<PAGE>
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, 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 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 17
Page 1 of 18 Pages
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
Quarterly Report on Form 10-Q
For the Quarter Ended
September 30, 1999
Table of Contents
-----------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements (Unaudited)
Balance Sheets - September 30, 1999 and December 31, 1998 3
Statements of Income - Three and Nine Months Ended
September 30, 1999 and 1998 4
Statements of Cash Flows - Nine Months Ended
September 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
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Exhibit Index 17
Signature 18
</TABLE>
2
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,482,855 $ 2,723,454
Accounts receivable 1,041,737 1,340,631
Receivable from related party 1,160,610 50,521
Equipment held for sale or re-lease 859,339 534,643
Net investment in direct finance leases 2,613,755 3,560,216
Leased equipment, net 35,059,432 39,594,222
----------- -----------
Total assets $42,217,728 $47,803,687
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 971,864 $ 1,508,619
Payables to affiliates 52,191 48,360
Rents received in advance 576,951 554,824
Distributions payable to partners 442,633 440,798
Discounted lease rentals 9,493,085 12,603,909
----------- -----------
Total liabilities 11,536,724 15,156,510
----------- -----------
Partners' capital:
General partner - -
Limited partners:
Class A 30,292,390 32,239,114
Class B 388,614 408,063
----------- -----------
Total partners' capital 30,681,004 32,647,177
----------- -----------
Total liabilities and partners' capital $42,217,728 $47,803,687
=========== ===========
</TABLE>
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,
------------------------ -------------------------
1999 1998 1999 1998
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Operating lease rentals $3,698,059 $4,371,142 $12,184,419 $13,060,808
Direct finance lease income 52,287 146,859 195,878 385,356
Equipment sales margin 299,591 185,727 471,681 401,600
Interest income 40,403 35,169 367,333 122,965
---------- ---------- ----------- -----------
Total revenue 4,090,340 4,738,897 13,219,311 13,970,729
---------- ---------- ----------- -----------
Expenses:
Depreciation 3,073,197 3,405,018 9,214,711 10,066,646
Management fees paid to general partner 79,012 109,962 275,707 321,445
Direct services from general partner 45,506 52,994 138,880 147,721
General and administrative 76,387 61,624 219,168 206,379
Interest on discounted lease rentals 137,100 284,241 503,429 837,215
Provision for losses 200,000 25,000 856,972 725,000
---------- ---------- ----------- -----------
Total expenses 3,611,202 3,938,839 11,208,867 12,304,406
---------- ---------- ----------- -----------
Net income $ 479,138 $ 800,058 $ 2,010,444 $ 1,666,323
========== ========== =========== ===========
Net income allocated:
To the general partner $ 13,193 $ 13,181 $ 39,545 $ 39,574
To the Class A limited partners 461,235 778,930 1,950,990 1,610,309
To the Class B limited partner 4,710 7,947 19,909 16,440
---------- ---------- ----------- -----------
$ 479,138 $ 800,058 $ 2,010,444 $ 1,666,323
========== ========== =========== ===========
Net income per weighted average Class A
limited partner unit outstanding $ 0.94 $ 1.58 $ 3.97 $ 3.27
========== ========== =========== ===========
Weighted average Class A limited
partner units outstanding 491,795 492,297 491,900 492,632
========== ========== =========== ===========
</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,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net cash provided by operating activities $ 15,534,627 $18,530,217
------------ -----------
Cash flows from investing activities:
Purchases of equipment on operating leases from affiliate (5,938,292) (5,651,734)
Investment in direct finance leases, acquired from affiliate (178,347) (2,286,569)
------------ -----------
Net cash used in investing activities (6,116,639) (7,938,303)
------------ -----------
Cash flows from financing activities:
Proceeds from discounted lease rentals 205,734 1,728,059
Principal payments on discounted lease rentals (6,889,539) (7,304,291)
Redemptions of Class A limited partner units (22,126) (84,481)
Distributions to partners (3,952,656) (3,958,264)
------------ -----------
Net cash used in financing activities (10,658,587) (9,618,977)
------------ -----------
Net (decrease)/increase in cash and cash equivalents (1,240,599) 972,937
Cash and cash equivalents at beginning of period 2,723,454 2,813,686
------------ -----------
Cash and cash equivalents at end of period $ 1,482,855 $ 3,786,623
============ ===========
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 503,429 $ 837,215
Supplemental disclosure of noncash investing and
financing activities:
Discounted rentals assumed in equipment acquisitions 3,630,085 4,758,505
Discounted lease rental for bankrupt lessee written-off
as uncollectible 57,104 -
</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, 1998 was derived from the audited financial statements
included in the Partnership's 1998 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, 1998, 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.
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.
2. Transactions With the General Partner and 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, 1999, management fees of $28,957 are
included in payables to affiliates.
6
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Transactions With the General Partner and Affiliates, 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 September 30, 1999, direct services from the General Partner of
$23,234 are included in payables to 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 September 30, 1999, there were no general and
administrative costs included in payables to affiliates.
Receivable From Related Party
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 related party balance. At the end of September 1999, $1,160,610
rents had been applied by the General Partner that were transferred to the
Partnership subsequent to the end of the quarter and prior to the filing of the
September 30, 1999 Quarterly Report.
Equipment Purchases
During the nine months ended September 30, 1999, 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>
Ball Aerospace & Technology Office Furniture $ 56,589 $ 1,961 $ 58,550
Birmingham Steel Corp Copier 9,450 327 9,777
E Trade Office Furniture 4,300,821 141,653 4,442,474
General Motors Corporation Cameras 379,175 13,138 392,313
General Motors Corporation Forklift 180,141 6,242 186,383
General Motors Corporation Lift Truck 48,437 1,678 50,115
General Motors Corporation Material Handling 191,454 6,634 198,088
General Motors Corporation Rider Sweeper 32,627 1,131 33,758
</TABLE>
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
<TABLE>
<CAPTION>
Acquisition Total
Equipment Cost of Fees and Equipment
Lessee Description Equipment Reimbursements Purchase Price
- -------------------------- ------------------ ---------- -------------- ---------------
<S> <C> <C> <C> <C>
General Motors Corporation Scrubber $ 418,261 $ 14,492 $ 432,753
General Motors Corporation Scrubber/Sweeper 35,135 1,217 36,352
General Motors Corporation Sweeper 179,823 6,231 186,054
General Motors Corporation Walkie Lift 110,212 3,819 114,031
Hitachi Computer Products Cisco Routers 200,826 6,959 207,785
HK Systems Teleconferencing 41,413 1,435 42,848
McGraw Hill Computer Equipment 21,996 762 22,758
New Stevens Snowgroomer 120,405 4,172 124,577
Rental Services Tractors, Trucks 544,227 18,857 563,084
Sebastian Vineyards Bottle Equipment 907,798 31,455 939,253
Thompson Industries Computer Equipment 13,019 451 13,470
Treasure Chest Advertising Forklift 20,685 717 21,402
United Airlines Docking System 78,551 2,079 80,630
Wyle Labs Office Furniture 26,217 908 27,125
Wyle Labs Servers 16,485 571 17,056
Wyle Labs Thermal Cycling 407,972 14,136 422,108
Xerox Computer Equipment 1,053,787 36,514 1,090,301
Thomson Computer Equipment 32,551 1,128 33,679
---------- -------------- ---------------
9,428,057 318,667 9,746,724
========== ============== ===============
</TABLE>
At September 30, 1999, the General Partner had identified approximately $3
million of equipment that satisfied the Partnership's acquisition criteria and
is expected to be acquired during the remainder of 1999.
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 items of income and expense and
changes in those items derived from the Statements of Income:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ------------------------------------------
1999 1998 Change 1999 1998 Change
--------- --------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 540,049 $ 828,742 $ (288,6933) $ 2,662,157 $ 2,542,303 $ 119,854
Equipment sales margin 299,591 185,727 113,864 471,681 401,600 70,081
Interest income 40,403 35,169 5,234 367,333 122,965 244,368
Management fees paid to general partner (79,012) (109,962) 30,950 (275,707) (321,445) 45,738
Direct services from general partner (45,506) (52,994) 7,488 (138,880) (147,721) 8,841
General and administrative expenses (76,387) (61,624) (14,763) (219,168) (206,379) (12,789)
Provision for losses (200,000) (25,000) (175,000) (856,972) (725,000) (131,972)
--------- --------- ---------- ----------- ----------- ------------
Net income $ 479,138 $ 800,058 $ (320,920) $ 2,010,444 $ 1,666,323 $ 344,121
========= ========= ========== =========== =========== ============
</TABLE>
Leasing Margin
Leasing margin consists of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating lease rentals $ 3,698,059 $ 4,371,142 $12,184,419 $13,060,808
Direct finance lease income 52,287 146,859 195,878 385,356
Depreciation (3,073,197) (3,405,018) (9,214,711) (10,066,646)
Interest on discounted lease rentals (137,100) (284,241) (503,429) (837,215)
----------- ----------- ----------- -----------
Leasing margin $ 310,316 $ 828,742 $ 2,432,424 $ 2,542,303
=========== =========== =========== ===========
Leasing margin ratio 14% 18% 22% 19%
=========== =========== =========== ===========
</TABLE>
All components of leasing margin decreased for the three and nine months ended
September 30, 1999 as compared to the three and nine months ended September 30,
1998 due to portfolio run-off.
9
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Results of Operations, continued
- ---------------------
Leasing Margin, continued
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. 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 principle is 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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Equipment sales revenue $ 2,726,715 $ 1,668,352 $ 3,695,129 $ 4,132,204
Cost of equipment sales (2,427,124) (1,482,625) (3,233,448) (3,730,604)
----------- ----------- ----------- -----------
Equipment sales margin $ 299,591 $ 185,727 $ 471,681 $ 401,600
=========== =========== =========== ===========
</TABLE>
Currently, a portion of the Partnership's initial leases have expired and the
equipment is either being re-leased or sold to the lessee or a third party.
Equipment sales margin is affected by the volume and composition of equipment
that becomes available for sale. Equipment sales margin increased for the nine
months ended September 30, 1999 compared to the nine months ended September 30,
1998 primarily due to a one time recognition of gain from the receipt of funds
pursuant to the sale of a note receivable representing settlement with a
bankrupt lessee in the amount of $206,630. Equipment sales margin increased for
the three months ended September 30, 1999 compared to the three months ended
September 30, 1998 primarily due to a gain of $140,609 on the sale of machine
tools.
Interest Income
Interest income increased due to an increase in the amount of invested cash
during the three and nine months ended September 30, 1999 as compared to the
three and nine months ended September 30, 1998. Interest
10
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Results of Operations, continued
Interest Income, continued
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.
Expenses
Management fees paid to general partner decreased for the three and nine months
ended September 30, 1999 as compared to the three and nine months ended
September 30, 1998 primarily due to the decrease in operating lease rentals.
Direct services from general partner and general and administrative expenses for
the three and nine months ended September 30, 1999 remained comparable to 1998.
Management fees and direct services are also discussed in detail under Note 2 to
the financial statements. The primary components of general and administrative
expenses for the three and nine months ended September 30, 1999 and September
30, 1998 were data processing, advertising, audit and tax fees, printing and
state income tax fees.
Direct services from the general partner for the three and nine months ended
September 30, 1999 decreased primarily because of a change in the methodology
used to determine the amount to be reimbursed to the affiliate for asset
management services. The affiliate now charges the Partnership a fixed fee for
asset management services. This fee is equal to an estimated cost to refurbish
a piece of equipment returned to the affiliates' warehouse. The fee is charged
to the Partnership when the equipment is returned, and is recorded as an expense
for the period.
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 the termination of the initial 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 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
any other-than-temporary losses in value.
11
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Provision for Losses, continued
A provision for loss of $856,972 was recorded for the nine months ended
September 30, 1999. Significant adjustments were as follows: $552,680, $113,560
and $111,000 was related primarily to the identification of other-than-temporary
losses in value for phone equipment, machine tools and other equipment,
respectively, that was returned to the Partnership at lease maturity; $54,732
was related to a lower of cost or market adjustment on printing and phone
equipment held for sale or re-lease; and $25,000 was related to the write-off of
assets leased to a bankrupt lessee for which no recovery is possible.
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, 1999, the Partnership acquired
equipment subject to leases with a total equipment purchase price of $9,746,724.
At September 30, 1999, the General Partner had not identified approximately $3
million of equipment that satisfied the Partnership's acquisition criteria.
During the nine months ended September 30, 1999, the Partnership declared
distributions to the partners of $3,954,491 ($442,633 of which was paid during
October 1999). 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 the 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 1999, 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 internal information technology
12
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Liquidity & Capital Resources, continued
- ----------------------------------------
Year 2000 Issues, continued
("IT") 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. The affiliate is in the process of upgrading or
replacing all components of its IT systems which were identified as being
affected by the Year 2000 issue. At the present time, the affiliate has
completed upgrades and testing of the upgrades for all components of its IT
systems except its primary application software which controls the partnership's
financial records, asset management detail, and billing records. The affiliate
has fully identified all aspects of the application software which have Year
2000 issues and has commenced the process of upgrading the software. The
affiliate expects that the new upgrades will be fully operational by December
31, 19999, 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 upgrades by December 31, 1999. However, should the affiliate be
unsuccessful in completing the necessary upgrades by December 31, 1999, the
affiliate 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 due to billing or collection problems which
could arise related to Year 2000 issues. 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. Because the cost of addressing Year 2000
issues are borne by the affiliate, it is expected that the costs associated with
Year 2000 readiness will not be material to the partnership. 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, or on its
ability to provide services to the Partnership.
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.
13
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
New Accounting Pronouncements, continued
- -----------------------------
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.
"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.
14
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The partnership's leases with equipment users are non-cancelable and have lease
rates which are fixed at lease inception. The partnership finances its leases,
in part, with discounted lease rentals at a fixed debt rate. The partnership's
other assets and liabilities are also at fixed rates. Consequently the
partnership has no interest rate risk or other market risk exposure.
15
<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, 1999.
16
<PAGE>
Item No. Exhibit Index
27 Financial Data Schedule
17
<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 15, 1999 By: /s/ Dana T. Martin
----------------------------------
Dana T. Martin
Assistant Vice President
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,482,855
<SECURITIES> 0
<RECEIVABLES> 2,202,347
<ALLOWANCES> 0
<INVENTORY> 859,339
<CURRENT-ASSETS> 0
<PP&E> 37,673,187
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,217,728
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,681,004
<TOTAL-LIABILITY-AND-EQUITY> 42,217,728
<SALES> 471,681
<TOTAL-REVENUES> 13,219,311
<CGS> 0
<TOTAL-COSTS> 11,208,867
<OTHER-EXPENSES> 414,587
<LOSS-PROVISION> 856,972
<INTEREST-EXPENSE> 503,429
<INCOME-PRETAX> 2,010,444
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,010,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,010,444
<EPS-BASIC> 3.97
<EPS-DILUTED> 3.97
</TABLE>
