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, 2002
|_| 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 0-21552
ATEL Cash Distribution Fund IV, L.P.
(Exact name of registrant as specified in its charter)
California 94-3145429
---------- ----------
(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
1
Part I FINANCIAL INFORMATION
Item 1. Financial Statements.
2
ATEL CASH DISTRIBUTION FUND IV, L.P.
BALANCE SHEET
JUNE 30, 2002
(Unaudited)
ASSETS
Cash and cash equivalents $ 1,140,574
Accounts receivable, net of allowance for
doubtful accounts of $24,383 131,258
Investments in leases 1,933,738
----------------
$ 3,205,570
================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 202,463
Accounts payable 104,807
Accrued interest payable 1,460
----------------
Total liabilities 308,730
Partners' capital:
General partners 231,743
Limited partners 2,665,097
----------------
Total partners' capital 2,896,840
----------------
$ 3,205,570
================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND IV, L.P.
INCOME STATEMENTS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2002 AND 2001
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Lease revenues:
Operating leases $ 303,151 $ 315,013 $ 165,289 $ 166,121
Direct financing leases 425,427 288,615 222,654 143,005
(Loss) gain on sale of assets 10,131 (1,916) 2,737 (9,279)
Interest income 6,953 13,599 2,692 5,368
Other income 293 1,182 256 144
--------------- ---------------- ---------------- ----------------
745,955 616,493 393,628 305,359
Expenses:
Depreciation and amortization 243,024 249,378 118,466 114,167
Cost reimbursements to General Partner 135,666 251,284 83,916 150,813
Other 54,996 61,268 30,408 24,974
Professional fees 29,640 26,075 18,505 20,455
Interest 10,431 23,851 4,717 10,005
Equipment and incentive management fees - - - (30,928)
--------------- ---------------- ---------------- ----------------
473,757 611,856 256,012 289,486
--------------- ---------------- ---------------- ----------------
Net income $ 272,198 $ 4,637 $ 137,616 $ 15,873
=============== ================ ================ ================
Net income:
General partners $ 2,722 $ 46 $ 1,376 $ 159
Limited partners 269,476 4,591 136,240 15,714
--------------- ---------------- ---------------- ----------------
$ 272,198 $ 4,637 $ 137,616 $ 15,873
=============== ================ ================ ================
Net income per limited partnership unit $0.04 $0.00 $0.02 $0.00
Weighted average number of units
outstanding 7,487,350 7,487,350 7,487,350 7,487,350
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD ENDED
JUNE 30, 2002
(Unaudited)
Limited Partners General
Units Amount Partners Total
Balance December 31, 2001 7,487,350 $ 3,331,557 $ 229,021 $ 3,560,578
Distributions to limited partners (935,936) - (935,936)
Net income 269,476 2,722 272,198
--------------- ---------------- ---------------- ----------------
Balance June 30, 2002 7,487,350 $ 2,665,097 $ 231,743 $ 2,896,840
=============== ================ ================ ================
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2002 AND 2001
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2002 2001 2002 2001
---- ---- ---- ----
Operating activities:
Net income $ 272,198 $ 4,637 $ 137,616 $ 15,873
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 243,024 249,378 118,466 114,167
Loss (gain) on sale of assets (10,131) 1,916 (2,737) 9,279
Changes in operating assets and liabilities:
Accounts receivable 61,995 1,985,623 69,723 88,081
Bank overdrafts - (230,243) - -
Accounts payable, general partner (48,454) (32,722) - (30,928)
Accounts payable, other (4,432) 27,426 (158) 82,129
Accrued interest payable (663) (2,552) (335) (1,288)
Unearned operating lease income (43,219) 27,617 (41,204) 77,197
--------------- ---------------- ---------------- ----------------
Net cash from operations 470,318 2,031,080 281,371 354,510
--------------- ---------------- ---------------- ----------------
Investing activities:
Proceeds from sales of assets 401,040 180,790 31,903 45,146
Reduction in investment in direct financing
leases 27,573 241,222 3,846 157,059
--------------- ---------------- ---------------- ----------------
Net cash provided by investing activities 428,613 422,012 35,749 202,205
--------------- ---------------- ---------------- ----------------
Financing activities:
Payments of non-recourse debt (91,933) (407,149) (46,462) (205,482)
Distributions to limited partners (935,936) (1,331,182) - 2,853
--------------- ---------------- ---------------- ----------------
Net cash used in financing activities (1,027,869) (1,738,331) (46,462) (202,629)
--------------- ---------------- ---------------- ----------------
Net increase (decrease) in cash and
cash equivalents (128,938) 714,761 270,658 354,086
Cash at beginning of period 1,269,512 55,445 869,916 416,120
--------------- ---------------- ---------------- ----------------
Cash at end of period $ 1,140,574 $ 770,206 $ 1,140,574 $ 770,206
=============== ================ ================ ================
Supplemental disclosures of cash flow information:
Cash paid during period for interest $ 11,094 $ 26,403 $ 5,052 $ 11,293
=============== ================ ================ ================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
1. Summary of significant accounting policies:
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. Organization and partnership matters:
ATEL Cash Distribution Fund IV, L.P. (the Partnership), was formed under the
laws of the State of California on September 19, 1991, for the purpose of
acquiring equipment to engage in equipment leasing and sales activities.
The Partnership's business consists of leasing various types of equipment. As of
June 30, 2002, the original terms of the leases were from six months to eight
years.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Expense or Reclass-
December 31, Amortization ifications & June 30,
2001 of Leases Dispositions 2002
---- --------- -------------- ----
Net investment in operating leases $ 1,835,915 $ (237,770) $ (390,909) $ 1,207,236
Net investment in direct financing leases 1,325,813 (27,573) - 1,298,240
Initial direct costs, net of accumulated
amortization of $111,629 in 2001 and
$116,882 in 2002 18,387 (5,254) - 13,133
Equipment held for lease - - -
Reserve for losses (584,871) - - (584,871)
----------------- ---------------- ---------------- ----------------
$ 2,595,244 $ (270,597) $ (390,909) $ 1,933,738
================= ================ ================ ================
6
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
3. Investments in leases (continued):
The Partnership's investment in property on operating leases consists of the
following:
Reclassifications &
December 31, Dispositions June 30,
2001 1st Quarter 2nd Quarter 2002
---- ----------- ----------- ----
Transportation $ 2,810,685 $ (615,914) $ (109,859) $ 2,084,912
Construction 1,756,195 - - 1,756,195
Manufacturing 457,670 - - 457,670
Materials handling 318,012 - - 318,012
--------------- ---------------- ---------------- ----------------
5,342,562 (615,914) (109,859) 4,616,789
Less accumulated depreciation (3,506,647) 132,240 (35,146) (3,409,553)
--------------- ---------------- ---------------- ----------------
$ 1,835,915 $ (483,674) $ (145,005) $ 1,207,236
=============== ================ ================ ================
All of the property on operating leases was acquired from 1992 through 1997.
At June 30, 2002, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Financing Operating Total
Six months ending December 31, 2002 $ 453,000 $ 293,247 $ 746,247
Year ending December 31, 2003 906,000 553,206 1,459,206
2004 595,199 - 595,199
--------------- ---------------- ----------------
$ 1,954,199 $ 846,453 $ 2,800,652
=============== ================ ================
7
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
4. 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
7.1% to 9.1%.
Future minimum principal payments of long-term non-recourse debt as of June 30,
2002 are as follows:
Principal Interest Total
Six months ending December 31, 2002 $395,983 $ 7,044 $ 103,027
Year ending December 31, 2002 106,480 2,861 109,341
--------------- ---------------- ----------------
$ 202,463 $ 9,905 $ 212,368
=============== ================ ================
5. Related party transactions:
The terms of the Agreement of Limited Partnership provide that the General
Partners and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
The General Partners and/or Affiliates earned the following fees, commissions
and reimbursements, pursuant to the Limited Partnership Agreement during the six
month periods ended June 30, 2002 and 2001 as follows :
2002 2001
---- ----
Reimbursement of administrative costs $ 135,666 $ 251,284
Incentive and equipment management fees - -
---------------- ----------------
$ 135,666 $ 251,284
================ ================
Effective January 1, 2001, the General Partners have ceased charging the
Partnership any further fees.
8
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
6. Partner's capital:
The Fund is authorized to issue up to 7,500,000 Units of Limited Partnership
interest in addition to the Initial Limited Partners.
The Fund's Net Profits, Net Losses and Tax Credits are to be allocated 99% to
the Limited Partners and 1% to the General Partners.
As more fully described in the Agreement of Limited Partnership, available Cash
from Operations and Cash from Sales or Refinancing shall be distributed as
follows:
First, 5% of Distributions of Cash from Operations to the General Partner as
Incentive Management Fees.
Second, the balance to the Limited Partners until the Limited Partners have
received aggregate Distributions, as defined, 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, as defined.
Third, the General Partner will receive as Incentive Management Fees, the
following:
(A) 10% of remaining Cash from Operations, as defined,
(B) 15% of remaining Cash from Sales or Refinancing, as defined.
Fourth, the balance to the Limited Partners.
7. Subsequent event:
In July 2002, the Partnership sold a significant portion of its lease assets
prior to the maturity of the initial lease terms. The assets had been on lease
to Tarmac America, Inc. The information below summarizes the sales transactions.
Original cost of equipment $ 1,730,181
Net book value of assets at date of sale $ 540,785
Sales price $ 665,542
Non-recouse debt repaid at time of sale $ 186,752
Net cash received from sale $ 478,791
Gain realized on sale $ 124,757
9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Funds which have been received, but which have not yet been invested in leased
equipment, are invested in interest-bearing accounts or high-quality/short-term
commercial paper.
The Partnership's primary source of liquidity during 2002 were lease revenues
and proceeds from the sales of lease assets. 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 partner envisions no such requirements for
operating purposes.
As of June 30, 2002, the Partnership had borrowed approximately $38,342,000,
with a remaining unpaid balance of $202,463. Borrowings are to be non-recourse
to the Partnership, that is, the only recourse of the lender will be to the
equipment or corresponding lease acquired or secured with the loan proceeds. The
general partner expects that aggregate borrowings in the future will be
approximately 40% of aggregate equipment cost. In any event, 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. As of June 30,
2002, there were no such commitments.
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 significantly, 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.
Cash Flows, 2002 vs. 2001:
Six months:
During the first six months of 2002 and 2001, lease rents were the primary
source of cash flows.
Cash flows from operations decreased by $1,560,761, from $2,031,080 in 2001 to
$470,319 in 2002. Most of this decrease relates to the collection of accounts
receivable balances, existing as of December 31, 2000, during the first half of
2001. The large accounts receivable balance at December 31, 2000 related to the
sale of lease assets that occurred on that date. The cash was received in
January 2001. There were no similar balances collected in 2002.
Sources of cash from investing activities consisted of proceeds from the sales
of lease assets and from direct financing lease rents accounted for as
reductions of the net investment in such leases. Proceeds from sales of assets
increased from $180,790 in 2001 to $401,040 in 2002.
10
In 2002 and 2001, there were no sources of cash from financing activities. As
scheduled debt payments have been made over the last year, debt balances have
been reduced. As a result, the amounts of cash used to make such debt payments
has also decreased. The Partnership has made no distributions from 2002
operations. The only distributions in 2002 were from 2001 operations (in January
2002). The fund is currently making distributions only once a year based on the
amount of cash available. The amount that was available at the end of 2001, was
less than in the prior year. Because of this, the General Partner decreased the
amount of the distribution compared to the previous year.
Three months:
Lease rents were the primary source of cash flows in the second quarter of 2002
and 2001.
Cash flows from operations have decreased by $73,138 ($354,510 in 2001 and
$281,372 in 2002). Most of the decrease has come about because of decreased
collections of lease rents in advance of the actual due dates for the payments
(unearned lease revenues). This results from the timing of the cash collections
rather than from decreases in revenues.
In 2002, proceeds from lease assets sales were the most significant source of
cash from investing activities. Proceeds from asset sales has decreased as most
of the Partnership's remaining lease assets have been sold over the last
eighteen months. Rents from direct financing leases also provided cash flows
from investing activities but has decreased as a result of asset sales. Such
rents were the primary source of cash from investing activities in 2001.
During the second quarter of 2002 and 2001, there were no financing sources of
cash. Payments of non-recourse debt and distributions to the Limited Partners
decreased for the same reasons as noted above for the six month period.
Results of Operations
Operations in the 2002 resulted in net income of $272,199 for the six month
period and $137,617 for the three month period. Operations in 2001, operations
resulted in net income of $4,367 for the six month period and $15,873 for the
three month period.
Operating lease revenues decreased by $11,862 for the six month period and by
$832 for the three month period. Revenues have declined as leases have matured
and as the underlying assets have been sold. The Partnership's investment in
lease assets has decreased from $3,720,468 at December 31, 2000 to $1,933,738 at
June 30, 2002. Most of the decrease has been as a result of sales of assets. As
leases mature and the related assets are sold, lease revenues are expected to
continue to decline. Gains and losses from the sales of those assets are not
expected to be consistent from one period to another.
The Partnership's operating expenses decreased by $138,100 for the six month
period and by $33,475 for the three month period. Most of the decrease resulted
from decreased cost reimbursements paid to the General Partner.
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
No material legal proceedings are currently pending against the Partnership or
against any of its assets.
11
Quaker Coal Company
On December 31, 1997, Quaker Coal Company, one of the Partnership's lessees,
(the Debtor) requested a moratorium on lease payments from January through March
1998. No lease payments were made by the lessee through June 1998, and as a
result, the General Partner declared the lease in default. Subsequently, the
lessee cured the outstanding payments and eventually satisfied substantially all
lease payments due under the lease; however, the General Partner refused to
waive the default and insisted on contractual damages. The General Partner filed
a suit against the lessee for its contractual damages in the U.S. District Court
of Northern California (the "Court"). On June 16, 2000, the lessee filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. The amounts of these
damages have not been included in the financial statements included in Part I,
Item 1 of this report.
The Partnership obtained a stipulation for relief from the automatic bankruptcy
stay to allow the Court to issue its ruling, and filed a request to participate
on the Official Committee of Unsecured Creditors in the bankruptcy proceedings.
The Partnership succeeded upon securing the return of its equipment, which has
been liquidated. The Court issued a ruling on March 4, 2001, denying the
Partnership's claim for damages. The Debtor subsequently filed a claim against
the Partnership, for reimbursement of its legal expenses. The General Partner
believes the Court's decision is erroneous as a matter law, and has filed an
appeal of the decision in the U.S. District Court of Appeals.
The Debtor filed a plan of reorganization, which was objected to by several
large creditors, including the General Partner. These creditors were also
seeking a formal role on the creditors committee or formation of their own
committee.
Upon the termination of the Debtor's exclusivity period, competing plans were
filed by other creditors to the plan, and voting on the competing plans occurred
October 8, 2001. The results of the vote were that, another of the creditors,
American Electric Power's ("AEP") Plan of Reorganization ("AEP Plan") was
successful. Under the AEP Plan, the claim of the Partnerships has been assigned
to a liquidating trustee for resolution and satisfaction from the Debtor's
estate.
In January 2002, ATEL attended an appellate settlement conference seeking to
resolve the outstanding disputed claim. A reserve has been set aside by the
liquidating trustee in the amount of $1.2 million in partial satisfaction of the
Company's claim, although this claim amount remains in dispute. Currently, the
likelihood of recovery of amounts above the payment of the lease rent and the
liquidation of the equipment already received remains speculative and highly
uncertain.
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.
12
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, 2002
Income statements for the six and three month periods
ended June 30, 2002 and 2001.
Statement of changes in partners' equity for the six
months ended June 30, 2002.
Statements of cash flows for the six and three month
periods ended June 30, 2002 and 2001.
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
13
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10QSB of ATEL Cash Distribution
Fund IV, LP, (the "Partnership") for the period ended June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, I, Dean L. Cash, Chief Executive Officer of ATEL
Financial Services, LLC, general partner of the Partnership, hereby certify
that:
1. The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act
of 1934 ; and
2. The information contained in the Report fairly presents,
in all material respects, the finanancial condition and
results of operations of the Partnership.
/s/ DEAN L. CASH
- ----------------------------------------------------
Dean L. Cash President and Chief Executive
Officer of General Partner
August 14, 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10QSB of ATEL Cash Distribution
Fund IV, LP, (the "Partnership") for the period ended June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, I, Paritosh K. Choksi, Chief Financial Officer of
ATEL Financial Services, LLC, general partner of the Partnership, hereby certify
that:
1. The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act
of 1934 ; and
2. The information contained in the Report fairly presents,
in all material respects, the finanancial condition and
results of operations of the Partnership.
/s/ PARITOSH K. CHOKSI
- -------------------------------------------------------------------
Paritosh K. Choksi Executive Vice President of General
Partner, Principal financial officer of registrant
August 14, 2002
14
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, 2002
ATEL CASH DISTRIBUTION FUND IV, 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 General
Partner
By: /s/ PARITOSH K. CHOKSI
-----------------------------------
Paritosh K. Choksi
Executive Vice President of
General Partner, Principal
financial officer of registrant
By: /s/ DONALD E. CARPENTER
------------------------------------
Donald E. Carpenter,
Principal accounting officer of
registrant
15