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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x | Quarterly Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934. |
For the quarterly period ended March 31, 2008
¨ | 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 000-24175
ATEL Capital Equipment Fund VII, L.P.
(Exact name of registrant as specified in its charter)
California | 94-3248318 | |
(State or other jurisdiction of Incorporation or organization) | (I. R. S. Employer Identification No.) |
600 California Street, 6th Floor, San Francisco, California 94108-2733
(Address of principal executive offices)
Registrant’s telephone number, including area code (415) 989-8800
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Limited Partnership Units
Indicate by a check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The number of Limited Partnership Units outstanding as of April 30, 2008 was 14,985,550.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Table of Contents
ATEL CAPITAL EQUIPMENT FUND VII, L. P.
Part I. | Financial Information | |||
Item 1. | Financial Statements (Unaudited) | |||
Balance Sheets, March 31, 2008 and December 31, 2007 | 3 | |||
Statements of Operations for the three months ended March 31, 2008 and 2007 | 4 | |||
Statements of Changes in Partners’ Capital for the year ended December 31, 2007 and for the three months ended March 31, 2008 | 5 | |||
Statements of Cash Flows for the three months ended March 31, 2008 and 2007 | 6 | |||
Notes to the Financial Statements | 7 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||
Item 4. | Controls and Procedures | 19 | ||
Part II. | Other Information | |||
Item 1. | Legal Proceedings | 20 | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 20 | ||
Item 3. | Defaults Upon Senior Securities | 20 | ||
Item 4. | Submission of Matters to a Vote of Security Holders | 20 | ||
Item 5. | Other Information | 20 | ||
Item 6. | Exhibits | 20 |
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Part I. FINANCIAL INFORMATION
Item 1. | Financial Statements (Unaudited). |
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
BALANCE SHEETS
MARCH 31, 2008 AND DECEMBER 31, 2007
(in thousands)
March 31, 2008 | December 31, 2007 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
Cash and cash equivalents | $ | 3,005 | $ | 3,909 | ||
Accounts receivable, net of allowance for doubtful accounts of $515 as of March 31, 2008 and $516 as of December 31, 2007 | 515 | 1,775 | ||||
Investments in equipment and leases, net of accumulated depreciation and impairment loss of $53,911 as of March 31, 2008 and $54,224 as of December 31, 2007 | 15,970 | 17,570 | ||||
Due from Affiliates | 295 | — | ||||
Other assets | 12 | 34 | ||||
Total assets | $ | 19,797 | $ | 23,288 | ||
LIABILITIES AND PARTNERS’ CAPITAL | ||||||
Accounts payable and accrued liabilities: | ||||||
General Partner | $ | 523 | $ | 546 | ||
Other | 337 | 754 | ||||
Accrued interest payable | 1 | 1 | ||||
Non-recourse debt | — | 24 | ||||
Interest rate swap contracts | 5 | 7 | ||||
Unearned operating lease income | 421 | 210 | ||||
Total liabilities | 1,287 | 1,542 | ||||
Partners’ capital: | ||||||
General Partner | — | — | ||||
Limited Partners | 18,510 | 21,746 | ||||
Total Partners’ capital | 18,510 | 21,746 | ||||
Total liabilities and Partners’ capital | $ | 19,797 | $ | 23,288 | ||
See accompanying notes.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31, 2008 AND 2007
(in thousands, except per unit data)
(Unaudited)
Three months ended March 31, | ||||||||
2008 | 2007 | |||||||
Revenues: | ||||||||
Leasing activities: | ||||||||
Operating leases | $ | 1,600 | $ | 3,184 | ||||
Direct financing leases | 19 | 31 | ||||||
(Loss) gain on sales of assets | (233 | ) | 316 | |||||
Interest income | 18 | 104 | ||||||
Other | 1 | 103 | ||||||
Total revenues | 1,405 | 3,738 | ||||||
Expenses: | ||||||||
Depreciation of operating lease assets | 823 | 1,411 | ||||||
Marine vessel maintenance and other operating costs | 377 | 556 | ||||||
Interest expense | 4 | 9 | ||||||
Cost reimbursements to General Partner | 750 | 750 | ||||||
Provision for impairment loss | 200 | — | ||||||
Equipment and incentive management fees to General Partner | 73 | 61 | ||||||
Railcar and equipment maintenance | 143 | 169 | ||||||
Professional fees | 87 | 184 | ||||||
Insurance | 11 | 61 | ||||||
Equipment storage | — | 1 | ||||||
Reversal of provision for doubtful accounts | (1 | ) | (22 | ) | ||||
Other | 146 | 274 | ||||||
Total operating expenses | 2,613 | 3,454 | ||||||
(Loss) income from operations | (1,208 | ) | 284 | |||||
Other expense, net | — | (6 | ) | |||||
Net (loss) income | $ | (1,208 | ) | $ | 278 | |||
Net income (loss): | ||||||||
General Partner | $ | 152 | $ | — | ||||
Limited Partners | (1,360 | ) | 278 | |||||
$ | (1,208 | ) | $ | 278 | ||||
Net (loss) income per Limited Partnership Unit | $ | (0.09 | ) | $ | 0.02 | |||
Weighted average number of Units outstanding | 14,985,550 | 14,985,550 |
See accompanying notes.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2007 AND
FOR THE THREE MONTHS ENDED
MARCH 31, 2008
(in thousands, except per unit data)
(Unaudited)
Limited Partners | General | |||||||||||||
Units | Amount | Partner | Total | |||||||||||
Balance December 31, 2006 | 14,985,550 | $ | 31,808 | $ | — | $ | 31,808 | |||||||
Distributions to Limited Partners ($0.80 per Unit) | — | (11,991 | ) | — | (11,991 | ) | ||||||||
Distributions to General Partner | — | — | (972 | ) | (972 | ) | ||||||||
Net income | — | 1,929 | 972 | 2,901 | ||||||||||
Balance December 31, 2007 | 14,985,550 | 21,746 | — | 21,746 | ||||||||||
Distributions to Limited Partners ($0.13 per Unit) | — | (1,876 | ) | — | (1,876 | ) | ||||||||
Distributions to General Partner | — | — | (152 | ) | (152 | ) | ||||||||
Net (loss) income | — | (1,360 | ) | 152 | (1,208 | ) | ||||||||
Balance March 31, 2008 | 14,985,550 | $ | 18,510 | $ | — | $ | 18,510 | |||||||
See accompanying notes.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH ENDED
MARCH 31, 2008 AND 2007
(in thousands)
(Unaudited)
Three months ended March 31, | ||||||||
2008 | 2007 | |||||||
Operating activities: | ||||||||
Net (loss) income | $ | (1,208 | ) | $ | 278 | |||
Adjustments to reconcile net (loss) income to cash provided by operating activities: | ||||||||
Loss (gain) on sales of assets | 233 | (316 | ) | |||||
Depreciation of operating lease assets | 823 | 1,411 | ||||||
Amortization of unearned income on direct finance leases | (19 | ) | (31 | ) | ||||
Portion of swap liability charged to interest expense | (1 | ) | (1 | ) | ||||
Change in fair value of interest rate swap contracts | (1 | ) | (3 | ) | ||||
Reversal of provision for doubtful accounts | (1 | ) | (22 | ) | ||||
Provision for impairment loss | 200 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 1,261 | 248 | ||||||
Other assets | 22 | 59 | ||||||
Accounts payable: | ||||||||
General Partner | (23 | ) | 71 | |||||
Other | (417 | ) | (378 | ) | ||||
Affiliates | (295 | ) | — | |||||
Unearned lease income | 211 | 19 | ||||||
Net cash provided by operating activities | 785 | 1,335 | ||||||
Investing activities: | ||||||||
Proceeds from sales of lease assets | 243 | 1,703 | ||||||
Payments received on direct finance leases | 120 | 108 | ||||||
Net cash provided by investing activities | 363 | 1,811 | ||||||
Financing activities: | ||||||||
Repayments of: | ||||||||
Non-recourse debt | (24 | ) | (23 | ) | ||||
Distributions: | ||||||||
General Partner | (152 | ) | — | |||||
Limited Partners | (1,876 | ) | — | |||||
Net cash used in financing activities | (2,052 | ) | (23 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (904 | ) | 3,123 | |||||
Cash and cash equivalents at beginning of period | 3,909 | 7,367 | ||||||
Cash and cash equivalents at end of period | $ | 3,005 | $ | 10,490 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for interest | $ | 4 | $ | 9 | ||||
See accompanying notes.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Limited Partnership matters:
ATEL Capital Equipment Fund VII, L.P. (the “Partnership”) was formed under the laws of the State of California on May 17, 1996 for the purpose of acquiring equipment to engage in equipment leasing and sales activities, primarily in the United States. The Partnership may continue until December 31, 2017. The General Partner of the Partnership is ATEL Financial Services, LLC (“AFS”), a California limited liability company. Prior to converting to a limited liability company structure, AFS was formerly known as ATEL Financial Corporation.
The Partnership conducted a public offering of 15,000,000 Units of Limited Partnership Interest (“Units”), at a price of $10 per Unit. On January 7, 1997, subscriptions for the minimum number of Units (120,000, $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Partnership. On that date, the Partnership commenced operations in its primary business (acquiring equipment to engage in equipment leasing and sales activities). Gross contributions in the amount of $150 million (15,000,000 units) were received as of November 27, 1998, exclusive of $500 of Initial Partners’ capital investment and $100 of AFS’ capital investment. The offering was terminated on November 27, 1998.
The Partnership’s principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Partnership’s invested capital; (ii) generates regular distributions to the partners of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), which ended December 31, 2004 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Partnership is governed by its Limited Partnership Agreement (“Partnership Agreement”).
Pursuant to the Partnership Agreement, AFS receives compensation and reimbursements for services rendered on behalf of the Partnership (Note 4). AFS is required to maintain in the Partnership reasonable cash reserves for working capital, the repurchase of Units and contingencies.
The Partnership is in the liquidation phase of its life cycle as defined in the Partnership Agreement.
2. Summary of significant accounting policies:
Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 8 of Regulation S-X. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the General Partner, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that effect reported amounts in the financial statements and accompanying notes. Therefore, actual results could differ from those estimates. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results for the year ending December 31, 2008.
Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on equity or net income.
Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.
Use of estimates:
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term, expected future cash flows used for impairment analysis purposes, and determination of the allowance for doubtful accounts.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies (continued):
Cash and cash equivalents:
Cash and cash equivalents include cash in banks and cash equivalent investments with original maturities of ninety days or less.
Credit risk:
Financial instruments that potentially subject the Partnership to concentrations of credit risk include cash and cash equivalents, direct finance lease receivables and accounts receivable. The Partnership places its cash deposits and temporary cash investments with creditworthy, high quality financial institutions. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Partnership. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating leases and direct financing leases.
Accounts receivable:
Accounts receivable represent the amounts billed under operating and direct finance lease contracts which are currently due to the Partnership. Allowances for doubtful accounts are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and invoiced amounts. Accounts receivable are charged off to the allowance on specific identification basis. Amounts recovered that were previously written-off are recorded as other income in the period received.
Direct financing leases and related revenue recognition:
Income from direct financing lease transactions is reported using the financing method of accounting, in which the Partnership’s investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding.
Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and billed and unbilled receivables. Direct financing leases are written-off to the allowance as they are deemed uncollectible.
Direct financing leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the credit worthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon management’s judgment, direct finance lessees with balances less than 90 days delinquent may be placed in a non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable.
Equipment on operating leases and related revenue recognition:
Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values at the end of the leases. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred.
Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally from 36 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies (continued):
Initial direct costs:
In prior years, the Partnership capitalized initial direct costs (“IDC”) associated with the origination and funding of lease assets as defined in Statement of Financial Accounting Standards (“SFAS”) No. 91 “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases.” IDC included both internal costs (e.g., labor and overhead) and external broker fees incurred with the acquisition. Remaining IDC is being amortized on a lease by lease basis based on actual lease term using a straight-line method for operating leases and the effective interest rate method for direct finance leases. Upon disposal of the underlying lease assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases that were not consummated were not eligible for capitalization as initial direct costs. Such amounts were expensed as acquisition expense.
Asset valuation:
Recorded values of the Partnership’s asset portfolio are periodically reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows) of the asset and its carrying value on the measurement date.
Segment reporting:
The Partnership adopted the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” SFAS No. 131 establishes annual and interim standards for operating segments of a Partnership. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenue, and its major customers. The Partnership is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly the Partnership operates in one reportable operating segment in the United States.
The Partnership’s chief operating decision makers are the General Partner’s Chief Executive Officer and its Chief Operating Officer. The Partnership believes that its equipment leasing business operates as one reportable segment because: a) the Partnership measures profit and loss at the equipment portfolio level as a whole; b) the chief operating decision makers do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Partnership does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Partnership has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Partnership has not chosen to organize its business around geographic areas.
Certain of the Partnership’s lessee customers have international operations. In these instances, the Partnership is aware that certain equipment, primarily rail and transportation, may periodically exit the country. However, these lessee customers are US-based, and it is impractical for the Partnership to track, on an asset-by-asset and day-by-day basis, where these assets are deployed.
The primary geographic regions in which the Partnership sought leasing opportunities were North America and Europe. Currently, 100% of the Partnership’s operating revenues are from customers domiciled in North America.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies (continued):
Derivative financial instruments:
In June 1998, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which established new accounting and reporting standards for derivative instruments. SFAS No. 133 has been amended by SFAS No. 137, issued in June 1999, by SFAS No. 138, issued in June 2000 and by SFAS No. 149, issued in June 2003.
The Partnership recognizes all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. Derivative instruments are designated as fair value, cash flow, or foreign currency hedges, and reported with changes in the fair value of the derivative instruments. Upon adoption on January 1, 2001, the Partnership recorded its interest rate swap hedging instruments at fair value in the balance sheet, designated the interest rate swaps as cash flow hedges, and recognized the offsetting gains or losses as adjustments to be reported in net income or other comprehensive income, as appropriate. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in current earnings during the period of change. Such interest rate swaps are linked to and adjust effectively the interest rate sensitivity of specific long-term debt.
The effective portion of the change in fair value of the interest rate swaps is recorded in Accumulated Other Comprehensive Loss (“AOCL”) and the ineffective portion (if any) directly in earnings. Amounts in AOCL are reclassified into earnings in a manner consistent with the earnings pattern of the underlying hedged item (generally reflected in interest expense). If a hedged item is de-designated prior to maturity, previous adjustments to AOCL are recognized in earnings to match the earnings recognition pattern of the hedged item (e.g., level yield amortization if hedging an interest bearing instruments). Interest income or expense on most hedging derivatives used to manage interest rate exposure is recorded on an accrual basis as an adjustment to the yield of the link exposures over the periods covered by the contracts. This matches the income recognition treatment of the exposure (i.e., the liabilities, which are carried at historical cost, with interest recorded on an accrual basis). See note 5, Receivables funding program, for further information regarding interest rate swaps.
Credit exposure from derivative financial instruments, which are assets, arises from the risk of a counterparty default on the derivative contract. The amount of the loss created by the default is the replacement cost or current positive fair value of the defaulted contract.
Unearned operating lease income:
The Partnership records prepayments on operating leases as a liability, unearned operating lease income. The liability is recorded when the prepayments are received and recognized as operating lease revenue ratably over the period to which the prepayments relate.
Income taxes:
Pursuant to the provisions of Section 701 of the Internal Revenue Code, a partnership is not subject to federal income taxes. Accordingly, the Partnership has provided current income and franchise taxes for only those states which levy taxes on partnerships.
Per unit data:
Net income (loss) and distributions per Unit are based upon the weighted average number of Limited Partnership Units outstanding during the period.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies (continued):
Other expense, net:
Other expense, net consists of gains on interest rate swap contracts and losses on foreign currency transactions, and is detailed below for the three months ended March 31, 2008 and 2007, respectively (in thousands):
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
Foreign currency loss | $ | (1 | ) | $ | (9 | ) | ||
Change in fair value of interest rate swap contracts | 1 | 3 | ||||||
$ | — | $ | (6 | ) | ||||
Recent accounting pronouncements:
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”), as an amendment to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 161 requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The fair value of derivative instruments and their gains and losses will need to be presented in tabular format in order to present a more complete picture of the effects of using derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of adopting this pronouncement.
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R replaces SFAS 141 and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. This standard is effective for fiscal years beginning after December 15, 2008. The Partnership does not presently anticipate the adoption of SFAS 141R to significantly impact its financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115” (“SFAS 159”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. The Partnership adopted the provisions of SFAS 159 on January 1, 2008. The adoption of SFAS 159 did not have a significant effect on the Partnership’s financial position, results of operations or cash flows.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The provisions of SFAS 157 were to be effective for fiscal years beginning after November 15, 2007. However, in February 2008, the FASB issued FASB Staff Position (“FSP”) No. 157-2, which defers the effective date of SFAS 157 as it pertains to fair value measurements of nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. On January 1, 2008, the Partnership adopted the provisions of SFAS 157 except as it applied to its investment in equipment and leases, and other nonfinancial assets and nonfinancial liabilities as noted in FSP No. 157-2. The partial adoption of SFAS 157 did not have a significant effect on the Partnership’s financial position, results of operations or cash flows.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
3. Investment in equipment and leases, net:
The Partnership’s investments in equipment and leases consist of the following (in thousands):
Balance December 31, 2007 | Reclassifications & Additions / Dispositions | Depreciation/ Amortization Expense or Amortization of Leases | Balance March 31, 2008 | ||||||||||||
Net investment in operating leases | $ | 16,693 | $ | (479 | ) | $ | (813 | ) | $ | 15,401 | |||||
Net investment in direct financing leases | 825 | 2 | (101 | ) | 726 | ||||||||||
Assets held for sale or lease, net | 51 | (199 | ) | (10 | ) | (158 | ) | ||||||||
Initial direct costs | 1 | — | — | 1 | |||||||||||
Total | $ | 17,570 | $ | (676 | ) | $ | (924 | ) | $ | 15,970 | |||||
Impairment of investments in leases and assets held for sale or lease:
Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. For the three months ended March 31, 2008, the Partnership established a $200 thousand impairment loss reserve related to impaired refrigerated containers. No assets were identified as impaired during management’s review for the three months ended March 31, 2007.
Depreciation expense on property subject to operating leases and property held for lease or sale totaled $823 thousand and $1.4 million for the three months ended March 31, 2008 and 2007.
Operating leases:
Property on operating leases consists of the following (in thousands):
Balance December 31, 2007 | Additions | Reclassifications or Dispositions | Balance March 31, 2008 | |||||||||||||
Transportation | $ | 46,577 | $ | — | $ | (1,826 | ) | $ | 44,751 | |||||||
Marine vessels/barges | 17,859 | — | — | 17,859 | ||||||||||||
Construction | 4,222 | — | 276 | 4,498 | ||||||||||||
Mining equipment | 772 | — | — | 772 | ||||||||||||
Materials handling | 413 | — | — | 413 | ||||||||||||
Other | 432 | — | (5 | ) | 427 | |||||||||||
70,275 | — | (1,555 | ) | 68,720 | ||||||||||||
Less: accumulated depreciation | (53,582 | ) | (813 | ) | 1,076 | (53,319 | ) | |||||||||
Total | $ | 16,693 | $ | (813 | ) | $ | (479 | ) | $ | 15,401 | ||||||
Direct financing leases:
As of March 31, 2008 and December 31, 2007, investment in direct financing leases consists of various transportation, manufacturing and medical equipment. The following lists the components of the Partnership’s investment in direct financing leases as of March 31, 2008 and December 31, 2007 (in thousands):
March 31, 2008 | December 31, 2007 | |||||||
Total minimum lease payments receivable | $ | 160 | $ | 299 | ||||
Estimated residual values of leased equipment (unguaranteed) | 615 | 615 | ||||||
Investment in direct financing leases | 775 | 914 | ||||||
Less unearned income | (49 | ) | (89 | ) | ||||
Net investment in direct financing leases | $ | 726 | $ | 825 | ||||
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
3. Investment in equipment and leases, net (continued):
At March 31, 2008, the aggregate amounts of future minimum lease payments are as follows (in thousands):
Operating Leases | Direct Financing Leases | Total | |||||||||
Nine months ending December 31, 2008 | $ | 2,773 | $ | 109 | $ | 2,882 | |||||
Year ending December 31, 2009 | 3,072 | 41 | 3,113 | ||||||||
2010 | 1,295 | 10 | 1,305 | ||||||||
2011 | 746 | — | 746 | ||||||||
2012 | 537 | — | 537 | ||||||||
2013 | 140 | — | 140 | ||||||||
Thereafter | — | — | — | ||||||||
$ | 8,563 | $ | 160 | $ | 8,723 | ||||||
The Partnership utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of lease transactions. The useful lives for investment in leases by category are as follows (in years):
Equipment category | Useful Life | |
Mining | 30-40 | |
Transportation, rail | 30-35 | |
Marine vessels | 20-30 | |
Materials handling | 7-10 | |
Transportation, other | 7-10 | |
Construction | 7-10 |
4. Related party transactions:
The terms of the Partnership Agreement provide that AFS and/or affiliates are entitled to receive certain fees for equipment management and resale and for management of the Partnership.
The Partnership Agreement allows for the reimbursement of costs incurred by AFS in providing administrative services to the Partnership. Administrative services provided include Partnership accounting, investor relations, legal counsel and lease and equipment documentation. AFS is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as disposition of equipment. Reimbursable costs incurred by AFS are allocated to the Partnership based upon estimated time incurred by employees working on Partnership business and an allocation of rent and other costs based on utilization studies.
Each of ATEL Leasing Corporation (“ALC”), ATEL Equipment Corporation (“AEC”), ATEL Investor Services (“AIS”) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Partnership. Acquisition services are performed for the Partnership by ALC; equipment management, lease administration and asset disposition services are performed by AEC; investor relations and communications services are performed by AIS; and general administrative services for the Partnership are performed by AFS.
Cost reimbursements to the General Partner are based on its costs incurred in performing administrative services for the Partnership. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.
Incentive management fees are computed as 4.0% of distributions of cash from operations, as defined in the Partnership Agreement and equipment management fees are computed as 3.5% of gross revenues from operating leases, as defined in the Partnership Agreement plus 2.0% of gross revenues from full payout leases, as defined in the Partnership Agreement.
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
4. Related party transactions (continued):
During the three months ended March 31, 2008 and 2007, AFS earned fees, commissions and reimbursements, pursuant to the Partnership Agreement as follows (in thousands):
Three Months Ended March 31, | ||||||
2008 | 2007 | |||||
Equipment and incentive management fees to General Partner | $ | 73 | $ | 61 | ||
Cost reimbursements to General Partner and/or affiliates | 750 | 750 | ||||
$ | 823 | $ | 811 | |||
The Partnership Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or affiliates. The cumulative limit increases annually. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be reimbursable in future years to the extent of the cumulative limit. As of March 31, 2008, costs reimbursable to AFS in future periods totaled approximately $406 thousand.
5. Receivables funding program:
In 1998, the Partnership entered into a $65 million receivables funding program (the “Program”) with a third party receivables financing company that issues commercial paper rated A1 by Standard and Poor’s and P1 by Moody’s Investor Services. Under the Program, the receivables financing company received a general lien against all of the otherwise unencumbered assets of the Partnership. The program provided for borrowing at a variable interest rate and required AFS, on behalf of the Partnership, to enter into interest rate swap agreements with certain counterparties (also rated A1/P1) to mitigate the interest rate risk associated with a variable rate note. The Program expired as to new borrowings in April 2002. The receivables funding program terminated in January 2007.
As of March 31, 2008, the Partnership receives or pays interest on interest rate agreements with a notional principal totaling approximately $385 thousand on the difference between nominal rates ranging from 6.16% to 7.58% and a variable rate of 2.58% at March 31, 2008. No actual borrowing or lending is involved. The termination of swaps was to coincide with the maturity of the debt. Through the swap agreements, the interest rates on the borrowings have been effectively fixed. The interest to be paid or received on the swap contracts is accrued as interest rates change and is currently recognized as an adjustment to interest expense. The interest rate swaps are carried at fair value on the balance sheet with unrealized gain/loss included in the statement of operations in other income or loss.
Borrowings under the Program are as follows (in thousands):
Date Borrowed | Original Amount Borrowed | Balance March 31, 2008 | Notional Balance March 31, 2008 | Swap Value March 31, 2008 | Payment Rate On Interest Swap Agreement | |||||||||||
7/1/1998 | $ | 25,000 | $ | — | $ | 124 | $ | (1 | ) | 6.16 | % | |||||
4/16/1999 | 9,000 | — | — | — | — | |||||||||||
1/26/2000 | 11,700 | — | 261 | (5 | ) | 7.58 | % | |||||||||
5/25/2001 | 2,000 | — | — | — | — | |||||||||||
9/28/2001 | 6,000 | — | — | — | — | |||||||||||
1/31/2002 | 4,400 | — | — | — | * | |||||||||||
$ | 58,100 | $ | — | $ | 385 | $ | (6 | ) | ||||||||
* | Under the terms of the Program, no interest rate swap agreements were required for this borrowing. |
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ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
6. Commitments:
At March 31, 2008, the Partnership had no commitments to purchase lease assets.
7. Guarantees:
The Partnership enters into contracts that contain a variety of indemnifications. The Partnership’s maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
In the normal course of business, the Partnership enters into contracts of various types, including lease contracts, contracts for the sale or purchase of lease assets, management contracts, loan agreements, credit lines and other debt facilities. It is prevalent industry practice for most contracts of any significant value to include provisions that each of the contracting parties—in addition to assuming liability for breaches of the representations, warranties, and covenants that are part of the underlying contractual obligations—also assume an obligation to indemnify and hold the other contracting party harmless for such breaches, for harm caused by such party’s gross negligence and willful misconduct, including, in certain instances, certain costs and expenses arising from the contract.
The General Partner has substantial experience in managing similar leasing programs subject to similar contractual commitments in similar transactions, and the losses and claims arising from these commitments have been insignificant, if any. Generally, to the extent these contracts are performed in the ordinary course of business under the reasonable business judgment of the General Partner, no liability will arise as a result of these provisions. The General Partner has no reason to believe that the facts and circumstances relating to the Partnership’s contractual commitments differ from those it has entered into on behalf of the prior programs it has managed. The General Partner knows of no facts or circumstances that would make the Partnership’s contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Partnership believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability under the Partnership’s similar commitments is remote. Should any such indemnification obligation become payable, the Partnership would separately record and/or disclose such liability in accordance with GAAP.
8. Partners’ Capital:
As of March 31, 2008, 14,985,550 Units were issued and outstanding. The Partnership had been authorized to issue up to 15,000,050 Units, including the 50 Units issued to the Initial Limited Partners, as defined.
As defined in the Partnership Agreement, the Partnership’s Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Limited Partners and 7.5% to AFS. Distributions to Limited Partners were as follows (in thousands, except per unit data):
Three Months Ended March 31, | ||||||
2008 | 2007 | |||||
Distributions declared | $ | 1,876 | $ | — | ||
Weighted average number of Units outstanding | 14,985,550 | 14,985,550 | ||||
Weighted average distributions per Unit | $ | 0.13 | $ | — | ||
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Statements contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” (“MD&A”) and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic conditions, including, fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Partnership’s performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Partnership’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other than as required by law.
Overview
ATEL Capital Equipment Fund VII, L.P. (the “Partnership”) is a California partnership that was formed in May 1996 for the purpose of engaging in the sale of limited liability investment units and acquiring equipment to generate revenues from equipment leasing and sales activities, primarily in the United States.
The Partnership conducted a public offering of 15,000,000 Units of Limited Partnership Interest (“Units”), at a price of $10 per Unit. The offering was terminated in November 1998. During early 1999, the Partnership completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, throughout the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), the Partnership reinvested cash flow in excess of certain amounts required to be distributed to the Limited Partners and/or utilized its credit facilities to acquire additional equipment.
The Partnership may continue until December 31, 2017. However, pursuant to the guidelines of the Limited Partnership Agreement, the Partnership began to liquidate its assets and distribute the proceeds thereof after the end of the Reinvestment Period which ended in December 2004.
As of March 31, 2008, the Partnership remains in its liquidation phase. Accordingly, assets that mature will be returned to inventory and most likely will be subsequently sold, which will result in decreasing revenue as earning assets decrease. Periodic distributions are paid at the discretion of the General Partner.
Capital Resources and Liquidity
The liquidity of the Partnership varies, increasing to the extent cash flows from leases and proceeds from lease asset sales exceed expenses and decreasing as distributions are made to the Limited Partners and to the extent expenses exceed cash flows from leases and proceeds from asset sales.
The primary source of liquidity for the Partnership is its cash flow from a diversified group of lessees for fixed lease terms at fixed rental amounts. As the initial lease terms expire, the Partnership will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on the Partnership’s success in re-leasing or selling the equipment as it comes off lease.
Throughout the Reinvestment Period, which ended December 31, 2004, the Partnership reinvested a portion of lease payments from assets owned in new leasing transactions. Such reinvestment occurred only after the payment of all current obligations, including debt service (both principal and interest), the payment of management fees to AFS and providing for certain cash distributions to the Limited Partners.
The Partnership currently has available adequate reserves to meet its immediate cash requirements and those of the next twelve months, but in the event those reserves were found to be inadequate, the Partnership would likely be in a position to borrow against its current portfolio to meet such requirements. AFS envisions no such requirements for operating purposes.
If inflation in the general economy becomes significant, it may affect the Partnership in as much as the residual (resale) values and rates on re-leases of the Partnership’s leased assets may increase as the costs of similar assets increase. However, the Partnership’s revenues from existing leases would not increase; as such rates are generally fixed for the terms of the leases without adjustment for inflation.
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If interest rates increase significantly, the lease rates that the Partnership can obtain on future leases will be expected to increase as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates.
The Partnership participated with AFS and certain of its affiliates, as defined in the Partnership Agreement, in a financing arrangement (the “Master Terms Agreement”) comprised of: (1) a working capital term loan facility to AFS, (2) an acquisition facility and (3) a warehouse facility to AFS, the Partnership and affiliates, and (4) a venture facility available to an affiliate. The Master Terms Agreement is with a group of financial institutions and includes certain financial and non-financial covenants. The Master Terms Agreement, which originally totaled $75 million and expired on June 28, 2007, was renewed for an additional two years with an availability of $65 million pending redefinition of the lender base. On July 28, 2007, with a redefinition of the lender base, the facility was amended to reset availability to $75 million. The availability of borrowings to the Partnership under the Master Terms Agreement was reduced by the amount outstanding on any of the above mentioned facilities. The Partnership was removed as a party to the Master Terms Agreement on January 31, 2007.
Additionally, in 1998, the Partnership established a $65 million receivables funding program with a receivables financing company that issues commercial paper rated A1 from Standard and Poor’s and P1 from Moody’s Investor Services. In this receivables funding program, the lenders received a general lien against all of the otherwise unencumbered assets of the Partnership. The program provided for borrowing at a variable interest rate and required AFS, on behalf of the Partnership, to enter into interest rate swap agreements with certain counterparties (also rated A1/P1) to mitigate the interest rate risk associated with a variable rate note. AFS believes that this program allowed the Partnership to avail itself of lower cost debt than that available for individual non-recourse debt transactions. The program expired as to new borrowings in April 2002. The receivables funding program terminated in January 2007.
As of March 31, 2008, the Partnership receives or pays interest on interest rate swap agreements with a notional principal totaling approximately $385 thousand on the difference between nominal rates ranging from 6.16% to 7.58% and a variable rate of 2.58% at March 31, 2008. The fair value of the interest rate swaps totaled $6 thousand at March 31, 2008 and was recorded as a liability on the balance sheet with a corresponding unrealized gain/loss included in the statement of operations in other income or loss.
Finally, the Partnership has access to certain sources of non-recourse debt financing, which the Partnership uses on a transaction basis as a means of mitigating credit risk. As of March 31, 2008, the Partnership had repaid all of its outstanding non-recourse debt. The General Partner does not anticipate any future non-recourse borrowings on behalf of the Partnership.
The Partnership Agreement limits such borrowings to 50% of the total cost of equipment, in the aggregate.
The Partnership commenced periodic distributions, based on cash flows from operations, beginning with the month of January 1997.
At March 31, 2008, the Partnership had no commitments to purchase leased assets and pursuant to the Partnership Agreement, the Partnership can no longer purchase any new leased assets.
Cash Flows
Operating Activities
The Partnership’s primary source of cash from operations has been rents from operating leases. Additionally, its cash flows are impacted by changes in certain operating assets and liabilities.
Cash provided by operating activities decreased by $550 thousand for the first quarter of 2008 as compared to the first quarter of 2007. The net decrease in cash flow was primarily attributable to a (1) the period over period decline in results of operations as adjusted for non-cash revenue and expense such as gains on sales of assets and depreciation expense, and (2) increased payments made against accounts payable and accrued liabilities offset, in part, by increases in (1) payments received on accounts receivable and (2) unearned lease income.
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The period over period net decline in net operating results, as adjusted for non-cash items, reduced cash flow by $1.3 million, and was mainly attributable to the decline in operating lease revenue. Likewise, the increase in payments made against accounts payable and accrued liabilities decreased cash flow by $428 thousand, and was mainly a result of 2007 accruals related to maintenance and management fees that were paid during the first quarter of 2008.
Partially offsetting the above decline in cash flow were increases of $1.0 million, resulting from increased payments received on accounts receivable, and $192 thousand from increased unearned rents received during the first quarter of 2008, when compared to the same period in 2007. The increased payments on accounts receivable was primarily due to first quarter 2008 receipt of a $1.1 million payment on a 2007 revenue accrual related to short-term rentals of certain vessels.
Investing Activities
Net cash provided by investing activities decreased by $1.4 million for the first quarter of 2008 as compared to the first quarter of 2007. The net decrease in cash flow reflects a $1.5 million reduction in proceeds from sales of lease assets.
The reduction in proceeds from sales of lease assets was mainly due to the period over period decrease in sales of terminating lease assets, as more assets under leases scheduled for termination were re-leased rather than sold.
Financing Activities
Net cash used in financing activities increased by $2.0 million for the first quarter of 2008 as compared to the first quarter of 2007. The net increase in cash used was due to distributions during the first quarter of 2008 totaling $1.9 million and $152 thousand to the Limited Partners and the General Partner, respectively, versus none during the first quarter of 2007.
Results of Operations
On January 7, 1997, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities).
Cost reimbursements to the General Partner are based on its costs incurred in performing administrative services for the Partnership. These costs are allocated to each managed entity based on certain criteria such as existing or new leases, number of investors or equity depending upon the type of cost incurred.
The three months ended March 31, 2008 versus the three months ended March 31, 2007
The Partnership had net a net loss of $1.2 million for the first quarter of 2008 as compared to net income of $278 thousand for the first quarter of 2007. The results for the first quarter of 2008 reflect a decrease in total revenues offset, in part, by a decrease in total operating expenses when compared to the first quarter of 2007.
Revenues
Total revenues for the first quarter of 2008 decreased by $2.3 million, or 62%, as compared to the first quarter of 2007. The net decrease in total revenues was primarily a result of decreases in operating lease revenue, gain recognized on sales of assets and other income.
During the first quarter of 2008, operating lease revenue decreased by $1.6 million when compared to the first quarter of 2007. The decrease was attributable to several factors, including the dry dock status of revenue producing vessels, continued run-off of the Partnership’s lease portfolio, and increased sales of terminating lease assets.
Net gain on sales of assets declined by $549 thousand primarily due to a weak market demand for the types of assets sold during the first quarter of 2008 as compared to the first quarter of 2007. Assets sold during the first quarter of 2008 were mostly comprised of containers compared to tractors and other material handling equipment sold during the same period in 2007.
Other income for the first quarter of 2008 declined by $102 thousand when compared to the first quarter of 2007, which included maintenance costs associated with returned equipment that were billed back to certain lessees.
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Expenses
Total expenses for the first quarter of 2008 declined by $841 thousand, or 24%, as compared to the first quarter of 2007. The net decrease in expenses was primarily a result of decreases in depreciation, vessel maintenance expense, professional fees and other expense.
Depreciation expense for the first quarter of 2008 dropped by $588 thousand as compared to the first quarter of 2007 due to run-off of the lease asset portfolio and sales of terminating lease assets. Vessel maintenance expense declined by $179 thousand primarily due to decreased vessel activity resulting from a weak market demand.
Other expense declined by $128 thousand mostly due to a decline in management fees associated with the Partnership’s fleet of barges; while professional fees decreased by $97 thousand primarily due to the elimination of costs associated with the audit and restatement of the Partnership’s prior year financial statements, which were largely completed during the second quarter of 2007.
Item 4. | Controls and procedures. |
Evaluation of disclosure controls and procedures
The Partnership’s General Partner’s Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Partnership’s disclosure controls and procedures, the Chief Executive Officer and Executive Vice President and Chief Financial Officer and Chief Operating Officer concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.
The Partnership does not control the financial reporting process, and is solely dependent on the Management of the General Partner, who is responsible for providing the Partnership with financial statements in accordance with generally accepted accounting principles in the United States. The General Partner’s disclosure controls and procedures, as is applicable to the Partnership, were effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Changes in internal control
There were no changes in the General Partner’s internal control over financial reporting, as is applicable to the Partnership, during the quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, the General Partner’s internal control over financial reporting, as is applicable to the Partnership.
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PART II. OTHER INFORMATION
Item 1. | Legal Proceedings. |
In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Partnership. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Partnership’s financial position or results of operations. No material legal proceedings are currently pending against the Partnership or against any of its assets.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None.
Item 3. | Defaults Upon Senior Securities. |
None.
Item 4. | Submission Of Matters To A Vote Of Security Holders. |
None.
Item 5. | Other Information. |
None.
Item 6. | Exhibits. |
Documents filed as a part of this report:
1. | Financial Statement Schedules |
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and therefore have been omitted.
2. | Other Exhibits |
31.1 | Rule 13a-14(a)/ 15d-14(a) Certification of Dean L. Cash | |
31.2 | Rule 13a-14(a)/ 15d-14(a) Certification of Paritosh K. Choksi | |
32.1 | Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash | |
32.2 | Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 13, 2008
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
(Registrant)
By: | ATEL Financial Services, LLC | |
General Partner of Registrant |
By: | /s/ Dean L. Cash | |
Dean L. Cash | ||
President and Chief Executive Officer of ATEL Financial Services, LLC (General Partner) | ||
By: | /s/ Paritosh K. Choksi | |
Paritosh K. Choksi | ||
Executive Vice President and Chief Financial Officer and ATEL Financial Services, LLC (General Partner) | ||
By: | /s/ Samuel Schussler | |
Samuel Schussler | ||
Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (General Partner) |
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