Atel Capital Equipment Fund Viii (ZZHJB) 10-Q 2013 Q3 Quarterly report

Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended September 30, 2013

o	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 000-33103

ATEL Capital Equipment Fund VIII, LLC

(Exact name of registrant as specified in its charter)

California	94-3307404
(State or other jurisdiction of Incorporation or organization)	(I. R. S. Employer Identification No.)

The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111

(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 Liability Company 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.Yesx Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yesx Noo

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 filero	Accelerated filero	Non-accelerated filero	Smaller reporting companyx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yeso Nox

The number of Limited Liability Company Units outstanding as of October 31, 2013 was 13,560,188.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
  
Index

Part I. Financial Information		3
Item 1. Financial Statements (Unaudited)		3
Balance Sheets, September 30, 2013 and December 31, 2012		3
Statements of Income for the three and nine months ended September 30, 2013 and 2012		4
Statements of Changes in Members’ Capital for the year ended December 31, 2012 and for the nine months ended September 30, 2013		5
Statements of Cash Flows for the three and nine months ended September 30, 2013 and 2012		6
Notes to the Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 4. Controls and Procedures		18
Part II. Other Information		19
Item 1. Legal Proceedings		19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3. Defaults Upon Senior Securities		19
Item 4. Mine Safety Disclosures		19
Item 5. Other Information		19
Item 6. Exhibits		19

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

BALANCE SHEETS

SEPTEMBER 30, 2013 AND DECEMBER 31, 2012
(In Thousands)

	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Cash and cash equivalents	$	4,438	$	516
Accounts receivable, net of allowance for doubtful accounts of $3 as of September 30, 2013 and $10 as of December 31, 2012		670		836
Prepaid expenses and other assets		23		19
Investments in equipment and leases, net of accumulated depreciation of $33,093 as of September 30, 2013 and $35,621 as of December 31, 2012		5,927		6,959
Total assets	$	11,058	$	8,330
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member	$	328	$	780
Other		104		172
Unearned operating lease income		70		86
Total liabilities		502		1,038
Commitments and contingencies
Members’ capital:
Managing Member		—		—
Other Members		10,556		7,292
Total Members’ capital		10,556		7,292
Total liabilities and Members’ capital	$	11,058	$	8,330

See accompanying notes.

3

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2013 AND 2012
(In Thousands Except for Units and Per Unit Data)
(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013			2012
Revenues:
Leasing activities:
Operating leases	$	888	$	1,363	$	3,030		$	4,180
Direct financing leases		—		11		—			41
Gain on sales of assets		131		89		1,690			112
Other revenue		67		1		175			2
Total revenues		1,086		1,464		4,895			4,335
Expenses:
Depreciation of operating lease assets		154		276		530			847
Asset management fees to Managing Member		25		45		86			134
Vessel maintenance		—		252		107			675
Railcar maintenance		101		128		288			366
Cost reimbursements to Managing Member		77		72		229			361
Other management fees		22		40		72			115
Railcar storage fees		25		26		62			61
Professional fees		27		47		108			128
Insurance		13		14		12			40
Provision (reversal of provision) for doubtful accounts		3		—		(7	)		(22	)
Taxes on income and franchise fees		—		—		26			41
Postage		7		1		13			10
Printing and photocopying		3		1		11			15
Freight and shipping		2		1		14			10
Other		30		35		80			100
Total operating expenses		489		938		1,631			2,881
Net income	$	597	$	526	$	3,264		$	1,454
Net income:
Managing Member	$	—	$	—	$	—		$	—
Other Members		597		526		3,264			1,454
	$	597	$	526	$	3,264		$	1,454
Net income per Limited Liability Company Unit (Other Members)	$	0.04	$	0.04	$	0.24		$	0.11
Weighted average number of Units outstanding		13,560,188		13,560,188		13,560,188			13,560,188

See accompanying notes.

4

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2012
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2013
(In Thousands Except for Units and Per Unit Data)

	Other Members					Managing Member			Total
	Units		Amount
Balance December 31, 2011		13,560,188	$	8,850		$	—		$	8,850
Distributions to Other Members ($0.24 per Unit)		—		(3,186	)		—			(3,186	)
Distributions to Managing Member		—		—			(258	)		(258	)
Net income		—		1,628			258			1,886
Balance December 31, 2012		13,560,188		7,292			—			7,292
Net income		—		3,264			—			3,264
Balance September 30, 2013 (Unaudited)		13,560,188	$	10,556		$	—		$	10,556

See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF CASH FLOWS

FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2013 AND 2012
(In Thousands)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Operating activities:
Net income	$	597		$	526		$	3,264		$	1,454
Adjustment to reconcile net income to cash provided by operating activities:
Gain on sales of assets		(131	)		(89	)		(1,690	)		(112	)
Depreciation of operating lease assets		154			276			530			847
Provision (reversal of provision) for doubtful accounts		3			—			(7	)		(22	)
Changes in operating assets and liabilities:
Accounts receivable		70			(46	)		173			(17	)
Prepaid expenses and other assets		(9	)		(7	)		(4	)		(18	)
Accounts payable, Managing Member		12			13			(452	)		(285	)
Accounts payable, other		18			60			(68	)		60
Unearned operating lease income		24			5			(16	)		(4	)
Net cash provided by operating activities		738			738			1,730			1,903
Investing activities:
Proceeds from sales of lease assets		384			134			2,144			195
Principal payments received on direct financing leases		—			37			48			123
Improvements to lease assets		—			(24	)		—			(24	)
Net cash provided by investing activities		384			147			2,192			294
Financing activities:
Net cash provided by financing activities		—			—			—			—
Net increase in cash and cash equivalents		1,122			885			3,922			2,197
Cash and cash equivalents at beginning of period		3,316			2,237			516			925
Cash and cash equivalents at end of period	$	4,438		$	3,122		$	4,438		$	3,122
Supplemental disclosures of cash flow information:
Cash paid during the period for taxes	$	—		$	5		$	17		$	38

See accompanying notes.

6

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
  
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund VIII, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on July 31, 1998. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing and sales activities. The Managing Member or Manager of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company. The Company may continue until December 31, 2019. Each Member’s personal liability for obligations of the Company generally will be limited to the amount of their respective contributions and rights to undistributed profits and assets of the Company.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. On January 13, 1999, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date the Company commenced operations in its primary business. Gross contributions in the amount of $135.7 million (13,570,188 units) were received as of November 30, 2000, inclusive of $500 of initial Member’s capital investment and $100 of AFS’ capital investment. The offering was terminated on November 30, 2000. As of September 30, 2013, 13,560,188 Units remain issued and outstanding.

The Company’s principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Company’s invested capital; (ii) generates regular distributions to the Members 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, 2006, and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by its Limited Liability Company Operating Agreement (“Operating Agreement”), as amended.

Pursuant to the Operating Agreement, AFS and/or its affiliates receive compensation for services rendered and reimbursements for costs incurred on behalf of the Company (See Note 5). The Company is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.

As of September 30, 2013, the Company continues in the liquidation phase of its life cycle as defined in the Operating Agreement.

These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission.

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 the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the Managing Member, 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. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no significant effect on the reported financial position or results of operations.

Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.

7

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
  
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after September 30, 2013, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements, or adjustments thereto.

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 relate primarily to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.

Segment reporting:

The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.

Certain of the Company’s lessee customers have international operations. In these instances, the Company 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 Company to track, on an asset-by-asset, day-by-day basis, where these assets are deployed.

The primary geographic region in which the Company sought leasing opportunities was North America. The table below summarizes geographic information relating to the sources, by nation, of the Company’s total revenues for the nine months ended September 30, 2013 and 2012 and long-lived tangible assets as of September 30, 2013 and December 31, 2012 (dollars in thousands):

	For The Nine Months Ended September 30,
	2013		% of Total			2012		% of Total
Revenue
United States	$	4,821		98	%	$	4,210		97	%
Canada		74		2	%		125		3	%
Total International		74		2	%		125		3	%
Total	$	4,895		100	%	$	4,335		100	%

	As of September 30,					As of December 31,
	2013		% of Total			2012		% of Total
Long-lived assets
United States	$	5,903		100	%	$	6,935		100	%
Canada		24		0	%		24		0	%
Total International		24		0	%		24		0	%
Total	$	5,927		100	%	$	6,959		100	%

Per Unit data:

Net income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the period.

8

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
  
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

Recent accounting pronouncements:

Recent accounting standards updates as issued by the Financial Accounting Standards Board (FASB) were evaluated and determined to be not applicable to the Company.

3. Allowance for credit losses:

The Partnership’s allowance for credit losses are as follows (in thousands):

	Accounts Receivable Allowance for Doubtful Accounts					Valuation Adjustments on Financing Receivables		Total Allowance for Credit Losses
	Finance Leases		Operating Leases			Finance Leases
Balance December 31, 2011	$	—	$	22		$	—	$	22
Reversal of provision		—		(12	)		—		(12	)
Balance December 31, 2012		—		10			—		10
Reversal of provision		—		(7	)		—		(7	)
Balance September 30, 2013	$	—	$	3		$	—	$	3

The allowance for credit losses at both September 30, 2013 and December 31, 2012 were related to delinquent operating lease receivables.

As of September 30, 2013, the Partnership had no financing lease receivables, as its remaining finance lease matured on July 1, 2013. By comparison, at December 31, 2012, finance lease receivables totaled $100 thousand, all of which were current.

4. Investment in equipment and leases, net:

The Company’s investment in leases consists of the following (in thousands):

	Balance December 31, 2012		Reclassifications & Additions/ Dispositions			Depreciation/Amortization Expense or Amortization of Leases			Balance September 30, 2013
Net investment in operating leases	$	6,230	$	(1,104	)	$	(492	)	$	4,634
Net investment in direct financing leases		100		(52	)		(48	)		—
Assets held for sale or lease, net		629		702			(38	)		1,293
Total	$	6,959	$	(454	)	$	(578	)	$	5,927

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. Impairment losses are recorded as an adjustment to the net investment in operating leases. There were no impairment losses recorded during the three and nine months ended September 30, 2013 and 2012.

The Company utilizes a straight line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Company’s equipment totaled $154 thousand and $276 thousand for the respective three months ended September 30, 2013 and 2012, and $530 thousand and $847 thousand for the respective nine months ended September 30, 2013 and 2012.

All of the remaining property on lease was acquired during the years 1999 through 2001.

9

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
  
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Investment in equipment and leases, net: - (continued)

Operating leases:

Property on operating leases consists of the following (in thousands):

	Balance December 31, 2012			Additions			Reclassifications or Dispositions			Balance September 30, 2013
Containers	$	19,380		$	—		$	(1,976	)	$	17,404
Transportation, rail		13,125			—			(1,731	)		11,394
Marine vessel		4,793			—			(4,793	)		—
Other		640			—			—			640
		37,938			—			(8,500	)		29,438
Less accumulated depreciation		(31,708	)		(492	)		7,396			(24,804	)
Total	$	6,230		$	(492	)	$	(1,104	)	$	4,634

The average estimated residual value for assets on operating leases was 11% and 10% of the assets’ original cost at September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013 and December 31, 2012, the Company had no operating leases in non-accrual status.

The Company may earn revenues from its containers, marine vessel and certain other assets based on utilization of such assets or through fixed term leases. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of operating lease revenues, and totaled $392 thousand and $596 thousand for the respective three months ended September 30, 2013 and 2012, and $1.4 million and $1.8 million for the respective nine months ended September 30, 2013 and 2012.

Direct financing leases:

As of September 30, 2013, the Partnership had no investment in direct financing leases, as its remaining finance lease matured on July 1, 2013. At December 31, 2012, such investment primarily consisted of railcars and manufacturing equipment. The components of the Company’s investment in direct financing leases as of December 31, 2012 are as follows (in thousands):

	December 31, 2012
Total minimum lease payments receivable	$	48
Estimated residual values of leased equipment (unguaranteed)		52
Investment in direct financing leases		100
Less unearned income		—
Net investment in direct financing leases	$	100

10

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
  
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Investment in equipment and leases, net: - (continued)

At September 30, 2013, the aggregate amount of future lease payments associated with operating leases is as follows (in thousands):

	Operating Leases
Three months ending December 31, 2013	$	386
Year ending December 31, 2014		1,199
2015		568
2016		280
2017		263
2018		75
	$	2,771

5. Related party transactions:

The terms of the Operating Agreement provide that AFS and/or affiliates are entitled to receive certain fees for equipment management and resale and for management of the Company.

The Operating Agreement allows for the reimbursement of costs incurred by AFS for providing administrative services to the Company. Administrative services provided include Company 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 management of equipment.

Each of ATEL Leasing Corporation (“ALC”) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Company on behalf of the Managing Member. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications and general administrative services are performed by AFS.

Cost reimbursements to the Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are allocated among all managed entities based on certain criteria such as managed assets, number of investors or contributed capital based upon the type of cost incurred.

During the three and nine months ended September 30, 2013 and 2012, AFS and/or affiliates earned fees and commissions, and billed for reimbursements, pursuant to the Operating Agreement as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Asset management fees to Managing Member	$	25	$	45	$	86	$	134
Cost reimbursements to Managing Member		77		72		229		361
	$	102	$	117	$	315	$	495

The Fund’s Operating Agreement places an annual and cumulative limit for cost reimbursements to AFS and/or its affiliates. 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 such amounts may be payable if within the annual and cumulative limits in such future years. The Fund is a finite life and self-liquidating entity, and AFS and its affiliates have no recourse against the Fund for the amount of any unpaid excess reimbursable administrative expenses. The Fund will continue to require administrative services from AFS and its affiliates through the end of its term, and will therefore continue to incur reimbursable administrative expenses in each year. The Fund has determined that payment of any amounts in excess of the annual and cumulative limits is not probable, and the date any portion of such amount may be paid, if ever, is uncertain. When the Fund completes its

11

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
  
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

5. Related party transactions: - (continued)

liquidation stage and terminates, any unpaid amount will expire unpaid, with no claim by AFS or its affiliates against any liquidation proceeds or any party for the unpaid balance. For the year ending December 31, 2013, it is not anticipated that any further billings to the Fund will equal or exceed the annual or cumulative reimbursable expense limitation. Such is reflective of the continued diminishing Fund asset base over which reimbursements are calculated.

6. Guarantees:

The Company enters into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

The Managing Member knows of no facts or circumstances that would make the Company’s contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Company 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 Company’s similar commitments is remote. Should any such indemnification obligation become payable, the Company would separately record and/or disclose such liability in accordance with GAAP.

7. Gain contingencies:

ATEL filed a claim on behalf of the Company and certain affiliated entities in Federal court in New Orleans for the under-reporting of revenue by a fleet manager of three marine vessels, seeking to recover an approximate amount of 10% of gross proceeds, which in the aggregate for all affiliated entities represents $2.8 million for the years 2005 – 2007 (of which the Company’s portion is an approximate $350 thousand). The annual allocable portion of the claim is not considered material to the Company in any given year. The trial was concluded during the first week of August 2012. In October 2012, the matter was remitted to the Federal Judge to render a decision on both the law and the facts. The decision of the Court was rendered at the end of June 2013 and the court found in favor of the defendants. The Company filed an appeal of the court’s decision and is hopeful for a recovery of all or portion of its asserted claims, but the outcome of the litigation remains uncertain as of such date. As a result of the ruling, the defendants have filed a claim for legal fees and costs, of which the Company’s portion would amount to approximately $88 thousand, however, this claim remains in dispute pending the outcome of the appeal, and a final award in favor of either party remains uncertain at this time.

8. Members’ capital:

As of September 30, 2013 and December 31, 2012, 13,560,188 Units were issued and outstanding. The Company was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial Members (50 Units).

The Company has the right, exercisable at the Managing Member’s discretion, but not the obligation, to repurchase Units of a Unitholder who ceases to be a U.S. Citizen, for a price equal to 100% of the holder’s capital account. The Company is otherwise permitted, but not required, to repurchase Units upon a holder’s request. The repurchase of Fund Units is made in accordance with Section 13 of the Amended and Restated Limited Liability Company Operating Agreement. The repurchase would be at the discretion of the Managing Member on terms it determines to be appropriate under given circumstances, in the event that the Managing Member deems such repurchase to be in the best interest of the Company; provided, the Company is never required to repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered Units are cancelled. Units repurchased in prior periods were repurchased at amounts representing the original investment less cumulative distributions made to the Unitholder with respect to the Units. All Units repurchased during a

12

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
  
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

8. Members’ capital: - (continued)

quarter are deemed to be repurchased effective the last day of the preceding quarter, and are not deemed to be outstanding during, or entitled to allocations of net income, net loss or distributions for the quarter in which such repurchase occurs.

As defined in the Operating Agreement, the Company’s Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Other Members and 7.5% to AFS.

There were no distributions declared or paid during the three and nine months ended September 30, 2013 and 2012.

13

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,” 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 leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Company’s performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Fund’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 VIII, LLC (the “Company” or the “Fund”) is a California limited liability company that was formed in July 1998 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 Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. The offering was terminated in November 2000. Total proceeds of the offering were $135.7 million. During early 2001, the Company 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 Company reinvested cash flow in excess of certain amounts required to be distributed to the Other Members and/or utilized its credit facilities to acquire additional equipment.

The Company may continue until December 31, 2019. However, pursuant to the guidelines of the Operating Agreement, the Company began to liquidate its assets and distribute the proceeds thereof after the end of the Reinvestment Period which ended in December 2006.

As of September 30, 2013, the Company continues in its liquidation phase. Accordingly, assets related to leases that mature will be returned to inventory and most likely sold, which will result in decreasing revenue as earning assets decrease. Periodic distributions are paid at the discretion of the Managing Member.

Results of Operations

The three months ended September 30, 2013 versus the three months ended September 30, 2012

The Company had net income of $597 thousand and $526 thousand for the three months ended September 30, 2013 and 2012, respectively. The results for the third quarter of 2013 primarily reflect decreases in total operating expenses and total revenues when compared to the prior year period.

Revenues

Total revenues for the third quarter of 2013 decreased by $378 thousand, or 26%, as compared to the prior year period. The net decrease in total revenues was largely due to a decline in operating lease revenues offset in part by increases in other revenue and gain on sales of assets.

The decrease in operating lease revenues totaled $475 thousand and was primarily attributable to the December 2012 termination of a lease relative to the Fund’s marine vessel, the decrease in usage-based rental income during the current year period, and the impact of continued run-off and dispositions of lease assets since September 30, 2012.

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Partially offsetting the aforementioned decrease in revenues were increases in other revenue and gain on sales of assets totaling $66 thousand and $42 thousand, respectively. Gains on sales of assets increased largely due to the sale of equipment associated with the maturity of the Fund’s remaining direct financing lease in July 2013; and, other revenue increased primarily due to a tax refund received from the City of Philadelphia in September 2013.

Expenses

Total operating expenses for the third quarter of 2013 decreased by $449 thousand, or 48%, as compared to the prior year period. The net decrease in total operating expenses was primarily due to reductions in vessel maintenance costs, depreciation expense and railcar maintenance costs.

Vessel maintenance declined by $252 thousand primarily due to vessel inactivity since the end of the lease term in December 2012. Depreciation expense was reduced by $122 thousand largely due to continued run-off and sales of lease assets; and, railcar maintenance costs decreased by $27 thousand largely due to the continued decline in the number of railcars owned by the Company, consistent with a fund in liquidation.

The nine months ended September 30, 2013 versus the nine months ended September 30, 2012

The Company had net income of $3.3 million and $1.5 million for the nine months ended September 30, 2013 and 2012, respectively. The results for the first nine months of 2013 primarily reflect an increase in total revenues coupled with a decrease in total operating expenses when compared to the prior year period.

Revenues

Total revenues for the first nine months of 2013 increased by $560 thousand, or 13%, as compared to the prior year period. The net increase in total revenues was largely due to increases in gains recognized on sales of assets and in other revenue partially offset by a decline in operating lease revenues.

The increase in gains recognized on sales of assets totaled $1.6 million and was largely a result of increased volume and change in the mix of assets sold. During the current year period, the Fund sold a group of railcars which were in high demand resulting in a significant gain on the transaction. In addition, the Fund recognized a gain from the sales of equipment associated with the maturity of a direct financing lease.

Other revenue increased by $173 thousand primarily due to fees collected relative to the termination of the marine vessel lease and a tax refund received from the City of Philadelphia.

Partially offsetting the aforementioned increases in revenues was a $1.2 million decrease in operating lease revenues. The decrease in operating lease revenues was primarily attributable to the December 2012 termination of a lease relative to the Fund’s marine vessel, the decrease in usage-based rental income during the current year period, and the impact of continued run-off and dispositions of lease assets since September 30, 2012.

Expenses

Total operating expenses for the first nine months of 2013 decreased by $1.3 million, or 43%, as compared to the prior year period. The net decrease was primarily due to reductions in the following expenses: vessel maintenance costs, depreciation expense, costs reimbursed to the Managing Member, railcar maintenance costs, asset management fees to the Manager, and other management fees.

Vessel maintenance costs declined by $568 thousand primarily due to vessel inactivity since the end of the lease term in December 2012; and, depreciation expense was reduced by $317 thousand largely due to continued run-off and sales of lease assets.

Moreover, costs reimbursed to the Managing Member decreased by $132 thousand as the Fund no longer has the accumulation of reimbursable administrative expenses in excess of the limitations as defined in the Operating Agreement. As such, the costs reimbursed to AFS during the current year period only represent current period charges. It is not anticipated that any further billings to the Fund will equal or exceed the annual or cumulative reimbursable expense limitation.

The decrease in railcar maintenance costs totaled $78 thousand and was primarily due to the continued decline in the number of railcars owned by the Company. Asset management fees paid to the Manager declined by

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$48 thousand as a result of the decline in managed assets and related rents; and, other management fees decreased by $43 thousand primarily due to a refund received from the third party manager relative to prepaid marine vessel expenses. Such expenses were refunded as a result of the vessel lease termination.

Capital Resources and Liquidity

At September 30, 2013 and December 31, 2012, the Company’s cash and cash equivalents totaled $4.4 million and $516 thousand, respectively. The liquidity of the Company varies, increasing to the extent that cash flows from leases and proceeds of asset sales exceed expenses and decreasing as distributions are made to the Other Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

The primary source of liquidity for the Company is its cash flow from leasing activities. As initial lease terms expire, the Company re-leases or sells the equipment. The future liquidity beyond the contractual minimum rentals will depend on the Company’s success in remarketing or selling the equipment as it comes off rental.

If inflation in the general economy becomes significant, it may affect the Company in as much as the residual (resale) values and rates on re-leases of the Company’s leased assets may increase as the costs of similar assets increase. However, the Company’s revenues from existing leases would not increase; as such rates are generally fixed for the terms of the leases without adjustment for inflation. In addition, if interest rates increase significantly under such circumstances, the lease rates that the Company 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 Company currently believes it has adequate reserves available 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 Company would likely be in a position to borrow against its current portfolio to meet such requirements. AFS envisions no such requirements for operating purposes.

Cash Flows

The following table sets forth summary cash flow data (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net cash provided by:
Operating activities	$	738	$	738	$	1,730	$	1,903
Investing activities		384		147		2,192		294
Financing activities		—		—		—		—
Net increase in cash and cash equivalents	$	1,122	$	885	$	3,922	$	2,197

The three months ended September 30, 2013 versus the three months ended September 30, 2012

During the three months ended September 30, 2013, the Partnership’s primary source of liquidity had been cash flows from its portfolio of operating lease contracts. During the prior year period, liquidity was derived from cash flows from both the Partnership’s portfolio of operating lease contracts and its direct financing leases. In addition, the Fund realized $384 thousand and $134 thousand of proceeds from sales of equipment during the respective three months ended September 30, 2013 and 2012.

During the same comparative periods, cash was primarily used to pay invoices related to management fees and expenses. As the Fund is in its liquidation phase, any future financing activity is anticipated to only include distributions to Members.

The nine months ended September 30, 2013 versus the nine months ended September 30, 2012

During the nine months ended September 30, 2013 and 2012, the Company’s primary source of liquidity was cash flow from its portfolio of operating and direct financing lease contracts. In addition, the Company realized proceeds from sales or dispositions of equipment totaling $2.1 million and $195 thousand during the nine months ended September 30, 2013 and 2012, respectively.

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During the same comparative periods, cash was primarily used to pay invoices related to management fees and expenses.

Distributions

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of January 1999. During its liquidation phase, the rates and frequency of periodic distributions paid by the Fund are solely at the discretion of the Managing Member. There were no distributions declared or paid during the three and nine months ended September 30, 2013 and 2012.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At September 30, 2013, the Company had no commitments to purchase lease assets. Pursuant to the Operating Agreement, the Company will no longer purchase any new lease assets.

Gain Contingency

ATEL filed a claim on behalf of the Company and certain affiliated entities in Federal court in New Orleans for the under-reporting of revenue by a fleet manager of three marine vessels, seeking to recover an approximate amount of 10% of gross proceeds, which in the aggregate for all affiliated entities represents $2.8 million for the years 2005 – 2007 (of which the Company’s portion is an approximate $350 thousand). The annual allocable portion of the claim is not considered material to the Company in any given year. The trial was concluded during the first week of August 2012. In October 2012, the matter was remitted to the Federal Judge to render a decision on both the law and the facts. The decision of the Court was rendered at the end of June 2013 and the court found in favor of the defendants. The Company filed an appeal of the court’s decision and is hopeful for a recovery of all or portion of its asserted claims, but the outcome of the litigation remains uncertain as of such date. As a result of the ruling, the defendants have filed a claim for legal fees and costs, of which the Company’s portion would amount to approximately $88 thousand, however, this claim remains in dispute pending the outcome of the appeal, and a final award in favor of either party remains uncertain at this time.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

Recent accounting standards updates as issued by the Financial Accounting Standards Board (FASB) were evaluated and determined to be not applicable to the Company.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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. On an on-going basis, the Company evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.

The Company’s critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material changes to the Company’s critical accounting policies since December 31, 2012.

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Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

The Company’s Managing Member’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Company’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 Company’s disclosure controls and procedures, Management 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 Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, which is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Member’s disclosure controls and procedures, as applicable to the Company, 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 Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Managing Member’s internal control over financial reporting, as is applicable to the Company.

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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 Company. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Company’s financial position or results of operations. No material legal proceedings are currently pending against the Company 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. Mine Safety Disclosures.

Not Applicable.

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
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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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: November 13, 2013

ATEL CAPITAL EQUIPMENT FUND VIII, LLC
(Registrant)

	By: ATEL Financial Services, LLC Managing Member of Registrant

By: /s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member)
By: /s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member)
By: /s/ Samuel Schussler Samuel Schussler Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (Managing Member)

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