Form 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 1997 |_| 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 0-16843 ATEL Cash Distribution Fund, a California Limited Partnership (Exact name of registrant as specified in its charter) California 94-2985201 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 235 Pine Street, 6th Floor, San Francisco, California 94104 (Address of principal executive offices) Registrant's telephone number, including area code: (415) 989-8800 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 |_| DOCUMENTS INCORPORATED BY REFERENCE None Part I. FINANCIAL INFORMATION Item 1. Financial Statements. ATEL CASH DISTRIBUTION FUND (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEET JUNE 30, 1997 (Unaudited) ASSETS Cash and cash equivalents $214,343 Accounts receivable, net of allowance for doubtful accounts of $22,097 (3,147) Investment in leases and equipment 157,785 --------------- $368,981 =============== LIABILITIES AND PARTNERS' CAPITAL Non-recourse debt $135,609 Accounts payable and accruals 6,662 Accrued interest 1,047 --------------- Total liabilities 143,318 Partners' capital: General partners 21,315 Limited partners 204,348 --------------- Total partners' capital 225,663 --------------- $368,981 =============== See notes to financial statements ATEL CASH DISTRIBUTION FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1997 and 1996 (Unaudited) Six Months Three Months Ended June 30, Ended June 30, 1997 1996 1997 1996 ---- ---- ---- ---- Revenues: Lease income: Operating $42,944 $57,074 $18,770 $27,878 Direct financing 5,826 24,691 2,254 11,663 Gain on sale of equipment 25,000 5,196 25,000 - Other 2,986 25,955 2,340 25,946 Interest income 1,710 361 1,134 215 -------------- -------------- --------------- --------------- 78,466 113,277 49,498 65,702 -------------- -------------- --------------- --------------- Expenses: Depreciation 17,686 21,572 8,177 10,562 Other 8,124 4,647 5,940 3,045 Interest 6,655 8,358 3,216 4,078 Professional fees 4,363 5,035 3,094 3,797 Taxes 3,045 3,326 3,045 3,326 Provision for losses - 1,133 - 1,133 -------------- -------------- --------------- --------------- 39,873 44,071 23,472 25,941 -------------- -------------- --------------- --------------- Net income $38,593 $69,206 $26,026 $39,761 ============== ============== =============== =============== Net income: General partners $386 $692 $260 $398 Limited partners 38,207 68,514 25,766 39,363 -------------- -------------- --------------- --------------- $38,593 $69,206 $26,026 $39,761 ============== ============== =============== =============== Net income per limited partnership unit $1.91 $3.43 $1.29 $1.97 Weighted average number of units outstanding 19,962 19,962 19,962 19,962 STATEMENTS OF CHANGES IN PARTNERS' CAPITAL SIX MONTHS ENDED JUNE 30, 1997 Limited Partners General Units Amount Partners Total Balance December 31, 1996 19,962 $277,924 $20,929 $298,853 Net income 38,207 386 38,593 Distributions (111,783) - (111,783) -------------- -------------- --------------- --------------- Balance June 30, 1997 19,962 $204,348 $21,315 $225,663 ============== ============== =============== =============== See notes to financial statements ATEL CASH DISTRIBUTION FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1997 and 1996 (Unaudited) Six Months Three Months Ended June 30, Ended June 30, 1997 1996 1997 1996 ---- ---- ---- ---- Operating activities: Net income $38,593 $69,206 $26,026 $39,761 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization expense 17,686 21,572 8,177 10,562 Gain on sales of assets (25,000) (5,196) (25,000) - Provision for losses - 1,133 - 1,133 Changes in operating assets and liabilities: Accounts receivable 29,024 2,688 3,147 8,076 Accrued interest (148) (135) (75) (68) Unearned operating lease income - 339 - 1,254 Accounts payable, other (4,512) 5 (41,687) 3,386 -------------- -------------- --------------- --------------- Net cash provided by (used in) operations 55,643 89,612 (29,412) 64,104 -------------- -------------- --------------- --------------- Investing activities: Proceeds from sales of lease assets 57,000 14,000 57,000 1 Reductions in net investment in direct financing leases 27,236 47,112 14,276 24,237 -------------- -------------- --------------- --------------- Net cash provided by investing activities 84,236 61,112 71,276 24,238 -------------- -------------- --------------- --------------- Financing activities: Distributions to limited partners (111,783) (124,079) (55,891) (55,891) Repayments of non-recourse debt (19,171) (17,481) (9,696) (8,842) -------------- -------------- --------------- --------------- Net cash used in by financing activities (130,954) (141,560) (65,587) (64,733) -------------- -------------- --------------- --------------- Net increase (decrease) in cash and cash equivalents 8,925 9,164 (23,723) 23,609 Cash and cash equivalents at beginning of period 205,418 91,084 238,066 76,639 -------------- -------------- --------------- --------------- Cash and cash equivalents at end of period $214,343 $100,248 $214,343 $100,248 ============== ============== =============== =============== Supplemental disclosures of cash flow information: Cash paid during the period for interest $6,655 $8,358 $3,216 $4,078 ============== ============== =============== =============== See notes to financial statements ATEL CASH DISTRIBUTION FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) 1. Interim financial statements: The unaudited interim financial statements reflect all adjustments which are, in the opinion of the general partners, necessary to a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim financial statements should be read in conjunction with the most recent report on Form 10K. 2. Investment in leases: The Partnership's investment in leases consists of the following: Depreciation Expense or December 31, Amortization June 30, 1996 of Leases Dispositions 1997 ---- --------- -------------- ---- Net investment in operating leases $200,690 (17,686) (32,000) $151,004 Net investment in direct financing leases 40,467 (27,236) - 13,231 Reserve for losses (6,450) - - (6,450) -------------- -------------- --------------- --------------- $234,707 ($44,922) ($32,000) $157,785 ============== ============== =============== =============== Operating leases: The following schedule provides an analysis of the Partnership's investment in property on operating leases by major classifications as of December 31, 1996, acquisitions and dispositions during the quarters ended March 31, and June 30, 1997 and as of June 30, 1997. December 31, Dispositions June 30, 1996 1st Quarter 2nd Quarter 1997 Materials handling $208,787 $208,787 Food processing 35,653 35,653 Manufacturing equipment 30,263 ($25,988) 4,275 Motor vehicles 220,787 (220,787) - -------------- -------------- --------------- --------------- 495,490 (246,775) 248,715 Less accumulated depreciation (294,800) ($9,509) 206,598 (97,711) -------------- -------------- --------------- --------------- $200,690 ($9,509) ($40,177) $151,004 ============== ============== =============== =============== Equipment on operating leases was acquired in 1987, 1988, 1989, 1990, 1992 , 1993 and 1995. ATEL CASH DISTRIBUTION FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) 2. Investment in leases: (continued) At June 30, 1997, the aggregate amounts of future minimum lease payments from direct financing leases and operating leases are as follows: Year ending Direct December 31, Financing Operating Total 1997 $33,062 $26,689 $59,751 1998 - 51,948 51,948 1999 - 51,948 51,948 2000 - 25,974 25,974 -------------- -------------- --------------- $33,062 $156,559 $189,621 ============== ============== =============== 3. Non-recourse debt: Note payable to financial institution is due in monthly installments of principal and interest. The note is secured by an assignment of lease payments and a pledge of the assets which were purchased with the proceeds of the note. Interest on the note is at an annual rate of 9.25%. The balance remaining at June 30, 1997 is due in monthly payments through 2000. Future minimum principal and interest payments of debt as of June 30, 1997 are as follows: Year ending December 31, Principal Interest Total 1997 $20,078 $5,897 $25,975 1998 43,042 8,906 51,948 1999 47,203 4,745 51,948 2000 25,286 688 25,974 -------------- -------------- --------------- $135,609 $20,236 $155,845 ============== ============== =============== ATEL CASH DISTRIBUTION FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) 4. Related party transactions: The terms of the Limited Partnership Agreement provide that the General Partners and/or their Affiliates are entitled to receive certain fees for equipment acquisition, management and resale and for management of the Partnership. The General Partners earned partnership management fees equal to 5% of cash distributed from operations and equipment management fees equal to 2% of full payout lease rentals and 5% of operating lease rentals pursuant to the Limited Partnership Agreement. The Limited Partnership Agreement allows for the reimbursement of costs incurred by ATEL in providing administrative services to the Partnership. Administrative services provided include partnership accounting, investor relations, legal counsel and lease and equipment documentation. ATEL is not reimbursed for services where it is entitled to receive a separate fee as compensation for such services, such as acquisition and disposition of equipment. Reimbursable costs incurred by ATEL are allocated to the Partnership based upon actual time incurred by employees working on Partnership business and an allocation of rent and other costs based on utilization studies. Effective May 1, 1994, the General Partners have elected to waive all reimbursements of administrative costs. In 1997 and 1996, $25,121 and $28,402 were waived. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity At June 30, 1997, the Partnership had cash balances of $214,343. Of this amount, $55,891 was cash held for the distribution made to the Limited Partners in July of 1997. During the first and second quarters, the Partnership's primary sources of liquidity were cash flows from lease rentals. The liquidity of the Partnership will vary in the future, increasing to the extent cash flows from operations exceed expenses, and decreasing as distributions are made to the Limited Partners and to the extent expenses exceed cash flows from leases and proceeds from asset sales. The Partnership currently has available adequate reserves to meet contingencies. As of June 30, 1997, the Partnership had borrowed approximately $2,817,500 with a remaining unpaid balance of $135,609. The borrowings are non-recourse to the Partnership, that is the only recourse of the lender is to the equipment or corresponding lease acquired or secured with the loan proceeds. The Agreement of Limited Partnership limits such borrowings to 80% of the total cost of equipment, in aggregate. The Partnership made distributions of cash from operations to the Limited Partners in April and July 1997. These distributions were based on the results of operations in the first and second quarters of 1997. The amount of each of the distributions was $2.50 per Unit. The distributions represent an annualized distribution rate of 2.00%. If inflation in the general economy becomes significant, it may affect the Partnership inasmuch as the residual (resale) values and rates on re-leases 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. If interest rates increase or decrease significantly, the lease rates that the Partnership can obtain on future leases will be expected to increase or decrease in parallel 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. Cash Flows Six months, 1997 vs. 1996 During the first six months of 1997, the Partnership's primary sources of cash were from rents from operating leases and proceeds from asset sales. The amounts of rents from leases decreased from $128,877 in 1996 to $76,006 in 1997, a decrease of $52,871. The decrease is the result of scheduled lease terminations and subsequent sales of the related assets. During the second quarter of 1996, the Partnership received $25,938 relating to the FNN bankruptcy settlement. The Partnership did not receive any similar amount in 1997. Sources of cash from investing activities consisted of direct financing lease rents and proceeds from lease asset sales. Direct financing lease rents decreased by $19,876 due to lease terminations and sales of the lease assets. The proceeds from these and other asset sales increased from $14,000 in 1996 to $57,000 in 1997. The increase in sales proceeds was primarily due to an increase the underlying amount of assets sold in comparison to the prior year. In 1997, there were no sources of cash flows from financing activities. Uses of cash for financing activities did not change significantly from 1996 to 1997. Three months, 1997 vs. 1996 Cash flows from operations decreased due to the same causes noted above for the six month period. Cash flows from investing activities increased due to the same causes noted above for the six month period. In 1997, there were no sources of cash flows from financing activities. Uses of cash for financing activities did not change significantly from 1996 to 1997. Results of Operations The results of operations in future periods may vary significantly from those of the first six months of 1997 as the Partnership's lease portfolio of capital equipment matures. Revenues from leases are expected to decline over the long term as leased assets come off lease and are sold or re-leased at lower lease rates. The effect on net income is not determinable as it will depend to a large degree on the amounts received from the sales of assets or from re-leases to either the same or new lessees once the initial lease terms expire. Six and three months, 1997 vs. 1996 Operating lease revenues have decreased due to lease terminations and asset sales. Depreciation has also decreased due to the asset sales. Interest expense has decreased as the average balances of outstanding debt have decreased due to scheduled debt payments. Revenues from direct financing leases decreased compared to 1996. These decreases resulted primarily from scheduled lease terminations and asset sales during the prior year. Gains on sales of assets increased by $19,804 (six months) and $25,000 (three months) compared to 1996. The increases resulted from larger amounts of operating lease assets being sold in 1997 compared to 1996. The original cost of operating lease assets sold increased from $41,807 in 1996 to $246,775 in 1997. Gains on sales of assets is not expected to be consistent from one period to another. In the second quarter of 1996, the Partnership received $25,938 relating to the bankruptcy of FNN. There were no such payments in 1997, nor were any expected. The Partnership's expenses decreased by $4,198 for the six month period compared to 1996. The decrease was primarily related to decreases in depreciation and interest expenses. These decreases were the result of assets sales over the last year and scheduled debt payments. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. Inapplicable. Item 2. CHANGES IN SECURITIES. Inapplicable. Item 3. DEFAULTS UPON SENIOR SECURITIES. Inapplicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Inapplicable. Item 5. OTHER INFORMATION. Inapplicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Documents filed as a part of this report 1. Financial Statements Included in Part I of this report: Balance sheet, June 30, 1997. Statements of operations for the six and three month periods ended June 30, 1997 and 1996. Statements of changes in partners' capital for the six months ended June 30, 1997. Statements of cash flows for the six and three month periods ended June 30, 1997 and 1996. Notes to the financial statements. 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. 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: August 14, 1997 ATEL Cash Distribution Fund, a California limited partnership (Registrant) By: /s/ A. J. BATT ------------------------------------------- A. J. Batt, General Partner of registrant By: /s/ DEAN L. CASH ------------------------------------------- Dean Cash, General Partner of registrant By: /s/ F. RANDALL BIGONY ------------------------------------------- F. Randall Bigony Principal financial officer of registrant By: /s/ DONALD E. CARPENTER ------------------------------------------- Donald E. Carpenter, Principal accounting officer of registrant