Form 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended September 30, 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 000-17631
ATEL Cash Distribution Fund II, a California
Limited Partnership (Exact name of
registrant as specified in its charter)
California 94-3051991
(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
Former name, former address and former fiscal year, if changed since last report
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 II
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1997
(Unaudited)
ASSETS
Cash and cash equivalents $969,259
Accounts receivable, net of allowance for doubtful
accounts of $15,552 119,606
Investment in equipment and leases 3,026,091
----------------
$4,114,956
================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $868,333
Accrued interest 11,607
Accounts payable:
General Partners 20,117
Other 70,498
Deposits due to lessees 9,000
Unearned lease income 25,488
----------------
Total liabilities 1,005,043
Partners' capital:
General Partners 84,288
Limited Partners 3,025,625
----------------
Total partners' capital 3,109,913
----------------
$4,114,956
================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
Revenues: 1997 1996 1997 1996
---- ---- ---- ----
Lease income:
Operating $695,748 $1,144,100 $178,166 $338,012
Direct financing 120,782 250,018 33,779 71,411
Leveraged 14,161 12,860 2,023 3,215
Gain (loss) on disposition of assets 150,984 51,757 867 (11,893)
Interest income 20,681 10,869 7,716 4,724
Other 64,298 177,151 546 79,323
--------------- ---------------- ---------------- ----------------
1,066,654 1,646,755 223,097 484,792
--------------- ---------------- ---------------- ----------------
Expenses:
Depreciation 291,868 712,396 74,075 184,516
Interest expense 96,282 190,085 24,964 55,118
Management fees 63,963 119,981 14,048 45,941
Administrative cost reimbursements 99,420 101,298 34,552 40,396
Taxes 20,641 32,048 - -
Other expense 28,987 31,345 2,916 12,376
Professional fees 21,052 19,682 12,602 6,471
Provision for losses 4,162 16,192 - 4,846
--------------- ---------------- ---------------- ----------------
626,375 1,223,027 163,157 349,664
--------------- ---------------- ---------------- ----------------
Net income $440,279 $423,728 $59,940 $135,128
=============== ================ ================ ================
Net income:
General Partners $4,403 $4,237 $599 $1,351
Limited Partners 435,876 419,491 59,341 133,777
--------------- ---------------- ---------------- ----------------
$440,279 $423,728 $59,940 $135,128
=============== ================ ================ ================
Net income per Limited Partnership unit $6.23 $5.99 $0.85 $1.91
Weighted average number of units
outstanding 69,979 69,979 69,979 69,979
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
NINE MONTHS ENDED SEPTEMBER 30, 1997
Limited Partners General
Units Amount Partners Total
Balance December 31, 1996 69,979 $3,608,097 $79,885 $3,687,982
Net income 435,876 4,403 440,279
Distributions to limited partners (1,018,348) - (1,018,348)
--------------- ---------------- ---------------- ----------------
Balance September 30, 1997 69,979 $3,025,625 $84,288 $3,109,913
=============== ================ ================ ================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Operating activities:
Net income $440,279 $423,728 $59,940 $135,128
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 291,868 712,396 74,075 184,516
Revenues from leveraged leases (14,161) (12,860) (2,023) (3,215)
(Gain) loss on dispositions of assets (150,984) (51,757) (867) 11,893
Provision for losses 4,162 16,192 - 4,846
Changes in operating assets and liabilities:
Accounts receivable (89,363) 26,349 (26,286) 1,675
Accounts payable, General Partner (1,165) (15,252) 18,576 12,120
Accounts payable, other 3,714 19,169 (1,583) (1,632)
Accrued interest (17,485) (17,777) (5,663) (6,030)
Customer deposit (60,000) - - -
Unearned operating lease income 8,989 (23,818) 14,807 (11,028)
--------------- ---------------- ---------------- ----------------
Net cash provided by operations 415,854 1,076,370 130,976 328,273
--------------- ---------------- ---------------- ----------------
Investing activities:
Proceeds from sales of equipment 768,223 679,310 204,259 248,151
Reductions of net investment in direct
financing leases 639,725 670,327 216,916 220,499
--------------- ---------------- ---------------- ----------------
Net cash provided by investing activities 1,407,948 1,349,637 421,175 468,650
--------------- ---------------- ---------------- ----------------
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
(Continued)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Financing activities:
Repayment of non-recourse debt (825,532) (956,809) (240,258) (307,442)
Distributions to limited partners (1,018,348) (1,603,898) (272,772) (472,804)
--------------- ---------------- ---------------- ----------------
Net cash used in financing activities (1,843,880) (2,560,707) (513,030) (780,246)
--------------- ---------------- ---------------- ----------------
Net (decrease) increase in cash and cash
equivalents (20,078) (134,700) 39,121 16,677
Cash and cash equivalents at beginning of
period 989,337 874,714 930,138 723,337
--------------- ---------------- ---------------- ----------------
Cash and cash equivalents at end of
period $969,259 $740,014 $969,259 $740,014
=============== ================ ================ ================
Supplemental disclosures of cash flow information:
Cash paid for interest $96,282 $190,085 $24,964 $55,118
=============== ================ ================ ================
Supplemental schedule of non-cash transactions:
Operating lease assets reclassified to equipment
held for lease $1,131,256 $146,252 $85,102 $146,252
Less accumulated depreciation (865,387) (118,612) (62,762) (118,612)
--------------- ---------------- ---------------- ----------------
$265,869 $27,640 $22,340 $27,640
=============== ================ ================ ================
Assets held for lease reclassified as operating
lease assets $1,045,766 $1,045,766
Less accumulated depreciation (802,625) (802,625)
--------------- ----------------
$243,141 $243,141
=============== ================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(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 Reclass-
December 31, Amortization ifications & September 30,
1996 Additions of Leases Dispositions 1997
---- --------- --------- - ------------- ----
Net investment in operating leases $2,756,220 ($291,868) ($634,469) $1,829,883
Net investment in direct
financing leases 1,774,588 (639,725) (6,396) 1,128,467
Net investment in leveraged
leases 93,925 14,161 - 108,086
Assets held for sale - - 22,728 22,728
Reserve for losses (59,809) ($4,162) - 898 (63,073)
---------------- --------------- ---------------- ---------------- ----------------
$4,564,924 ($4,162) ($917,432) ($617,239) $3,026,091
================ =============== ================ ================ ================
The following schedule provides an analysis of the Partnership's investment in
equipment on operating leases by major classifications as of December 31, 1996,
dispositions during the three month periods ended March 31, June 30 and
September 30, 1997 and as of September 30, 1997:
December 31, -------- Reclassifications & Dispositions -------- September 30,
Equipment type 1996 1st Quarter 2nd Quarter 3rd Quarter 1997
-------------- ---- ----------- ----------- ----------- ----
Aircraft $3,164,533 ($810,000) $2,354,533
Mining 1,316,547 - ($1,045,766) $1,275,560 1,546,341
Manufacturing 717,059 - - (1,007) 716,052
Materials handling 835,681 - (105,498) (455,493) 274,690
Other 1,035,350 (76,913) (192,613) (682,951) 82,873
---------------- --------------- ---------------- ---------------- ----------------
7,069,170 (886,913) (1,343,877) 136,109 4,974,489
Less accumulated depreciation (4,312,950) 391,502 969,615 (192,773) (3,144,606)
---------------- --------------- ---------------- ---------------- ----------------
$2,756,220 ($495,411) ($374,262) ($56,664) $1,829,883
================ =============== ================ ================ ================
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
2. Investment in leases (continued):
At September 30, 1997, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Financing Operating Total
--------- --------- -----
Three months ending December 31, 1997 $29,298 $154,891 $184,189
Year ending December 31,1998 115,204 314,951 430,155
1999 4,248 306,932 311,180
2000 - 239,499 239,499
2001 - 37,200 37,200
2002 - 18,600 18,600
========== ============ ============
$148,750 $1,072,073 $1,220,823
========== ============ ============
3. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
9.43% to 12.86%.
Future minimum principal payments of debt as of September 30, 1997 are as
follows:
Principal Interest Total
--------- -------- -----
Three months ending December 31, 1997 $211,620 $24,028 $235,648
Year ending December 31, 1998 230,050 61,609 291,659
1999 233,530 36,202 269,732
2000 193,133 9,166 202,299
---------- ---------- ----------
$868,333 $131,005 $999,338
========== ========== ==========
4. Commitments, management and report of fees:
The terms of the Agreement of Limited Partnership provide that the General
Partners and/or Affiliates are entitled to receive certain fees.
The General Partners and/or Affiliates earned partnership and equipment
management fees of $63,963 in 1997 and $119,181 in 1996, as permitted in the
Agreement of Limited Partnership .
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Capital Resources and Liquidity
The Partnership's primary source of liquidity is cash received from lease
rentals. The liquidity of the Partnership will vary in the future, increasing to
the extent cash flows from leases exceed expenses and decreasing as lease assets
are acquired, as distributions are made to the Limited Partners and to the
extent expenses exceed cash flows from leases.
The Partnership currently has available adequate reserves to meet contingencies,
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. The General Partners envision no such requirements for
operating purposes, nor have they explored with lenders the possibility of
obtaining loans. There can be no assurance as to the terms of any such financing
or that the Partnership will be able to obtain such loans.
As of September 30, 1997, the Partnership had borrowed approximately
$21,700,000. The remaining unpaid balance on those borrowings was approximately
$868,000. The borrowings are non-recourse to the Partnership, that is, the only
recourse of the lender will be to the equipment or corresponding lease acquired
with the loan proceeds. The Agreement of Limited Partnership limits such
borrowings to 40% of the total cost of equipment, in aggregate.
No commitments of capital have been or are expected to be made.
The Partnership made distributions of cash from 1997 first quarter operations in
April 1997, from second quarter operations in July 1997 and from third quarter
operations in October 1997. The amounts of each of the distributions were $3.75
per Unit. These distributions represent an annualized distribution rate of 3.0%.
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, nine months, 1997 vs. 1996
Lease revenues, the Partnership's primary source of cash, decreased by $576,287
compared to 1996. Lease revenues have declined as leases have matured and the
underlying assets have been sold.
Cash flows provided by investing activities increased by $58,311 primarily as a
result of increased asset sales. The increase in sales proceeds was partially
offset by a decrease in cash flows from direct financing leases.
There were no financing sources of cash in 1997 or 1996. Debt principal payments
have decreased due to scheduled debt payments.
Cash flows, three months, 1997 vs. 1996
For the third quarter, lease rents were the primary source of cash for the
Partnership. Lease rents decreased by $198,670 compared to 1996. As noted above,
the decrease is the result of assets coming off lease and being subsequently
sold.
Cash flows provided by investing activities decreased by $44,475 due largely to
decreased asset sales.
There were no financing sources of cash in 1997 or 1996. Debt principal payments
decreased due to the causes noted above for the nine month period. In both the
nine and three month periods, distributions decreased as the per Unit
distribution rate was decreased effective with the distribution in April 1997.
Results of Operations
The results of operations in future periods may vary significantly from those of
the first nine 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.
1996 vs. 1995
Operating lease revenues decreased by $448,352 for the nine month period and
$159,846 for the three month period due to lease terminations and subsequent
asset sales. Direct financing lease revenues decreased by $129,236 for the nine
month period and decreased by $37,632 for the three month period compared to
1996. The decreases resulted from lease terminations and asset sales. In 1997,
sales of assets resulted in gains of $150,984 (nine months) and $867 (three
months). In 1996, sales of assets resulted in gains of $51,757 for the nine
month period and losses of $11,893 for the three month period. Such gains and
losses are not expected to be comparable from one period to another.
Depreciation expense declined by $420,528 (nine months) and $110,441 (three
months) as a result of asset sales since October 1, 1995. Interest expense
continues to decline in both the three and nine month periods in relation to the
declining balances of debt. There have been no new borrowings in the current
year.
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 sheets, September 30, 1997.
Income statements for the nine and three month
periods ended September 30, 1997 and 1996.
Statement of changes in partners' capital for
the nine months ended September 30, 1997.
Statements of cash flows for the nine and three
month periods ended September 30, 1997 and
1996.
Notes to the financial statements
2 Financial Statement Schedules.
All other schedules for which provision is made
in the applicable accounting regulations of the
Securities and Exchange Commission are not
required under the related instructions or are
inapplicable, and therefore have been omitted.
(b) Report on Form 8-K
None
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, 1997
ATEL Cash Distribution Fund II,
a California Limited Partnership
(Registrant)
By: /s/ A. J. BATT
---------------------------------------------------
A. J. Batt
General Partner of registrant
By: /s/ DEAN L. CASH
---------------------------------------------------
Dean L. 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