Atel Capital Equipment Fund Viii (ZZHJB) 10-Q 2008 Q1 Quarterly report

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 000-33103

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.)

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 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.    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 Liability Company Units outstanding as of April 30, 2008 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, 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 Members’ 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	17
Item 4.	Controls and Procedures	20
Part II.	Other Information	21
Item 1.	Legal Proceedings	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 5.	Other Information	21
Item 6.	Exhibits	21

2

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

BALANCE SHEETS

MARCH 31, 2008 AND 2007

(in thousands)

	March 31, 2008		December 31, 2007
	(Unaudited)
ASSETS
Cash and cash equivalents	$	2,560	$	4,709
Accounts receivable, net of allowance for doubtful accounts of $34 as of March 31, 2008 and $38 as of December 31, 2007		753		941
Prepaid expenses		5		15
Investments in equipment and leases, net of accumulated depreciation and impairment loss reserve of $35,019 as of March 31, 2008 and $37,865 as of December 31, 2007		14,311		16,281
Total assets	$	17,629	$	21,946
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member	$	861	$	1,247
Accrued distributions to Other Members		—		6,448
Affiliates		26		—
Other		370		525
Accrued interest payable		5		6
Non-recourse debt		1,706		1,932
Interest rate swap contracts		92		91
Unearned operating lease income		113		99
Total liabilities		3,173		10,348
Commitments and contingencies
Members’ capital:
Managing Member		—		—
Other Members		14,456		11,598
Total Members’ capital		14,456		11,598
Total liabilities and Members’ capital	$	17,629	$	21,946

See accompanying notes.

3

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

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	$	1,659		$	2,252
Direct financing leases		2			9
Gain on sales of assets		3,036			26
Interest		27			13
Other revenue		2			3
Total revenues		4,726			2,303
Expenses:
Depreciation of operating lease assets		732			1,017
Interest expense		66			87
Asset management fees to Managing Member		59			140
Vessel maintenance		23			197
Railcar maintenance		180			127
Cost reimbursements to Managing Member		679			679
Amortization of initial direct costs		1			3
Professional fees		87			253
Insurance		9			23
Recovery of provision for doubtful accounts		(4	)		(4	)
Taxes on income and franchise fees		10			—
Other		25			60
Total operating expenses		1,867			2,582
Net income (loss) from operations		2,859			(279	)
Other (loss) income, net		(1	)		29
Net income (loss)	$	2,858		$	(250	)
Net income (loss):
Managing Member	$	—		$	—
Other Members		2,858			(250	)
	$	2,858		$	(250	)
Net income (loss) per Limited Liability Company Unit (Other Members)	$	0.21		$	(0.02	)
Weighted average number of Units outstanding		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, 2007

AND FOR THE

THREE MONTHS ENDED

MARCH 31, 2008

(in thousands, except per unit data)

(Unaudited)

	Other Members				Managing
	Units	Amount			Member			Total
Balance December 31, 2006	13,560,188	$	18,550		$	—		$	18,550
Distributions to Other Members ($0.58 per Unit)	—		(7,803	)		—			(7,803	)
Distributions to Managing Member	—		—			(633	)		(633	)
Net income	—		851			633			1,484
Balance December 31, 2007	13,560,188		11,598			—			11,598
Net income	—		2,858			—			2,858
Balance March 31, 2008	13,560,188	$	14,456		$	—		$	14,456

See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED

MARCH 31, 2008 AND 2007

(in thousands)

(Unaudited)

	Three months ended March 31,
	2008			2007
Operating activities:
Net income (loss)	$	2,858		$	(250	)
Adjustment to reconcile net income (loss) to cash provided by operating activities:
Gain on sales of assets		(3,036	)		(26	)
Depreciation of operating lease assets		732			1,017
Amortization of unearned income on direct finance leases		(2	)		(9	)
Amortization of initial direct costs		1			3
Change in fair value of interest rate swap contracts		1			(29	)
Recovery of provision for doubtful accounts		(4	)		(4	)
Changes in operating assets and liabilities:
Accounts receivable		192			119
Prepaid expenses and other assets		10			32
Accounts payable, Managing Member		137			(157	)
Accounts payable, Affiliates		26			—
Accounts payable, other		(156	)		(109	)
Accrued interest payable		(1	)		(14	)
Unearned operating lease income		14			182
Net cash provided by operating activities		772			755
Investing activities:
Proceeds from sales of lease assets		4,245			409
Payments received on direct finance leases		30			87
Net cash provided by investing activities		4,275			496
Financing activities:
Repayments of non-recourse debt		(226	)		(564	)
Distributions to Other Members		(6,447	)		(1,304	)
Distributions to Managing Member		(523	)		—
Net cash used in financing activities		(7,196	)		(1,868	)
Net decrease in cash and cash equivalents		(2,149	)		(617	)
Cash and cash equivalents at beginning of period		4,709			1,858
Cash and cash equivalents at end of period	$	2,560		$	1,241
Supplemental disclosures of cash flow information:
Cash paid during the period for taxes	$	10		$	—
Cash paid during the period for interest	$	67		$	101

See accompanying notes.

6

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund VIII, LLC (the “Company”) 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, lending and sales activities. The Managing Member 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 (acquiring equipment to engage in equipment leasing, lending and sales activities). 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 March 31, 2008, 13,560,188 Units were 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.

The Company, or AFS on behalf of the Company, has incurred costs in connection with the organization, registration and issuance of the Limited Liability Company Units (Note 4). The amount of such costs to be borne by the Company is limited by certain provisions of the Company’s Operating Agreement. The Company will pay AFS and affiliates of AFS substantial fees which may result in a conflict of interest. The Company will pay substantial fees to AFS and its affiliates before distributions are paid to investors even if the Company does not produce profits. Therefore, the financial position of the Company could change significantly.

The Company is in the liquidation phase of its life cycle as defined in the Operating 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 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. 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.

These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-KSB for the year ended December 31, 2007, filed with the Securities and Exchange Commission.

7

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on equity or net income.

Note 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 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.

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 Company to concentrations of credit risk include cash and cash equivalents, direct finance lease receivables and accounts receivable. The Company places its cash deposits and temporary cash investments with creditworthy, high quality financial institutions and, therefore, believes that such concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Company. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating and direct financing leases.

Accounts receivable:

Accounts receivable represent the amounts billed under operating and direct financing lease contracts which are currently due to the Company. 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 Company’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 charged 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.

8

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):

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 24 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.

Initial direct costs:

The Company capitalizes initial direct costs (“IDC”) associated with the origination and funding of lease assets as defined in Statement of Financial Accounting Standards (“SFAS”) No. 91 (“SFAS No. 91”) “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases.” IDC includes both internal costs (e.g., labor and overhead) and external broker fees incurred with the origination. The costs are 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 are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

Asset valuation:

Recorded values of the Company’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 Company reports segment information in accordance with 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 company. It also requires entity-wide disclosures about the products and services an entity provides, the material countries

9

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):

in which it holds assets and reports revenue, and its major customers. 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.

The Company’s chief operating decision makers are the Managing Member’s Chief Executive Officer and its Chief Operating Officer. The Company believes that its equipment leasing business operates as one reportable segment because: a) the Company 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 Company does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business around geographic areas.

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 regions in which the Company sought leasing opportunities were North America and Europe. Currently, 100% of the Company’s operating revenues are from customers domiciled in North America.

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 Company records all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. It further provides criteria for derivative instruments to be designated as fair value, cash flow, or foreign currency hedges, and establishes accounting standards for reporting changes in the fair value of the derivative instruments. Upon adoption on January 1, 2001, the Company 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 Income (“AOCI”) and the ineffective portion (if any) directly in earnings. Amounts in AOCI 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 AOCI 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 6, 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.

10

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):

Unearned operating lease income:

The Company 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:

The Company is treated as a partnership for federal income tax purposes. Pursuant to the provisions of Section 701 of the Internal Revenue Code, a partnership is not subject to federal income taxes. Accordingly, the Company has provided current income taxes for only those states which levy income taxes on partnerships.

Other income (loss), net:

Other income (loss) consists of fair value adjustments on interest rate swap contracts.

Per unit data:

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

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 Company 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 Company adopted the provisions of SFAS 159 on January 1, 2008. The adoption of SFAS 159 did not have a significant effect on the Company’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

11

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies (continued):

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 Company 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 Company’s financial position, results of operations or cash flows.

3. Investment in equipment and leases, net:

The Company’s investment in leases consists 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	$	15,796	$	(1,209	)	$	(731	)	$	13,856
Net investment in direct financing leases		379		—			(28	)		351
Assets held for sale or lease, net		103		—			(1	)		102
Initial direct costs, net of accumulated amortization of $79 at March 31, 2008 and $108 at December 31, 2007		3		—			(1	)		2
Total	$	16,281	$	(1,209	)	$	(761	)	$	14,311

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. At March 31, 2008 and December 31, 2007, the Company had an impairment loss reserve of $70 thousand related to railcars. There were no additional impairment losses for the three months ended March 31, 2008 and 2007.

Depreciation expense on property subject to operating leases and property held for lease or sale was $732 thousand and $1.0 million for the three months ended March 31, 2008 and 2007, respectively.

All of the leased property was acquired during the period from 1999 through 2002.

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, rail	$	23,822		$	—		$	(4,745	)	$	19,077
Containers		20,952			—			(43	)		20,909
Transportation, other		5,020			—			—			5,020
Material handling		1,041			—			—			1,041
Other		2,300			—			—			2,300
		53,135			—			(4,788	)		48,347
Less accumulated depreciation		(37,339	)		(731	)		3,579			(34,491	)
Total	$	15,796		$	(731	)	$	(1,209	)	$	13,856

12

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

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

Direct financing leases:

As of March 31, 2008, investment in direct financing leases consists of refrigerated trailers and tractors. The following lists the components of the Company’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	$	18		$	49
Estimated residual values of leased equipment (unguaranteed)		334			334
Investment in direct financing leases		352			383
Less unearned income		(1	)		(4	)
Net investment in direct financing leases	$	351		$	379

At March 31, 2008, the aggregate amount of future lease payments is as follows (in thousands):

	Operating Leases		Direct Financing Leases		Total
Nine months ending December 31, 2008	$	3,784	$	18	$	3,802
Year ending December 31, 2009		2,661		—		2,661
2010		1,302		—		1,302
2011		761		—		761
2012		358		—		358
2013		128		—		128
Thereafter		64		—		64
	$	9,058	$	18	$	9,076

The Company 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
Transportation, rail	30 - 35
Manufacturing	10 - 20
Material handling	7 - 10
Natural gas compressors	7 - 10
Transportation, other	7 - 10

13

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

4. 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. Reimbursable costs incurred by AFS are allocated to the Company based upon estimated time incurred by employees working on Company 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 Company. Acquisition services are performed for the Company 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 Company 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 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.

During the three months ended March 31, 2008 and 2007, AFS and/or affiliates earned fees, commissions and reimbursements, pursuant to the Operating Agreement as follows (in thousands):

	Three Months Ended March 31,
	2008		2007
Asset management fees to Managing Member	$	59	$	140
Cost reimbursements to Managing Member		679		679
	$	738	$	819

The Operating 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 $1.2 million.

5. Non-recourse debt:

At March 31, 2008, non-recourse debt consists of notes payable to a financial institution. The notes are due in monthly installments. Interest on the notes is at a fixed rate of 6.90% per annum. The notes are secured by assignments of lease payments and pledges of assets. At March 31, 2008, the carrying value of the pledged assets is $1.1 million. The notes mature from 2008 through 2010.

Future minimum payments of non-recourse debt are as follows (in thousands):

	Principal		Interest		Total
Nine months ending December 31, 2008	$	552	$	75	$	627
Year ending December 31, 2009		756		56		812
2010		398		8		406
	$	1,706	$	139	$	1,845

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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

6. Receivables funding program:

In 1999, the Company established a $40 million receivables funding program (“Program”) (which was subsequently increased to a maximum of $125 million in July 2000) with a receivables financing company that issues commercial paper rated A1 from Standard and Poor’s and P1 from Moody’s Investor Services. Under the terms of the Program, the lenders received a general lien against all of the otherwise unencumbered assets of the Company. The Program provided for borrowing at a variable interest rate and required the Company 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 January 2002. The Program terminated in January 2007.

As of March 31, 2008, the Company receives or pays interest on interest rate swap agreements with a notional principal totaling $3.0 million, based on the difference between nominal rates ranging from 4.35% to 7.50% and a variable rate of 2.62% at March 31, 2008. No actual borrowing or lending is involved. The termination of swaps was to coincide with the maturity of the debt. The differential to be paid or received is accrued as interest rates change and is recognized currently as an adjustment to interest expense related to the debt. Through the swap agreements, the interest rates on historical borrowings were effectively fixed. The differential to be paid or received is accrued as interest rates change and is recognized currently as an adjustment to interest expense related to the debt. 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
11/11/1999	$	20,000	$	—	$	—	$	—		—
12/21/1999		20,000		—		2,797		(90	)	7.41	%
12/24/1999		25,000		—		—		—		—
4/17/2000		6,500		—		—		—		—
4/28/2000		1,900		—		—		—		—
8/3/2000		19,000		—		148		(1	)	7.50	%
10/31/2000		7,500		—		—		—		—
1/29/2001		8,000		—		—		—		—
6/1/2001		2,000		—		—		—		—
9/1/2001		9,000		—		85		(1	)	4.35	%
1/31/2002		3,900		—		—		—		*
	$	122,800	$	—	$	3,030	$	(92	)

* Under the terms of the Program, no interest rate swap agreements were required for this borrowing.

7. Commitments:

As of March 31, 2008, the Company had no commitments to purchase lease assets.

15

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

8. 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.

In the normal course of business, the Company 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 Managing Member 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 Managing Member, no liability will arise as a result of these provisions. The Managing Member has no reason to believe that the facts and circumstances relating to the Company’s contractual commitments differ from those it has entered into on behalf of the prior programs it has managed. 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.

9. Members’ capital:

As of March 31, 2008, 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).

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.

Distributions totaling $6.4 million and $1.3 million were paid to Other Members during the three months ended March 31, 2008 and 2007, respectively.

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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,” 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 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”) 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 March 31, 2008, the Company 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 Managing Member.

Capital Resources and Liquidity

The liquidity of the Company varies, increasing to the extent cash flows from leases and proceeds of asset sales exceed expenses and decreasing as lease assets are acquired, 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 a diversified group of lessees for fixed term leases with fixed rental amounts. 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 re-leasing or selling the equipment as it comes off lease.

Throughout the Reinvestment Period, which ended December 31, 2006, the Company 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 cash distributions to the Other Members.

The Company 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 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.

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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.

If interest rates increase significantly, 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.

In 1999, the Company established a $40 million receivables funding program (“Program”) (which was subsequently increased to a maximum of $125 million in July 2000) with a receivables financing company that issues commercial paper rated A1 from Standard and Poor’s and P1 from Moody’s Investor Services. Under the terms of the Program, the lenders received a general lien against all of the otherwise unencumbered assets of the Company. The Program provided for borrowing at a variable interest rate and requires the Company 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 January 2002 and was fully terminated in January 2007.

As of March 31, 2008, the Company receives or pays interest on interest rate swap agreements with a notional principal totaling $3.0 million, based on the difference between nominal rates ranging from 4.35% to 7.50% and a variable rate of 2.62% at March 31, 2008. The fair value of the interest rate swaps totaled $92 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 Company has access to certain sources of non-recourse debt financing, which the Company uses on a transaction basis as a means of mitigating credit risk. The non-recourse debt financing consists of notes payable to a financial institution. The notes are due in monthly installments. Interest on the notes is at a fixed rate of 6.90% per annum. The notes are secured by an assignment of lease payments and pledges of assets. At March 31, 2008, the carrying value of the pledged assets is $1.1 million. The notes mature through 2010.

The Operating Agreement limits such borrowings to 50% of the total cost of equipment, in the aggregate.

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of January 1999.

At March 31, 2008, the Company had no commitments to purchase lease assets. Pursuant to the Operating Agreement, the Company will no longer purchase any new lease assets.

Cash Flows

The three months ended March 31, 2008 versus the three months ended March 31, 2007

Operating Activities

The Company’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.

Net cash provided by operating activities was relatively flat at $772 thousand for the first quarter of 2008 as compared to $755 thousand for the first quarter of 2007. Significant period over period changes include: (1) increases in accounts payable and accrued liabilities, (2) a decline in unearned lease income and (3) the period over period decline in operating results as adjusted for non-cash revenue and expense such as gains on sales of assets and depreciation.

The increase in accounts payable and accrued liabilities benefited cash flow by $273 thousand and was primarily due to period-end accruals related to administrative costs reimbursable to AFS.

Unearned lease income decreased by $168 thousand mainly due to an increase in unearned rents realized in the first quarter of 2008, as compared to the first quarter of 2007. The period over period decline in operating results, as adjusted for non-cash items, totaled $152 thousand and was attributable to a decrease in operating lease revenue offset, in part, by decreases in vessel maintenance expense and professional fees.

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Investing Activities

Net cash provided by investing activities for the first quarter of 2008 increased by $3.8 million as compared to the first quarter of 2007. The net increase in cash flow was primarily due to $4.2 million of proceeds from the sale of close to 200 railcars to a major railway customer in January 2008. The Company recognized a $3.0 million gain on the sale as a result of the strong market demand for such railcars at the time of the transaction.

Financing Activities

Net cash used in financing activities increased by $5.3 million for the first quarter of 2008 as compared to the first quarter of 2007. The net increase in cash used (net decrease in cash flow) was primarily due to a $5.1 million period over period increase in distributions paid to Other Members. The distributions were based on cash available net of any short-term payables and reserves as determined by the Managing Member.

Results of Operations

On January 13, 1999, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing and lending activities)

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

The three months ended March 31, 2008 versus the three months ended March 31, 2007

The Company had net income of $2.9 million for the first quarter of 2008 and a net loss of $250 thousand for the first quarter of 2007. The results for the first quarter of 2008 reflect an increase in total revenues and a decline in operating expenses when compared to the first quarter of 2007.

Revenues

Total revenues for the first quarter of 2008 increased by $2.4 million, or 105%, as compared to the first quarter of 2007. The net increase in total revenues was primarily a result of a $3.0 million increase in net gains on sales of lease assets offset, in part, by a $593 thousand decrease in operating lease revenue.

The period over period decrease in net gain on sales of lease assets was primarily due to gains of $3.0 million recognized on the sale of railcars to a major railway customer in January 2008. The decline in operating lease revenue was mainly attributable to run-off of the lease portfolio and sales of lease assets.

Expenses

Total expenses for the first quarter of 2008 decreased by $715 thousand, or 28%, as compared to the first quarter of 2007. The net decrease in total expenses was mainly due to decreases in depreciation expense, vessel maintenance costs, professional fees and asset management fees.

The period over period decline in depreciation expense totaled $285 thousand and was the result of continued run-off of the Company’s lease portfolio and sales of lease assets. The decrease in vessel maintenance expense totaled $174 thousand and was primarily attributable to inactivity of a vessel since November 2007.

In addition, professional fees and asset management fees paid to the Managing Member decreased by $166 thousand and $81 thousand, respectively. The decrease in professional fees was primarily due to the elimination of costs associated with the audit and restatement of the Company’s prior year financial statements which were largely completed during the second quarter of 2007; while the decrease in management fees paid to AFS was due to the continued decline in assets under management during the Fund’s liquidation phase.

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Other

The Company recorded other expense, net totaling $1 thousand and other income, net totaling $29 thousand for the first quarter of 2008 and 2007, respectively, related to the change in the fair value of its interest swap contracts.

Item 4. Controls and procedures.

Evaluation of disclosure controls and procedures

The Company’s Managing Member’s 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, 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 Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, who 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 is 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 is applicable to the Company, during the quarter ended March 31, 2008 that has materially affected, or is 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. 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 VIII, L.P.

(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)

22