10-Q 1 toprs1_062504.txt TOPRS1 2Q04 6/25/04 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 25, 2004 MERRILL LYNCH PREFERRED CAPITAL TRUST I (Exact name of Registrant as specified in its certificate of trust) COMMISSION FILE NO.: 1-7182-01 Delaware 13-7102991 (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 MERRILL LYNCH PREFERRED FUNDING I, L.P. (Exact name of Registrant as specified in its certificate of limited partnership) COMMISSION FILE NO.: 1-7182-02 Delaware 13-3917686 (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 Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of August 4, 2004 no voting stock was held by non-affiliates of the Registrants. ================================================================================ PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS --------------------

MERRILL LYNCH PREFERRED CAPITAL TRUST I CONDENSED BALANCE SHEETS (unaudited) (dollars in thousands, except per security amounts) -----------------------------------------------------------------------------------------------------------------------~~--------~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 DECEMBER 2726, ~~2002~~2003 -------------~~-----~~ ----------------- ASSETS Investment in partnership preferred securities $ 283,505 $ 283,505 ~~Income~~Interest receivable from affiliates 5,493 5,493 ---------- ---------- Total Assets $ 288,998 $ 288,998 ========== ========== LIABILITY AND STOCKHOLDERS' EQUITY Distributions payable $ 5,493 $ 5,493 ---------- ---------- Stockholders' equity: Preferred securities (7 3/4% Trust Originated Preferred Securities; 11,000,000 authorized, issued, and outstanding; $25 liquidation amount per security) 275,000 275,000 Common securities (7 3/4% Trust Common Securities; 340,208 authorized, issued, and outstanding; $25 liquidation amount per security) 8,505 8,505 ---------- ---------- Total Stockholders' equity 283,505 283,505 ---------- ---------- Total Liability and Stockholders' Equity $ 288,998 $ 288,998 ========== ==========

See Note to Condensed Financial Statements 2

MERRILL LYNCH PREFERRED CAPITAL TRUST I CONDENSED STATEMENTS OF EARNINGS (unaudited) (dollars in thousands) -----------------------------------------------------------------------------------------------------------~~---------~~ FOR THE THREE MONTHS ENDED ----------------------------------~~-----~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~SEPTEMBER~~June 27, ~~2002~~2003 -------------~~-----~~ -------------~~-----~~ EARNINGS Income on partnership preferred securities $ 5,493 $ 5,493 ========= ========= FOR THE ~~NINE~~SIX MONTHS ENDED ----------------------------------~~-----~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~SEPTEMBER~~June 27, ~~2002~~2003 -------------~~-----~~ -------------~~-----~~ EARNINGS Income on partnership preferred securities $ 1610,~~479~~986 $ 1610,~~479~~986 ========= =========

See Note to Condensed Financial Statements 3

MERRILL LYNCH PREFERRED CAPITAL TRUST I CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) (dollars in thousands) ------------------------------------------------------------------------------------------------- FOR THE ~~NINE~~SIX MONTHS ENDED ----------------------------------~~-----~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~SEPTEMBER~~June 27, ~~2002~~2003 -------------~~-----~~ -------------~~-----~~ PREFERRED SECURITIES Balance, beginning and end of period $ 275,000 $ 275,000 ---------- ---------- COMMON SECURITIES Balance, beginning and end of period 8,505 8,505 ---------- ---------- UNDISTRIBUTED EARNINGS Balance, beginning of period - - Earnings 1610,~~479~~986 1610,~~479~~986 Distributions (105,~~986~~493) (105,~~986~~493) Distributions payable (5,493) (5,493) ---------- ---------- Balance, end of period - - ---------- ---------- Total Stockholders' Equity $ 283,505 $ 283,505 ========== ==========

See Note to Condensed Financial Statements 4

MERRILL LYNCH PREFERRED CAPITAL TRUST I CONDENSED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands) ------------------------------------------------------------------------------------------------------------------- FOR THE ~~NINE~~SIX MONTHS ENDED ----------------------------------~~-----~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~SEPTEMBER~~June 27, ~~2002~~2003 -------------~~-----~~ -------------~~-----~~ CASH FLOWS FROM OPERATING ACTIVITIES: Earnings $ 1610,~~479~~986 $ 1610,~~479~~986 --------- --------- Cash provided by operating activities 1610,~~479~~986 1610,~~479~~986 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions (1610,~~479~~986) (1610,~~479~~986) --------- --------- Cash used for financing activities (1610,~~479~~986) (1610,~~479~~986) --------- --------- NET CHANGE IN CASH - - CASH, BEGINNING OF PERIOD - - --------- --------- CASH, END OF PERIOD $ - $ - ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOWS: Preferred and common distributions of $5,328 and $165, respectively, were accrued at ~~September~~June 2625, ~~2003~~2004 and ~~September~~June 27, ~~2002~~2003.

See Note to Condensed Financial Statements 5 MERRILL LYNCH PREFERRED CAPITAL TRUST I NOTE TO CONDENSED FINANCIAL STATEMENTS (unaudited) June 25, 2004 ------------------------------------------------------------------------------- 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 I (the "Trust") for the year ended December 26, 2003. The December 26, 2003 balance sheet information was derived from the audited financial statements. The interim financial statements for the three- and six-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 I, 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 I, L.P. CONDENSED BALANCE SHEETS (unaudited) (dollars in thousands) ----------------------------------------------------------------------------------------------------------------~~-------~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~DECEMBER~~December 2726, ~~2002~~2003 -------------~~-----~~ ----------------- ASSETS Cash $ - $ - Investments: Affiliate debentures 330,055 330,055 U.S. Government and agencies 3,483 3,~~499~~483 ---------- ---------- Total investments 333,538 333,~~554~~538 ~~Income~~Interest receivable from affiliates 6,395 6,395 ---------- ---------- Total Assets $ 339,933 $ 339,~~949~~933 ========== ========== LIABILITY AND PARTNERS' CAPITAL Distributions payable $ 6,395 $ 6,395 ---------- ---------- Partners' capital: Limited partnership interest 283,505 283,505 General partnership interest 50,033 50,~~049~~033 ---------- ---------- Total partners' capital 333,538 333,~~554~~538 ---------- ---------- Total Liability and Partners' Capital $ 339,933 $ 339,~~949~~933 ========== ==========

See Note to Condensed Financial Statements 7

MERRILL LYNCH PREFERRED FUNDING I, L.P. CONDENSED STATEMENTS OF EARNINGS (unaudited) (dollars in thousands) -----------------------------------------------------------------------------------------------~~--------~~ FOR THE THREE MONTHS ENDED ----------------------------------~~-----~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~SEPTEMBER~~June 27, ~~2002~~2003 -------------~~-----~~ -------------~~-----~~ EARNINGS Interest income: Affiliate debentures $ 6,395 $ 6,395 U.S. Government and agencies 14 10 16 ---------- ---------- Earnings $ 6,~~405~~409 $ 6,~~411~~405 ========== ========== FOR THE ~~NINE~~SIX MONTHS ENDED ----------------------------------~~-----~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~SEPTEMBER~~June 27, ~~2002~~2003 -------------~~-----~~ -------------~~-----~~ EARNINGS Interest income: Affiliate debentures $ 1912,~~185~~790 $ 1912,~~184~~790 U.S. Government and agencies 3321 6223 ---------- ---------- Earnings $ 1912,~~218~~811 $ 1912,~~246~~813 ========== ==========

See Note to Condensed Financial Statements 8

MERRILL LYNCH PREFERRED FUNDING I, L.P. CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (unaudited) (dollars in thousands) ------------------------------------------------------------------------------------------------~~--------~~ FOR THE ~~NINE~~SIX MONTHS ENDED ----------------------------------~~-----~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~SEPTEMBER~~June 27, ~~2002~~2003 -------------~~-----~~ -------------~~-----~~ LIMITED PARTNER'S CAPITAL Balance, beginning of period $ 283,505 $ 283,505 Net income allocated to limited partner 1610,~~479~~986 1610,~~479~~986 Distributions (105,~~986~~493) (105,~~986~~493) Distributions payable (5,493) (5,493) ---------- ---------- Balance, end of period 283,505 283,505 ---------- ---------- GENERAL PARTNER'S CAPITAL Balance, beginning of period 50,~~049~~033 50,~~131~~049 Net income allocated to general partner 21,~~739~~825 21,~~767~~827 Distributions (~~1,853~~923) (~~1,961~~931) Distributions payable (902) (902) ---------- ---------- Balance, end of period 50,033 50,~~035~~043 ---------- ---------- TOTAL PARTNERS' CAPITAL $ 333,538 $ 333,~~540~~548 ========== ==========

See Note to Condensed Financial Statements 9

MERRILL LYNCH PREFERRED FUNDING I, L.P. CONDENSED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands) ---------------------------------------------------------------------------------------------------------------------------- FOR THE ~~NINE~~SIX MONTHS ENDED ----------------------------------~~-----~~ ~~SEPTEMBER~~June 2625, ~~2003~~2004 ~~SEPTEMBER~~June 27, ~~2002~~2003 -------------~~-----~~ --------------~~----~~ CASH FLOWS FROM OPERATING ACTIVITIES: Earnings $ 1912,~~218~~811 $ 1912,~~246~~813 Accretion of U.S. Government and agencies (3321) (6223) --------- --------- Cash provided by operating activities 1912,~~185~~790 1912,~~184~~790 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investment securities (63,~~960~~479) (63,~~959~~480) Maturities of investment securities 73,~~009~~500 73,~~117~~509 --------- --------- Cash provided by investing activities 4921 ~~158~~29 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to limited partner (1610,~~479~~986) (1610,~~479~~986) Distributions to general partner (21,~~755~~825) (21,~~863~~833) --------- --------- Cash used for financing activities (1912,~~234~~811) (1912,~~342~~819) --------- --------- NET CHANGE IN CASH - - CASH, BEGINNING OF PERIOD - 1- --------- --------- CASH, END OF PERIOD $ - $ 1- ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOWS: Distributions of $6,395 were accrued at ~~September~~June 2625, ~~2003~~2004 and ~~September~~June 27, ~~2002~~2003.

See Note to Condensed Financial Statements 10 MERRILL LYNCH PREFERRED FUNDING I, L.P. NOTE TO CONDENSED FINANCIAL STATEMENTS (unaudited) June 25, 2004 -------------------------------------------------------------------------------- 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 I, L.P. (the "Partnership") for the year ended December 26, 2003. The December 26, 2003 balance sheet information was derived from the audited financial statements. The interim financial statements for the three- and six-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 is recorded at cost and its investment in U.S. Government and agencies is classified as available -for-sale and recorded at accreted cost, 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 are effective. 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 second fiscal quarter of 2004 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 AND REPORTS ON FORM 8-K (a) 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. (b) Reports on Form 8-K None. 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 I* By: /s/ HAIG J. NARGESIAN --------------------------------------------- Name: Haig J. Nargesian Title: Regular Trustee MERRILL LYNCH PREFERRED FUNDING I, L.P.* By: MERRILL LYNCH & CO., INC., as General Partner By: /s/ JOHN J. FOSINA --------------------------------------------- Name: John J. Fosina Title: Controller, Merrill Lynch & Co., Inc. Date: August 4, 2004 -------------------- * 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

Filing Compare · MERRILL LYNCH PREFERRED CAPITAL TRUST I