<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 June 30, 2000
-------------------------------------------------
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 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
June 30, 2000
Table of Contents
-----------------
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (Unaudited)
Balance Sheets - June 30, 2000 and December 31, 1999 3
Statements of Income - Three and Six Months Ended
June 30, 2000 and 1999 4
Statements of Cash Flows - Six Months Ended
June 30, 2000 and 1999 5
Notes to Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-15
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
2
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
BALANCE SHEETS
ASSETS
June 30, December 31,
2000 1999
----------- -----------
(Unaudited)
Cash and cash equivalents $ 1,711,110 $ 4,382,378
Accounts receivable 1,460,332 1,404,792
Receivable from affiliates 370,324 715,524
Equipment held for sale or re-lease 864,000 1,470,585
Net investment in direct finance leases 2,746,717 1,916,677
Leased equipment, net 33,436,301 32,213,785
----------- -----------
Total assets $40,588,784 $42,103,741
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 1,647,597 $ 2,337,411
Payables to affiliates 35,533 60,405
Rents received in advance 345,348 471,353
Distributions payable to partners 444,198 442,346
Discounted lease rentals 10,893,499 9,257,171
----------- -----------
Total liabilities 13,366,175 12,568,686
----------- -----------
Partners' capital:
General partner - -
Limited partners:
Class A 26,868,705 29,158,012
Class B 353,904 377,043
----------- -----------
Total partners' capital 27,222,609 29,535,055
----------- -----------
Total liabilities and partners' capital $40,588,784 $42,103,741
=========== ===========
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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Operating lease rentals $3,397,542 $4,152,011 $7,246,564 $8,486,360
Direct finance lease income 73,367 71,840 116,999 143,591
Equipment sales margin 215,540 106,939 326,146 378,720
Interest income 34,177 78,207 84,255 120,300
---------- ---------- ---------- ----------
Total revenue 3,720,626 4,408,997 7,773,964 9,128,971
---------- ---------- ---------- ----------
Expenses:
Depreciation 2,806,051 3,027,172 5,878,149 6,141,514
Management fees paid to general partner 26,113 93,157 154,358 196,694
Direct services from general partner 47,088 51,630 121,043 93,374
General and administrative 161,371 84,598 234,155 142,781
Interest on discounted lease rentals 215,858 162,973 449,100 366,330
Provision for losses 550,000 606,972 600,000 656,972
---------- ---------- ---------- ----------
Total expenses 3,806,481 4,026,502 7,436,805 7,597,665
---------- ---------- ---------- ----------
Net income (loss) $ (85,855) $ 382,495 $ 337,159 $1,531,306
========== ========== ========== ==========
Net income (loss) allocated:
To the general partner $ 13,155 $ 13,171 $ 26,317 $ 26,352
To the Class A limited partners (98,020) 365,588 307,733 1,489,755
To the Class B limited partner (990) 3,736 3,109 15,199
---------- ---------- ---------- ----------
$ 364,145 $ 382,495 $ 337,159 $1,531,306
========== ========== ========== ==========
Net income (loss) per weighted average
Class A limited partner unit outstanding $ (.20) $ .74 $ .63 $ 3.03
========== ========== ========== ==========
Weighted average Class A limited
partner units outstanding 491,253 491,795 491,359 491,954
========== ========== ========== ==========
</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
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 9,283,235 $10,379,243
----------- -----------
Cash flows from investing activities:
Purchases of equipment on operating leases from affiliate (6,604,536) (4,042,612)
Investment in direct finance leases, acquired from affiliate (750,394) (109,203)
----------- -----------
Net cash used in investing activities (7,354,930) (4,151,815)
----------- -----------
Cash flows from financing activities:
Proceeds from discounted lease rentals 896,890 205,734
Principal payments on discounted lease rentals (2,848,710) (4,698,439)
Redemptions of Class A limited partner units (19,964) (22,126)
Distributions to partners (2,627,789) (2,635,502)
----------- -----------
Net cash used in financing activities (4,599,573) (7,150,333)
----------- -----------
Net decrease in cash and cash equivalents (2,671,268) (922,905)
Cash and cash equivalents at beginning of period 4,382,378 2,723,454
----------- -----------
Cash and cash equivalents at end of period $ 1,711,110 $ 1,800,549
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 449,101 $ 359,845
Supplemental disclosure of noncash investing and
financing activities:
Discounted rentals assumed in equipment acquisitions 3,588,148 -
Discounted lease rental for bankrupt lessee written-off
as uncollectible - 57,104
Rents deducted from cash paid for equipment acquisitions 99,061
</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, 1999 was
derived from the audited financial statements included in the Partnership's
1999 Form 10-KA. 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-KA for
the year ended December 31, 1999, 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. 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 June 30, 2000, management fees of $29,311 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 June 30, 2000, direct services from the General
Partner of $6,222 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 related party balance.
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
During the six months ended June 30, 2000, the Partnership acquired the
equipment described below from Capital Associates International, Inc.
("CAII"):
<TABLE>
<CAPTION>
Acquisition Total
Cost of Fees and Equipment
Lessee Equipment Description Equipment Reimbursements Purchase Price
-------------------------- --------------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Alliant Tech PC's 96,198 3,333 99,531
American Honda Editing Equipment 44,680 1,548 46,228
BOC PC's 358,462 12,421 370,883
BOC Computer Equipment 1,099,054 38,082 1,137,136
Daimler Chrysler Pallet Trucks 58,463 2,026 60,489
EEX PC's 167,345 5,798 173,143
EMC Computer Equipment 490,184 16,985 507,169
EMC Servers 470,637 16,308 486,945
Geico Networking 10,970 380 11,350
Geico Servers 192,556 6,672 199,228
General Dynamics Computer 246,644 8,546 255,190
General Motors Corporation Fork Lift 57,234 1,983 59,217
General Motors Corporation Platform Truck 554,070 19,199 573,269
General Motors Corporation Rider Die Handler 946,025 32,780 978,805
General Motors Corporation Scrubber 42,351 1,467 43,819
General Motors Corporation Sweeper 107,149 3,713 110,862
General Motors Corporation Utility Carts 183,596 6,362 189,958
Honeywell Computer 961,788 31,547 993,335
Johnson Control Lift Truck 175,114 5,867 180,981
Louisiana Pacific Crawler 248,507 8,611 257,118
Louisiana Workers Copiers 119,408 4,138 123,546
Lucent Fork Lift 58,800 2,037 60,837
Magna Seating Computer 413,213 14,057 427,270
Matsushita Servers 191,910 6,650 198,560
McGraw Hill Computer Equipment 320,385 11,388 331,773
McGraw Hill PC's 50,900 1,764 52,663
McGraw Hill Printers 100,129 3,469 103,598
Nabisco Lift Truck 33,551 1,163 34,714
NBC Media Composer 84,000 2,911 86,911
New York Life Copiers 179,927 6,234 186,161
New York Presbyterian Hosp Medical Equipment 409,060 14,174 423,234
Northrop Grumman Computer 159,255 5,056 164,311
Otis Elevator Workstations 55,854 1,935 57,789
Ryder Fork Lift 55,056 1,908 56,964
Ryder Pallet Trucks 18,831 652 19,483
Ryder Wire Decks 7,801 270 8,071
Teachers Insurance Computer Equipment 262,082 9,081 271,163
Thompson Machine Tool 126,365 4,379 130,744
Thomson Tool Cart 44,495 1,542 46,037
Thomson Industries Machine Tools 63,183 2,189 65,372
TXU Business Computer 265,633 8,423 274,056
U-Haul Servers 127,134 4,405 131,539
Unilever Fork Lift 100,800 3,493 104,293
</TABLE>
8
<PAGE>
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Acquisition Total
Cost of Fees and Equipment
Lessee Equipment Description Equipment Reimbursements Purchase Price
-------------------------- --------------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Williams Sonoma POS 831,994 28,829 860,823
Xerox Computer Equipment 84,638 2,933 87,571
---------- -------------- --------------
10,675,431 366,708 11,042,139
========== ============== ==============
</TABLE>
3. General Partner Matters
-----------------------
According to the records of CAII, an affiliate of the general partner, as of
June 30, 2000, CAII owes the Partnership approximately $400,000, for rents,
remarketing proceeds and other amounts (collectively, the "Prior Rents")
collected by CAII on behalf of the Partnership during periods prior to
February 1, 2000 (the "Prior Periods"). According to its own records, CAII
owes approximately $3.0 million to other investors and creditors as of June
30, 2000 (who, along with the Partnership, are referred to herein as the
"Payees"), for Prior Rents collected by CAII on their behalf during the Prior
Periods. CAII, which presently does not have the funds to repay all of the
Prior Rents, is in negotiations with the Payees to develop a plan for
repayment of the Prior Rents owed to all Payees over time. The Partnership is
withholding acquisition fees and managements fees otherwise payable to the
general partner and crediting such withheld fees (the "Fees") against the
Prior Rents owing from CAII. The Partnership intends to continue to withhold
future Fees until such time as it recovers all Prior Rents.
The amount stated on the Balance Sheet as Receivable from affiliates is net
of a $300,000 allowance recorded at December 31, 1999.
The Partnership relies upon the services of CAII for origination of leases,
administrative and accounting services and remarketing of leases and
equipment, among other services. Should CAII be unable to develop a plan for
repayment with it's Payees, the Partnership may be required to contract with
another party for these services. In such event, there is no assurance that
another provider of these services can be identified.
9
<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 Six Months
Ended June 30, Ended June 30,
----------------------- -------------------------
2000 1999 Change 2000 1999 Change
--------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 449,000 $1,033,706 $ (584,706) $ 1,036,314 $ 2,122,107 $(1,085,793)
Equipment sales margin 215,540 106,939 108,601 326,146 378,720 (52,574)
Interest income 34,177 78,207 (44,030) 84,255 120,300 (36,045)
Management fees paid to general partner (26,113) (93,157) 67,044 (154,358) (196,694) 42,336
Direct services from general partner (47,088) (51,630) 4,542 (121,043) (93,374) (27,669)
General and administrative expenses (161,371) (84,598) (76,773) (234,155) (142,781) (91,374)
Provision for losses (550,000) (606,972) 56,972 (600,000) (656,972) 56,972
--------- ---------- ---------- ----------- ----------- -----------
Net income (loss) $ (85,855) $ 382,495 $ (468,350) $ 337,159 $ 1,531,306 $(1,194,147)
========= ========== ========== =========== =========== ===========
</TABLE>
The Partnership recorded a loss for the three months ended June 30, 2000
primarily due to the provision for losses of $550,000 described below. Without
the provision for losses, the Partnership would have recorded income of $364,145
nd $787,159 during the three and six months ended June 30, 2000, respectively.
Leasing Margin
Leasing margin consists of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -------------------------
2000 1999 2000 1999
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operating lease rentals $ 3,397,542 $ 4,152,011 $ 7,246,564 $ 8,486,360
Direct finance lease income 73,367 71,840 116,999 143,591
Depreciation (2,806,051) (3,027,172) (5,878,149) (6,141,514)
Interest on discounted lease rentals (215,858) (162,973) (449,100) (366,330)
----------- ------------ ----------- -----------
Leasing margin $ 449,000 $ 1,033,706 $ 1,036,314 $ 2,122,107
=========== ============ =========== ===========
Leasing margin ratio 13% 24% 14% 25%
=========== ============ =========== ===========
</TABLE>
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
---------------------
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. Leasing margin and leasing
margin ratio decreased for the six months ended June 30, 2000 compared to the
six months ended June 30, 1999 in part due to the increase in interest expense
associated with the operating leases financed with non-recourse debt added to
the portfolio during the period. In addition, operating lease rentals decreased
for the six months ended June 30, 2000 as compared to the six months ended June
30, 1999 primarily due to a decrease in month to month rental income.
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 Six Months Ended
June 30, June 30,
----------------------- ------------------------
2000 1999 2000 1999
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Equipment sales revenue $ 1,683,407 $ 543,264 $ 2,390,942 $1,175,044
Cost of equipment sales (1,467,867) (436,325) (2,064,297) (796,324)
----------- --------- ----------- ----------
Equipment sales margin $ 215,540 $ 106,939 $ 326,645 $ 378,720
=========== ========= =========== ==========
</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 become available for sale. Equipment sales margin was higher for the six
months ended June 30, 1999 compared to the six months ended June 30, 2000
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 $206,360.
11
<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
Interest income decreased due to a decrease in the amount of invested cash
during the six months ended June 30, 2000 as compared to the six months ended
June 30, 1999. 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.
Expenses
Management fees are earned on gross rents received and will fluctuate due to
variances in cash flow. Management fees paid to general partner for the six
months ended June 30, 2000 were lower than the six months ended June 30, 1999
primarily due to a decrease in rents collected.
Direct services from general partner increased for the six months ended June 30,
2000 compared to the six months ended June 30, 1999 primarily due to a change in
the method in which the general partner charges for its asset management
services. The Partnership pays a refurbishing charge to the general partner at
the time computer equipment is returned by the lessee to the Partnership. The
refurbishing charge includes all services necessary to prepare the equipment for
re-sale. Computer equipment returned to the Partnership for the six months
ended June 30, 2000 generated refurbishing charges in the amount of $67,810.
General and administrative charges increased for the six months ended June 30,
2000 compared to the six months ended June 30, 1999 primarily due to an increase
in storage charges for equipment returned to the Partnership at lease maturity,
and increase in income tax expense due to a change in the way Michigan
apportions multi state companies and an increase in appraisal fees to determine
fair market value for sale of equipment.
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
assessments of the estimated residual values of its assets to identify any
other-than-temporary losses in value.
12
<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
---------------------
Provision for Losses, continued
A provision for loss of $600,000 was recorded for the six months ended June 30,
2000 related to a decline in the realizable value of computer equipment returned
to the Partnership.
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 six months ended June 30, 2000, the Partnership acquired equipment
subject to leases with a total equipment purchase price of $11,042,139.
During the six months ended June 30, 2000, the Partnership declared
distributions to the partners of $2,629,641 ($444,198 of which was paid during
July 2000). 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 2000, 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.
The Partnership will enter its liquidation period (as defined in the Partnership
Agreement) on approximately July 1, 2000. At that time, except for commitments
to purchase made during the reinvestment period, the Partnership will no longer
reinvest in additional equipment under leases. At June 30, 2000, the
Partnership has committed to purchase approximately $18,000 of new equipment
during the remainder of the year.
13
<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
-----------------------------
According to the records of CAII, an affiliate of the general partner, as of
June 30, 2000, CAII owes the Partnership approximately $400,000 for rents,
remarketing proceeds and other amounts (collectively, the "Prior Rents")
collected by CAII on behalf of the Partnership during periods prior to February
1, 2000 (the "Prior Periods"). According to its own records, CAII owes
approximately $3.0 million to other investors and creditors at July 31, 2000
(who, along with the Partnership, are referred to herein as the "Payees"), for
Prior Rents collected by CAII on their behalf during the Prior Periods. CAII,
which presently does not have the funds to repay all of the Prior Rents, is in
negotiations with the Payees to develop a plan for repayment of the Prior Rents
owed to all Payees over time. The Partnership is withholding acquisition fees
and managements fees otherwise payable to the general partner and crediting such
withheld fees (the "Fees") against the Prior Rents owing from CAII.
The amount stated on the balance sheet as Receivable from affiliates is net of a
$300,000 allowance recorded at December 31, 1999.
The Partnership relies upon the services of CAII for origination of leases,
administrative and accounting services and remarketing of leases and equipment,
among other services. Should CAII be unable to develop a plan for repayment with
it's Payees, the Partnership may be required to contract with another party for
these services. In such event, there is no assurance that another provider of
these services can be identified.
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. 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.
14
<PAGE>
"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 1999 Form 10-KA when and where applicable.
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 significant 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 June 30, 2000.
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: August 15, 2000 By: /s/Susan M. Landi
------------------------
Susan M. Landi
Chief Accounting Officer
18
