UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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x | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. | |
For the year ended December 31, 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 000-23842
ATEL Cash Distribution Fund V, L.P.
(Exact name of registrant as specified in its charter)
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California | 94-3165807 | |
(State or other jurisdiction of incorporation or organization) | (I. R. S. Employer Identification No.) |
600 California Street, 6th Floor, San Francisco, California 94108-2733
(Address of principal executive offices)
Registrant’s telephone number, including area code:(415) 989-8800
Securities registered pursuant to section 12(b) of the Act:None
Securities registered pursuant to section 12(g) of the Act:Limited Partnership Units
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yeso Nox
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1934.Yeso Nox
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filero | Accelerated filero | Non-accelerated filero (Do not check if a smaller reporting company) | Smaller reporting companyx |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yeso Nox
State the aggregate market value of voting stock held by non-affiliates of the registrant: Not applicable
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) Not applicable
The number of Limited Partnership Units outstanding as of February 29, 2012 was 12,471,600.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
Item 1. BUSINESS
General Development of Business
ATEL Cash Distribution Fund V, L.P. (the “Partnership” or the “Fund”) was formed under the laws of the State of California in September 1992. The Partnership was formed for the purpose of engaging in the sale of limited partnership investment units and acquiring equipment to engage in equipment leasing and sales activities. The General Partner of the Partnership is ATEL Financial Services, LLC (“AFS”), a California limited liability company. Prior to converting to a limited liability company structure, AFS was formerly known as ATEL Financial Corporation.
The Partnership conducted a public offering of 12,500,000 Limited Partnership Units (“Units”) at a price of $10 per Unit. On March 19, 1993, subscriptions for the minimum number of Units, 120,000, or $1.2 million, had been received. On that date, the Partnership commenced operations in its primary business (acquiring equipment to engage in equipment leasing and sales activities). As of November 15, 1994, the Partnership had received and accepted subscriptions for 12,500,000, or $125 million in addition to the initial Limited Partners’ Units and the offering was terminated. As of December 31, 2011, 12,471,600 Units were issued and outstanding.
The Partnership’s principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Partnership’s invested capital; (ii) generates distributions to the partners of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), which ended December 31, 2000; and (iii) provides significant distributions following the Reinvestment Period and until all equipment has been sold. The Partnership is governed by its Limited Partnership Agreement (“Partnership Agreement”).
Pursuant to the Partnership Agreement, AFS receives compensation and reimbursements for services rendered on behalf of the Partnership (see Note 5 to the financial statements included in Item 8 of this report). AFS is required to maintain in the Partnership reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.
As of December 31, 2011, the Partnership remains in the liquidation phase of its life cycle as defined in the Partnership Agreement.
Narrative Description of Business
The Partnership has acquired various types of equipment, and leases such equipment pursuant to Operating Leases or Full Payout Leases, whereby Operating Leases are defined as being leases in which the minimum lease payments during the initial lease term do not recover the full cost of the equipment and Full Payout Leases recover such cost. Guidelines provided by the offering indicated that no more than 25% of the aggregate purchase price of equipment would be subject to operating leases upon final investment of the net proceeds of the offering and that no more than 20% of the aggregate purchase price of equipment would be invested in equipment acquired from a single manufacturer.
The Partnership only purchased equipment under pre-existing leases or for which a lease would be entered into concurrently at the time of the purchase. The Partnership completed its acquisition phase with the investment of the net proceeds from the public offering of Units.
The Partnership’s objective has been to lease a minimum of 75% of the equipment acquired with the net proceeds of the offering to lessees that (i) had an average credit rating by Moody’s Investor Service, Inc. of Baa or better, or the credit equivalent as determined by AFS, with the average rating weighted to account for the original equipment cost for each item leased or (ii) were established hospitals with histories of profitability or municipalities. The balance of the original equipment portfolio could include equipment leased to lessees, which although deemed creditworthy by AFS, would not satisfy the general credit rating criteria for the portfolio. In excess of 75% of the equipment acquired with the net proceeds of the offering (based on original purchase cost) was originally leased to lessees with an average credit rating of Baa or better or to such hospitals or municipalities as described in (ii) above.
AFS sought to limit the amount invested in equipment to any single lessee to not more than 20% of the aggregate purchase price of equipment owned at any time during the Reinvestment Period.
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During 2011 and 2010, certain lessees generated significant portions (defined as 10% or more) of the Partnership’s total lease revenues as follows:
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Type of Equipment | Percentage of Total Lease Revenues | |||||||||||
Lessee | 2011 | 2010 | ||||||||||
Union Pacific Railroad Company | Railcars | 28 | % | 34 | % | |||||||
Central States Enterprises | Railcars | 23 | % | 26 | % | |||||||
Interstate Commodities | Railcars | 21 | % | 14 | % | |||||||
Union Carbide Corporation | Railcars | * | 10 | % |
* | Less than 10%. |
These percentages are not expected to be comparable in future periods.
The equipment leasing industry is highly competitive. Equipment manufacturers, corporations, partnerships and others offer users an alternative to the purchase of most types of equipment with payment terms that vary widely depending on the lease term, type of equipment and creditworthiness of the lessee. The ability of the Partnership to keep the equipment leased and/or operating and the terms of the acquisitions, leases and dispositions of equipment depends on various factors (many of which are not in the control of AFS or the Partnership), such as general economic conditions, including the effects of inflation or recession, and fluctuations in supply and demand for various types of equipment resulting from, among other things, technological and economic obsolescence.
The business of the Partnership is not seasonal.
The Partnership has no full time employees. AFS employees and affiliates provide the services the partnership requires to effectively operate. The cost of these services is reimbursed by the Partnership to AFS and affiliates per the Partnership Agreement.
Equipment Leasing Activities
The Partnership had acquired a diversified portfolio of equipment. The equipment had been leased to lessees in various industries. The following tables set forth the types of equipment acquired by the Partnership through December 31, 2011 and the industries to which the assets were leased (dollars in thousands):
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Asset Types | Purchase Price Excluding Acquisition Fees | Percentage of Total Acquisitions | ||||||
Transportation | $ | 95,489 | 50.90 | % | ||||
Mining equipment | 27,998 | 14.92 | % | |||||
Furniture, fixtures and office equipment | 22,210 | 11.84 | % | |||||
Construction | 15,335 | 8.17 | % | |||||
Materials handling | 13,829 | 7.37 | % | |||||
Office automation | 4,594 | 2.45 | % | |||||
Other* | 8,141 | 4.35 | % | |||||
$ | 187,596 | 100.00 | % |
* | Individual amounts included in “Other” represent less than 2% of the total. |
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Industry of Lessee | Purchase Price Excluding Acquisition Fees | Percentage of Total Acquisitions | ||||||
Transportation, rail | $ | 46,271 | 24.67 | % | ||||
Mining | 29,823 | 15.90 | % | |||||
Oil & gas | 21,302 | 11.36 | % | |||||
Retail, foods | 11,216 | 5.98 | % | |||||
Food processing | 9,829 | 5.24 | % | |||||
Construction | 9,411 | 5.02 | % | |||||
Chemicals | 9,075 | 4.84 | % | |||||
Retail, restaurant | 8,528 | 4.55 | % | |||||
Transportation, other | 8,311 | 4.43 | % | |||||
Primary metals | 7,526 | 4.01 | % | |||||
Manufacturing, other | 6,816 | 3.63 | % | |||||
Manufacturing, auto/truck | 6,690 | 3.57 | % | |||||
Printing | 4,708 | 2.51 | % | |||||
Other* | 8,090 | 4.29 | % | |||||
$ | 187,596 | 100.00 | % |
* | Individual amounts included in “Other” represent less than 2% of the total. |
Through December 31, 2011, the Partnership had disposed of certain leased assets as set forth below (in thousands):
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Asset Types | Original Equipment Cost Excluding Acquisition Fees | Sales Price | Excess of Rents Over Expenses* | |||||||||
Transportation | $ | 75,052 | $ | 35,579 | $ | 67,501 | ||||||
Mining equipment | 27,998 | 7,797 | 26,376 | |||||||||
Furniture, fixtures and office equipment | 22,210 | 8,315 | 18,925 | |||||||||
Construction | 15,335 | 4,035 | 16,773 | |||||||||
Materials handling | 13,829 | 2,878 | 15,158 | |||||||||
Office automation | 4,594 | 970 | 4,814 | |||||||||
Other | 7,906 | 3,625 | 9,419 | |||||||||
$ | 166,924 | $ | 63,199 | $ | 158,966 |
* | Includes only those expenses directly related to the production of the related rents |
For further information regarding the Partnership’s equipment lease portfolio as of December 31, 2011, see Note 4 to the financial statements, Investments in equipment and leases, net, as set forth in Part II, Item 8, Financial Statements and Supplementary Data.
Certain of the Partnership’s lessee customers have international operations. In these instances, the Partnership is aware that certain equipment, primarily rail and transportation, may periodically exit the country. However, these lessee customers are US-based, and it is impractical for the Partnership to track, on an asset-by-asset, day-by-day basis, where these assets are deployed. For further information regarding the Partnership’s geographic revenues and assets, and major customers, see Notes 2 and 3 to the financial statements as set forth in Part II, Item 8, Financial Statements and Supplementary Data.
Item 2. PROPERTIES
The Partnership does not own or lease any real property, plant or material physical properties other than the equipment held for lease as set forth in Item 1, Business.
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Item 3. LEGAL PROCEEDINGS
In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Partnership. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Partnership’s financial position or results of operations. No material legal proceedings are currently pending against the Partnership or against any of its assets.
Item 4. [REMOVED AND RESERVED]
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PART II
Item 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
There are certain material conditions and restrictions on the transfer of Units imposed by the terms of the Partnership Agreement. Consequently, there is no public market for Units and it is not anticipated that a public market for Units will develop. In the absence of a public market for the Units, there is no currently ascertainable fair market value for the Units.
Holders
As of December 31, 2011, a total of 6,562 investors were Unitholders of record in the Partnership.
ERISA Valuation
In order to permit ERISA fiduciaries who hold Units to satisfy their annual reporting requirements, AFS estimated the value per Unit of the Partnership’s assets as of December 31, 2011. AFS calculated the estimated liquidation proceeds that would be realized by the Partnership, assuming an orderly disposition of all of the Partnership’s assets as of December 31, 2011. The estimates were based on the amount of remaining lease payments on existing Partnership leases, and the estimated residual values of the equipment held by the Partnership upon the termination of those leases. This valuation was based solely on AFS’s perception of market conditions and the types and amounts of the Partnership’s assets. No independent valuation was sought.
After calculating the aggregate estimated disposition proceeds, AFS then calculated the portion of the aggregate estimated value of the Partnership assets that would be distributed to Unitholders on liquidation of the Partnership, and divided the total so distributable by the number of outstanding Units. As of December 31, 2011, the value of the Partnership’s assets, calculated on this basis, was approximately $0.49 per Unit. The foregoing valuation was performed solely for the ERISA purposes described above. There is no market for the Units, and, accordingly, this value does not represent an estimate of the amount a Unitholder would receive if he were to seek to sell his Units. Furthermore, there can be no assurance as to the amount the Partnership may actually receive if and when it seeks to liquidate its assets or the amount of lease payments and equipment disposition proceeds it will actually receive over the remaining term of the Partnership.
Distributions
The Partnership does not make dividend distributions. The Limited Partners of the Partnership are entitled to certain distributions as provided under the Partnership Agreement.
AFS has sole discretion in determining the amount of distributions; provided however, that AFS will not reinvest in equipment, but will distribute, subject to payment of any obligations of the Partnership.
Distributions were paid in December 2011 and December 2010. The annualized rates for distributions from 2011 and 2010 operations were $0.15 and $0.10 per Unit, respectively. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the General Partner.
Item 6. SELECTED FINANCIAL DATA
A smaller reporting company is not required to present selected financial data in accordance with item 301(c) of Regulation S-K.
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Item 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Statements contained in this Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), and elsewhere in this Form 10-K, 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 leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Partnership’s performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Fund’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-K. 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-K or to reflect the occurrence of unanticipated events, other than as required by law.
Overview
ATEL Cash Distribution Fund V, L.P. (the “Partnership”) is a California partnership that was formed in September 1992 for the purpose of engaging in the sale of limited liability investment units and acquiring equipment to generate revenues from equipment leasing and sales activities, primarily in the United States. The General Partner of the Partnership is ATEL Financial Services, LLC (“AFS”), a California limited liability company.
The Partnership conducted a public offering of 12,500,000 Limited Partnership units (“Units”), at a price of $10 per Unit. The offering was terminated in November 1994. During early 1995, the Partnership completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, throughout the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), the Partnership reinvested cash flow in excess of certain amounts required to be distributed to the Limited Partners and/or utilized its credit facilities to acquire additional equipment.
The Partnership may continue until December 31, 2013. However, pursuant to the guidelines of the Limited Partnership Agreement, the Partnership began to liquidate its assets and distribute the proceeds thereof after the end of the Reinvestment Period which ended in December 2000.
As of December 31, 2011, the Partnership remains in its liquidation phase. Accordingly, assets that mature will be returned to inventory and most likely will be subsequently sold, which will result in decreasing revenue as earning assets decrease. The Partnership continues to generally make distributions on an annual basis or at the discretion of the General Partner.
Results of Operations
As of December 31, 2011 and 2010, approximately 99% and 98% of the Partnership’s operating lease assets (as a percentage of total equipment cost), respectively, were leased to lessees in the rail transportation industry.
As previously indicated, certain lessees generated significant portions (defined as 10% or more) of the Partnership’s total lease revenues during 2011 and 2010 as follows:
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Type of Equipment | Percentage of Total Lease Revenues | |||||||||||
Lessee | 2011 | 2010 | ||||||||||
Union Pacific Railroad Company | Railcars | 28 | % | 34 | % | |||||||
Central States Enterprises | Railcars | 23 | % | 26 | % | |||||||
Interstate Commodities | Railcars | 21 | % | 14 | % | |||||||
Union Carbide Corporation | Railcars | * | 10 | % |
* | Less than 10%. |
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These percentages are not expected to be comparable in future periods due to the expiration of lessee contracts during the Fund’s liquidation period.
It has been the Partnership’s objective to maintain a 100% utilization rate for all equipment purchased in any given year. All equipment transactions were acquired subject to binding lease commitments, so equipment utilization remained high throughout the reinvestment stage. Initial lease terms of these leases were generally from 36 to 84 months, and as they expired, the Partnership attempted to re-lease or sell the equipment; as such, utilization rates may tend to decrease during the liquidation stage of the Partnership. All of the Partnership’s equipment on lease was acquired in the years 1993 through 2004. The utilization percentage of existing assets under lease was 99% and 100% when calculated at December 31, 2011 and 2010, respectively.
Cost reimbursements to the General Partner are based on its costs incurred in performing administrative services for the Partnership. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.
2011 versus 2010
The Partnership had net income of $966 thousand and $601 thousand for the years ended December 31, 2011 and 2010, respectively. The 2011 results primarily reflect a decline in total operating expenses and an increase in total revenues when compared to the prior year.
Revenues
Total revenues for 2011 increased by $40 thousand, or 1%, as compared to the prior year. The net growth in revenues was comprised of increases in operating lease revenues and other revenues offset, in part, by a decline in gain on sales of lease assets.
The increase in operating lease revenues totaled $62 thousand and was mainly due to a higher negotiated rate on a lease that renewed in 2011 offset, in part, by the impact of continued sales of lease assets during the liquidation stage of the Partnership. Other revenues increased by $31 thousand largely due to the resolution of certain items previously held in suspense.
Partially offsetting the aforementioned increases in revenues was a $53 thousand decrease in gain on sales of lease assets primarily as a result of the lower volume of railcars sold in 2011.
Expenses
Total expenses for 2011 decreased by $325 thousand, or 15%, as compared to the prior year. The net reduction in expenses was primarily a result of decreases in depreciation expense, railcar maintenance expense and costs reimbursed to AFS offset, in part, by an increase in management fees paid to AFS.
Depreciation expense was reduced by $197 thousand, or 21%, largely due to an increase in the number of assets that have been fully depreciated since 2010, combined with asset sales and dispositions. Railcar maintenance expense decreased by $74 thousand as the 2010 amount included maintenance costs related to the re-leasing of certain inventoried railcars. Moreover, the 2011 railcar inventory continued to decline as a result of asset sales and dispositions. Costs reimbursed to AFS decreased by $52 thousand mainly due to lower administrative costs allocated to the Fund to better align costs with the Partnership’s declining operations.
Partially offsetting the aforementioned decreases in expenses was a $30 thousand increase in management fees paid to AFS. The increase in management fees paid to AFS was largely due to higher current year incentive fees resulting from distributions of increased cash from operations during 2011 as compared to 2010. Such cash distributions were higher primarily as a result of increased rents combined with decreased railcar maintenance and partnership administration expenses, as previously discussed.
Capital Resources and Liquidity
At December 31, 2011 and 2010, the Partnership’s cash and cash equivalents totaled $249 thousand and $496 thousand, respectively. The liquidity of the Partnership varies, increasing to the extent cash flows from leases and proceeds from lease asset sales exceed expenses and decreasing as distributions are made to the partners and to the extent expenses exceed cash flows from leases and proceeds from asset sales.
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The primary source of liquidity for the Partnership has been its cash flow from leasing activities. As the initial lease terms have expired, the Partnership ventured to re-lease or sell the equipment. Future liquidity will depend on the Partnership’s success in remarketing or selling the equipment as it comes off-rental.
If inflation in the general economy becomes significant, it may affect the Partnership in as much as the residual (resale) values of the Partnership’s leased assets may increase as the costs of similar assets increase. However, the Partnership’s revenues from existing leases would not increase as such rates are generally fixed for the terms of the leases without adjustment for inflation. In addition, if interest rates increase significantly under such circumstances, the lease rates that the Partnership can obtain on future leases will be expected to increase as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates.
The Partnership 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 Partnership would likely be in a position to borrow against its current portfolio to meet such requirements. AFS envisions no such requirements for operating purposes.
Cash Flows
The following table sets forth summary cash flow data (in thousands):
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2011 | 2010 | |||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | 1,405 | $ | 1,216 | ||||
Investing activities | 218 | 279 | ||||||
Financing activities | (1,870 | ) | (1,591 | ) | ||||
Net decrease in cash and cash equivalents | $ | (247 | ) | $ | (96 | ) |
2011 versus 2010
During 2011 and 2010, the Partnership’s primary sources of liquidity were cash flows from its portfolio of operating lease contracts and proceeds from lease asset sales.
During the same comparative years, cash was primarily used to make distributions to limited partners, totaling $1.9 million and $1.2 million for 2011 and 2010, respectively. In addition, during 2010, cash was used to pay off $344 thousand of non-recourse debt. As the Fund is in its liquidation phase, any future financing activity is anticipated to only include distributions to Partners.
Non-Recourse Long-Term Debt
The Partnership’s long-term borrowings are generally non-recourse to the Partnership, that is, the only recourse of the lender is to the equipment or corresponding lease acquired with the loan proceeds. Through its term of existence, the Partnership had borrowed $62.5 million of non-recourse debt. As of May 1, 2010, the Partnership had repaid all of its debt obligations. As of December 31, 2011 and 2010, the Partnership had no outstanding non-recourse debt. The General Partner does not anticipate any future non-recourse borrowings on behalf of the Partnership.
Distributions
The Partnership commenced periodic distributions, based on cash flows from operations, beginning with the second quarter of 1993. See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, for additional information regarding the distributions.
Commitments and Contingencies and Off-Balance Sheet Transactions
Commitments and Contingencies
At December 31, 2011, the Partnership had no commitments to purchase lease assets and pursuant to the Partnership Agreement, the Partnership will no longer purchase any new lease assets.
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Off-Balance Sheet Transactions
None.
Critical Accounting Policies and Estimates
The policies discussed below are considered by management of the Partnership to be critical to an understanding of the Partnership’s financial statements because their application requires significant complex or subjective judgments, decisions, or assessments, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. The Partnership also states these accounting policies in the notes to the financial statements and in relevant sections in this discussion and analysis. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.
Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term, expected future cash flows used for impairment analysis purposes, and determination of the allowance for doubtful accounts.
Equipment on operating leases and related revenue recognition:
Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.
Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases were generally from 36 to 84 months. The difference between rents received and rental revenues recognized is recorded as unearned operating lease income on the balance sheet.
Operating leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, revenues are recognized on a cash basis.
Asset valuation:
Recorded values of the Partnership’s asset portfolio are periodically reviewed for impairment. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the assets and its carrying value on the measurement date.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Report of Independent Registered Public Accounting Firm, Financial Statements and Notes to Financial Statements attached hereto at pages 10 through 21.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Partners
ATEL Cash Distribution Fund V, L.P.
We have audited the accompanying balance sheets of ATEL Cash Distribution Fund V, L.P. (“Partnership”) as of December 31, 2011 and 2010, and the related statements of income, changes in partners’ capital, and cash flows for the years then ended. These financial statements are the responsibility of the Management of the Partnership’s General Partner. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ATEL Cash Distribution Fund V, L.P. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
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/s/ Moss Adams LLP | ||
San Francisco, California March 9, 2012 |
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ATEL CASH DISTRIBUTION FUND V, L.P.
BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
(In Thousands)
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2011 | 2010 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 249 | $ | 496 | ||||
Accounts receivable | 261 | 95 | ||||||
Prepaid expenses | 2 | 4 | ||||||
Investments in equipment and leases, net of accumulated depreciation of $13,789 at December 31, 2011 and $16,402 at December 31, 2010 | 2,843 | 3,624 | ||||||
Total assets | $ | 3,355 | $ | 4,219 | ||||
LIABILITIES AND PARTNERS’ CAPITAL | ||||||||
Accounts payable and accrued liabilities: | ||||||||
General Partner | $ | 113 | $ | 81 | ||||
Other | 225 | 130 | ||||||
Unearned operating lease income | 21 | 108 | ||||||
Total liabilities | 359 | 319 | ||||||
Commitments and contingencies | ||||||||
Partners’ capital: | ||||||||
General Partner | 215 | 205 | ||||||
Limited Partners | 2,781 | 3,695 | ||||||
Total Partners’ capital | 2,996 | 3,900 | ||||||
Total liabilities and Partners’ capital | $ | 3,355 | $ | 4,219 |
See accompanying notes.
11
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
(In Thousands Except for Units and Per Unit Data)
![]() | ![]() | ![]() | ||||||
2011 | 2010 | |||||||
Revenues: | ||||||||
Leasing activities: | ||||||||
Operating leases | $ | 2,565 | $ | 2,503 | ||||
Gain on sales of assets | 198 | 251 | ||||||
Other | 35 | 4 | ||||||
Total revenues | 2,798 | 2,758 | ||||||
Expenses: | ||||||||
Depreciation of operating lease assets | 761 | 958 | ||||||
Cost reimbursements to General Partner | 253 | 305 | ||||||
Professional fees | 28 | 42 | ||||||
Railcar maintenance | 372 | 446 | ||||||
Interest expense | — | 3 | ||||||
Equipment and incentive management fees to General Partner | 156 | 126 | ||||||
Other management fees | 81 | 83 | ||||||
Outside services | 66 | 73 | ||||||
Other | 115 | 121 | ||||||
Total expenses | 1,832 | 2,157 | ||||||
Net income | $ | 966 | $ | 601 | ||||
Net income: | ||||||||
General Partner | $ | 10 | $ | 6 | ||||
Limited Partners | 956 | 595 | ||||||
$ | 966 | $ | 601 | |||||
Net income per Limited Partnership Unit | $ | 0.08 | $ | 0.05 | ||||
Weighted average number of Units outstanding | 12,471,600 | 12,471,600 |
See accompanying notes.
12
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
(In Thousands Except for Units and Per Unit Data)
![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||
Limited Partners | General Partner | Total | ||||||||||||||
Units | Amount | |||||||||||||||
Balance December 31, 2009 | 12,471,600 | $ | 4,347 | $ | 199 | $ | 4,546 | |||||||||
Distributions to Limited Partners ($0.10 per Unit) | — | (1,247 | ) | — | (1,247 | ) | ||||||||||
Net income | — | 595 | 6 | 601 | ||||||||||||
Balance December 31, 2010 | 12,471,600 | 3,695 | 205 | 3,900 | ||||||||||||
Distributions to Limited Partners ($0.15 per Unit) | — | (1,870 | ) | — | (1,870 | ) | ||||||||||
Net income | — | 956 | 10 | 966 | ||||||||||||
Balance December 31, 2011 | 12,471,600 | $ | 2,781 | $ | 215 | $ | 2,996 |
See accompanying notes.
13
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
(In Thousands)
![]() | ![]() | ![]() | ||||||
2011 | 2010 | |||||||
Operating activities: | ||||||||
Net income | $ | 966 | $ | 601 | ||||
Adjustment to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation of operating lease assets | 761 | 958 | ||||||
Gain on sales of assets | (198 | ) | (251 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (166 | ) | (34 | ) | ||||
Prepaid expenses | 2 | 1 | ||||||
Accounts payable and accruals: | ||||||||
General Partner | 32 | 10 | ||||||
Other | 95 | (74 | ) | |||||
Accrued interest payable | — | (1 | ) | |||||
Unearned operating lease income | (87 | ) | 6 | |||||
Net cash provided by operating activities | 1,405 | 1,216 | ||||||
Investing activities: | ||||||||
Proceeds from sales of assets | 218 | 285 | ||||||
Improvements of equipment on operating leases | — | (6 | ) | |||||
Net cash provided by investing activities | 218 | 279 | ||||||
Financing activities: | ||||||||
Repayments of non-recourse debt | — | (344 | ) | |||||
Distributions to Limited Partners | (1,870 | ) | (1,247 | ) | ||||
Net cash used in financing activities | (1,870 | ) | (1,591 | ) | ||||
Net decrease in cash and cash equivalents | (247 | ) | (96 | ) | ||||
Cash and cash equivalents at beginning of year | 496 | 592 | ||||||
Cash and cash equivalents at end of year | $ | 249 | $ | 496 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the year for taxes | $ | 3 | $ | 5 | ||||
Cash paid during the year for interest | $ | — | $ | 4 |
See accompanying notes.
14
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Limited Partnership matters:
ATEL Cash Distribution Fund V, L.P. (the “Partnership” or the “Fund”) was formed under the laws of the State of California in September 1992. The Partnership was formed for the purpose of engaging in the sale of limited partnership investment units and acquiring equipment to engage in equipment leasing and sales activities. The Partnership may continue until December 31, 2013. The General Partner of the Partnership is ATEL Financial Services, LLC (“AFS”), a California limited liability company. Prior to converting to a limited liability company structure, AFS was formerly known as ATEL Financial Corporation.
The Partnership conducted a public offering of 12,500,000 Limited Partnership Units (“Units”) at a price of $10 per Unit. On March 19, 1993, subscriptions for the minimum number of Units, 120,000, or $1.2 million, had been received. On that date, the Partnership commenced operations in its primary business (acquiring equipment to engage in equipment leasing and sales activities). As of November 15, 1994, the Partnership had received and accepted subscriptions for 12,500,000, or $125 million in addition to the initial Limited Partners’ Units and the offering was terminated. As of December 31, 2011, 12,471,600 Units were issued and outstanding.
The Partnership’s principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Partnership’s invested capital; (ii) generates distributions to the partners of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), which ended December 31, 2000; and (iii) provides significant distributions following the Reinvestment Period and until all equipment has been sold. The Partnership is governed by its Limited Partnership Agreement (“Partnership Agreement”).
Pursuant to the Partnership Agreement, AFS receives compensation and reimbursements for services rendered on behalf of the Partnership (Note 5). The Partnership is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.
As of December 31, 2011, the Partnership is in the liquidation phase of its life cycle as defined in the Partnership Agreement and is making distributions on an annual basis or at the discretion of the General Partner.
2. Summary of significant accounting policies:
Basis of presentation:
The accompanying balance sheets as of December 31, 2011 and 2010, and the related statements of income, changes in partners’ capital, and cash flows for the years then ended, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission. Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no significant effect on the reported financial position or results from operations.
Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.
In preparing the accompanying financial statements, the Partnership has reviewed, as determined necessary by the General Partner, events that have occurred after December 31, 2011, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements.
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 determination of the allowance for doubtful accounts.
15
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies: - (continued)
Cash and cash equivalents:
Cash and cash equivalents include cash in banks and cash equivalent investments, such as U.S. Treasury instruments, with original and/or purchased maturities of ninety days or less.
Credit risk:
Financial instruments that potentially subject the Partnership to concentrations of credit risk include cash and cash equivalents and accounts receivable. The Partnership places the majority of its cash deposits in noninterest-bearing transaction accounts which are fully insured, without limit, through December 31, 2012 under the Dodd-Frank amendment to the Federal Deposit Insurance Act. This unlimited coverage is separate from, and in addition to, the coverage provided to depositors with other accounts held at a depository institution insured by the Federal Deposit Insurance Corporation. The remainder of the Funds’ cash is temporarily invested in U.S. Treasury denominated instruments. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Partnership. Accounts receivable represent amounts due from lessees in various industries related to equipment on operating leases.
Accounts receivable:
Accounts receivable represent the amounts billed under operating lease contracts which are currently due to the Partnership. Allowances for doubtful accounts are typically established based on historical charge-off and collection experience and the collectability of specifically identified lessees and invoiced amounts. Accounts receivable deemed uncollectible are charged-off to the allowance on a specific identification basis. Amounts recovered that were previously written-off are recorded as other income in the period received.
Equipment on operating leases and related revenue recognition:
Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.
Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases were generally from 36 to 84 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.
Operating leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, revenues are recognized on a cash basis.
Asset valuation:
Recorded values of the Partnership’s asset portfolio are periodically reviewed for impairment. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the assets and its carrying value on the measurement date.
16
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies: - (continued)
Segment reporting:
The Partnership is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly the Partnership operates in one reportable operating segment in the United States.
The Partnership’s principal decision makers are the General Partner’s Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer. The Partnership believes that its equipment leasing business operates as one reportable segment because: a) the Partnership measures profit and loss at the equipment portfolio level as a whole; b) the principal decision makers do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Partnership does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Partnership has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Partnership has not chosen to organize its business around geographic areas.
However, certain of the Partnership’s lessee customers may have international operations. In these instances, the Partnership is aware that certain equipment, primarily rail and transportation, may periodically exit the country. However, these lessee customers are US-based, and it is impractical for the Partnership to track, on an asset-by-asset, day-by-day basis, where these assets are deployed.
The primary geographic region in which the Partnership sought leasing opportunities was North America. The table below summarizes geographic information relating to the sources, by nation, of the total net revenues for the years ended December 31, 2011 and 2010, and long-lived tangible assets as of December 31, 2011 and 2010 (dollars in thousands):
![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||
For the year ended December 31, | ||||||||||||||||
2011 | % of Total | 2010 | % of Total | |||||||||||||
Revenue | ||||||||||||||||
United States | $ | 2,675 | 96 | % | $ | 2,758 | 100 | % | ||||||||
Canada | 123 | 4 | % | — | 0 | % | ||||||||||
Total International | 123 | 4 | % | — | 0 | % | ||||||||||
Total | $ | 2,798 | 100 | % | $ | 2,758 | 100 | % |
![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||
As of December 31, | As of December 31, | |||||||||||||||
2011 | % of Total | 2010 | % of Total | |||||||||||||
Long-lived assets | ||||||||||||||||
United States | $ | 2,066 | 73 | % | $ | 3,624 | 100 | % | ||||||||
Canada | 777 | 27 | % | — | 0 | % | ||||||||||
Total International | 777 | 27 | % | — | 0 | % | ||||||||||
Total | $ | 2,843 | 100 | % | $ | 3,624 | 100 | % |
Unearned operating lease income:
The Partnership records prepayments on operating leases as a liability, unearned operating lease income. The liability is recorded when the prepayments are received and recognized as operating lease revenue ratably over the period to which the prepayments relate.
Income taxes:
Pursuant to the provisions of Section 701 of the Internal Revenue Code, a partnership is not subject to federal income taxes. All income and losses of the Partnership are the liability of the individual partners and are allocated to the partners for inclusion in their individual tax returns. Accordingly, the Partnership has provided current income and franchise taxes for only those states which levy taxes on partnerships. Interest and penalties on such taxes are considered to be insignificant.
17
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies: - (continued)
For the years ended December 31, 2011 and 2010, income taxes and franchise taxes totaled $3 thousand and $2 thousand, respectively. The Partnership does not have any entity level uncertain tax positions. The Partnership files income tax returns in the U.S. federal jurisdiction and various state jurisdictions and is generally subject to examination by U.S. federal (or state and local) income tax authorities for three years from the filing of a tax return.
The tax bases of the Partnership’s net assets and liabilities vary from the amounts presented in these financial statements at December 31, 2011 and 2010 as follows (in thousands):
![]() | ![]() | ![]() | ||||||
2011 | 2010 | |||||||
Financial statement basis of net assets | $ | 2,996 | $ | 3,900 | ||||
Tax basis of net assets (unaudited) | 16,805 | 17,266 | ||||||
Difference (unaudited) | $ | (13,809 | ) | $ | (13,366 | ) |
The primary differences between the tax bases of the net assets and the amounts recorded in the financial statements are the result of differences in the adjustments related to lease revenues and accounting for depreciation methods used in the financial statements and the Partnership’s tax returns.
The following reconciles the net income reported in these financial statements to the income reported on the Partnership’s federal tax return (unaudited) for each of the years ended December 31, 2011 and 2010 (in thousands):
![]() | ![]() | ![]() | ||||||
2011 | 2010 | |||||||
Net income per financial statements | $ | 966 | $ | 601 | ||||
Tax adjustments (unaudited): | ||||||||
Adjustment to depreciation expense | 621 | 674 | ||||||
Adjustments to lease revenues | (88 | ) | 7 | |||||
Gain on sale of assets | (90 | ) | 33 | |||||
Income per federal tax return (unaudited) | $ | 1,409 | $ | 1,315 |
Per unit data:
Net income and distributions per unit are based upon the weighted average number of Limited Partners’ units outstanding during the year.
3. Concentration of credit risk and major customers:
The Partnership has leased equipment to lessees in diversified industries. Leases are subject to AFS’s credit committee review. The leases provide for the return of the equipment upon default.
The Partnership is no longer acquiring equipment. As assets have been sold upon maturity of the related leases, concentrations have arisen in certain industries due to the decreasing number of remaining leases and assets.
As of December 31, 2011 and 2010, approximately 99% and 98%, of the Partnership’s operating lease assets (as a percentage of total equipment cost), respectively, were leased to lessees in the rail transportation industry.
18
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
3. Concentration of credit risk and major customers: - (continued)
During 2011 and 2010, certain lessees generated significant portions (defined as 10% or more) of the Partnership’s total lease revenues as follows:
![]() | ![]() | ![]() | ![]() | |||||||||
Percentage of Total Lease Revenues | ||||||||||||
Lessee | Type of Equipment | 2011 | 2010 | |||||||||
Union Pacific Railroad Company | Railcars | 28 | % | 34 | % | |||||||
Central States Enterprises | Railcars | 23 | % | 26 | % | |||||||
Interstate Commodities | Railcars | 21 | % | 14 | % | |||||||
Union Carbide Corporation | Railcars | * | 10 | % |
* | Less than 10%. |
4. Investments in equipment and leases, net:
The Partnership’s investments in equipment and leases consist of the following (in thousands):
![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||
Balance December 31, 2010 | Reclassifications & Additions/ Dispositions | Depreciation/ Amortization Expense or Amortization of Leases | Balance December 31, 2011 | |||||||||||||
Net investment in operating leases | $ | 3,624 | $ | (34 | ) | $ | (761 | ) | $ | 2,829 | ||||||
Assets held for sale or lease, net of accumulated depreciation of $5 in 2011 and $0 in 2010 | — | 15 | (1 | ) | 14 | |||||||||||
Total | $ | 3,624 | $ | (19 | ) | $ | (762 | ) | $ | 2,843 |
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. As a result of these reviews, management determined that no impairment losses existed in either 2011 or 2010.
The Partnership utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of lease transactions. Depreciation expense on the Partnership’s equipment approximated $761 thousand and $958 thousand for the years ended December 31, 2011 and 2010, respectively.
All of equipment on lease was acquired in the years 1993 through 2004.
Operating leases:
Equipment on operating leases consists of the following (in thousands):
![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||
Balance December 31, 2010 | Additions | Reclassifications or Dispositions | Balance December 31, 2011 | |||||||||||||
Transportation, rail | $ | 19,626 | $ | — | $ | (3,247 | ) | $ | 16,379 | |||||||
Containers | 400 | — | (166 | ) | 234 | |||||||||||
20,026 | — | (3,413 | ) | 16,613 | ||||||||||||
Less accumulated depreciation | (16,402 | ) | (761 | ) | 3,379 | (13,784 | ) | |||||||||
Total | $ | 3,624 | $ | (761 | ) | $ | (34 | ) | $ | 2,829 |
The average estimated residual value for assets on operating leases was 14% and 15% of the assets’ original cost at December 31, 2011 and 2010, respectively. As of December 31, 2011 and 2010, the Partnership had no operating leases in non-accrual status.
19
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
4. Investments in equipment and leases, net: - (continued)
At December 31, 2011, the aggregate amounts of future minimum lease payments under operating leases are as follows (in thousands):
![]() | ![]() | |||
Operating Leases | ||||
Year ending December 31, 2012 | $ | 1,324 | ||
2013 | 1,166 | |||
2014 | 1,012 | |||
2015 | 776 | |||
2016 | 652 | |||
Thereafter | 105 | |||
$ | 5,035 |
As indicated in Note 1, the Partnership is scheduled to terminate no later than December 31, 2013. In the event that any assets remain at such date, the Fund will venture to dispose of such assets in an orderly manner within a reasonable timeframe.
5. Related party transactions:
The terms of the Partnership Agreement provide that AFS and/or affiliates are entitled to receive certain fees for equipment acquisition, management and resale, and for management of the Partnership.
The Partnership Agreement allows for the reimbursement of costs incurred by AFS in providing administrative services to the Partnership. Administrative services provided include Partnership accounting, investor relations, legal counsel and lease and equipment documentation. AFS is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as 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 Partnership. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications and general administrative services are performed by AFS.
Cost reimbursements to the General Partner are based on its costs incurred in performing administrative services for the Partnership. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.
Incentive management fees are computed as 5% of distributions of cash from operations, as defined in the Partnership Agreement and equipment management fees are computed as 5% of gross revenues from operating leases, as defined in the Partnership Agreement plus 2% of gross revenues from full payout leases, as defined in the Partnership Agreement.
During the years ended December 31, 2011 and 2010, AFS and/or affiliates earned fees, commissions and reimbursements pursuant to the Partnership Agreement as follows (in thousands):
![]() | ![]() | ![]() | ||||||
2011 | 2010 | |||||||
Cost reimbursements to General Partner and/or affiliates | $ | 253 | $ | 305 | ||||
Equipment and incentive management fees to General Partner | 156 | 126 | ||||||
$ | 409 | $ | 431 | |||||
6. Guarantees:
The Partnership enters into contracts that contain a variety of indemnifications. The Partnership’s maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
20
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
6. Guarantees: - (continued)
The General Partner knows of no facts or circumstances that would make the Partnership’s contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Partnership believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability under the Partnership’s similar commitments is remote. Should any such indemnification obligation become payable, the Partnership would separately record and/or disclose such liability in accordance with GAAP.
7. Partners’ capital:
As of December 31, 2011 and 2010, 12,471,600 Units were issued and outstanding (including the Units issued to the initial Limited Partners).
The Partnership has the right, exercisable at the General Partner’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 Partnership 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 Agreement of Limited Partnership. The repurchase would be at the discretion of the General Partner on terms it determines to be appropriate under given circumstances, in the event that the General Partner deems such repurchase to be in the best interest of the Partnership; provided, the Partnership 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 unit-holder 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.
As defined in the Partnership Agreement, the Partnership’s Net Profits, Net Losses, and Distributions are to be allocated 99% to the Limited Partners and 1% to AFS. The Limited Partnership Agreement allows the Partnership to make an allocation of income to AFS in order to maintain the capital account of AFS at zero. There were no such allocations made during the respective years ended December 31, 2011 and 2010.
As defined in the Partnership Agreement, available Cash from Operations and Cash from Sales and Refinancing are to be distributed as follows:
First, 5% of Distributions of Cash from Operations to AFS as Incentive Management Fee;
Second, the balance to the Limited Partners until the Limited Partners have received Aggregate Distributions in an amount equal to their Original Invested Capital, as defined, plus a 10% per annum cumulative (compounded daily) return on their Adjusted Invested Capital;
Third, AFS will receive as Incentive Management Compensation, 15% of remaining Cash from Operations and remaining Cash from Sales or Refinancing; and
Fourth, the balance to the Limited Partners.
Distributions to Limited Partners for the years ended December 31, 2011 and 2010 were as follows (in thousands except Units and per Unit data):
![]() | ![]() | ![]() | ||||||
2011 | 2010 | |||||||
Distributions declared | $ | 1,870 | $ | 1,247 | ||||
Weighted average number of Units outstanding | 12,471,600 | 12,471,600 | ||||||
Weighted average distributions per Unit | $ | 0.15 | $ | 0.10 |
21
Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
The Partnership’s General Partner’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Partnership’s disclosure controls and procedures, 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 Partnership does not control the financial reporting process, and is solely dependent on the Management of the General Partner, who is responsible for providing the Partnership with financial statements in accordance with generally accepted accounting principles in the United States. The General Partner’s disclosure controls and procedures, as they are applicable to the Partnership, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78aet seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
The Management of the General Partner is responsible for establishing and maintaining adequate internal control over financial reporting as that term is defined in Exchange Act Rule 13a-15(f) for the Partnership, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2011. The internal control process of the General Partner, as it is applicable to the Partnership, was designed to provide reasonable assurance to Management regarding the preparation and fair presentation of published financial statements, and includes those policies and procedures that:
(1) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that the Partnership’s receipts and expenditures are being made only in accordance with authorization of the Management of the General Partner; and |
(2) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements. |
All internal control processes, no matter how well designed, have inherent limitations. Therefore, even those processes determined to be effective can provide only reasonable assurance with respect to the reliability of financial statement preparation and presentation. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management of the General Partner assessed the effectiveness of its internal control over financial reporting, as it is applicable to the Partnership, as of December 31, 2011. In making this assessment, it used the criteria set forth inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, Management of the General Partner concluded that the General Partner’s internal control over financial reporting, as it is applicable to the Partnership, was effective as of December 31, 2011.
22
This annual report does not include an attestation report of the Partnership’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Partnership’s independent registered public accounting firm pursuant to Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which exempts non-accelerated filers from Section 404(b) of the Sarbanes-Oxley Act of 2002.
Changes in internal control
There were no changes in the General Partner’s internal control over financial reporting, as it is applicable to the Partnership, during the quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, the General Partner’s internal control over financial reporting, as it is applicable to the Partnership.
23
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The registrant is a Limited Partnership and, therefore, has no officers or directors.
All of the outstanding capital stock of ATEL Financial Services, LLC (“AFS”) (the General Partner) is held by ATEL Capital Group (“ACG”), a holding company formed to control AFS and affiliated companies. The outstanding voting capital stock of ACG is owned 100% by Dean L. Cash.
Each of ATEL Leasing Corporation (“ALC”) and AFS is a subsidiary under the control of ACG and performs services for the Partnership. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications services and general administrative services are performed by AFS.
The officers and directors of ACG and its affiliates are as follows:
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Dean L. Cash | President and Chief Executive Officer of ATEL Financial Services, LLC (General Partner) | |
Paritosh K. Choksi | Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (General Partner) | |
Vasco H. Morais | Executive Vice President, Secretary and General Counsel of ATEL Financial Services, LLC (General Partner) |
Dean L. Cash, age 61, became chairman, president and chief executive officer of ATEL in April 2001. Mr. Cash joined ATEL as director of marketing in 1980 and served as a vice president since 1981, executive vice president since 1983 and a director since 1984. Prior to joining ATEL, Mr. Cash was a senior marketing representative for Martin Marietta Corporation, data systems division, from 1979 to 1980. From 1977 to 1979, he was employed by General Electric Corporation, where he was an applications specialist in the medical systems division and a marketing representative in the information services division. Mr. Cash was a systems engineer with Electronic Data Systems from 1975 to 1977, and was involved in maintaining and developing software for commercial applications. Mr. Cash received a B.S. degree in psychology and mathematics in 1972 and an M.B.A. degree with a concentration in finance in 1975 from Florida State University. Mr. Cash is an arbitrator with the American Arbitration Association and is qualified as a registered principal with the Financial Industry Regulatory Authority.
Paritosh K. Choksi, age 58, joined ATEL in 1999 as a director, senior vice president and its chief financial officer. He became its executive vice president and CFO/COO in April 2001. Prior to joining ATEL, Mr. Choksi was chief financial officer at Wink Communications, Inc. from 1997 to 1999. From 1977 to 1997, Mr. Choksi was with Phoenix American Incorporated, a financial services and management company, where he held various positions during his tenure, and was senior vice president, chief financial officer and director when he left the company. Mr. Choksi was involved in all corporate matters at Phoenix and was responsible for Phoenix’s capital market needs. He also served on the credit committee overseeing all corporate investments, including its venture lease portfolio. Mr. Choksi was a part of the executive management team which caused Phoenix’s portfolio to increase from $50 million in assets to over $2 billion. Mr. Choksi is a member of the board of directors of Syntel, Inc. Mr. Choksi received a bachelor of technology degree in mechanical engineering from the Indian Institute of Technology, Bombay; and an M.B.A. degree from the University of California, Berkeley.
Vasco H. Morais, age 53, joined ATEL in 1989 as general counsel. Mr. Morais manages ATEL’s legal department, which provides legal and contractual support in the negotiating, documenting, drafting, reviewing and funding of lease transactions. In addition, Mr. Morais advises on general corporate law matters, and assists on securities law issues. From 1986 to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of America’s equipment leasing subsidiaries, providing in-house legal support on the documentation of tax-oriented and non-tax oriented direct and leveraged lease transactions, vendor leasing programs and general corporate matters. Prior to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital Companies in the Corporate and Securities Legal Department involved in drafting and reviewing contracts, advising on corporate law matters and securities law issues. Mr. Morais received a B.A. degree in 1982 from the University of California in Berkeley, a J.D. degree in 1986 from Golden Gate University Law School; and an M.B.A. (Finance) degree from Golden Gate University in 1997. Mr. Morais, an active member of the State Bar of California since 1986, served as co-chair of the Uniform Business Law Section of the State Bar of California and was inducted as a fellow of the American College of Commercial Finance Lawyers in 2010.
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Audit Committee
The board of directors of the General Partner acts as the audit committee of the Partnership. Dean L. Cash and Paritosh K. Choksi are members of the board of directors of the General Partner and are deemed to be financial experts. They are not independent of the Partnership.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on a review of Forms 3, 4 and 5, the Partnership is not aware of any failures to file reports of beneficial ownership required to be filed during or for the year ended December 31, 2011.
Code of Ethics
A Code of Ethics that is applicable to the Partnership, including the Chief Executive Officer and Chief Financial Officer and Chief Operating Officer of its General Partner, AFS, or persons acting in such capacity on behalf of the Partnership, is included as Exhibit 14.1 to this report.
Item 11. EXECUTIVE COMPENSATION
The registrant is a Limited Partnership and, therefore, has no officers or directors.
Set forth hereinafter is a description of the nature of remuneration paid and to be paid to AFS and its Affiliates. The amount of such remuneration paid for the years ended December 31, 2011 and 2010 is set forth in Item 8 of this report under the caption “Financial Statements and Supplementary Data — Notes to Financial Statements — Related party transactions,” at Note 5 thereof, which information is hereby incorporated by reference.
Acquisition Fees
Acquisition fees were paid to AFS for services rendered in finding, reviewing and evaluating equipment purchased by the Partnership and rejecting equipment not purchased by the Partnership. The total amount of acquisition fees to be paid to AFS or their Affiliates was not to exceed 3.5% of the aggregate purchase price of equipment acquired, not to exceed approximately 4.75% of the Gross Proceeds of the Offering.
The maximum amount of such fees to be paid was $5.9 million, all of which had been paid as of December 31, 1996. No such fees have been paid subsequent to that date.
Equipment Management Fees
As compensation for its services rendered generally in managing or supervising the management of the Partnership’s equipment and in supervising other ongoing services and activities including, among others, arranging for necessary maintenance and repair of equipment, collecting revenue, paying operating expenses, determining the equipment is being used in accordance with all operative contractual arrangements, property and sales tax monitoring and preparation of financial data, AFS or its affiliates are entitled to receive management fees which are payable for each fiscal quarter and are to be in an amount equal to (i) 5% of the gross lease revenues from “operating” leases and (ii) 2% of gross lease revenues from “full payout” leases which contain net lease provisions. See Note 5 to the financial statements included at Item 8, Financial Statements and Supplementary Data, of this report for amounts paid.
Incentive Management Fees
As compensation for its services rendered in establishing and maintaining the composition of the Partnership’s equipment portfolio and its acquisition and debt strategies and supervising fund administration including supervising the preparation of reports and maintenance of financial and operating data of the Partnership, Securities and Exchange Commission and Internal Revenue Service filings, returns and reports, AFS is entitled to receive the Partnership management fee which shall be payable for each fiscal quarter and shall be an amount equal to 5% of distributions of cash from operations until such time as the Limited Partners have received aggregate distributions of cash from operations in an amount equal to their original invested capital plus a 10% per annum return on their average adjusted invested capital (as defined in the Partnership Agreement). Thereafter, the incentive management fee shall be 15% of all distributions of cash from operations, sales or refinancing. See Note 5 to the financial statements included at Item 8, Financial Statements and Supplementary Data, of this report for amounts paid.
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Equipment Resale Fees
As compensation for services rendered in connection with the sale of equipment, AFS is entitled to receive an amount equal to the lesser of (i) 3% of the sales price of the equipment, or (ii) one-half the normal competitive equipment sales commission charged by unaffiliated parties for such services. Such fee is payable only after the Limited Partners have received a return of their adjusted invested capital (as defined in the Partnership Agreement) plus 10% of their adjusted invested capital per annum calculated on a cumulative basis, compounded daily, commencing the last day of the quarter in which the limited partner was admitted to the Partnership. To date, none have been accrued or paid.
Equipment Re-lease Fee
As compensation for providing re-leasing services, AFS is entitled to receive fees equal to 2% of the gross rentals or the comparable competitive rate for such services relating to comparable equipment, whichever is less, derived from the re-lease provided that (i) AFS or their affiliates have and will maintain adequate staff to render such services to the Partnership, (ii) no such re-lease fee is payable in connection with the re-lease of equipment to a previous lessee or its affiliates, (iii) AFS or its affiliates have rendered substantial re-leasing services in connection with such re-lease and (iv) AFS or its affiliates are compensated for rendering equipment management services. To date, amounts accrued and paid have been nominal.
General Partner’s Interest in Operating Proceeds
Net income, net loss and investment tax credits are allocated 99% to the Limited Partners and 1% to AFS. See the statements of income included in Item 8, Financial Statements and Supplementary Data, of this report for the amounts allocated to the General and Limited Partners in 2011.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
At December 31, 2011, no investor is known to hold beneficially more than 5% of the issued and outstanding Units.
Security Ownership of Management
The parent of AFS is the beneficial owner of Limited Partnership Units as follows:
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(1) Title of Class | (2) Name and Address of Beneficial Owner | (3) Amount and Nature of Beneficial Ownership | (4) Percent of Class | |||
Limited Partnership Units | Dean Cash 600 California Street, 6th Floor San Francisco, CA 94108 | Initial Limited Partner Units 25 Units ($250) (owned by wife) | 0.0002% |
Changes in Control
The Limited Partners have the right, by vote of the Limited Partners owning more than 50% of the outstanding limited Partnership units, to remove a General Partner.
AFS may at any time call a meeting of the Limited Partners or a vote of the Limited Partners without a meeting, on matters on which they are entitled to vote, and shall call such meeting or for vote without a meeting following receipt of a written request therefore of Limited Partners holding 10% or more of the total outstanding Limited Partnership units.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to Item 1 of this report under the caption “Equipment Leasing Activities,” Item 8 of this report under the caption “Financial Statements and Supplementary Data — Notes to Financial Statements — Related party transactions” at Note 5 thereof, and Item 11 of this report under the caption “Executive Compensation,” are hereby incorporated by reference.
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Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
During the most recent two years, the Partnership incurred audit fees with its principal auditors as follows (in thousands):
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2011 | 2010 | |||||||
Audit fees | $ | 17 | $ | 25 |
Audit fees consist of the aggregate fees and expenses billed in connection with the audit of the Partnership’s annual financial statements and review of the financial statements included in the Partnership’s quarterly reports on Form 10-Q.
The board of directors of the General Partner acts as the audit committee of the Partnership. Engagements for audit services, audit related services and tax services are approved in advance by the Chief Financial Officer of the General Partner acting on behalf of the board of directors of the General Partner in its role as the audit committee of the Partnership.
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) | Financial Statements and Schedules |
1. | Financial Statements |
Included in Part II of this report:
2. | Financial Statement Schedules |
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
(b) | Exhibits |
(3) and (4) Agreement of Limited Partnership, included as exhibit B to the Prospectus filed as exhibit 28.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 33-53162), is hereby incorporated herein by reference
(14.1) Code of Ethics
(31.1) Certification of Dean L. Cash pursuant to Rules 13a-14(a)/15d-14(a)
(31.2) Certification of Paritosh K. Choksi pursuant to Rules 13a-14(a)/15d-14(a)
(32.1) Certification of Dean L. Cash pursuant to 18 U.S.C. section 1350
(32.2) Certification of Paritosh K. Choksi pursuant to 18 U.S.C. section 1350
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 9, 2012
ATEL Cash Distribution Fund V, L.P.
(Registrant)
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By: ATEL Financial Services, LLC |
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By: /s/ Dean L. Cash | ||
By: /s/ Paritosh K. Choksi | ||
By: /s/ Samuel Schussler |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the persons in the capacities and on the dates indicated.
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SIGNATURE | CAPACITIES | DATE | ||
/s/ Dean L. Cash![]() | President and Chief Executive Officer of ATEL Financial Services, LLC (General Partner) | March 9, 2012 | ||
/s/ Paritosh K. Choksi![]() | Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (General Partner) | March 9, 2012 | ||
/s/ Samuel Schussler![]() | Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (General Partner) | March 9, 2012 |
No proxy materials have been or will be sent to security holders. An annual report will be furnished to security holders subsequent to the filing of this report on Form 10-K, and copies thereof will be furnished supplementally to the Commission when forwarded to the security holders.
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