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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended September 30, 2009
¨ | 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)
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 a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant 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). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The number of Limited Partnership Units outstanding as of October 31, 2009 was 12,471,600.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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ATEL CASH DISTRIBUTION FUND V, L.P.
Index
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Item 1. | Financial Statements (Unaudited). |
ATEL CASH DISTRIBUTION FUND V, L.P.
BALANCE SHEETS
SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(In Thousands)
(Unaudited)
September 30, 2009 | December 31, 2008 | |||||
ASSETS | ||||||
Cash and cash equivalents | $ | 1,130 | $ | 675 | ||
Accounts receivable, net of allowance for doubtful accounts of $13 at September 30, 2009 and $8 at December 31, 2008 | 141 | 186 | ||||
Prepaid expenses | 7 | 4 | ||||
Investments in equipment and leases, net of accumulated depreciation of $15,428 at September 30, 2009 and $14,537 at December 31, 2008 | 4,920 | 6,003 | ||||
Total assets | $ | 6,198 | $ | 6,868 | ||
LIABILITIES AND PARTNERS’ CAPITAL | ||||||
Accounts payable and accrued liabilities: | ||||||
General Partner | $ | 37 | $ | 41 | ||
Due to Affiliates | 1 | — | ||||
Other | 216 | 215 | ||||
Accrued interest payable | 2 | 5 | ||||
Non-recourse debt | 547 | 1,142 | ||||
Unearned operating lease income | 104 | 107 | ||||
Total liabilities | 907 | 1,510 | ||||
Commitments and contingencies | ||||||
Partners’ capital: | ||||||
General Partner | 199 | 199 | ||||
Limited Partners | 5,092 | 5,159 | ||||
Total Partners’ capital | 5,291 | 5,358 | ||||
Total liabilities and Partners’ capital | $ | 6,198 | $ | 6,868 | ||
See accompanying notes.
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ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2009 AND 2008
(In Thousands Except for Units and Per Unit Data)
(Unaudited)
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
Revenues: | |||||||||||||||
Leasing activities: | |||||||||||||||
Operating leases | $ | 662 | $ | 707 | $ | 2,014 | $ | 2,242 | |||||||
Gain on sales of assets | 10 | 14 | 64 | 82 | |||||||||||
Interest income | — | 4 | — | 16 | |||||||||||
Other | 1 | 53 | 1 | 82 | |||||||||||
Total revenues | 673 | 778 | 2,079 | 2,422 | |||||||||||
Expenses: | |||||||||||||||
Depreciation of operating lease assets | 331 | 337 | 1,053 | 1,102 | |||||||||||
Cost reimbursements to General Partner | 163 | 136 | 461 | 413 | |||||||||||
Professional fees | 6 | 1 | 36 | 95 | |||||||||||
Railcar maintenance | 119 | 163 | 339 | 394 | |||||||||||
Interest expense | 8 | 18 | 31 | 60 | |||||||||||
Equipment and incentive management fees to General Partner | 20 | 30 | 61 | 101 | |||||||||||
Other management fees | 18 | 29 | 61 | 58 | |||||||||||
Outside services | 4 | 22 | 50 | 76 | |||||||||||
Other | 28 | (2 | ) | 54 | 30 | ||||||||||
Total expenses | 697 | 734 | 2,146 | 2,329 | |||||||||||
Net (loss) income | $ | (24 | ) | $ | 44 | $ | (67 | ) | $ | 93 | |||||
Net (loss) income: | |||||||||||||||
General Partner | $ | — | $ | — | $ | — | $ | 1 | |||||||
Limited Partners | (24 | ) | 44 | (67 | ) | 92 | |||||||||
$ | (24 | ) | $ | 44 | $ | (67 | ) | $ | 93 | ||||||
Net (loss) income per Limited Partnership Unit | $ | 0.00 | $ | 0.00 | $ | (0.01 | ) | $ | 0.01 | ||||||
Weighted average number of Units outstanding | 12,471,600 | 12,471,600 | 12,471,600 | 12,471,600 |
See accompanying notes.
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ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2008
AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2009
(In Thousands Except for Units and Per Unit Data)
(Unaudited)
Limited Partners | General Partner | Total | |||||||||||
Units | Amount | ||||||||||||
Balance December 31, 2007 | 12,471,600 | $ | 6,709 | $ | 198 | $ | 6,907 | ||||||
Distributions to Limited Partners ($0.13 per Unit) | — | (1,621 | ) | — | (1,621 | ) | |||||||
Net income | — | 71 | 1 | 72 | |||||||||
Balance December 31, 2008 | 12,471,600 | 5,159 | 199 | 5,358 | |||||||||
Net loss | — | (67 | ) | — | (67 | ) | |||||||
Balance September 30, 2009 | 12,471,600 | $ | 5,092 | $ | 199 | $ | 5,291 | ||||||
See accompanying notes.
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ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2009 AND 2008
(In Thousands)
(Unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Operating activities: | ||||||||||||||||
Net (loss) income | $ | (24 | ) | $ | 44 | $ | (67 | ) | $ | 93 | ||||||
Adjustment to reconcile net (loss) income to cash provided by operating activities: | ||||||||||||||||
Depreciation of operating lease assets | 331 | 337 | 1,053 | 1,102 | ||||||||||||
Gain on sales of assets | (10 | ) | (14 | ) | (64 | ) | (82 | ) | ||||||||
Provision (reversal of provision) for doubtful accounts | 13 | (7 | ) | 5 | (7 | ) | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 20 | 37 | 40 | 209 | ||||||||||||
Prepaid expenses | (6 | ) | (6 | ) | (3 | ) | (2 | ) | ||||||||
Accounts payable and accruals: | ||||||||||||||||
General Partner | 10 | (23 | ) | (4 | ) | (26 | ) | |||||||||
Affiliates | 1 | (1 | ) | 1 | — | |||||||||||
Other | (1 | ) | 94 | 1 | 44 | |||||||||||
Accrued interest payable | (1 | ) | — | (3 | ) | (2 | ) | |||||||||
Unearned operating lease income | (3 | ) | 73 | (3 | ) | 75 | ||||||||||
Net cash provided by operating activities | 330 | 534 | 956 | 1,404 | ||||||||||||
Investing activities: | ||||||||||||||||
Proceeds from sales of lease assets | 14 | 17 | 94 | 119 | ||||||||||||
Net cash provided by investing activities | 14 | 17 | 94 | 119 | ||||||||||||
Financing activities: | ||||||||||||||||
Repayments of non-recourse debt | (201 | ) | (191 | ) | (595 | ) | (566 | ) | ||||||||
Distributions to Limited Partners | — | — | — | (624 | ) | |||||||||||
Net cash used in financing activities | (201 | ) | (191 | ) | (595 | ) | (1,190 | ) | ||||||||
Net increase in cash and cash equivalents | 143 | 360 | 455 | 333 | ||||||||||||
Cash and cash equivalents at beginning of period | 987 | 1,140 | 675 | 1,167 | ||||||||||||
Cash and cash equivalents at end of period | $ | 1,130 | $ | 1,500 | $ | 1,130 | $ | 1,500 | ||||||||
Supplemental disclosures of cash flow information: | ||||||||||||||||
Cash paid during the period for taxes | $ | — | $ | — | $ | 5 | $ | 5 | ||||||||
Cash paid during the period for interest | $ | 9 | $ | 18 | $ | 33 | $ | 62 | ||||||||
See accompanying notes.
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ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and 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 September 30, 2009, 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 additional 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 4). 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 September 30, 2009, 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.
These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission.
2. Summary of significant accounting policies:
Basis of presentation:
The Partnership has prepared the accompanying unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the General Partner, 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.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. Operating results for the interim periods presented 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 effect on equity or net income.
Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.
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ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies (continued):
In preparing the accompanying unaudited financial statements, the Partnership has reviewed, as determined necessary by the General Partner, events that have occurred after September 30, 2009, up until the issuance of the financial statements, which occurred on November 12, 2009. 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, expected future cash flows used for impairment analysis purposes, and determination of the allowance for doubtful accounts.
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.
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 based in the United States, 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 regions in which the Partnership sought leasing opportunities were North America and Europe. Currently, 100% of the Partnership’s operating revenues are from customers domiciled in North America.
Per Unit data:
Net income (loss) and distributions per Unit are based upon the weighted average number of Limited Partners’ Units outstanding during the period.
Recent accounting pronouncements:
The Generally Accepted Accounting Principles Topic of the FASB Accounting Standards Codification identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. The guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Partnership adopted the guidance for its third quarter 2009 interim reporting period. The adoption of the guidance did not have a significant impact on the Partnership’s financial position, results of operations or cash flows.
The Subsequent Events Topic of the FASB Accounting Standards Codification establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The guidance is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The Partnership adopted the guidance for its second quarter 2009 interim reporting period. The adoption of the guidance did not have a significant impact on the Partnership’s financial position, results of operations or cash flows.
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ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
2. Summary of significant accounting policies (continued):
The Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification provides guidance on determining fair value when there is no active market or where the price inputs being used represent distressed sales. The guidance is effective for interim and annual periods ending after June 15, 2009 and has been adopted by the Partnership for its second quarter 2009 interim reporting period with no impact on its financial position, results of operations or cash flows.
The Financial Instruments Topic of the FASB Accounting Standards Codification increases the frequency of fair value disclosures for financial instruments within the scope of the Topic from an annual basis to a quarterly basis. The guidance is effective for interim reporting periods ending after June 15, 2009. The Partnership adopted the guidance for its second quarter 2009 interim reporting period without significant effect on the Partnership’s financial position, results of operations or cash flows.
The Business Combinations Topic of the FASB Accounting Standards Codification establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. The guidance also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. The guidance is effective for fiscal years beginning after December 15, 2008 and will impact the Partnership only if it elects to enter into a business combination subsequent to December 31, 2008.
The Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The guidance was to be effective for fiscal years beginning after November 15, 2007. However, in February 2008, the FASB deferred the effective date of the guidance as it pertains to fair value measurements of nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. On January 1, 2008, the Partnership adopted the provisions of the guidance except as it applies to its investment in equipment and leases, and other nonfinancial assets and nonfinancial liabilities. The deferred provisions of the guidance were implemented effective January 1, 2009 without significant effect on the Partnership’s financial position, results of operations or cash flows.
3. Investment in equipment and leases, net:
The Partnership’s investments in equipment and leases consist of the following (in thousands):
Balance December 31, 2008 | Reclassifications & Additions / Dispositions | Depreciation/ Amortization Expense or Amortization of Leases | Balance September 30, 2009 | |||||||||||
Net investment in operating leases | $ | 5,692 | $ | (22 | ) | $ | (1,053 | ) | $ | 4,617 | ||||
Assets held for sale or lease, net of accumulated depreciation of $1,038 at September 30, 2009 and $1,065 at December 31, 2008 | 311 | (8 | ) | — | 303 | |||||||||
Total | $ | 6,003 | $ | (30 | ) | $ | (1,053 | ) | $ | 4,920 | ||||
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ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
3. Investment in equipment and leases, net (continued):
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 sale or lease. As a result of these reviews, management determined that no impairment losses existed in the three and nine month periods ended September 30, 2009 and 2008. Depreciation expense on property subject to operating leases and property held for lease or sale was $331 thousand and $337 thousand for the respective three months ended September 30, 2009 and 2008, and was $1.1 million each for the respective nine months ended September 30, 2009 and 2008.
All of the leased property was acquired in the years 1993 through 2004.
Operating leases:
Equipment on operating leases consists of the following (in thousands):
Balance December 31, 2008 | Additions | Reclassifications or Dispositions | Balance September 30, 2009 | |||||||||||||
Transportation, rail | $ | 18,523 | $ | — | $ | (35 | ) | $ | 18,488 | |||||||
Containers | 642 | — | (122 | ) | 520 | |||||||||||
19,165 | — | (157 | ) | 19,008 | ||||||||||||
Less accumulated depreciation | (13,473 | ) | (1,053 | ) | 135 | (14,391 | ) | |||||||||
Total | $ | 5,692 | $ | (1,053 | ) | $ | (22 | ) | $ | 4,617 | ||||||
The average estimated residual value for assets on operating leases was 18% and 19% of the assets’ original cost at September 30, 2009 and December 31, 2008, respectively.
At September 30, 2009, the aggregate amounts of future minimum lease payments under operating leases are as follows (in thousands):
Operating Leases | |||||
Three months ending December 31, 2009 | $ | 597 | |||
Year ending December 31, 2010 | 1,455 | ||||
2011 | 709 | ||||
2012 | 155 | ||||
$ | 2,916 | ||||
The Partnership utilizes a straight-line depreciation method for equipment in all of the categories currently in its portfolio of lease transactions. The useful lives for investment in leases by category are as follows (in years):
Equipment category | Useful Life | |
Transportation, rail | 30 - 35 | |
Containers | 7 - 10 |
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ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
4. 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 acquisition and disposition 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 three and nine months ended September 30, 2009 and 2008, AFS and/or affiliates earned fees, commissions and reimbursements pursuant to the Partnership Agreement as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||
Cost reimbursements to General Partner | $ | 163 | $ | 136 | $ | 461 | $ | 413 | ||||
Equipment and incentive management fees to General Partner | 20 | 30 | 61 | 101 | ||||||||
$ | 183 | $ | 166 | $ | 522 | $ | 514 | |||||
5. Non-recourse debt:
At September 30, 2009, non-recourse debt consists of a note payable to a financial institution. The note is due in monthly installments. Interest on the note is at a fixed rate of 5.0%. The note is secured by assignments of lease payments and pledges of assets. At September 30, 2009, gross lease rentals totaled approximately $557 thousand over the remaining lease terms; and the carrying value of the pledged assets was approximately $1.5 million. The note matures in 2010.
The non-recourse note payable does not contain any material financial covenant. The note is secured by a lien granted by the Partnership to the non-recourse lender on (and only on) the discounted lease transaction. The lender has 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 this specific security and the Partnership does not guarantee (nor is the Partnership otherwise contractually responsible for) the payment of non-recourse note as a general obligation or liability of the Partnership. Although the Partnership does not have any direct general liability in connection with the non-recourse note apart from the security granted, the Partnership is directly and generally liable and responsible for certain representations, warranties, and covenants made to the lender, such as warranties as to genuineness of the transaction parties’ signatures, as to the genuineness of the lease chattel paper or the transaction as a whole, or as to the Partnership’s good title to or perfected interest in the secured collateral, as well as
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ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
5. Non-recourse debt (continued):
similar representations, warranties and covenants typically provided by non-recourse borrowers and customary in the equipment finance industry, and are viewed by the industry as being consistent with a non-recourse discount financing obligation. Accordingly, as there are no financial covenants or ratios imposed on the Partnership in connection with this non-recourse obligation, the Partnership does not believe there are any material covenants that warrant footnote disclosure.
Future minimum payments of non-recourse debt are as follows (in thousands):
Principal | Interest | Total | |||||||||
Three months ending December 31, 2009 | $ | 203 | $ | 6 | $ | 209 | |||||
Year ended December 31, 2010 | 344 | 4 | 348 | ||||||||
$ | 547 | $ | 10 | $ | 557 | ||||||
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.
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 September 30, 2009 and December 31, 2008, 12,471,600 Units were issued and outstanding (including the 50 Units issued to the Initial Limited Partners).
As defined in the Limited Partnership Agreement, the Partnership’s Net Income, Net Losses, and Tax Credits 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. In accordance with the terms of the Limited Partnership Agreement, additional allocations of income were made to AFS in 2008. The amounts allocated were determined so as to bring AFS’s ending capital account balance to zero at the end of each year.
As defined in the Limited 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;
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ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
7. Partners’ Capital (continued):
Third, AFS will receive as Incentive Management Compensation, the following:
(A) | 10% of remaining Cash from Operations and |
(B) | 15% of remaining Cash from Sales or Refinancing; and |
Fourth, the balance to the Limited Partners.
Distributions to the Limited Partners were as follows (in thousands except units and per unit data):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||
Distributions declared | $ | — | $ | — | $ | — | $ | 624 | ||||
Weighted average number of Units outstanding | 12,471,600 | 12,471,600 | 12,471,600 | 12,471,600 | ||||||||
Weighted average distributions per Unit | $ | — | $ | — | $ | — | $ | 0.05 | ||||
8. Fair value of financial instruments:
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.
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 Partnership’s own estimates of assumptions that market participants would use in pricing the asset or liability.
At September 30, 2009, the Partnership had no financial assets or liabilities that require measurement on a recurring or non-recurring basis.
The Partnership 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 Partnership 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.
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 Partnership’s financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Partnership’s financial statements and related notes.
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ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
8. Fair value of financial instruments (continued):
Cash and cash equivalents:
The recorded amounts of the Partnership’s cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.
Non-recourse debt:
The fair value of the Partnership’s non-recourse debt is estimated using discounted cash flow analyses, based upon the current market borrowing rates for similar types of borrowing arrangements.
Limitations
The fair value estimates presented herein were based on pertinent information available to the Partnership as of September 30, 2009 and December 31, 2008. Although the Partnership 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 Partnership’s financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at September 30, 2009 and December 31, 2008 (in thousands):
September 30, 2009 | December 31, 2008 | |||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||
Financial assets: | ||||||||||||
Cash and cash equivalents | $ | 1,130 | $ | 1,130 | $ | 675 | $ | 675 | ||||
Financial liabilities: | ||||||||||||
Non-recourse debt | 547 | 555 | 1,142 | 1,173 |
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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,” (“MD&A”) 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 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 Partnership’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other than as required by law.
Overview
ATEL 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 (“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 September 30, 2009, 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
The three months ended September 30, 2009 versus the three months ended September 30, 2008
The Partnership had a net loss of $24 thousand for the third quarter of 2009 compared to net income of $44 thousand for the third quarter of 2008. The results for the third quarter of 2009 reflect a decrease in total revenues offset, in part, by a reduction in total operating expenses when compared to the prior year period.
Revenues
Total revenues for the third quarter of 2009 decreased by $105 thousand, or 13%, as compared to the prior year period. The decrease was primarily due to a $52 thousand decline in other revenue combined with a $45 thousand decline in revenues from operating leases.
Other revenue declined as the third quarter 2008 amount included revenues attributable to the resolution of items held in suspense; and operating lease revenue decreased largely due to continued run-off of the lease portfolio and dispositions of lease assets.
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Expenses
Total expenses for the third quarter of 2009 decreased by $37 thousand, or 5%, as compared to the prior year period. The net reduction in expenses was primarily a result of decreases in railcar maintenance, outside services, other management fees, interest expense and management fees paid to AFS. These decreases in expense were partially offset by increases in other expense and costs reimbursed to AFS.
The decrease in railcar maintenance expense totaled $44 thousand and was largely attributable to run-off of the Partnership’s railcar portfolio. Outside services expense was reduced by $18 thousand mainly due to a period over period reduction in consulting fees. Management fees paid to a third party railcar manager declined by $11 thousand as the third quarter 2008 amount included payments of additional maintenance charges. Likewise, interest expense decreased by $10 thousand largely due to the continued decline in outstanding non-recourse debt; and management fees paid to AFS declined by $10 thousand mainly due to the continued decline in managed assets and related rents.
Partially offsetting the aforementioned decreases in expenses were increases in other expense and costs reimbursed to AFS totaling $30 thousand and $27 thousand, respectively. The increase in other expense was largely attributable to increased provision for delinquent receivables and increased printing and postage expenses related to mailings of investor information; while the increase in costs reimbursed to AFS was attributable to increased administrative costs.
The nine months ended September 30, 2009 versus the nine months ended September 30, 2008
The Partnership had a net loss of $67 thousand for the first nine months of 2009 compared to net income of $93 thousand for the prior year period. The results for the first nine months of 2009 reflect a decrease in total revenues offset, in part, by a decline in total operating expenses when compared to the same period of 2008.
Revenues
Total revenues for the first nine months of 2009 decreased by $343 thousand, or 14%, as compared to the prior year period. The decline was comprised of a $228 thousand reduction in revenues from operating leases, an $81 thousand decline in other revenue, and decreases of $18 thousand and $16 thousand in gain on sales of assets and interest income, respectively.
The decrease in operating lease revenue was attributable to run-off and dispositions of lease assets. Other revenue declined as the 2008 amount included revenues attributable to the resolution of items held in suspense and the reversal of a $29 thousand prior period accrued liability. In addition, gain on sales of assets declined mainly due to the decrease in volume of assets sold during the first nine months of 2009 when compared to the same period of 2008; and interest income declined due to the period over period decrease in the Partnership’s interest earning cash balances and the continued lower interest rate environment.
Expenses
Total expenses for the first nine months of 2009 decreased by $183 thousand, or 8%, as compared to the prior year period. The net reduction in expenses was primarily a result of decreases in professional fees, railcar maintenance expense, depreciation expense, management fees paid to AFS, interest expense, and outside services offset, in part, by increases in costs reimbursed to AFS and other expense.
Professional fees declined by $59 thousand primarily as a result of a period over period reduction in tax preparation and audit related fees; and railcar maintenance expense decreased by $55 thousand largely due to run-off of the railcar portfolio. Similarly, the continued run-off of the Partnership’s lease assets during the Fund’s liquidation phase resulted in a $49 thousand decrease in depreciation expense. Management fees paid to AFS decreased by $40 thousand due to the absence of current year incentive fees, as there have not been any distributions declared or paid through September 2009, combined with the continued decline in managed assets and related rents. In addition, interest expense decreased by $29 thousand mainly due to the declining balance of the Partnership’s non-recourse debt; and outside services was reduced by $26 thousand mainly due to a period over period reduction in consulting fees and the elimination of a consulting position utilized during the prior year period.
The aforementioned decreases in expense were offset, in part, by a $48 thousand increase in costs reimbursed to AFS and a $24 thousand increase in other expense. The increase in costs reimbursed to AFS was largely a result of increased administrative costs; and the increase in other expense was mainly due to increased provision for delinquent receivables and increased printing and postage expenses related to mailings of investor information.
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Capital Resources and Liquidity
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.
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.
The changes in the Partnership’s cash flow for the three and nine months ended September 30, 2009 when compared to the three and nine months ended September 30, 2008 are as follows:
The three months ended September 30, 2009 versus the three months ended September 30, 2008
• | Operating Activities |
Cash provided by operating activities decreased by $204 thousand, or 38%, for the third quarter of 2009 as compared to the prior year period. The net decrease in cash flow was mainly attributable to a $76 thousand decline in unearned operating lease income, a $60 thousand net decrease in accounts payable and accrued liabilities and a $50 thousand decrease in net operating results, as adjusted for non-cash revenue and expense items such as gains on sales of assets and depreciation expense.
Unearned rents decreased primarily as a result of a $70 thousand prepayment of railcar rents received in the third quarter of 2008 as opposed to none for 2009; while accounts payable and accrued liabilities declined mainly due to third quarter 2008 accruals related to unpaid distributions. The decrease in net operating results, as adjusted for non-cash items, was mainly due to a decline in operating lease revenues offset, in part, by reductions in certain operating expenses.
• | Investing Activities |
Cash provided by investing activities for the third quarter of 2009 declined by $3 thousand, or 18%, when compared to the prior year period, primarily due to a decrease in proceeds from sales of lease assets, which declined on lower volume of containers sold during the third quarter of 2009 as compared to the same period in 2008.
• | Financing Activities |
Net cash used in financing activities increased by $10 thousand, or 5%, for the third quarter of 2009 as compared to the third quarter of 2008. The increase in cash used (decline in cash flow) was mainly due to the higher amount of scheduled principal payments made on the Partnership’s non-recourse debt.
The nine months ended September 30, 2009 versus the nine months ended September 30, 2008
• | Operating Activities |
Cash provided by operating activities decreased by $448 thousand, or 32%, for the first nine months of 2009 as compared to the prior year period. The net decrease in cash flow was mainly attributable to a $179 thousand decline in net operating results, as adjusted for non-cash revenue and expense items such as gains on sales of assets and depreciation expense, a $169 thousand reduction in collections of accounts receivable and a $78 thousand decrease in unearned rents.
The decrease in year-to-date net operating results, as adjusted for non-cash items, was mainly due to a decline in operating lease revenues offset, in part, by reductions in certain operating expenses. The period over period decline in collections of accounts receivable was attributable to a higher amount of prior period revenue accruals collected during the first nine months of 2008 as compared to the same period in 2009; and the decrease in unearned rents was primarily a result of a $70 thousand prepayment of railcar rents received in the third quarter of 2008 as opposed to none for 2009.
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• | Investing Activities |
Cash provided by investing activities for the nine months of 2009 declined by $25 thousand, or 21%, when compared to the prior year period, primarily due to a decrease in proceeds from sales of lease assets, which declined on lower volume of containers sold during the first nine months of 2009 as compared to the same period in 2008.
• | Financing Activities |
Net cash used in financing activities decreased by $595 thousand, or 50%, for the first nine months of 2009 as compared to the first nine months of 2008 primarily due to the timing of payments of distributions to the Limited Partners. The annual distribution for 2007 was paid during the first quarter of 2008.
In a normal economy, 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 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. For detailed information on the Partnership’s debt obligations, see Note 5 to the financial statements, Non-recourse debt, as set forth in Item 1, Financial Statements.
The Partnership commenced periodic distributions, based on cash flows from operations, beginning with the second quarter of 1993. At September 30, 2009, the Partnership had no commitments to purchase leased assets and pursuant to the Partnership Agreement, the Partnership will no longer purchase any new leased assets.
Item 4T. | 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, which 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 it is applicable to the Partnership, 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 General Partner’s internal control over financial reporting, as it is applicable to the Partnership, during the quarter ended September 30, 2009 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.
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Item 1. | 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.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None.
Item 3. | Defaults Upon Senior Securities. |
None.
Item 4. | Submission of Matters to a Vote of Security Holders. |
None.
Item 5. | Other Information. |
None.
Item 6. | Exhibits. |
Documents filed as a part of this report:
1. | Financial Statement Schedules |
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and therefore have been omitted.
2. | Other Exhibits |
31.1 Rule 13a-14(a)/ 15d-14(a) Certification of Dean L. Cash
31.2 Rule 13a-14(a)/ 15d-14(a) Certification of Paritosh K. Choksi
32.1 Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash
32.2 Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 12, 2009
ATEL Cash Distribution Fund V, L.P. (Registrant) | ||||||
By: | ATEL Financial Services, LLC | |||||
General Partner of Registrant | ||||||
By: | /s/ Dean L. Cash | |||||
Dean L. Cash, | ||||||
President and Chief Executive Officer of ATEL Financial Services, LLC (General Partner) | ||||||
By: | /s/ Paritosh K. Choksi | |||||
Paritosh K. Choksi, | ||||||
Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (General Partner) | ||||||
By: | /s/ Samuel Schussler | |||||
Samuel Schussler, | ||||||
Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (General Partner) |
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