UNITED STATES
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 April 1, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NO.: 1-7182-06
MERRILL LYNCH PREFERRED CAPITAL TRUST III
(Exact name of Registrant as specified in its certificate of trust)
Delaware 13-7139561
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 World Financial Center
New York, New York 10080
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
COMMISSION FILE NO.: 1-7182-05
MERRILL LYNCH PREFERRED FUNDING III, L.P.
(Exact name of Registrant as specified in its
certificate of limited partnership)
Delaware 13-3982448
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 World Financial Center
New York, New York 10080
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
The Registrants meet the conditions set forth in General Instruction H (1)(a)
and (b) of Form 10-Q and are therefore filing this form with the reduced
disclosure format.
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the Registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of May 12, 2005 no voting stock was held by non-affiliates of the
Registrants.
================================================================================
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
--------------------
MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED BALANCE SHEETS (unaudited)
(dollars in thousands, except per security amounts)
- -----------------------------------------------------------------------------------------------------------------------
April 1, 2005 December 31, 2004
-------------- -----------------
ASSETS
Investment in affiliate partnership preferred securities $ 773,196 $ 773,196
---------- ----------
Total Assets $ 773,196 $ 773,196
========== ==========
STOCKHOLDERS' EQUITY
Stockholders' equity:
Preferred securities (7% Trust Originated Preferred Securities; 30,000,000
authorized, issued, and outstanding; $25 liquidation
amount per security) $ 750,000 $ 750,000
Common securities (7% Trust Common Securities;
927,840 authorized, issued, and outstanding;
$25 liquidation amount per security) 23,196 23,196
---------- ----------
Total Stockholders' Equity $ 773,196 $ 773,196
========== ==========
See Note to Condensed Financial Statements
2
MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF EARNINGS (unaudited)
(dollars in thousands)
- --------------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
-----------------------------------
April 1, 2005 March 26, 2004
-------------- --------------
EARNINGS
Interest on affiliate partnership preferred securities $ 13,531 $ 13,531
========= =========
See Note to Condensed Financial Statements
3
MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(dollars in thousands)
- ---------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
-----------------------------------
April 1, 2005 March 26, 2004
-------------- --------------
PREFERRED SECURITIES
Balance, beginning and end of period $ 750,000 $ 750,000
---------- ----------
COMMON SECURITIES
Balance, beginning and end of period 23,196 23,196
---------- ----------
UNDISTRIBUTED EARNINGS
Balance, beginning of period - -
Earnings 13,531 13,531
Distributions (13,531) -
Distributions payable - (13,531)
---------- ----------
Balance, end of period - -
---------- ----------
Total Stockholders' Equity $ 773,196 $ 773,196
========== ==========
See Note to Condensed Financial Statements
4
MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
(dollars in thousands)
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
-----------------------------------
April 1, 2005 March 26, 2004
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings $ 13,531 $ 13,531
-------- ---------
Cash provided by operating activities 13,531 13,531
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (13,531) (13,531)
-------- ---------
Cash used for financing activities (13,531) (13,531)
-------- ---------
NET CHANGE IN CASH - -
CASH, BEGINNING OF PERIOD - -
-------- ---------
CASH, END OF PERIOD $ - $ -
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
No distributions were accrued at April 1, 2005 preferred and common
distributions of $13,125 and $406, respectively, were accrued at March 26, 2004.
See Note to Condensed Financial Statements
5
MERRILL LYNCH PREFERRED CAPITAL TRUST III
NOTE TO CONDENSED FINANCIAL STATEMENTS (unaudited)
April 1, 2005
- -------------------------------------------------------------------------------
BASIS OF PRESENTATION
These unaudited condensed financial statements should be read in conjunction
with the audited financial statements included in the Annual Report on Form 10-K
of Merrill Lynch Preferred Capital Trust III (the "Trust") for the year ended
December 31, 2004. The December 31, 2004 balance sheet information was derived
from the audited financial statements. The interim condensed financial
statements for the three-month periods are unaudited; however, in the opinion of
the Regular Trustee of the Trust, all adjustments, consisting only of normal
recurring accruals necessary for a fair statement of the results of operations,
have been included.
INVESTMENTS
The Trust's investment in Merrill Lynch Preferred Funding III, L.P. (the
"Partnership") Preferred Securities represents a limited partnership interest in
the Partnership and is recorded at cost. At quarter end, the fair value of the
investment approximates its carrying value. Income on the Partnership Preferred
Securities is accrued when earned.
6
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED BALANCE SHEETS (unaudited)
(dollars in thousands)
- -----------------------------------------------------------------------------------------------------------------------
April 1, 2005 December 31, 2004
-------------- -----------------
ASSETS
Investments:
Affiliate debentures $ 900,546 $ 900,546
U.S. Government and agencies 9,169 9,116
---------- ----------
Total investments 909,715 909,662
---------- ----------
Total Assets $ 909,715 $ 909,662
========== ==========
PARTNERS' CAPITAL
Partners' capital:
Limited partnership interest $ 773,196 $ 773,196
General partnership interest 136,519 136,466
---------- ----------
Total Partners' Capital $ 909,715 $ 909,662
========== ==========
See Note to Condensed Financial Statements
7
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED STATEMENTS OF EARNINGS (unaudited)
(dollars in thousands)
- -----------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
-----------------------------------
April 1, 2005 March 26, 2004
-------------- --------------
EARNINGS
Interest income:
Affiliate debentures $ 15,760 $ 15,760
U.S. Government and agencies 53 18
---------- ----------
Earnings $ 15,813 $ 15,778
========== ==========
See Note to Condensed Financial Statements
8
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (unaudited)
(dollars in thousands)
- ------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
-----------------------------------
April 1, 2005 March 26, 2004
-------------- --------------
LIMITED PARTNER'S CAPITAL
Balance, beginning of period $ 773,196 $ 773,196
Net income allocated to limited partner 13,531 13,531
Distributions (13,531) -
Distributions payable - (13,531)
---------- ----------
Balance, end of period 773,196 773,196
---------- ----------
GENERAL PARTNER'S CAPITAL
Balance, beginning of period 136,466 136,455
Net income allocated to general partner 2,282 2,247
Distributions (2,229) -
Distributions payable - (2,229)
---------- ----------
Balance, end of period 136,519 136,473
---------- ----------
TOTAL PARTNERS' CAPITAL $ 909,715 $ 909,669
========== ==========
See Note to Condensed Financial Statements
9
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
(dollars in thousands)
- -------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
-----------------------------------
April 1, 2005 March 26, 2004
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings $ 15,813 $ 15,778
Accretion of U.S. Government and agencies (53) (18)
--------- ---------
Cash provided by operating activities 15,760 15,760
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to limited partner (13,531) (13,531)
Distributions to general partner (2,229) (2,229)
--------- ---------
Cash used for financing activities (15,760) (15,760)
--------- ---------
NET CHANGE IN CASH - -
CASH, BEGINNING OF PERIOD - -
--------- ---------
CASH, END OF PERIOD $ - $ -
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
No were accrued at April 1, 2005 and distributions of $15,760 were accrued at
March 26, 2004.
See Note to Condensed Financial Statements
10
MERRILL LYNCH PREFERRED FUNDING III, L.P.
NOTE TO CONDENSED FINANCIAL STATEMENTS (unaudited)
April 1, 2005
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
These unaudited condensed financial statements should be read in conjunction
with the audited financial statements included in the Annual Report on Form 10-K
of Merrill Lynch Preferred Funding III, L.P. (the "Partnership") for the year
ended December 31, 2004. The December 31, 2004 balance sheet information was
derived from the audited financial statements. The interim condensed financial
statements for the three-month periods are unaudited; however, in the opinion of
the General Partner of the Partnership, all adjustments, consisting only of
normal recurring accruals necessary for a fair statement of the results of
operations, have been included.
INVESTMENTS
The Partnership's investment in affiliate debentures, which is recorded at cost,
and its investment in U.S. Government and agencies, which are recorded at
accreted cost and which mature within one year, are classified as
available-for-sale, which both approximate fair value.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
No disclosure is required for this Item pursuant to General Instruction H of
Form 10-Q. There are no material changes in the amount of revenue and expense
items between the most recent fiscal year-to-date period presented and the
corresponding year-to-date period in the preceding fiscal year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
No disclosure is required for this Item pursuant to General Instruction H of
Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
The persons who function as the equivalent of the chief executive officer and
chief financial officer of the Trust and the Partnership have evaluated the
effectiveness of the Trust's and the Partnership's disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934) as of the end of the period covered by this Report. Based on that
evaluation, the persons who function as the equivalent of the chief executive
officer and chief financial officer of the Trust and the Partnership have
concluded that the Trust's and the Partnership's disclosure controls and
procedures were effective as of the end of the period covered by this Report.
In addition, no change in the Trust's and the Partnership's internal control
over financial reporting (as defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934) occurred during the first fiscal quarter of 2005 that
has materially affected, or is reasonably likely to materially affect, the
Trust's or the Partnership's internal control over financial reporting.
12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
12 Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions.
31.1 Rule 13a - 14(a) Certification.
31.2 Rule 13a - 14(a) Certification.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
MERRILL LYNCH PREFERRED CAPITAL TRUST III*
By: /s/ HAIG J. NARGESIAN
---------------------------------------------
Name: Haig J. Nargesian
Title: Regular Trustee
MERRILL LYNCH PREFERRED FUNDING III, L.P.*
By: MERRILL LYNCH & CO., INC., as General Partner
By: /s/ KATHLEEN SKERO
---------------------------------------------
Name: Kathleen Skero
Title: Controller, Merrill Lynch & Co., Inc.
May 12, 2005
- -----------
* There is no principal executive officer(s), principal financial officer,
controller, principal accounting officer or board of directors of the
Registrants. The Trustees of the Trust (which include the Regular Trustees, the
Property Trustee and the Delaware Trustee) together exercise all powers and
perform all functions with respect to the Trust.
14
INDEX TO EXHIBITS
EXHIBITS
12 Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions.
31.1 Rule 13a - 14(a) Certification.
31.2 Rule 13a - 14(a) Certification.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15