will generate sufficient cash
flow from operations during the remainder of 1999 to (1) meet current operating
requirements and (2) fund cash distributions to the Class A limited partners in
accordance with the Partnership Agreement. Distributions during the liquidation
phase will vary based upon cash availability. All distributions are expected to
be a return of capital for economic purposes.
The Class B limited partner distributions of cash from operations are
subordinated to the Class A limited partners cumulative preferred distribution
of 12% per annum per the Partnership Agreement. The Partnership is in the
liquidation stage, and distributions are based on excess cash available from
operations. Although on a monthly basis the distributions to the Class A limited
partners has varied from an annualized rate of 6 percent to 24 percent, the
cumulative distributions during the six months ended June 30, 1999 have been
paid at the preferred annualized rate of 12%. Consequently, the Class B limited
partner will receive distributions for five of the six months ended June 30,
1999.
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
12
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Liquidity and Capital Resources, continued
- -------------------------------
YEAR 2000 ISSUES, continued
programs which have date-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 affiliate's software has already
been upgraded to correctly account for the Year 2000 issue. The affiliate is
implementing additional upgrades whereby the affiliate's primary lease tracking
and accounting software will account for the Year 2000 correctly. The affiliate
expects that the new upgrades will be fully operational by December 31, 1999,
and therefore expects that it will be fully Year 2000 compliant. The affiliate
does not expect any other changes required for the Year 2000 to have a material
effect on its financial position or results of operations. As such, the
affiliate has not developed any specific contingency plans in the event it fails
to complete the upgrades by December 31, 1999. However, should the affiliate be
unsuccessful in completing the necessary upgrades by December 31, 1999, it does
not expect there will be a material adverse effect on the Partnership's
financial position or results of operations. There could be a negative impact on
the Partnership's ability to realize expected cash flows from leased equipment
on a timely basis. While it is expected that the Partnership's ability to
ultimately realize all expected cash flows will not be impacted, delays in
collecting cash flows would have a negative impact on the timing of
distributions to partners. The affiliate does not expect any Year 2000 issues
relating to its customers and vendors to have a material effect on its financial
position or results of operations.
New Accounting Pronouncements
- -----------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("Statement 133").
Statement 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Statement 133 is effective
for fiscal years beginning after June 15, 1999, with earlier application
permitted. The Partnership adopted Statement 133 in the first quarter of 1999.
The General Partner does not expect the adoption to have an impact on its
financial reporting.
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement 133, an Amendment of FASB Statement 133.
Statement 137 effectively extends the required application of Statement 133 to
fiscal years beginning after June 15, 2000, with earlier application permitted.
The Partnership adopted Statement 133 in the first quarter of 1999. The General
Partner does not expect the adoption of Statement 133 or Statement 137 to have
an impact on its financial reporting.
13
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Liquidity and Capital Resources, continued
- -------------------------------
"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 level of
lease originations, realization of residual values, the availability and cost of
financing sources 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 is in the liquidation stage (as defined in the Partnership
Agreement). Consequently, the partnership is no longer originating new leases.
The partnership's existing leases are non-cancelable, have fixed rates and are
financed with fixed rate debt. Therefore, the partnership has no exposure to
fluctuations in interest rates or other market risk exposure.
14
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, L.P.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is involved in routine legal proceedings incidental
to the conduct of its business. The general partner believes none of
these legal proceedings will have a material adverse effect on the
financial condition or operations of the Partnership.
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, 1999.
15
<PAGE>
CAPITAL PREFERRED YIELD FUND-II, 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-II, L.P.
By: CAI Equipment Leasing III Corp.
Dated: August 16, 1999 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 809,920
<SECURITIES> 0
<RECEIVABLES> 177,871
<ALLOWANCES> 0
<INVENTORY> 313,000
<CURRENT-ASSETS> 0
<PP&E> 9,418,134
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,718,925
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,237,090
<TOTAL-LIABILITY-AND-EQUITY> 10,718,925
<SALES> 379,520
<TOTAL-REVENUES> 2,803,053
<CGS> 0
<TOTAL-COSTS> 2,229,645
<OTHER-EXPENSES> 131,401
<LOSS-PROVISION> 75,000
<INTEREST-EXPENSE> 146,197
<INCOME-PRETAX> 573,408
<INCOME-TAX> 0
<INCOME-CONTINUING> 573,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 573,408
<EPS-BASIC> 4.10
<EPS-DILUTED> 4.10
</TABLE>
