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 September 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 33-44158
---------------------------------------------------------
Capital Preferred Yield Fund-III, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1248907
----------------------- ------------------------------------
(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-III, L.P.
Quarterly Report on Form 10-Q
For the Quarter Ended
September 30, 1998
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (Unaudited)
Balance Sheets - September 30, 1998 and December 31, 1997 3
Statements of Income - Three and Nine Months Ended
September 30, 1998 and 1997 4
Statements of Cash Flows - Nine Months Ended
September 30, 1998 and 1997 5
Notes to Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Exhibit Index 15
Signature 16
2
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
BALANCE SHEETS
ASSETS
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
Cash and cash equivalents $ 3,786,623 $ 2,813,686
Accounts receivable 1,099,084 1,044,068
Receivable from related party 5,342 6,523
Equipment held for sale or re-lease 702,287 506,197
Net investment in direct finance leases 4,103,187 3,326,833
Leased equipment, net 41,565,855 46,193,567
----------- -----------
Total assets $51,262,378 $53,890,874
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 896,568 $ 687,727
Payables to affiliates 44,326 39,276
Rents received in advance 984,239 632,478
Distributions payable to partners 440,798 441,650
Discounted lease rentals 15,010,447 15,828,174
----------- -----------
Total liabilities 17,376,378 17,629,305
----------- -----------
Partners' capital:
General partner - -
Limited partners:
Class A 33,465,472 35,818,106
Class B 420,528 443,463
----------- -----------
Total partners' capital 33,886,000 36,261,569
----------- -----------
Total liabilities and partners' capital $51,262,378 $53,890,874
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
Operating lease rentals $ 4,371,142 $ 4,627,126 $ 13,060,808 $ 14,083,922
Direct finance lease income 146,859 92,109 385,356 283,584
Equipment sales margin 185,727 567,588 401,600 1,476,487
Interest income 35,169 28,929 122,965 84,759
----------- ----------- ------------ ------------
Total revenue 4,738,897 5,315,752 13,970,729 15,928,752
----------- ----------- ------------ ------------
EXPENSES:
Depreciation 3,405,018 3,280,891 10,066,646 10,474,920
Management fees to general partner 109,962 100,199 321,445 318,145
Direct services from general partner 52,994 40,828 147,721 89,384
General and administrative 61,624 50,416 206,379 159,959
Interest on discounted lease rentals 284,241 324,429 837,215 1,151,115
Provision for losses 25,000 100,000 725,000 150,000
----------- ----------- ------------ ------------
Total expenses 3,938,839 3,896,763 12,304,406 12,343,523
----------- ----------- ------------ ------------
NET INCOME $ 800,058 $ 1,418,989 $ 1,666,323 $ 3,585,229
=========== =========== ============ ============
NET INCOME ALLOCATED:
To the general partner $ 13,181 $ 13,265 $ 39,574 $ 39,847
To the Class A limited partners 778,930 1,391,537 1,610,309 3,509,596
To the Class B limited partner 7,947 14,187 16,440 35,786
----------- ----------- ------------ ------------
$ 800,058 $ 1,418,989 $ 1,666,323 $ 3,585,229
=========== =========== ============ ============
Net income per weighted average Class A
limited partner unit outstanding $ 1.58 $ 2.81 $ 3.27 $ 7.07
=========== =========== ============ ============
Weighted average Class A limited
partner units outstanding 492,297 495,948 492,632 496,220
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1998 1997
------------ -------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIEs $ 18,530,217 $ 19,396,833
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment on operating leases from affiliate (5,651,734) (5,219,336)
Investment in direct finance leases, acquired from affiliate (2,286,569) (50,602)
------------ -------------
Net cash used in investing activities (7,938,303) (5,269,938)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from discounted lease rentals 1,728,059 -
Principal payments on discounted lease rentals (7,304,291) (8,287,137)
Redemptions of Class A limited partner units (84,481) (116,865)
Distributions to partners (3,958,264) (3,986,097)
------------ -------------
Net cash used in financing activities (9,618,977) (12,390,099)
------------ -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 972,937 1,736,796
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,813,686 798,140
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,786,623 $ 2,534,936
============ =============
Supplemental disclosure of cash flow information - Interest paid
on discounted lease rentals $ 837,215 $ 1,151,115
Supplemental disclosure of noncash investing and financing
activities - Discounted lease rentals assumed in equipment
acquisitions 4,758,505 97,600
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, 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-III, 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, 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.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("Statement 131"). Statement 131
provides guidance for reporting information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial reports of public companies.
An operating segment is defined as a component of a business that engages
in business activities from which it may earn revenue and incur expenses, a
component whose operating results are regularly reviewed by the company's
chief operating decision maker, and a component for which discrete
financial information is available. Statement 131 establishes quantitative
thresholds for determining operating segments of a company. Statement 131
is effective for fiscal years beginning after December 15, 1997, with
earlier application permitted. The Partnership adopted Statement 131 in the
first quarter of 1998. The adoption did not have an impact on its financial
reporting.
6
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Transactions With the General Partner and Affiliates
----------------------------------------------------
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 September 30, 1998, direct services from the
General Partner of $7,488 are included in payables to affiliates.
MANAGEMENT FEES 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 September 30, 1998, management fees of $36,838 are
included in payable 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.
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 September 1998, $5,391 rents were applied by the General Partner
that were transferred to the Partnership in October 1998.
EQUIPMENT PURCHASES
During the nine months ended September 30, 1998, the Partnership acquired
the equipment described below from Capital Associates International, Inc.
("CAII"):
<TABLE>
<CAPTION>
Acquisition Total
Equipment Cost of Fees and Equipment
Lessee Description Equipment Reimbursements Purchase Price
--------------------------- ------------------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Breckenridge Forklifts $ 99,157 $ 3,436 $ 102,593
Collins Industry Office automation 118,920 4,121 123,041
Consolidated Diesel Company Forklifts 11,811 409 12,220
Darigold Incorporated Forklifts 11,495 398 11,893
7
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
EQUIPMENT PURCHASES, (continued)
Acquisition Total
Equipment Cost of Fees and Equipment
Lessee Description Equipment Reimbursements Purchase Price
--------------------------- ------------------------- ------------ -------------- --------------
Digital Audio Printing equipment $ 91,334 $ 3,165 $ 94,499
E-Trade Group Incorporated Furniture 899,629 31,172 930,801
General Motors Corporation Dry vans 39,440 1,367 40,807
General Motors Corporation Forklifts 1,770,720 61,355 1,832,076
GM Powertrain Division Forklifts 287,985 9,979 297,964
HK System Inc. Communication equipment 73,986 2,564 76,550
ICI Americas Inc. Networking equipment 25,176 872 26,048
Lenmark International, Inc. Conveyor system 113,132 3,920 117,052
Lenmark International, Inc. Printed circuit board 567,600 19,667 587,267
Lucent Technology CPU's DEC 39,848 1,381 41,229
Lucent Technology Desktop personal computer 1,519,350 52,645 1,571,996
Lucent Technology Forklifts 127,401 4,414 131,815
Metris Direct Inc Networking equipment 59,324 2,056 61,379
Mitchell International Personal computers 1,382,045 47,888 1,429,933
Moog Incorporated Personal computers 1,693,170 58,668 1,751,838
New York State Electric Desktop computers 523,809 18,333 542,143
New York State Electric Personal computers 1,159,117 40,569 1,199,686
Oakland University PBX systems 497,555 17,414 514,969
Parke-Davis Pharmaceuticals Medical equipment 101,730 3,525 105,255
Parke-Davis Pharmaceuticals Research equipment 93,921 3,254 97,176
Philips Digital Video Systems Desktop personal computer 45,960 1,593 47,553
Polo Ralph Lauren Corporation Desktop computers 152,165 5,326 157,490
Polo Ralph Lauren Corporation PBX systems 76,114 2,664 78,778
Polo Ralph Lauren Corporation Peripheral printers 33,805 1,183 34,988
Polo Ralph Lauren Corporation Personal computers 195,021 6,826 201,846
Sony Electronics Forklifts 53,808 1,864 55,672
Thomson Industries Inc. Machine tools 67,983 2,356 70,339
Thomson industries, Inc. Personal computers 31,952 1,107 33,059
Treasure Chest Advertising Co. Forklifts 80,741 2,798 83,538
Williams Sonoma Point-of-sale equipment 191,210 6,625 197,835
Xerox Office automation 34,291 1,189 35,480
------------ --------- ------------
Total $ 12,270,705 $ 426,103 $ 12,696,808
============ ========= ============
</TABLE>
At September 30, 1998, the General Partner had identified approximately
$200,000 of additional equipment that satisfied the Partnership's
acquisition criteria. The Partnership expects to acquire this equipment
during the remainder of 1998.
8
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, 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 Nine Months Net Income
Ended September 30, of Changes Ended September 30, of Changes
--------------------------- Between -------------------------- Between
1998 1997 Periods 1998 1997 Periods
------------ ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 828,742 $ 1,113,915 $ (285,173) $ 2,542,303 $ 2,741,471 $ (199,168)
Equipment sales margin 185,727 567,588 (381,861) 401,600 1,476,487 (1,074,887)
Interest income 35,169 28,929 6,240 122,965 84,759 38,206
Management fees to general partner (109,962) (100,199) (9,763) (321,445) (318,145) (3,300)
Direct services from general partner (52,994) (40,828) (12,166) (147,721) (89,384) (58,337)
General and administrative (61,624) (50,416) (11,208) (206,379) (159,959) (46,420)
Provision for losses (25,000) (100,000) 75,000 (725,000) (150,000) (575,000)
----------- ----------- ---------- ----------- ----------- ------------
Net income $ 800,058 $ 1,418,989 $ (618,931) $ 1,666,323 $ 3,585,229 $ (1,918,906)
=========== =========== ========== =========== =========== ============
</TABLE>
LEASING MARGIN
Leasing margin consists of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating lease rentals $ 4,371,142 $ 4,627,126 $ 13,060,808 $ 14,083,922
Direct finance lease income 146,859 92,109 385,356 283,584
Depreciation (3,405,018) (3,280,891) (10,066,646) (10,474,920)
Interest expense on discounted lease rentals (284,241) (324,429) (837,215) (1,151,115)
------------ ------------ ------------ -------------
Leasing margin $ 828,742 $ 1,113,195 $ 2,542,303 $ 2,741,471
============ ============ ============ =============
Leasing margin ratio 18% 24% 19% 19%
== == == ==
</TABLE>
Leasing margin ratio will 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.
9
<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
Operating lease rentals decreased for the three and nine months ended September
30, 1998 ("1998 Quarter and 1998 Period", respectively) because more equipment
subject to operating leases was sold than purchased during the period.
Depreciation expense increased for the 1998 Quarter due to a lower average
residual value on the equipment subject to operating leases, while it decreased
for the 1998 Period because of the net reduction in operating leases discussed
above. Direct finance lease income increased due to growth in the net investment
in direct finance leases. Interest expense on discounted lease rentals decreased
as the related non-recourse debt was repaid.
The ultimate rate of return on leases depends, 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).
EQUIPMENT SALES MARGIN
Equipment sales margin consists of the following:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Equipment sales revenue $ 1,668,352 $ 1,817,339 $ 4,132,204 $ 5,046,749
Cost of equipment sales (1,482,625) (1,249,751) (3,730,604) (3,570,262)
----------- ----------- ----------- -----------
Equipment sales margin $ 185,727 $ 567,588 $ 401,600 $ 1,476,487
=========== =========== =========== ===========
Currently, a portion of the Partnership's initial leases have expired and the
equipment is either being released or sold to the lessee or a third party.
Equipment sales margin decreased for the 1998 Quarter and 1998 Period compared
to the 1997 Quarter and 1997 Period primarily due to the composition of
equipment that was sold. The Partnership sold certain mining, manufacturing and
printing equipment at a lower fair market value than originally anticipated.
INTEREST INCOME
Interest income increased due to an increase in invested cash during the quarter
ended September 30, 1998. 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.
10
<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
- ---------------------
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 is typically not known until the equipment is
remarketed at the termination of the lease) 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 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.
Accordingly, a provision for loss of $725,000 was recorded for the nine months
ended September 30, 1998. Of this amount, $160,000 is related to the estimated
decline in residual value on earth moving and warehouse automation equipment
returned to the partnership at lease maturity and $350,000 is primarily related
to losses realized on the sales of certain manufacturing and printing equipment
at a lower fair market value than originally anticipated. In addition, computer
equipment which has been held for sale or re-lease for over a year was written
down to recognize a decline in its fair market value. The balance is comprised
of provision for loss on other miscellaneous equipment returned to the
Partnership at lease maturity.
Liquidity & Capital Resources
- -----------------------------
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.
During the nine months ended September 30, 1998, the Partnership acquired
equipment subject to leases with a total equipment purchase price of
$12,696,808. At September 30, 1998, the General Partner had identified
approximately $200,000 of additional equipment that satisfied the Partnership's
acquisition criteria. The Partnership expects to acquire this equipment during
the remainder of 1998.
11
<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 nine months ended September 30, 1998, the Partnership declared
distributions to the partners of $3,957,411 ($440,798 of which was paid during
October 1998). A substantial 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 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.
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 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
affiliate's software has already been updated to correctly account for the Year
2000 issue. In addition, the affiliate is engaged in a system conversion,
whereby the affiliate's primary lease tracking and accounting software is being
replaced with new systems which will account for the Year 2000 correctly. The
affiliate expects that the new system will be fully operational by December 31,
1999, and therefore 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
conversion to a new system by December 31, 1999. In addition, 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.
12
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
New Accounting Pronouncements, continued
- -----------------------------
The Partnership will adopt Statement 133 in the first quarter of 1999. The
General Partner does not expect the adoption to have an impact on its financial
reporting.
"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 1997 Form 10-K when and where applicable.
13
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, 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) Exhibits
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended September 30, 1998.
14
<PAGE>
Item No. Exhibit Index
- -------- -------------
27 Financial Data Schedule
15
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, 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-III, L.P.
By: CAI Equipment Leasing IV Corp.
Dated: November 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,786,623
<SECURITIES> 0
<RECEIVABLES> 1,104,426
<ALLOWANCES> 0
<INVENTORY> 702,287
<CURRENT-ASSETS> 0
<PP&E> 41,565,855
<DEPRECIATION> 0
<TOTAL-ASSETS> 51,262,378
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 33,886,000
<TOTAL-LIABILITY-AND-EQUITY> 51,262,378
<SALES> 401,600
<TOTAL-REVENUES> 13,970,729
<CGS> 0
<TOTAL-COSTS> 12,304,406
<OTHER-EXPENSES> 469,166
<LOSS-PROVISION> 725,000
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</TABLE>
