Atel Capital Equipment Fund Xi 10-Q 2011 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, 2011

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 000-51858

ATEL Capital Equipment Fund XI, LLC

(Exact name of registrant as specified in its charter)

California	20-1357935
(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. 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 filer o     Accelerated filer o     Non-accelerated filer o     Smaller reporting company x

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, 2011 was 5,209,307.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL CAPITAL EQUIPMENT FUND XI, LLC
  
Index

Part I. Financial Information		3
Item 1. Financial Statements (Unaudited)		3
Balance Sheets, September 30, 2011 and December 31, 2010		3
Statements of Income for the three and nine months ended September 30, 2011 and 2010		4
Statements of Changes in Members’ Capital for the year ended December 31, 2010 and for the nine months ended September 30, 2011		5
Statements of Cash Flows for the three and nine months ended September 30, 2011 and 2010		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		29
Part II. Other Information		30
Item 1. Legal Proceedings		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults Upon Senior Securities		30
Item 4. [Removed and Reserved]		30
Item 5. Other Information		30
Item 6. Exhibits		30

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL CAPITAL EQUIPMENT FUND XI, LLC
  
BALANCE SHEETS
  
SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
(In Thousands)
(Unaudited)

	September 30, 2011		December 31, 2010
ASSETS
Cash and cash equivalents	$	1,267	$	2,992
Accounts receivable, net of allowance for doubtful accounts of $64 as of September 30, 2011 and $24 as of December 31, 2010		316		351
Notes receivable, net of unearned interest income of $214 as of September 30, 2011 and $299 as of December 31, 2010		1,170		1,495
Investment in securities		200		298
Investments in equipment and leases, net of accumulated depreciation of $28,897 as of September 30, 2011 and $27,904 as of December 31, 2010		17,812		20,615
Prepaid expenses and other assets		18		20
Total assets	$	20,783	$	25,771
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member	$	116	$	198
Accrued distributions to Other Members		552		551
Other		292		228
Non-recourse debt		6,153		8,033
Unearned operating lease income		305		377
Total liabilities		7,418		9,387
Commitments and contingencies
Members’ capital:
Managing Member		—		—
Other Members		13,365		16,384
Total Members’ capital		13,365		16,384
Total liabilities and Members’ capital	$	20,783	$	25,771

  
  
  
  
See accompanying notes.

3

ATEL CAPITAL EQUIPMENT FUND XI, LLC
  
STATEMENTS OF INCOME
  
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010
(In Thousands Except for Units and Per Unit Data)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Revenues:
Leasing and lending activities:
Operating leases	$	1,809		$	1,877		$	5,447		$	6,021
Direct financing leases		24			39			78			101
Interest on notes receivable		30			35			85			135
Gain on sales of lease assets and early termination of notes		36			22			35			118
Gain on sales or dispositions of securities		1			—			33			16
Other		3			31			28			67
Total revenues		1,903			2,004			5,706			6,458
Expenses:
Depreciation of operating lease assets		1,034			1,523			3,427			4,634
Asset management fees to Managing Member		87			93			264			316
Acquisition expense		35			68			78			68
Cost reimbursements to Managing Member		120			108			354			363
(Reversal of provision) provision for credit losses		(4	)		—			42			(24	)
Impairment losses on equipment		—			—			37			17
Provision for losses on investment in securities		—			—			57			—
Amortization of initial direct costs		9			29			35			91
Interest expense		96			115			320			377
Professional fees		12			13			86			145
Outside services		10			9			25			55
Other		21			21			92			91
Total operating expenses		1,420			1,979			4,817			6,133
Other (loss) income, net		(1	)		(5	)		(1	)		10
Net income	$	482		$	20		$	888		$	335
Net income (loss):
Managing Member	$	98		$	98		$	293		$	293
Other Members		384			(78	)		595			42
	$	482		$	20		$	888		$	335
Net income (loss) per Limited Liability Company Unit (Other Members)	$	0.07		$	(0.01	)	$	0.11		$	0.01
Weighted average number of Units outstanding		5,209,307			5,209,307			5,209,307			5,209,848

  
  
  
  
See accompanying notes.

4

ATEL CAPITAL EQUIPMENT FUND XI, LLC
  
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
  
FOR THE YEAR ENDED DECEMBER 31, 2010
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011
(In Thousands Except for Units and Per Unit Data)
(Unaudited)

	Other Members						Managing Member			Total
	Units			Amount
Balance December 31, 2009		5,210,507		$	21,288		$	—		$	21,288
Repurchases of Units		(1,200	)		(4	)		—			(4	)
Distributions to Other Members ($0.93 per Unit)		—			(4,819	)		—			(4,819	)
Distributions to Managing Member		—			—			(391	)		(391	)
Net (loss) income		—			(81	)		391			310
Balance December 31, 2010		5,209,307			16,384			—			16,384
Distributions to Other Members ($0.69 per Unit)		—			(3,614	)		—			(3,614	)
Distributions to Managing Member		—			—			(293	)		(293	)
Net income		—			595			293			888
Balance September 30, 2011		5,209,307		$	13,365		$	—		$	13,365

  
  
  
  
See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND XI, LLC
  
STATEMENTS OF CASH FLOWS
  
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010
(In Thousands)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Operating activities:
Net income	$	482		$	20		$	888		$	335
Adjustment to reconcile net income to cash provided by operating activities:
Gain on sales of lease assets and early termination of notes		(36	)		(22	)		(35	)		(118	)
Depreciation of operating lease assets		1,034			1,523			3,427			4,634
Amortization of initial direct costs		9			29			35			91
Impairment losses on equipment		—			—			37			17
(Reversal of provision) provision for credit losses		(4	)		—			42			(24	)
Provision for losses on investment in securities		—			—			57			—
Gain on sales or dispositions of securities		(1	)		—			(33	)		(16	)
Changes in operating assets and liabilities:
Accounts receivable		21			(177	)		(5	)		(195	)
Prepaid expenses and other assets		(7	)		(15	)		2			13
Accounts payable, Managing Member		29			13			(82	)		62
Accounts payable, other		23			(91	)		64			(141	)
Unearned operating lease income		1			(135	)		(72	)		(15	)
Net cash provided by operating activities		1,551			1,145			4,325			4,643
Investing activities:
Purchases of equipment on operating leases		(1,224	)		—			(1,224	)		—
Purchase of securities		—			—			—			(7	)
Proceeds from sales of lease assets and early termination of notes		210			297			430			878
Payments of initial direct costs		(2	)		—			(2	)		—
Proceeds from sales or dispositions of securities		2			—			74			16
Principal payments received on direct financing leases		42			27			136			75
Principal payments received on notes receivable		148			132			322			720
Net cash (used in) provided by investing activities		(824	)		456			(264	)		1,682
Financing activities:
Repayments under non-recourse debt		(582	)		(772	)		(1,880	)		(2,470	)
Distributions to Other Members		(1,204	)		(1,204	)		(3,613	)		(3,614	)
Distributions to Managing Member		(98	)		(98	)		(293	)		(293	)
Repurchases of Units		—			—			—			(4	)
Net cash used in financing activities		(1,884	)		(2,074	)		(5,786	)		(6,381	)
Net decrease in cash and cash equivalents		(1,157	)		(473	)		(1,725	)		(56	)
Cash and cash equivalents at beginning of period		2,424			4,071			2,992			3,654
Cash and cash equivalents at end of period	$	1,267		$	3,598		$	1,267		$	3,598
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	99		$	117		$	323		$	387
Cash paid during the period for taxes	$	2		$	9		$	31		$	48
Schedule of non-cash transactions:
Distributions payable to Other Members at period-end	$	552		$	551		$	552		$	551
Distributions payable to Managing Member at period-end	$	45		$	45		$	45		$	45

See accompanying notes.

6

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

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund XI, LLC (the “Company”) was formed under the laws of the State of California on June 25, 2004. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. Also, from time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements. 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, 2025. 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 May 31, 2005, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received 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). As of July 13, 2005, the Company had received subscriptions for 958,274 Units ($9.6 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. The Company terminated sales of Units effective April 30, 2006. Life-to-date net contributions through June 2010 totaled $52.2 million, consisting of approximately $52.8 million in gross contributions from Other Members purchasing Units under the public offering less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable) of $636 thousand. As of September 30, 2011, 5,209,307 Units were 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 ends December 31, 2012, and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by its Limited Liability Company Operating Agreement (“Operating Agreement”), as amended.

Pursuant to the 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.

The Company’s 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, 2010, 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, 2011 are not necessarily indicative of the results to be expected for the full year.

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

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

7

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

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

In preparing the accompanying unaudited financial statements, the Managing Member has reviewed events that have occurred after September 30, 2011 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, 2011 and 2010 and long-lived assets as of September 30, 2011 and December 31, 2010 (dollars in thousands):

	For The Nine Months Ended September 30,
	2011		% of Total			2010		% of Total
Revenue
United States	$	5,286		93	%	$	5,918		92	%
United Kingdom		420		7	%		540		8	%
Total International		420		7	%		540		8	%
Total	$	5,706		100	%	$	6,458		100	%

	As of September 30,					As of December 31,
	2011		% of Total			2010		% of Total
Long-lived assets (net)
United States	$	17,297		97	%	$	19,738		96	%
United Kingdom		515		3	%		877		4	%
Total International		515		3	%		877		4	%
Total	$	17,812		100	%	$	20,615		100	%

Investment in securities:

From time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements.

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. Prior to September 30, 2011, the Company deemed certain investment securities to be impaired and recorded fair value adjustments totaling $2 thousand and $55 thousand at June 30, 2011 and March 31, 2011, respectively. Such adjustments reduced the

8

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

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

cost basis of the investments. No additional fair value adjustment was recorded at September 30, 2011. At December 31, 2010, the Company recorded a fair value adjustment of approximately $15 thousand which reduced the cost basis of an impaired investment which was subsequently disposed of in January 2011.

Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried at an estimated fair value, as determined by the Managing Member, on the balance sheet as assets or liabilities. At September 30, 2011 and December 31, 2010, the Managing Member estimated the fair value of the warrants to be nominal in amount. Likewise, gains recognized on the net exercise of certain warrants during each of the three months ended September 30, 2011 and 2010, if any, were nominal in amount. Such gains totaled $33 thousand and $16 thousand for the respective nine months ended September 30, 2011 and 2010.

Foreign currency transactions:

Foreign currency transaction gains and losses are reported in the results of operations as “other income” or “other loss” in the period in which they occur. Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments as the foreign currency transactions risks to date have not been significant. The Company recognized net foreign currency losses totaling $1 thousand and $5 thousand for the respective three months ended September 30, 2011 and 2010; and, a net foreign currency loss of $1 thousand and a net foreign currency gain of $10 thousand for the respective nine months ended September 30, 2011 and 2010.

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:

In May 2011, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board (“IASB”) (collectively the “Boards”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 created a uniform framework for applying fair value measurement principles for companies around the world and clarified existing guidance in US GAAP. ASU 2011-04 is effective for the first reporting annual period beginning after December 15, 2011 and shall be applied prospectively. The Company anticipates that adoption of this update will not have a material impact on its financial position or results of operations.

In April 2011, the FASB issued ASU No. 2011-02, “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” ASU 2011-02 clarifies guidance on a creditor’s evaluation of whether it has granted a concession to a borrower and a creditor’s evaluation of whether a borrower is experiencing financial difficulties. The amendments in this update are effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011. In addition, an entity should disclose the information required by Accounting Standards Codification paragraphs 310-10-50-33 through 50-34, which was deferred by ASU 2011-01, for interim and annual periods beginning on or after June 15, 2011. The amendments in this update were adopted by the Company on July 1, 2011, and for purposes of measuring impairment, were applied retrospectively to January 1, 2011. The Company evaluated the guidance included in 2011-02 and has determined that it does not result in any new troubled debt restructurings that should be reported.

In January 2011, the FASB issued ASU No. 2011-01, “Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20.” ASU 2011-01 temporarily delays the effective date of the disclosures about troubled debt restructurings in Update 2010-20 for public entities. The delay is intended to allow the Board time

9

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

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

to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. The guidance will be effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The adoption of this update did not have a material impact on the Company’s financial position or results of operations.

3. Notes receivable:

The Company has various notes receivable from borrowers who have financed the purchase of equipment through the Company. The terms of the notes receivable are generally up to 120 months and bear interest at rates ranging from 8.4% to 12.0%. The notes are secured by the equipment financed, and mature from 2011 through 2016.

As of December 31, 2010, two notes receivable with a combined net book value approximating $96 thousand were on non-accrual status and were considered impaired relative to their payment terms. Of these non-accrual status notes, a note for $73 thousand was restructured pursuant to a forbearance agreement at graduated default interest-only payment terms followed by a balloon payment of unpaid principal scheduled for October 2011. The default interest rates increase started at 12.50% and graduated up to 18.00%. Such note was paid in full in September 2011. The remaining non-accrual note, for $23 thousand, was modified to defer the repayment of principal until April 2012 while maintaining interest-only payments at the original rate of 11.58%. As of September 30, 2011, this note continues in non-accrual status and reflects a principal balance outstanding of $21 thousand. While, as of the same date, the note was current with respect to its restructured terms, management has determined that a $2 thousand adjustment was necessary to reflect fair value.

The minimum future payments receivable as of September 30, 2011 are as follows (in thousands):

Three months ending December 31, 2011	$	100
Year ending December 31, 2012		417
2013		295
2014		221
2015		166
2016		187
		1,386
Less: portion representing unearned interest income		(214	)
		1,172
Less: Reserve for impairment		(2	)
Notes receivable, net	$	1,170

Initial direct costs (“IDC”) amortization expense related to notes receivable and the Company’s operating and direct financing leases for the three and nine months ended September 30, 2011 and 2010 are as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
IDC amortization – notes receivable	$	—	$	1	$	1	$	2
IDC amortization – lease assets		9		28		34		89
Total	$	9	$	29	$	35	$	91

10

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

4. Provision for credit losses:

The Company’s provision 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, 2009	$	—		$	—	$	209		$	—	$	—	$	209
Provision (reversal of provision) for credit losses		6			—		(24	)		—		—		(18	)
(Charge-offs)/adjustments		—			—		(167	)		—		—		(167	)
Balance December 31, 2010		6			—		18			—		—		24
(Reversal of provision) provision for credit losses		(6	)		—		46			2		—		42
Balance September 30, 2011	$	—		$	—	$	64		$	2	$	—	$	66

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 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, all payments received 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 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.

11

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

4. Provision for credit losses: - (continued)

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.

As of September 30, 2011 and December 31, 2010, 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, 2011	Notes Receivable		Finance Leases		Total
Allowance for credit losses:
Ending balance	$	2	$	—	$	2
Ending balance: individually evaluated for impairment	$	2	$	—	$	2
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—
Financing receivables:
Ending balance	$	1,170	$	271	$	1,441
Ending balance: individually evaluated for impairment	$	1,170	$	271	$	1,441
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—

December 31, 2010	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	$	1,4951	$	243	$	1,738
Ending balance: individually evaluated for impairment	$	1,495	$	243	$	1,738
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—

¹ Includes $1 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.

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.

12

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

4. Provision for credit losses: - (continued)

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, 2011 and December 31, 2010, 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, 2011		December 31, 2010		September 30, 2011		December 31, 2010
Pass	$	—	$	54	$	212	$	243
Special mention		1,151		1,367		59		—
Substandard		21		73		—		—
Doubtful		—		—		—		—
Total	$	1,172	$	1,494	$	271	$	243

At September 30, 2011 and December 31, 2010, net investment in financing receivables is aged as follows (in thousands):

September 30, 2011	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment>90 Days and Accruing
Notes receivable	$	—	$	—	$	—	$	—	$	1,172	$	1,172	$	—
Finance leases		—		—		—		—		271		271		—
Total	$	—	$	—	$	—	$	—	$	1,443	$	1,443	$	—

December 31, 2010	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment>90 Days and Accruing
Notes receivable	$	116	$	26	$	—	$	142	$	1,352	$	1,494	$	—
Finance leases		—		—		—		—		243		243		—
Total	$	116	$	26	$	—	$	142	$	1,595	$	1,737	$	—

As discussed in Note 3, one of the Company’s note receivable continues to be in non-accrual status at September 30, 2011 and was considered impaired relative to its payment terms. While, as of the same date, the note was current with respect to its restructured terms, management has determined that a $2 thousand adjustment was necessary to reflect fair value. The Company did not carry an impairment reserve on its financing receivables at December 31, 2010.

At September 30, 2011 and December 31, 2010, there were no accounts receivable related to net investments in financing receivables placed in non-accrual status.

13

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

5. Investment in equipment and leases, net:

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

	Balance December 31, 2010		Reclassifications, Additions/ Dispositions and Impairment Losses			Depreciation/ Amortization Expense or Amortization of Leases			Balance September 30, 2011
Net investment in operating leases	$	20,028	$	801		$	(3,427	)	$	17,402
Net investment in direct financing leases		243		164			(136	)		271
Assets held for sale or lease, net		262		(173	)		—			89
Initial direct costs, net of accumulated amortization of $175 at September 30, 2011 and $370 at December 31, 2010		82		2			(34	)		50
Total	$	20,615	$	794		$	(3,597	)	$	17,812

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. The Company had no impairment losses during each of the three months ended September 30, 2011 and 2010. However, during the respective first six months of 2011 and 2010, the Company deemed certain off-lease assets to be impaired, and accordingly, recorded fair value adjustments of $37 thousand and $17 thousand which reduced the cost basis of such assets.

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 $1.0 million and $1.5 million for the respective three months ended September 30, 2011 and 2010, and was approximately $3.4 million and $4.6 million for the respective nine months ended September 30, 2011 and 2010.

All of the leased property was acquired during the years 2005 through 2011.

Operating leases:

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

	Balance December 31, 2010			Additions			Reclassifications or Dispositions			Balance September 30, 2011
Materials handling	$	13,609		$	—		$	(1,282	)	$	12,327
Transportation, other		10,778			1,224			(81	)		11,921
Transportation, rail		11,723			—			—			11,723
Mining		2,893			—			—			2,893
Construction		2,336			—			(95	)		2,241
Aviation		1,658			—			—			1,658
Marine vessels		1,415			—			—			1,415
Manufacturing		953			—			—			953
Logging and lumber		781			—			—			781
Research		402			—			(402	)		—
Office furniture		146			—			(146	)		—
		46,694			1,224			(2,006	)		45,912
Less accumulated depreciation		(26,666	)		(3,427	)		1,583			(28,510	)
Total	$	20,028		$	(2,203	)	$	(423	)	$	17,402

14

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

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

The average estimated residual value for assets on operating leases was 22% and 21% of the assets’ original cost at September 30, 2011 and December 31, 2010, respectively.

On April 30, 2009, a major lessee, Chrysler Corporation, filed for bankruptcy protection under Chapter 11. Under a pre-package agreement, a new company was formed to purchase the assets of old Chrysler – its plants, brands, land, equipment, as well as its contracts with the union, dealers and suppliers – from the bankruptcy court. Under this agreement, the Company had its leases with the old, bankrupt Chrysler assumed by the new Chrysler, Chrysler Group, LLC, which is 54% owned by Fiat. The new Chrysler has remitted payments relative to the affirmed leases. At April 1, 2011, Chrysler accounts were returned to accrual status.

As of September 30, 2011, there were no operating lease contracts placed in non-accrual status. At December 31, 2010, the total net investment in equipment underlying lease contracts placed in non-accrual status totaled $612 thousand. Such contracts had related accounts receivable approximating $33 thousand at December 31, 2010. 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, and all other lease contracts, for any actual change in collectability status and indication of necessary valuation adjustments.

Direct financing leases:

As of September 30, 2011, investment in direct financing leases primarily consists of materials handling, research and manufacturing equipment. At December 31, 2010, such investment consisted of materials handling and research equipment. The components of the Company’s investment in direct financing leases as of September 30, 2011 and December 31, 2010 are as follows (in thousands):

	September 30, 2011			December 31, 2010
Total minimum lease payments receivable	$	312		$	331
Estimated residual values of leased equipment (unguaranteed)		46			51
Investment in direct financing leases		358			382
Less unearned income		(87	)		(139	)
Net investment in direct financing leases	$	271		$	243

There were no investments in direct financing lease assets in non-accrual status at September 30, 2011 and December 31, 2010.

At September 30, 2011, the aggregate amounts of future minimum lease payments to be received are as follows (in thousands):

	Operating Leases		Direct Financing Leases		Total
Three months ending December 31, 2011	$	1,251	$	68	$	1,319
Year ending December 31, 2012		3,729		185		3,914
2013		2,671		59		2,730
2014		1,823		—		1,823
2015		835		—		835
2016		158		—		158
Thereafter		237		—		237
	$	10,704	$	312	$	11,016

15

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

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 in 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.

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; and investor relations, communications services and general administrative services are performed by AFS.

Cost reimbursements to the Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are allocated 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 reimbursable in future years to the extent of the cumulative limit. As of September 30, 2011, the Company has not exceeded the annual and/or cumulative limitations discussed above.

AFS and/or affiliates earned fees and commissions, and billed for reimbursements, pursuant to the Operating Agreement as follows during each of the three and nine months ended September 30, 2011 and 2010 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Costs reimbursed to Managing Member and/or affiliates	$	120	$	108	$	354	$	363
Asset management fees to Managing Member and/or affiliates		87		93		264		316
Acquisition and initial direct costs paid to Managing Member		37		68		80		68
	$	244	$	269	$	698	$	747

7. Non-recourse debt:

At September 30, 2011, 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 4.33% to 5.95%. The notes are secured by assignments of lease payments and pledges of assets. At September 30, 2011, gross lease rentals totaled approximately $6.6 million over the remaining lease terms; and the carrying value of the pledged assets is approximately $9.0 million. The notes mature from 2011 through 2015.

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

16

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

7. Non-recourse debt: - (continued)

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, 2011	$	612	$	82	$	694
Year ending December 31, 2012		1,890		246		2,136
2013		1,699		155		1,854
2014		1,313		72		1,385
2015		639		17		656
	$	6,153	$	572	$	6,725

8. Borrowing facilities:

The Company participates with AFS and certain of its affiliates in a revolving credit facility (the “Credit Facility”) comprised of a working capital facility to AFS, an acquisition facility (the “Acquisition Facility”) and a warehouse facility (the “Warehouse Facility”) to AFS, the Company and affiliates, and a venture facility available to an affiliate with a syndicate of financial institutions which Credit Facility includes certain financial covenants. The Credit Facility is for an amount up to $75 million and expires in June 2012. The lending syndicate providing the Credit Facility has a blanket lien on all of the Company’s assets as collateral for any and all borrowings under the Acquisition Facility, and on a pro-rata basis under the Warehouse Facility.

As of September 30, 2011 and December 31, 2010, borrowings under the facility were as follows (in thousands):

	September 30, 2011		December 31, 2010
Total available under the financing arrangement	$	75,000	$	75,000
Amount borrowed by the Company under the acquisition facility		—		—
Amounts borrowed by affiliated partnerships and Limited Liability Companies under the working capital, acquisition and warehouse facilities		—		(5,345	)
Total remaining available under the working capital, acquisition and warehouse facilities	$	75,000	$	69,655

The Company and its affiliates pay an annual commitment fee to have access to this line of credit. As of September 30, 2011, the aggregate amount of the Credit Facility is potentially available to the Company, subject to certain sub-facility and borrowing-base limitations. However, as amounts are drawn on the Credit Facility by each of the Company and the affiliates who are borrowers under the Credit Facility, the amount remaining available to all borrowers to draw under the Credit Facility is reduced. As the Warehousing Facility is a short term bridge facility, any amounts borrowed under the Warehousing Facility, and then repaid by the affiliated borrowers (including the Company) upon allocation of an acquisition to a specific purchaser, become available under the Warehouse Facility for further short term borrowing.

17

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

8. Borrowing facilities: - (continued)

As of September 30, 2011, the Company’s Tangible Net Worth requirement under the Credit Facility was $10 million, the permitted maximum leverage ratio was not to exceed 1.25 to 1, and the required minimum interest coverage ratio was not to be less than 2 to 1. The Company was in compliance with these financial covenants under the Credit Facility with a minimum Tangible Net Worth, leverage ratio and interest coverage ratio, as calculated per the Credit Facility agreement of $13.4 million, 0.46 to 1, and 16.45 to 1, respectively, as of September 30, 2011. As such, as of September 30, 2011, the Company was in compliance with all material financial covenants, and with all other material conditions of the Credit Facility. The Company does not anticipate any covenant violations nor does it anticipate that any of these covenants will restrict its operations or its ability to procure additional financing.

Fee and interest terms

The interest rate on the Credit Facility is based on either the LIBOR/Eurocurrency rate of 1-, 2-, 3- or 6-month maturity plus a lender designated spread, or the bank’s Prime rate, which re-prices daily. Principal amounts of loans made under the Credit Facility that are prepaid may be re-borrowed on the terms and subject to the conditions set forth under the Credit Facility. At both September 30, 2011 and December 31, 2010, the Company had no outstanding borrowings under the acquisition facility.

Warehouse facility

To hold the assets under the Warehousing Facility prior to allocation to specific investor programs, a Warehousing Trust has been entered into by the Company, AFS, ALC, and certain of the affiliated partnerships and limited liability companies. The Warehousing Trust is used by the Warehouse Facility borrowers to acquire and hold, on a short-term basis, certain lease transactions that meet the investment objectives of each of such entities. Each of the leasing programs sponsored by AFS and ALC currently in its acquisition stage is a pro rata participant in the Warehousing Trust, as described below. When a program no longer has a need for short term financing provided by the Warehousing Facility, it is removed from participation, and as new leasing investment entities are formed by AFS and ALC and commence their acquisition stages, these new entities are added.

As of September 30, 2011, the investment program participants were ATEL Capital Equipment Fund X, LLC, the Company, ATEL 12, LLC and ATEL 14, LLC. Pursuant to the Warehousing Trust, the benefit of the lease transaction assets, and the corresponding liabilities under the Warehouse Facility, inure to each of such entities based upon each entity’s pro-rata share in the Warehousing Trust estate. The “pro-rata share” is calculated as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the Warehousing Trust estate, excepting that the trustees, AFS and ALC, are both jointly and severally liable for the pro rata portion of the obligations of each of the affiliated partnerships and limited liability companies participating under the Warehouse Facility. Transactions are financed through this Warehouse Facility only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and ALC. When a determination is made to allocate the transaction to a specific program for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or by means of proceeds of a draw under the Acquisition Facility, and the asset is removed from the Warehouse Facility collateral, and ownership of the asset and any debt obligation associated with the asset are assumed solely by the purchasing entity.

As of September 30, 2011, there were no borrowings under the Warehouse Facility. As of December 31, 2010, borrowings of $4.8 million were outstanding under the Warehouse Facility. The Company’s maximum contingent obligation on the outstanding warehouse balance at December 31, 2010 was approximately $1.1 million.

9. Commitments:

At September 30, 2011, the Company had no commitments to either purchase lease assets or fund loans.

10. 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.

18

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

10. Guarantees: - (continued)

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.

11. Members’ capital:

A total of 5,209,307 Units were issued and outstanding as of September 30, 2011 and December 31, 2010. The Fund was authorized to issue up to 15,000,000 Units. The Company terminated sales of Units effective April 30, 2006.

The Company has the right, exercisable in the Manager’s discretion, but not the obligation, to repurchase Units of a Unit- holder 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.

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,
	2011		2010		2011		2010
Distributions	$	1,205	$	1,204	$	3,614	$	3,614
Weighted average number of Units outstanding		5,209,307		5,209,307		5,209,307		5,209,848
Weighted average distributions per Unit	$	0.23	$	0.23	$	0.69	$	0.69

12. 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.

19

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

12. Fair value measurements: - (continued)

At September 30, 2011 and December 31, 2010, the Company had no assets or liabilities that require measurement at fair value on a recurring basis. However, at September 30, 2011, the Company measured an impaired note receivable on a non-recurring basis. In addition, at December 31, 2010, the Company measured impaired off-lease equipment and investment securities at fair value on a non-recurring basis. Such estimates of measurement methodology 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. At September 30, 2011, the Company deemed a note receivable impaired based upon an independent appraisal of the underlying collateral. Accordingly, the Company recorded a non-recurring adjustment totaling $2 thousand which reduced the cost basis of the note. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the impaired notes 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.

Impaired off-lease equipment

At December 31, 2010, the Company deemed certain off-lease equipment (assets) to be impaired and recorded a fair value adjustment of approximately $17 thousand to reduce the cost basis of the assets. The Company had no incremental impairment to lease equipment at September 30, 2011. Year-to-date, the Company had recorded fair value adjustments of $37 thousand which reduced the cost basis of certain off-lease equipment deemed impaired at June 30, 2011. The aforementioned fair value adjustments were all non-recurring. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of such impaired off-lease 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.

Impaired investment securities

The Company’s investment securities are not registered for public sale and are carried at cost. The investment securities are adjusted for impairment, if any, based upon factors which 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. At December 31, 2010, the Company recorded a non-recurring fair value adjustment of approximately $15 thousand. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the impaired investment security is classified within Level 1 of the valuation hierarchy as the security is actively traded on the Canadian national exchange. Accordingly, there is sufficient trading frequency and volume to provide pricing information on an ongoing basis. The impaired security was disposed of in January 2011.

There was no incremental impairment to investment securities at September 30, 2011. Year-to-date, the Company had recorded fair value adjustments of $2 thousand and $55 thousand which reduced the cost basis of investments deemed impaired at June 30, 2011 and March 31, 2011, respectively. The non-recurring fair value adjustment at June 30, 2011 was based on an approximate 25% reduction in valuation based on the expected value of shares of the venture company as contemplated in its merger agreement terms; and, the non-recurring fair value adjustment at March 31, 2011 was based on an approximate 87% reduction in valuation as determined by investee cash burn and potential for additional venture investors. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of both impaired investment securities are classified within Level 3 of the valuation hierarchy due to the significant inputs that are unobservable in the market.

20

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

12. Fair value measurements: - (continued)

The following table presents the fair value measurement of impaired assets 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, 2011 and December 31, 2010 (in thousands):

	September 30, 2011		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	$	19	$	—	$	—	$	19

	December 31, 2010		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 off-lease equipment	$	50	$	—	$	—	$	50
Impaired investment securities	$	41	$	41	$	—	$	—

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. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize or has realized in a current market exchange. 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 adjustments for non-accrual 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 the current market borrowing rates for similar types of borrowing arrangements.

Commitments and Contingencies

Management has determined that no recognition for the fair value of the Company’s loan commitments is necessary because their terms are made on a market rate basis and require borrowers to be in compliance with the Company’s credit requirements at the time of funding.

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

12. Fair value measurements: - (continued)

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.

Limitations

The fair value estimates presented herein were based on pertinent information available to the Company as of September 30, 2011 and December 31, 2010. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

The following table presents estimated fair values of the Company’s financial instruments at September 30, 2011 and December 31, 2010 (in thousands):

	September 30, 2011				December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	1,267	$	1,267	$	2,992	$	2,992
Notes receivable		1,170		1,170		1,495		1,495
Investment in securities		200		200		298		298
Financial liabilities:
Non-recourse debt		6,153		6,466		8,033		8,332

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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, the 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 XI, LLC (the “Company”) is a California limited liability company that was formed in June 2004 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 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 April 2006. During 2006, 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 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. Throughout the Reinvestment Period, which ends December 31, 2012, the Company anticipates continued reinvestment of cash flow in excess of minimum distributions and other obligations. The Company is governed by its Limited Liability Company Operating Agreement (“Operating Agreement”), as amended.

The Company may continue until December 31, 2025. Periodic distributions are paid at the discretion of the Managing Member.

Results of Operations

The three months ended September 30, 2011 versus the three months ended September 30, 2010

The Company had net income of $482 thousand and $20 thousand for the three months ended September 30, 2011 and 2010, respectively. Results for the third quarter of 2011 reflect a decrease in total operating expenses offset, in part, by a reduction in total revenues when compared with results for the prior year period.

Revenues

Total revenues for the third quarter of 2011 declined by $101 thousand, or 5%, as compared to the prior year period. The net reduction in total revenues was largely attributable to decreases in operating lease revenues and other revenue.

Total operating lease revenues declined by $68 thousand primarily due to continued run-off and sales of lease assets. Other revenue decreased by $28 thousand as the prior year period amounts included revenues associated with legal, collection and late fees assessed on certain terminated leases.

Expenses

Total expenses for the third quarter of 2011 decreased by $559 thousand, or 28%, as compared to the prior year period. The net reduction in total expenses was primarily due to decreases in depreciation expense and acquisition expense.

Depreciation expense decreased by $489 thousand, or 32%, largely due to run-off and sales of lease assets; and, acquisition expense declined by $33 thousand mainly due to a period over period decrease in allocated costs related to business development efforts.

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Other loss, net

The Company recorded other loss, net totaling $1 thousand and $5 thousand for the respective three months ended September 30, 2011 and 2010 related to losses from foreign currency transactions. The 2011 period decline in losses relative to the prior year period was largely due to the weakness of the U.S currency at the time of the transactions. The Company’s foreign currency transactions are primarily denominated in British pounds.

The nine months ended September 30, 2011 versus the nine months ended September 30, 2010

The Company had net income of $888 thousand and $335 thousand for the nine months ended September 30, 2011 and 2010, respectively. Results for the first nine months of 2011 reflect a decrease in total operating expenses offset, in part, by a reduction in total revenues when compared with results for the prior year period.

Revenues

Total revenues for the first nine months of 2011 declined by $752 thousand, or 12%, as compared to the prior year period. The net reduction in total revenues was largely attributable to decreases in operating lease revenues, gain on sale of assets and early termination of notes, and interest income on notes receivable.

Total operating lease revenues decreased by $574 thousand primarily as a result of continued run-off and sales of lease assets. Gain on sale of assets and early termination of notes declined by $83 thousand reflecting a change in the mix of assets sold during the current year period; and, interest income on notes receivable decreased by $50 thousand largely as a result of continued run-off of the notes receivable portfolio.

Expenses

Total expenses for the first nine months of 2011 decreased by $1.3 million, or 21%, as compared to the prior year period. The net reduction in total expenses was primarily due to decreases in depreciation expense and in professional fees and outside services expenses offset, in part, by increases in the provision for doubtful accounts and the provision for losses on investment securities.

Depreciation expense decreased by $1.2 million, or 26%, primarily due to run-off and sales of lease assets. Combined, professional fees and outside services expense declined by $89 thousand largely as a result of a period over period reduction in audit and other accounting fees.

The aforementioned decreases in expenses were partially offset by increases in the provision for credit losses and the provision for losses on investment securities totaling $66 thousand and $57 thousand, respectively.

The net increase in the provision for doubtful accounts was a result of a $42 thousand year-to-date 2011 provision relative to certain delinquent receivables coupled with a $24 thousand 2010 reversal of certain prior period provision. The increase in the provision for losses on investment securities reflects year-to-date 2011 fair value adjustments on impaired securities. Such adjustments, totaling $2 thousand and $55 thousand, reduced the cost basis of investments deemed impaired at June 30, 2011 and March 31, 2011, respectively. The fair value adjustment at June 30, 2011 was based on an approximate 25% reduction in valuation based on the expected value of shares of the venture company as contemplated in its merger agreement terms; and, the fair value adjustment at March 31, 2011 was based on an approximate 87% reduction in valuation as determined by investee cash burn and potential for additional venture investors. There was no fair value adjustment recorded during the prior year period.

Other (loss) income, net

The Company recorded other loss, net totaling $1 thousand and other income, net totaling $10 thousand for the respective nine months ended September 30, 2011 and 2010 related to gains and losses from foreign currency transactions.

The 2011 period decline in gains relative to the prior year period was largely due to the strength of the U.S currency at the time of the transactions as the Company’s foreign currency transactions are primarily denominated in British pounds.

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Capital Resources and Liquidity

At September 30, 2011 and December 31, 2010, the Company’s cash and cash equivalents totaled $1.3 million and $3.0 million, 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 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 the lease terms expire, the Company will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on AFS’s success in remarketing or selling the equipment as it comes off rental.

Throughout the Reinvestment Period (as defined in the Operating Agreement), the Company anticipates reinvesting a portion of lease payments from assets owned, and/or payments received on notes receivable, in new leasing or financing transactions. Such reinvestment will occur only after the payment of all obligations, including debt service (both principal and interest), the payment of management fees to AFS and providing for cash distributions to the Members.

In a normal economy, 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 and notes would not increase as such rates are generally fixed for the terms of the leases and notes without adjustment for inflation. In addition, if interest rates increase significantly under such circumstances, the rates that the Company can obtain on future lease or financing transactions will be expected to increase as the cost of capital is a significant factor in the pricing of leases and investments in notes receivable. Leases and notes 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.

Cash Flows

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net cash provided by (used in):
Operating activities	$	1,551		$	1,145		$	4,325		$	4,643
Investing activities		(824	)		456			(264	)		1,682
Financing activities		(1,884	)		(2,074	)		(5,786	)		(6,381	)
Net decrease in cash and cash equivalents	$	(1,157	)	$	(473	)	$	(1,725	)	$	(56	)

The three months ended September 30, 2011 versus the three months ended September 30, 2010

During the three months ended September 30, 2011 and 2010, the Company’s primary source of liquidity was cash flow from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company also realized cash flow from the sale or disposition of equipment and early termination of certain notes.

During the same periods, cash was primarily used to pay distributions to both the Other Members and the Managing Member, totaling a combined $1.3 million for each of the three months ended September 30, 2011 and 2010. In addition, during the third quarter of 2011, $1.2 million was used to purchase lease assets. There was no such purchase during the prior year period. Cash was also used to partially pay down $582 thousand and $772 thousand of debt during the respective three months ended September 30, 2011 and 2010; and, to pay invoices related to management fees and other payables.

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The nine months ended September 30, 2011 versus the nine months ended September 30, 2010

During the nine months ended September 30, 2011 and 2010, the Company’s primary source of liquidity was cash flow from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. Moreover, the Company realized cash flow from the sale or disposition of equipment and early termination of certain notes.

During the same periods, cash was primarily used to pay distributions to both the Other Members and the Managing Member, totaling a combined $3.9 million for each of the nine months ended September 30, 2011 and 2010. In addition, cash was used to partially pay down $1.9 million and $2.5 million of debt during the respective nine months ended September 30, 2011 and 2010. Cash totaling $1.2 million was also used to purchase lease assets during the first nine months of 2011. There was no lease asset purchase during the prior year period. Finally, cash was also used to pay invoices related to management fees and other payables during both nine-month periods of 2011 and 2010.

Revolving credit facility

The Company participates with AFS and certain of its affiliates in a revolving credit facility (the “Credit Facility”) comprised of a working capital facility to AFS, an acquisition facility (the “Acquisition Facility”) and a warehouse facility (the “Warehouse Facility”) to AFS, the Company and affiliates, and a venture facility available to an affiliate, with a syndicate of financial institutions.

Compliance with covenants

The Credit Facility includes certain financial and non-financial covenants applicable to each borrower, including the Company. Such covenants include covenants typically found in credit facilities of the size and nature of the Credit Facility, such as accuracy of representations, good standing, absence of liens and material litigation, etc. The Company and affiliates were in compliance with all covenants under the Credit Facility as of September 30, 2011. The Company considers certain financial covenants to be material to its ongoing use of the Credit Facility and these covenants are described below.

Material financial covenants

Under the Credit Facility, the Company is required to maintain a specific tangible net worth, to comply with a leverage ratio and an interest coverage ratio, and to comply with other terms expressed in the Credit Facility, including limitation on the incurrence of additional debt and guaranties, defaults, and delinquencies.

The material financial covenants are summarized as follows:

Minimum Tangible Net Worth: $10 million
Leverage Ratio (leverage to Tangible Net Worth): Not to exceed 1.25 to 1
Collateral Value: Collateral value under the Warehouse Facility must be no less than the outstanding borrowings under that facility.
EBITDA to Interest Ratio: Not to be less than 2 to 1 for the four fiscal quarters just ended.

“EBITDA” is defined under the Credit Facility as, for the relevant period of time (1) gross revenues (all payments from leases and notes receivable) for such period minus (2) expenses deducted in determining net income for such period plus (3) to the extent deducted in determining net income for such period (a) provision for income taxes and (b) interest expense, and (c) depreciation, amortization and other non-cash charges. Extraordinary items and gains or losses on (and proceeds from) sales or dispositions of assets outside of the ordinary course of business are excluded in the calculation of EBITDA. “Tangible Net Worth” is defined as, as of the date of determination, (i) the net worth of the Company, after deducting therefrom (without duplication of deductions) the net book amount of all assets of the Company, after deducting any reserves and other amounts for assets which would be treated as intangibles under GAAP, (U.S Generally Accepted Accounting Principles) and after certain other adjustments permitted under the agreements.

The financial covenants referred to above are applicable to the Company only to the extent that the Company has borrowings outstanding under the Credit Facility. As of September 30, 2011, the Company’s Tangible Net Worth requirement under the Credit Facility was $10 million, the permitted maximum leverage ratio was 1.25 to 1, and the required minimum interest coverage ratio (EBITDA/interest expense) was 2 to 1. The Company was in

26

compliance with each of these financial covenants with a minimum Tangible Net Worth, leverage ratio and (EBITDA) interest coverage ratio, as calculated per the Credit Facility agreement of $13.4 million, 0.46 to 1, and 16.45 to 1, respectively, as of September 30, 2011. As such, as of September 30, 2011, the Company was in compliance with all such material financial covenants.

Reconciliation to GAAP of EBITDA

For purposes of compliance with the Credit Facility covenants, the Company uses a financial calculation of EBITDA, as defined therein, which is a non-GAAP financial performance measure. The EBITDA is utilized by the Company to calculate its debt covenant ratios.

The following is a reconciliation of net income to EBITDA for the nine months ended September 30, 2011 (in thousands):

Net income – GAAP basis	$	888
Interest expense		320
Depreciation of operating lease assets		3,427
Amortization of initial direct costs		35
Provision for credit losses		42
Provision for losses on investment securities		57
Impairment losses on equipment		37
Principal payments received on direct financing leases		136
Principal payments received on notes receivable		322
EBITDA (for Credit Facility financial covenant calculation only)	$	5,264

Events of default, cross-defaults, recourse and security

The terms of the Credit Facility include standard events of default by the Company which, if not cured within applicable grace periods, could give lenders remedies against the Company, including the acceleration of all outstanding borrowings and a demand for repayment in advance of their stated maturity. If a breach of any material term of the Credit Facility should occur, the lenders may, at their option, increase borrowing rates, accelerate the obligations in advance of their stated maturities, terminate the facility, and exercise rights of collection available to them under the express terms of the facility, or by operation of law. The lenders also retain the discretion to waive a violation of any covenant at the Company’s request.

The Company is currently in compliance with its obligations under the Credit Facility. In the event of a technical default (e.g., the failure to timely file a required report, or a one-time breach of a financial covenant), the Company believes it has ample time to request and be granted a waiver by the lenders, or, alternatively, cure the default under the existing provisions of its debt agreements, including, if necessary, arranging for additional capital from alternate sources to satisfy outstanding obligations.

The lending syndicate providing the Credit Facility has a blanket lien on all of the Company’s assets as collateral for any and all borrowings under the Acquisition Facility, and on a pro-rata basis under the Warehouse Facility.

The Acquisition Facility is generally recourse solely to the Company, and is not cross-defaulted to any other obligations of affiliated companies under the Credit Facility, except as described in this paragraph. The Credit Facility is cross-defaulted to a default in the payment of any debt (other than non-recourse debt) or any other agreement or condition beyond the period of grace (not exceeding 30 days), the effect of which would entitle the lender under such agreement to accelerate the obligations prior to their stated maturity in an individual or aggregate principal amount in excess of 15% of the Company’s consolidated Tangible Net Worth. Also, a bankruptcy of AFS will trigger a default for the Company under the Credit Facility.

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Non-Recourse Long-Term Debt

As of September 30, 2011, the Company had non-recourse long-term debt totaling $6.2 million. 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.

For detailed information on the Company’s debt obligations, see Notes 7 and 8 to the financial statements as set forth in Part I, Item 1, Financial Statements (Unaudited).

Distributions

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of June 2005. Such distributions have been consistently made through September 30, 2011.

Other

Due to the bankruptcy of a major lessee, Chrysler Corporation, the Company, in accordance with its accounting policy for allowance for doubtful accounts, has placed all operating leases with Chrysler on non-accrual status pending resumption of recurring payment activity. The Company also considered the equipment underlying the lease contracts for impairment and believes that such equipment is not impaired as of December 31, 2010. At April 1, 2011, Chrysler accounts were returned to accrual status.

As of September 30, 2011 and December 31, 2010, the Company has certain other leases that have related 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.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At September 30, 2011, the Company had no commitments to purchase lease assets or fund loans.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements is included in Note 2 to the financial statements, Summary of significant accounting policies, as set forth in Part I, Item 1, Financial Statements (Unaudited).

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, 2010. There have been no material changes to the Company’s critical accounting policies since December 31, 2010.

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Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

The Company’s Managing Member’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Company’s disclosure controls and procedures, Management concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.

The Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, which is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Member’s disclosure controls and procedures, as applicable to the Company, were effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Changes in internal control

There were no changes in the Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended September 30, 2011 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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. [Removed and Reserved].

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: November 14, 2011

ATEL CAPITAL EQUIPMENT FUND XI, 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)

31