Atel Capital Equipment Fund Ix (ZZHJC) 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 000-50210

ATEL Capital Equipment Fund IX, LLC

(Exact name of registrant as specified in its charter)

California	94-3375584
(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 12,055,016.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL CAPITAL EQUIPMENT FUND IX, LLC

Index

Part I. Financial Information
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		23
Item 4. Controls and Procedures		27
Part II. Other Information
Item 1. Legal Proceedings		29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 3. Defaults Upon Senior Securities		29
Item 4. Mine Safety Disclosures		29
Item 5. Other Information		29
Item 6. Exhibits		29

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ATEL CAPITAL EQUIPMENT FUND IX, LLC

BALANCE SHEETS

SEPTEMBER 30, 2013 AND DECEMBER 31, 2012
(in thousands)

	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Cash and cash equivalents	$	5,887	$	5,217
Accounts receivable, net of allowance for doubtful accounts of $39 at September 30, 2013 and $55 at December 31, 2012		573		880
Notes receivable, net of unearned interest income of $69 and allowance for credit losses of $0 at September 30, 2013 and net of unearned interest income of $123 and allowance for credit losses of $54 as of December 31, 2012		599		965
Prepaid expenses and other assets		63		59
Investment in securities		5		5
Investments in equipment and leases, net of accumulated depreciation of $27,948 at September 30, 2013 and $39,698 at December 31, 2012		20,826		26,065
Total assets	$	27,953	$	33,191
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member	$	81	$	69
Other		339		454
Deposits due lessees		—		49
Non-recourse debt		14,201		17,384
Unearned operating lease income		194		295
Total liabilities		14,815		18,251
Commitments and contingencies
Members’ capital:
Managing Member		—		—
Other Members		13,138		14,940
Total Members’ capital		13,138		14,940
Total liabilities and Members’ capital	$	27,953	$	33,191

See accompanying notes.

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ATEL CAPITAL EQUIPMENT FUND IX, LLC

STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2013 AND 2012
(in thousands, except per unit data)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues:
Leasing and lending activities:
Operating leases	$	1,348		$	2,126		$	4,288		$	6,799
Direct financing leases		717			821			2,230			2,550
Interest on notes receivable		14			24			49			92
Gain on sales of lease assets and early termination of notes receivable		682			28			1,556			250
Gain from settlement of lease asset casualty		—			350			—			350
Unrealized gain on securities		—			—			—			5
Gain on sales or dispositions of securities and warrants		—			—			1			12
Other revenue		91			47			225			113
Total revenues		2,852			3,396			8,349			10,171
Expenses:
Depreciation of operating lease assets		533			813			1,818			2,547
Asset management fees to Managing Member and/or affiliates		101			157			289			463
Cost reimbursements to Managing Member and/or affiliates		174			191			527			602
Provision (reversal of provision) for credit losses		10			(8	)		(16	)		(11	)
Impairment losses		63			18			219			72
Amortization of initial direct costs		3			6			12			19
Other management fees		7			23			27			68
Interest expense		239			308			770			972
Professional fees		16			45			78			130
Outside services		13			10			44			33
Insurance		15			22			47			69
Marine vessel maintenance and other operating costs		(7	)		242			103			650
Railcar and equipment maintenance		44			35			130			96
Franchise fees and state taxes		21			7			91			93
Other		48			29			146			96
Total operating expenses		1,280			1,898			4,285			5,899
Other expense, net		—			—			(1	)		(5	)
Net income	$	1,572		$	1,498		$	4,063		$	4,267
Net income:
Managing Member	$	147		$	147		$	440		$	440
Other Members		1,425			1,351			3,623			3,827
	$	1,572		$	1,498		$	4,063		$	4,267
Net income per Limited Liability Company Unit (Other Members)	$	0.12		$	0.11		$	0.30		$	0.32
Weighted average number of Units outstanding		12,055,016			12,055,016			12,055,016			12,055,016

See accompanying notes.

4

ATEL CAPITAL EQUIPMENT FUND IX, 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 per unit data)

	Other Members					Managing Member			Total
	Units		Amount
Balance December 31, 2011		12,055,016	$	17,197		$	—		$	17,197
Distributions to Other Members ($0.60 per Unit)		—		(7,233	)		—			(7,233	)
Distributions to Managing Member		—		—			(586	)		(586	)
Net income		—		4,976			586			5,562
Balance December 31, 2012		12,055,016		14,940			—			14,940
Distributions to Other Members ($0.45 per Unit)		—		(5,425	)		—			(5,425	)
Distributions to Managing Member		—		—			(440	)		(440	)
Net income		—		3,623			440			4,063
Balance September 30, 2013 (Unaudited)		12,055,016	$	13,138		$	—		$	13,138

See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND IX, 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	$	1,572		$	1,498		$	4,063		$	4,267
Adjustment to reconcile net income to cash provided by operating activities:
Gain on sales of lease assets and early termination of notes receivable		(682	)		(28	)		(1,556	)		(250	)
Gain from settlement of lease asset casualty		—			(350	)		—			(350	)
Unrealized gain on securities		—			—			—			(5	)
Gain on sales or dispositions of securities and warrants		—			—			(1	)		(12	)
Depreciation of operating lease assets		533			813			1,818			2,547
Amortization of initial direct costs		3			6			12			19
Provision (reversal of provision) for credit losses		10			(8	)		(16	)		(11	)
Impairment losses		63			18			219			72
Changes in operating assets and liabilities:
Accounts receivable		(3	)		(101	)		323			89
Prepaid expenses and other assets		(13	)		(15	)		(4	)		(37	)
Accounts payable, Managing Member		29			15			12			(36	)
Accounts payable, other		6			(26	)		(115	)		(39	)
Deposits due lessees		(49	)		—			(49	)		—
Unearned operating lease income		33			(159	)		(101	)		(25	)
Net cash provided by operating activities		1,502			1,663			4,605			6,229
Investing activities:
Proceeds from sales of lease assets and early termination of notes receivable		1,047			143			3,651			478
Proceeds from sales or dispositions of securities and warrants		—			—			1			12
Principal payments received on direct financing leases		406			352			1,183			1,015
Principal payments received on notes receivable		76			187			278			543
Net cash provided by investing activities		1,529			682			5,113			2,048
Financing activities:
Repayments of non-recourse debt		(1,079	)		(1,011	)		(3,183	)		(2,983	)
Distributions to Other Members		(1,809	)		(1,809	)		(5,425	)		(5,425	)
Distributions to Managing Member		(147	)		(147	)		(440	)		(440	)
Net cash used in financing activities		(3,035	)		(2,967	)		(9,048	)		(8,848	)
Net (decrease) increase in cash and cash equivalents		(4	)		(622	)		670			(571	)
Cash and cash equivalents at beginning of period		5,891			5,644			5,217			5,593
Cash and cash equivalents at end of period	$	5,887		$	5,022		$	5,887		$	5,022
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	245		$	313		$	787		$	988
Cash paid during the period for taxes	$	1		$	7		$	77		$	124
Schedule of non-cash transactions:
Amount due from settlement of lease asset casualty	$	—		$	440		$	—		$	440

See accompanying notes.

6

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

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on September 27, 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to engage in equipment leasing, lending and sales activities, primarily in the United States. 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, 2020. Contributions in the amount of $600 were received as of December 31, 2000, $100 of which represented AFS’s continuing interest, and $500 of which represented the initial Member’s capital investment.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. On February 21, 2001, 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. As of April 3, 2001, the Company had received subscriptions for 753,050 Units ($7.5 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be released to the Company.

As of January 15, 2003, the offering was terminated. As of that date, the Company had received subscriptions for 12,065,266 Units ($120.7 million). Subsequent to January 15, 2003, Units totaling 10,250 were rescinded or repurchased and funds returned to investors (net of distributions paid and allocated syndication costs, as applicable). As of September 30, 2013, 12,055,016 Units remain issued and outstanding.

The Company’s principal objectives are 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 on December 31, 2009 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by the Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2010, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement.

Pursuant to the terms of the Operating Agreement, AFS receives compensation for services rendered and reimbursements for costs incurred on behalf of the Company (See Note 6). 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.

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.

7

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

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

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no significant impact 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.

In preparing the accompanying unaudited financial statements, the Managing Member has reviewed 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 primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and for determination of the allowance for doubtful accounts and reserve for credit losses on notes receivable.

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.

The primary geographic regions in which the Company seeks leasing opportunities are North America and Europe. 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):

	Nine Months Ended September 30,
	2013		% of Total			2012		% of Total
Revenue
United States	$	8,085		97	%	$	9,668		95	%
Canada		148		2	%		257		3	%
United Kingdom		116		1	%		246		2	%
Total International		264		3	%		503		5	%
Total	$	8,349		100	%	$	10,171		100	%

	As of September 30,					As of December 31,
	2013		% of Total			2012		% of Total
Long-lived assets
United States	$	20,739		100	%	$	25,571		98	%
Canada		—		0	%		340		1	%
United Kingdom		87		0	%		154		1	%
Total International		87		0	%		494		2	%
Total	$	20,826		100	%	$	26,065		100	%

8

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

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

Investment in securities:

Purchased securities

Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. There were neither impaired securities at September 30, 2013 and December 31, 2012 nor investment securities sold or disposed of during the three and nine months ended September 30, 2013 and 2012.

Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried at an estimated fair value on the balance sheet at the end of the period, as determined by the Managing Member. At September 30, 2013 and December 31, 2012, the Managing Member estimated the fair value of the warrants to be nominal in amount. There were no net exercises of warrants during the third quarters of 2013 and 2012. During the first nine months of 2013, the Company recognized nominal gains on the net exercise of certain warrants. By comparison, gains recognized on the net exercise of warrants amounted to an approximate $12 thousand during the first nine months of 2012.

Other expense, net:

Other expense, net for the nine months ended September 30, 2013 and 2012 consists solely of net losses on foreign exchange transactions totaling $1 thousand and $5 thousand, respectively. The Company’s net foreign currency translation gains and losses were nominal during the three-month periods ended September 30, 2013 and 2012.

Per Unit data:

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

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. Notes receivable, net:

The Company has various notes receivable from borrowers who have financed the purchase of equipment through the Company. At September 30, 2013, the original terms of the notes receivable are from 36 to 120 months and bear interest at rates ranging from 8.5% to 16.2 %. The notes are secured by the equipment financed. The notes mature from 2014 through 2016.

There were no notes receivable deemed impaired or in non-accrual status as of September 30, 2013. There were no notes receivable in non-accrual status as of December 31, 2012. However, as of the same date, the Company had an impaired note which was deemed so during the second quarter of 2012. As such, the Fund recorded a $54 thousand fair value adjustment during the second quarter of 2012 to reduce the cost basis of the impaired note. As of December 31, 2012, the amount of the estimated impairment remained the same and the net investment balance outstanding approximated $117 thousand.

During the third quarter of 2012, all past due amounts on this note were received bringing it current at September 30, 2012. The note was returned to accrual status effective October 1, 2012, and was fully settled during the first quarter of 2013 prior to its scheduled maturity resulting in a gain of $54 thousand.

9

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

3. Notes receivable, net: - (continued)

As of September 30, 2013, the minimum future payments receivable are as follows (in thousands):

Three months ending December 31, 2013	$	84
Year ending December 31, 2014		229
2015		166
2016		188
		667
Less: portion representing unearned interest income		(69	)
		598
Unamortized initial direct costs		1
Notes receivable, net	$	599

Initial direct costs (“IDC”) amortization expense related to the notes receivable and the Company’s operating and direct financing leases for the three and nine months ended September 30, 2013 and 2012 are as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
IDC amortization – notes receivable	$	—	$	—	$	—	$	1
IDC amortization – lease assets		3		6		12		18
Total	$	3	$	6	$	12	$	19

4. Allowance for credit losses:

The Company’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
	Notes Receivable		Finance Leases			Operating Leases			Notes Receivable			Finance Leases
Balance December 31, 2011	$	—	$	10		$	60		$	—		$	—	$	70
(Reversal of provision) provision		—		(3	)		(12	)		54			—		39
Balance December 31, 2012		—		7			48			54			—		109
Reversal of provision		—		—			(16	)		—			—		(16	)
Asset disposal		—		—			—			(54	)		—		(54	)
Balance September 30, 2013	$	—	$	7		$	32		$	—		$	—	$	39

Accounts receivable

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

Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness of specifically identified lessees and borrowers, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received. Accounts receivable 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

10

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

4. Allowance for credit losses: - (continued)

reviews the creditworthiness of companies with lease or note payments outstanding less than 90 days. Based upon management’s judgment, such leases or notes may be placed in non-accrual status. Leases or notes 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 receivable is probable. Until such time, revenues on operating leases are recognized on a cash basis. All payments received on amounts billed under direct financing leases and notes receivable are applied only against outstanding principal balances.

Financing receivables

In addition to the allowance established for delinquent accounts receivable, the total allowance related solely to financing receivables also includes anticipated impairment charges on notes receivable and direct financing leases.

Notes are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the note agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest when due. If it is determined that a loan is impaired with regard to scheduled payments, the Company will perform an analysis of the note to determine if an impairment valuation reserve is necessary. This analysis considers the estimated cash flows from the note, or the collateral value of the property underlying the note when note repayment is collateral dependent. Any required valuation reserve is charged to earnings when determined; and notes are charged off to the allowance as they are deemed uncollectible.

The asset underlying a direct financing lease contract is considered impaired if the estimated undiscounted future cash flows of the asset are less than its 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 marketplace 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, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date.

11

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

4. Allowance for credit losses: - (continued)

As of September 30, 2013 and December 31, 2012, the Company’s allowance for credit losses (related solely to financing receivables) and its recorded investment in financing receivables were as follows (in thousands):

September 30, 2013	Notes Receivable		Finance Leases		Total
Allowance for credit losses:
Ending balance	$	—	$	—	$	—
Ending balance: individually evaluated for impairment	$	—	$	—	$	—
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—
Financing receivables:
Ending balance	$	5991	$	11,2682	$	11,867
Ending balance: individually evaluated for impairment	$	599	$	11,268	$	11,867
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—

¹ Includes $1 of unamortized initial direct costs

² Includes $15 of unamortized initial direct costs

December 31, 2012	Notes Receivable		Finance Leases		Total
Allowance for credit losses:
Ending balance	$	54	$	—	$	54
Ending balance: individually evaluated for impairment	$	54	$	—	$	54
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—
Financing receivables:
Ending balance	$	1,0193	$	12,4774	$	13,496
Ending balance: individually evaluated for impairment	$	1,019	$	12,477	$	13,496
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—

³ Includes $1 of unamortized initial direct costs

⁴ Includes $24 of unamortized initial direct costs

The Company evaluates the credit quality of its financing receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:

Pass – Any account whose lessee/debtor, co-lessee/debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moody’s or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the Manager to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the Manager and the account is not considered by the Chief Credit Officer of the Manager to fall into one of the three risk profiles below.

12

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

4. Allowance for credit losses: - (continued)

Special Mention – Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Fund’s receivable at some future date.

Substandard – Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the Manager’s Credit Watch List.

Doubtful – Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the Manager’s Credit Watch List, and has been declared in default and the Manager has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired notes and leases as applicable.

At September 30, 2013 and December 31, 2012, the Company’s financing receivables by credit quality indicator and by class of financing receivables are as follows (excludes initial direct costs) (in thousands):

	Notes Receivable				Finance Leases
	September 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
Pass	$	598	$	259	$	11,253	$	12,426
Special mention		—		759		—		27
Substandard		—		—		—		—
Doubtful		—		—		—		—
Total	$	598	$	1,018	$	11,253	$	12,453

At September 30, 2013 and December 31, 2012, the investment in financing receivables is aged as follows (excludes initial direct costs) (in thousands):

September 30, 2013	31 – 60 Days Past Due		61 – 90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment >90 Days and Accruing
Notes receivable	$	—	$	—	$	—	$	—	$	598	$	598	$	—
Finance leases		—		—		—		—		11,253		11,253		—
Total	$	—	$	—	$	—	$	—	$	11,851	$	11,851	$	—

December 31, 2012	31 – 60 Days Past Due		61 – 90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment >90 Days and Accruing
Notes receivable	$	—	$	—	$	—	$	—	$	1,018	$	1,018	$	—
Finance leases		22		—		1		23		12,430		12,453		1
Total	$	22	$	—	$	1	$	23	$	13,448	$	13,471	$	1

As discussed in Note 3, no notes receivable were impaired or in non-accrual status as of September 30, 2013. As of December 31, 2012, the Company had an impaired note which was deemed so during the second quarter of 2012. As such, the Fund recorded a $54 thousand fair value adjustment during the second quarter of 2012 to reduce the cost basis of the impaired note. As of December 31, 2012, the amount of the estimated impairment remained the same and the net investment balance outstanding approximated $117 thousand.

13

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

4. Allowance for credit losses: - (continued)

During the third quarter of 2012, all past due amounts on this note were received bringing it current at September 30, 2012. Accordingly, the note was returned to accrual status effective October 1, 2012. During the first quarter of 2013, the note was settled prior to its scheduled maturity resulting in a gain of $54 thousand.

As of September 30, 2013, there were no investments in financing receivables with related accounts receivable past due more than 90 days which were still on an accrual basis. As of December 31, 2012, certain investments in financing receivables with related accounts receivable past due more than 90 days were still on an accrual basis based on management’s assessment of the collectability of such receivables. However, these accounts receivable were fully reserved and included in the allowance for doubtful accounts.

5. Investment in equipment and leases, net:

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

	Balance December 31, 2012		Reclassifications, Additions/ Dispositions and Impairment Losses			Depreciation/Amortization Expense or Amortization of Leases			Balance September 30, 2013
Net investment in operating leases	$	11,291	$	(416	)	$	(1,799	)	$	9,076
Net investment in direct financing leases		12,453		(16	)		(1,184	)		11,253
Assets held for sale or lease, net		2,289		(1,793	)		(19	)		477
Initial direct costs, net of accumulated amortization of $80 at September 30, 2013 and $82 at December 31, 2012		32		—			(12	)		20
Total	$	26,065	$	(2,225	)	$	(3,014	)	$	20,826

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. During the third quarter of 2013, the Company recorded fair value adjustments totaling $63 thousand to reduce the cost basis of the impaired lease and off-lease equipment. By comparison, fair value adjustments totaling $18 thousand were recorded during the third quarter of 2012 to reduce the cost basis of impaired off-lease equipment. Fair value adjustments relative to impaired equipment totaled $219 thousand and $72 thousand for the nine months ended September 30, 2013 and 2012, respectively.

As of September 30, 2013 and December 31, 2012, there were no lease contracts placed in non-accrual status. As of the same dates, the Company has certain other leases that have related accounts receivables aged 90 days or more that have not been placed on non-accrual status. In accordance with Company policy, such receivables are fully reserved. Management continues to closely monitor these leases for any actual change in collectability status and indication of necessary valuation adjustments.

The Company utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of operating lease transactions. Depreciation expense on the Company’s equipment was approximately $533 thousand and $813 thousand for the respective three months ended September 30, 2013 and 2012, and was $1.8 million and $2.5 million for the respective nine months ended September 30, 2013 and 2012. All of the leased property was acquired in years beginning with 2002 through 2010.

14

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

5. 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, Dispositions and Impairment Losses			Balance September 30, 2013
Transportation, rail	$	11,891		$	—		$	(44	)	$	11,847
Marine vessels		8,958			—			542			9,500
Transportation, other		10,439			—			(4,100	)		6,339
Manufacturing		2,056			—			(111	)		1,945
Natural gas compressors		1,671			—			—			1,671
Materials handling		2,939			—			(1,297	)		1,642
Construction		1,584			—			(124	)		1,460
Agriculture		1,151			—			—			1,151
Other		46			—			11			57
		40,735			—			(5,123	)		35,612
Less accumulated depreciation		(29,444	)		(1,799	)		4,707			(26,536	)
Total	$	11,291		$	(1,799	)	$	(416	)	$	9,076

The average estimated residual value for assets on operating leases was 17% and 16% of the assets’ original cost at September 30, 2013 and December 31, 2012, respectively. There were no operating leases placed in non-accrual status as of September 30, 2013 and December 31, 2012.

The Company may earn revenues from its containers, marine vessel and certain other assets based on utilization of such assets or a fixed-term lease. 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 $2 thousand and $7 thousand for the respective three months ended September 30, 2013 and 2012, and $44 thousand and $24 thousand for the respective nine months ended September 30, 2013 and 2012.

Direct financing leases:

As of September 30, 2013, investment in direct financing leases primarily consists of mining and logging equipment. As of December 31, 2012, such investment primarily consisted of materials handling, research, mining and construction equipment. The components of the Company’s investment in direct financing leases as of September 30, 2013 and December 31, 2012 are as follows (in thousands):

	September 30, 2013			December 31, 2012
Total minimum lease payments receivable	$	13,704		$	17,118
Estimated residual values of leased equipment (unguaranteed)		3,552			3,569
Investment in direct financing leases		17,256			20,687
Less unearned income		(6,003	)		(8,234	)
Net investment in direct financing leases	$	11,253		$	12,453

15

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

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

There was no investment in direct financing lease assets in non-accrual status at September 30, 2013 and December 31, 2012. However, at December 31, 2012, the Company had certain direct financing leases that have related accounts receivables aged 90 days or more that have not been placed on non-accrual status. In accordance with Company policy, such receivables are fully reserved and included in the allowance for doubtful accounts presented in Note 4.

At September 30, 2013, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

	Operating Leases		Direct Financing Leases		Total
Three months ending December 31, 2013	$	839	$	1,120	$	1,959
Year ending December 31, 2014		3,192		4,450		7,642
2015		1,916		4,450		6,366
2016		372		3,684		4,056
2017		344		—		344
2018		182		—		182
Thereafter		228		—		228
	$	7,073	$	13,704	$	20,777

6. 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, finance/treasury, 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. The Company would be liable for certain future costs to be incurred by AFS to manage the administrative services provided to the Company.

Each of ATEL Leasing Corporation (“ALC”) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Company. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications 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 managed assets, number of investors or contributed capital based upon the type of cost incurred. The Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or 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 recovered in future years to the extent of the cumulative limit. As of September 30, 2013, the Company has not exceeded the annual and/or cumulative limitations discussed above.

16

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

6. Related party transactions: - (continued)

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
Costs reimbursed to Managing Member and/or affiliates	$	174	$	191	$	527	$	602
Asset management fees to Managing Member and/or affiliates		101		157		289		463
	$	275	$	348	$	816	$	1,065

7. Non-recourse debt:

At September 30, 2013, non-recourse debt consists of notes payable to financial institutions. The notes are due in monthly installments. Interest on the notes is at fixed rates ranging from 6.16% to 6.66%. The notes are secured by assignments of lease payments and pledges of assets. At September 30, 2013, gross operating lease rentals and future payments on direct financing leases totaled approximately $15.4 million over the remaining lease terms; and the carrying value of the pledged assets is $13.7 million. The notes mature from 2015 through 2017.

The non-recourse debt does not contain any material financial covenants. The debt is secured by liens granted by the Company to the non-recourse lenders on (and only on) the discounted lease transactions. The lenders have recourse only to the following collateral: the specific leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items. The non-recourse obligation is payable solely out of the respective specific security and the Company does not guarantee (nor is the Company otherwise contractually responsible for) the payment of the non-recourse debt as a general obligation or liability of the Company. Although the Company does not have any direct or general liability in connection with the non-recourse debt apart from the security granted, the Company is directly and generally liable and responsible for certain representations, warranties, and covenants made to the lenders, such as warranties as to genuineness of the transaction parties' signatures, as to the genuineness of the respective lease chattel paper or the transaction as a whole, or as to the Company's good title to or perfected interest in the secured collateral, as well as similar representations, warranties and covenants typically provided by non-recourse borrowers and customary in the equipment finance industry, and are viewed by such industry as being consistent with non-recourse discount financing obligations. Accordingly, as there are no financial covenants or ratios imposed on the Company in connection with the non-recourse debt, the Company has determined that there are no material covenants with respect to the non-recourse debt that warrant footnote disclosure.

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

	Principal		Interest		Total
Three months ending December 31, 2013	$	1,096	$	221	$	1,317
Year ending December 31, 2014		4,568		726		5,294
2015		4,616		420		5,036
2016		3,743		133		3,876
2017		178		1		179
	$	14,201	$	1,501	$	15,702

17

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

8. Commitments and Contingencies:

At September 30, 2013, the Company had no commitments to purchase lease assets or fund new loans.

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.

9. 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.

10. Members’ capital:

As of September 30, 2013 and December 31, 2012, 12,055,016 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 Manager’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 Manager on terms it determines to be appropriate under given circumstances, in the event that the Manager 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 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.

18

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

10. Members’ capital: - (continued)

As defined in the Operating Agreement, the Company’s Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Members and 7.5% to AFS. In accordance with the terms of the Operating Agreement, additional allocations of income were made to AFS during the three and nine months ended September 30, 2013 and 2012. The amounts allocated were determined to bring AFS’s ending capital account balance to zero at the end of each period.

Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Distributions declared	$	1,809	$	1,809	$	5,425	$	5,425
Weighted average number of Units outstanding		12,055,016		12,055,016		12,055,016		12,055,016
Weighted average distributions per Unit	$	0.15	$	0.15	$	0.45	$	0.45

11. Fair value measurements:

Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, generally on a national exchange.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

Level 3 – Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company's own estimates of assumptions that market participants would use in pricing the asset or liability.

The Company had no assets or liabilities requiring measurement at fair value on a recurring basis as of September 30, 2013 and December 31, 2012; however, the Company recorded non-recurring adjustments to reflect the fair values of certain impaired lease and off-lease equipment during the third quarter of 2013, and those of certain impaired notes receivable and off-lease equipment during 2012. Balances shown at September 30, 2013 and December 31, 2012 reflect the fair value of the then existing impaired assets.

The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, notes receivable and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.

19

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

11. Fair value measurements: - (continued)

The measurement methodologies are as follows:

Impaired notes receivable

The fair value of the Company’s notes receivable is estimated using either third party appraisals of collateral or discounted cash flow analyses based upon current market rates for similar types of lending arrangements, with adjustments for non-accrual loans as deemed necessary. The Company had no fair value adjustments relative to impaired notes receivable during the three and nine months ended September 30, 2013. During the second quarter of 2012, the Company had recorded $54 thousand of fair value adjustments to reduce the cost basis of an impaired note. The adjustment was non-recurring and was based upon an independent appraisal of the underlying collateral. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the impaired note receivable is classified within Level 3 of the valuation hierarchy. Such valuation utilizes a market approach technique and uses inputs from third party appraisers that utilize current market transactions as adjusted for certain factors specific to the underlying collateral. The estimated impairment also represents the total fair value adjustments for the nine months ended September 30, 2012. Such amount remained unchanged through December 31, 2012. The note was subsequently settled during the first quarter of 2013 prior to its scheduled maturity.

Impaired off-lease equipment

During the third quarter of 2013, the Company recorded fair value adjustments totaling $63 thousand to reduce the cost basis of the impaired lease and off-lease equipment. By comparison, fair value adjustments totaling $18 thousand were recorded during the third quarter of 2012 to reduce the cost basis of impaired off-lease equipment. Fair value adjustments relative to impaired equipment totaled $219 thousand and $72 thousand for the nine months ended September 30, 2013 and 2012. Such third quarter 2012 amounts remained unchanged through December 31, 2012. All of the aforementioned adjustments were non-recurring. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair values of such impaired equipment are classified within Level 3 of the valuation hierarchy as the data sources utilized for the valuation of the assets reflect significant inputs that are unobservable in the market. Such valuation utilizes a market approach technique and uses inputs that reflect the sales price of similar assets sold by affiliates and/or information from third party remarketing agents not readily available in the market.

The following table presents the fair value measurement of assets and liabilities measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at September 30, 2013 and December 31, 2012 (in thousands):

	September 30, 2013		Level 1 Estimated Fair Value		Level 2 Estimated Fair Value		Level 3 Estimated Fair Value
Assets measured at fair value on a non-recurring basis:
Impaired lease and off-lease equipment	$	8	$	—	$	—	$	8

	December 31, 2012		Level 1 Estimated Fair Value		Level 2 Estimated Fair Value		Level 3 Estimated Fair Value
Assets measured at fair value on a non-recurring basis:
Impaired notes receivable, net	$	117	$	—	$	—	$	117
Impaired off-lease equipment		2		—		—		2

20

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

11. Fair value measurements: - (continued)

The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s non-recurring fair value adjustments categorized as Level 3 in the fair value hierarchy at September 30, 2013:

Name	Valuation Frequency	Valuation Technique	Unobservable Inputs	Range of Input Values
Lease Equipment	Non-recurring	Market Approach	Third Party Agents' Pricing   Quotes - per equipment	$500 (total of $7,500)
			Equipment Condition	Poor to Average

The following disclosure of the estimated fair value of financial instruments is made in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification. Fair value estimates, methods and assumptions, set forth below for the Company’s financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Company’s financial statements and related notes.

The Company has determined the estimated fair value amounts by using market information and valuation methodologies that it considers appropriate and consistent with the fair value accounting guidance. Considerable judgment is required to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and cash equivalents

The recorded amounts of the Company’s cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.

Notes receivable

The fair value of the Company’s notes receivable is estimated using either third party appraisals of collateral or discounted cash flow analyses based upon current market rates for similar types of lending arrangements, with credit risk or estimated collateral liquidation adjustments for impaired loans as deemed necessary.

Investment in securities

The Company’s investment securities are not registered for public sale and are carried at cost which management believes approximates fair value, as appropriately adjusted for impairment.

Non-recourse debt

The fair value of the Company’s non-recourse debt is estimated using discounted cash flow analyses, based upon current market borrowing rates for similar types of borrowing arrangements.

Commitments and Contingencies

Management has determined that the fair value of contingent liabilities (or guarantees) is not considered material because management believes there has been no event that has occurred wherein a guarantee liability has been incurred or will likely be incurred.

21

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

11. Fair value measurements: - (continued)

The following tables present a summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company’s balance sheet at September 30, 2013 and December 31, 2012 (in thousands):

	Fair Value Measurements at September 30, 2013
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	5,887	$	5,887	$	—	$	—	$	5 ,887
Notes receivable, net		599		—		—		599		599
Investment in securities		5		—		—		5		5
Financial liabilities:
Non-recourse debt		14,201		—		—		14,768		14,768

	Fair Value Measurements at December 31, 2012
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	5,217	$	5,217	$	—	$	—	$	5, 217
Notes receivable, net		965		—		—		965		965
Investment in securities		5		—		—		5		5
Financial liabilities:
Non-recourse debt		17,384		—		—		18,302		18,302

22

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 Company’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 market 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 IX, LLC (the “Company” or the “Fund”) is a California limited liability company that was formed in September 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to generate revenues from equipment leasing, lending and sales activities, primarily in the United States. The Managing Member of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company.

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 January 2003. During early 2003, the Company completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), the Company has utilized its credit facilities and reinvested cash flow in excess of certain amounts required to be distributed to the Other Members to acquire additional equipment.

The Company may continue until December 31, 2020. However, pursuant to the guidelines of the Limited Liability Company Operating Agreement (“Operating Agreement”), the Company commenced liquidation phase activities subsequent to the end of the Reinvestment Period which ended on December 31, 2009. Periodic distributions will be 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 $1.6 million and $1.5 million for the three months ended September 30, 2013 and 2012, respectively. The results for the third quarter of 2013 reflect a decrease in total operating expenses partially offset by a decrease in total revenues when compared to the prior year period.

Revenues

Total revenues for the third quarter of 2013 decreased by $544 thousand, or 16%, as compared to the prior year period. The net reduction in total revenues was primarily a result of decreases in both operating and direct financing lease revenues and the absence of gain recognized from the settlement of a lease asset casualty during the prior year period. Such decreases were partially offset by an increase in gain on sales of lease assets and early termination of notes receivable.

Operating lease revenues decreased by $778 thousand mainly due to the December 2012 termination of a lease relative to the Fund’s marine vessel and the impact of continued run-off and dispositions of lease assets.

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Direct financing lease revenues declined by $104 thousand primarily due to run-off of the portfolio. In addition, during the third quarter of 2012, the Company realized a $350 thousand gain on settlement of a casualty claim relative to a total loss on leased equipment. There were no such gains during the current year quarter.

Partially offsetting the aforementioned decreases in revenues was an increase of $654 thousand in gain on sale of lease assets and early termination of notes receivable. Such increase was largely due to a period over period change in the mix of assets sold, including $633 thousand of gain relative to the sale of leased helicopters.

Expenses

Total expenses for the third quarter of 2013 decreased by $618 thousand, or 33%, as compared to the prior year period. The net decline in expenses was primarily due to decreases in depreciation expense, marine vessel maintenance and other operating costs, interest expense and management fees paid to AFS. Such decreases in expenses were partially offset by an increase in impairment losses.

The decrease in depreciation expense totaled $280 thousand and was primarily a result of continued run-off and sales of lease assets, and an increase in the number of assets that have been fully depreciated since the third quarter of 2012. Marine vessel maintenance and other operating costs declined by $249 thousand largely due to vessel inactivity since the end of the lease term in December 2012. Interest expense was reduced by $69 thousand mainly due to an approximate $4.2 million net decrease in outstanding borrowings since September 30, 2012; and, management fees paid to AFS decreased by $56 thousand largely due to the continued decline in managed assets and related rents.

Partially offsetting the aforementioned decreases in expenses was a $45 thousand increase in impairment losses. This increase in impairment losses was largely due to current period adjustments to reduce the fair value of certain impaired lease and off-lease equipment, including certain materials handling equipment, based on information and/or pricing quotes from third party remarketing agents.

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

The Company had net income of $4.1 million and $4.3 million for the nine months ended September 30, 2013 and 2012, respectively. The results for the first nine months of 2013 reflect a decrease in total operating revenues partially offset by a decrease in total operating expenses when compared to the prior year period.

Revenues

Total revenues for the first nine months of 2013 decreased by $1.8 million, or 18%, as compared to the prior year period. The net decline in total revenues was primarily a result of decreases in both operating and direct financing lease revenues and the absence of gain recognized from the settlement of a lease asset casualty during the prior year period. Such decreases were partially offset by increases in gain on sales of lease assets and early termination of notes receivable, and other revenue.

Operating lease revenues decreased by $2.5 million mainly due to the December 2012 termination of a lease relative to the Fund’s marine vessel and the impact of continued run-off and dispositions of lease assets. Direct financing lease revenues declined by $320 thousand primarily due to run-off of the portfolio. In addition, during the first nine months of 2012, the Company realized a $350 thousand gain on settlement of a casualty claim relative to a total loss on leased equipment. There were no such gains during the current year period.

Partially offsetting the aforementioned decreases in revenues was an increase of $1.3 million in gain on sales of lease assets and early termination of notes receivable, and an increase of $112 thousand in other revenue. The increase in gains realized on sales of lease assets and early termination of notes was attributable to the change in the mix of assets sold, including $633 thousand of gain relative to the sale of leased helicopters. The increase in other revenue was largely due to fees associated with the termination of the marine vessel lease, and additional billings for excess wear and tear on returned equipment.

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Expenses

Total expenses for the first nine months of 2013 decreased by $1.6 million, or 27%, as compared to the prior year period. The net decline in expenses was primarily due to decreases in depreciation expense, marine vessel maintenance and other operating costs, interest expense, management fees paid to AFS and costs reimbursed to AFS. Such decreases in expenses were partially offset by an increase in impairment losses.

The decrease in depreciation expense totaled $729 thousand and was primarily attributable to run-off and sales of lease assets, and an increase in the number of assets that have been fully depreciated since September 30, 2012. Marine vessel maintenance and other operating costs declined by $547 thousand largely due to vessel inactivity since the end of the lease term in December 2012.

In addition, interest expense was reduced by $202 thousand mainly due to an approximate $4.2 million net decrease in outstanding borrowings since September 30, 2012. Management fees paid to AFS decreased by $174 thousand largely due to the continued decline in managed assets and related rents. Finally, costs reimbursed to AFS declined by $75 thousand largely due to lower costs allocated by the Manager based on the Company’s declining asset base, and operations, consistent with a Fund in liquidation.

Partially offsetting the aforementioned decreases in expenses was a $147 thousand increase in impairment losses. This increase in impairment losses was largely due to current period adjustments to reduce the fair value of certain impaired off-lease equipment, including certain materials handling equipment, based on information and/or pricing quotes from third party remarketing agents.

Capital Resources and Liquidity

The Company’s cash and cash equivalents totaled $5.9 million and $5.2 million at September 30, 2013 and December 31, 2012, respectively. 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 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 leasing rents and payments 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 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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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 (used in):
Operating activities	$	1,502		$	1,663		$	4,605		$	6,229
Investing activities		1,529			682			5,113			2,048
Financing activities		(3,035	)		(2,967	)		(9,048	)		(8,848	)
Net (decrease) increase in cash and cash equivalents	$	(4	)	$	(622	)	$	670		$	(571	)

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

During the three months ended September 30, 2013 and 2012, the Company’s primary sources of liquidity were cash flows from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company realized $1.0 million and $143 thousand of proceeds from sales or dispositions of equipment and early termination of notes receivable during the third quarters of 2013 and 2012, respectively.

During the same respective periods, cash was primarily used to pay distributions to both Other Members and the Managing Member and to pay down debt. Distribution paid to Members totaled $2.0 million for each of the three-month periods ended September 30, 2013 and 2012, while cash used to pay down debt totaled $1.1 million and $1.0 million for the third quarters of 2013 and 2012, respectively.

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 sources of liquidity were cash flows from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company realized $3.7 million and $490 thousand of proceeds from sales or dispositions of equipment and early termination of notes receivable, and the disposition of investment securities during the first nine months of 2013 and 2012, respectively.

During the same respective periods, cash was primarily used to pay distributions to both Other Members and the Managing Member and to pay down debt. Distribution paid to Members totaled $5.9 million for each of the nine-month periods ended September 30, 2013 and 2012, while cash used to pay down debt totaled $3.2 million and $3.0 million for the first nine months of 2013 and 2012, respectively.

Non-Recourse Long-Term Debt

As of September 30, 2013 and December 31, 2012, the Company had non-recourse long-term debt totaling $14.2 million and $17.4 million, respectively. Such non-recourse notes payable do not contain any material financial covenants. The notes are secured by a lien granted by the Company to the non-recourse lenders on (and only on) the discounted lease transactions. The lenders have recourse only to the following collateral: the specific leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items.

The Operating Agreement limits aggregate borrowings to 50% of the total cost of equipment. For detailed information on the Company’s non-recourse debt obligation, see Note 7 in Item 1. Financial Statements.

Distributions

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of February 2001. The monthly distributions were discontinued in 2010 as the Company entered its liquidation phase. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the Manager.

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Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At September 30, 2013, the Company had no commitments to purchase lease assets or fund new loans.

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.

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

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disclosure controls and procedures, as it 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 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 it 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 inapplicable, and therefore have been omitted.

2. Other Exhibits

31.1	Certification of Dean L. Cash
31.2	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 IX, 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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