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 March 31, 2004
|_| 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 000-21552
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.)
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 is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|
State issuer's revenues for its most recent fiscal year: $1,130,938
The number of Limited Partnership Units outstanding as of March 31, 2004 was
7,487,350.
DOCUMENTS INCORPORATED BY REFERENCE
None
1
ATEL CASH DISTRIBUTION FUND IV, L.P.
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Balance Sheet, March 31, 2004.
Income Statements for the three month periods ended March 31, 2004 and
2003.
Statements of Changes in Partners' Capital for the year ended December
31, 2003 and for the three month period ended March 31, 2004.
Statements of Cash Flows for the three month periods ended March 31,
2004 and 2003.
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
ATEL CASH DISTRIBUTION FUND IV, L.P.
BALANCE SHEET
MARCH 31, 2004
(Unaudited)
ASSETS
Cash and cash equivalents $ 350,655
Accounts receivable, net of allowance for doubtful
accounts of $2,383 97,230
Investments in leases 1,150,153
-------------
Total assets $ 1,598,038
=============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable:
General Partner $ 27,903
Other 27,665
Unearned operating lease income 41,933
-------------
Total liabilities 97,501
Partners' capital:
General Partner 245,903
Limited Partners 1,254,634
-------------
Total partners' capital 1,500,537
-------------
Total liabilities and partners' capital $ 1,598,038
=============
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND IV, L.P.
INCOME STATEMENTS
THREE MONTH PERIODS ENDED
MARCH 31, 2004 AND 2003
(Unaudited)
2004 2003
Revenues:
Leasing activities:
Operating leases $ 21,631 $ 111,293
Direct financing leases 150,229 196,206
Gain on sale of assets 21,510 30,119
Interest 1,063 2,850
Other 34,081 42
----------------- ----------------
228,514 340,510
----------------- ----------------
Expenses:
Cost reimbursements to General Partner 82,165 93,982
Professional fees 12,019 18,063
Depreciation of operating lease assets 7,950 76,208
Outside services 4,765 11,371
Bank charges 4,673 567
Other 5,728 4,752
Recovery of provision for doubtful accounts - (20,000)
Amortization of initial direct costs - 2,627
----------------- ----------------
117,300 187,570
----------------- ----------------
Net income $ 111,214 $ 152,940
================= ================
Net income
General Partner $ 1,112 $ 1,529
Limited Partners 110,102 151,411
----------------- ----------------
$ 111,214 $ 152,940
================= ================
Net income per Limited Partnership unit $ 0.01 $ 0.02
Weighted average number of units outstanding 7,487,350 7,487,350
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2003
AND FOR THE
THREE MONTH PERIOD ENDED
MARCH 31, 2004
(Unaudited)
Limited Partners General
Units Amount Partner Total
Balance December 31, 2002 7,487,350 $3,626,691 $241,456 $ 3,868,147
Distributions to Limited Partners - (1,687,504) - (1,687,504)
Net income - 330,128 3,335 333,463
----------------- --------------- ----------------- ----------------
Balance December 31, 2003 7,487,350 2,269,315 244,791 2,514,106
Distributions to Limited Partners - (1,124,783) - (1,124,783)
Net income - 110,102 1,112 111,214
----------------- --------------- ----------------- ----------------
Balance March 31, 2004 7,487,350 $1,254,634 $ 245,903 $ 1,500,537
================= =============== ================= ================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2004 AND 2003
(Unaudited)
2004 2003
Operating activities:
Net income $ 111,214 $ 152,940
Adjustments to reconcile net income to cash provided by operating
activities:
Gain on sale of asset (21,510) (30,119)
Depreciation of operating lease assets 7,950 76,208
Recovery of provision for doubtful accounts - (20,000)
Amortization of initial direct costs - 2,627
Changes in operating assets and liabilities:
Accounts receivable 12,943 (28,493)
Accounts payable, General Partner (12,297) -
Accounts payable, other (32,437) (2,894)
Unearned operating lease income 9,960 (25,257)
----------------- ----------------
Net cash provided by operating activities 75,823 125,012
----------------- ----------------
Investing activities:
Reduction in net investment in direct financing leases 65,698 30,014
Proceeds from sales of lease assets 30,847 51,923
----------------- ----------------
Net cash provided by investing activities 96,545 81,937
----------------- ----------------
Financing activities:
Distributions to Limited Partners (1,124,783) (1,687,504)
----------------- ----------------
Net cash used in financing activities (1,124,783) (1,687,504)
----------------- ----------------
Net decrease in cash and cash equivalents (952,415) (1,480,555)
Cash and cash equivalents at beginning of period 1,303,070 2,200,154
----------------- ----------------
Cash and cash equivalents at end of period $ 350,655 $ 719,599
================= ================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ - $ 16,690
================= ================
See accompanying notes.
6
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
1. Summary of significant accounting policies:
Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (GAAP) for
interim financial information and with instructions to Form 10-QSB and Article
10 of Regulation S-X. The unaudited interim financial statements reflect all
adjustments which are, in the opinion of the General Partner, 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. The
preparation of financial statements in accordance with GAAP requires management
to make estimates and assumptions that effect reported amounts in the financial
statements and accompanying notes. Therefore, actual results could differ from
those estimates. Operating results for the three months ended March 31, 2004 are
not necessarily indicative of the results for the year ending December 31, 2004.
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, 2003, filed with the Securities and Exchange
Commission.
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 shall continue until December 31, 2021.
Upon the sale of the minimum amount of Units of Limited Partnership interest
(Units) of $1,200,000 and the receipt of the proceeds thereof on March 6, 1992,
the Partnership commenced operations.
The Partnership does not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their individual tax
returns.
ATEL Financial Services, LLC (AFS), an affiliated entity, acts as the General
Partner of the Partnership.
Certain prior year balances have been reclassified to conform to the current
period presentation.
The Partnership is in the final stage of its liquidation and is making
distributions on an annual basis.
7
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Expense or
Amortization of Reclassi-
December 31, Direct Financing fications and March 31,
2003 Leases Dispositions 2004
Net investment in direct financing leases $ 1,040,685 $ (65,698) $ - $ 974,987
Net investment in operating leases 192,453 (7,950) (9,337) 175,166
----------------- --------------- ----------------- ----------------
$ 1,233,138 $ (73,648) $ (9,337) $ 1,150,153
================= =============== ================= ================
Property subject to operating leases consists of the following:
Reclassi-
December 31, Depreciation fications and March 31,
2003 Expense Dispositions 2004
Transportation $ 1,466,842 $ - $ (91,729) $ 1,375,113
Manufacturing 457,670 - - 457,670
Construction 35,920 - - 35,920
----------------- --------------- ----------------- ----------------
1,960,432 (91,729) 1,868,703
Less accumulated depreciation (1,767,979) (7,950) 82,392 (1,693,537)
----------------- --------------- ----------------- ----------------
$ 192,453 $ (7,950) $ (9,337) $ 175,166
================= =============== ================= ================
8
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
3. Investment in leases (continued):
Direct financing leases:
As of March 31, 2004, investment in direct financing leases consists of
materials handling equipment and rail cars. The following lists the components
of the Partnership's investment in direct financing leases as of March 31, 2004:
Total minimum lease payments receivable $ 376,473
Estimated residual values of leased equipment (unguaranteed) 895,961
-----------------
Investment in direct financing leases 1,272,434
Less unearned income (297,447)
-----------------
Net investment in direct financing leases $ 974,987
=================
At March 31, 2004, the aggregate amounts of future minimum lease payments are as
follows:
Operating Direct Financing
Leases Leases Total
Nine months ending December 31, 2004 $ 32,901 $ 376,473 $ 409,374
--------------- ----------------- ----------------
$ 32,901 $ 376,473 $ 409,374
=============== ================= ================
All of the property on operating leases was acquired during 1992, 1993, 1994,
1995 and 1996.
4. Related party transactions:
The terms of the Limited 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 Limited Partnership Agreement allows for the reimbursement of costs incurred
by AFS in providing services to the Partnership. Services provided include
Partnership accounting, investor relations, legal counsel and lease and
equipment documentation. AFS is not reimbursed for services where it is entitled
to receive a separate fee as compensation for such services, such as acquisition
and management of equipment. Reimbursable costs incurred by AFS are allocated to
the Partnership based upon an estimate of actual time incurred by employees
working on Partnership business and an allocation of rent and other costs based
on utilization studies.
Substantially all employees of AFS record time incurred in performing services
on behalf of all of the Partnerships serviced by AFS. AFS believes that the
costs reimbursed are the lower of (i) actual costs incurred on behalf of the
Partnership or (ii) the amount the Partnership would be required to pay
independent parties for comparable services in the same geographic location and
are reimbursable in accordance with the Limited Partnership Agreement.
AFS is entitled to receive incentive management fees (computed as 5% of
distributions of cash from operations, as defined in the Limited Partnership
Agreement) and equipment management fees (computed as 5% of gross revenues from
operating leases, as defined in the Limited Partnership Agreement plus 2% of
gross revenues from full payout leases, as defined in the Limited Partnership
Agreement).
9
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
4. Related party transactions (continued):
During 2001, AFS decided to take no further fees from the Partnership. Such fees
would otherwise have totaled approximately $4,726 and $8,456 in the three month
periods ended March 31, 2004 and 2003, respectively.
AFS and/or affiliates earned fees, commissions and reimbursements, pursuant to
the Limited Partnership Agreement. Cost reimbursement to AFS were $82,165 and
$93,982 in the three months ended March 31, 2004 and 2003, respectively.
5. Partners' Capital:
As of March 31, 2004, 7,487,350 Units ($74,873,500) were issued and outstanding
(including the 50 Units issued to the Initial Limited Partners).
The Partnership's Net Income, Net Losses, and Distributions, as defined, are to
be allocated 99% to the Limited Partners and 1% to AFS.
Distributions to the Limited Partners were as follows:
Three Months
Ended March 31,
2004 2003
Distributions $1,124,783 $ 1,687,504
Weighted average number of Units outstanding 7,487,350 7,487,350
Weighted average distributions per Unit $ 0.15 $ 0.23
10
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," and elsewhere in this Form
10-QSB, 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. Investors are cautioned not
to attribute undue certainty to these forward-looking statements, which speak
only as of the date of this Form 10-QSB. 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-QSB or to reflect the occurrence of
unanticipated events, other than as required by law.
Capital Resources and Liquidity
During the first quarters of 2004 and 2003, the Partnership's primary activity
was engaging in equipment leasing activities. During those same periods in 2004
and 2003, the Partnership's primary source of liquidity was rents from direct
financing and operating leases. The liquidity of the Partnership will vary in
the future, increasing to the extent cash flows from leases exceed expenses and
proceeds from lease asset sales, and decreasing as distributions are made to the
Limited Partners and to the extent expenses exceed cash flows from leases and
proceeds from lease asset sales.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on AFS' success in selling or re-leasing the equipment as it comes off
lease.
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. AFS envisions no such requirements for operating purposes.
Through March 31, 2004, the Partnership had borrowed approximately $38,342,000
all of which has been repaid.
No commitments of capital have been made or are expected to be made.
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
In the first quarters of 2004 and 2003, the primary sources of cash from
operations were rents from direct financing and operating leases. Direct finance
lease rents decreased from $196,206 in the first quarter of 2003 to $150,229 in
the first quarter of 2004, a decrease of $45,977. Cash from operating leases
decreased from $111,293 in the first quarter of 2003 to $21,631 in the first
quarter of 2004, a decrease of $89,662. This decrease was a result of maturing
of direct finance and operating leases and sales of the related assets over the
prior year.
Sources of cash from investing activities in the first quarters of 2004 and 2003
consisted of the proceeds of the sales of lease assets and cash flows from
reductions in net investments in direct financing leases. Proceeds from the
sales of lease assets are not expected to be consistent from one period to
another. Asset sales are made as leases expire, as purchasers can be found and
as the sales can be negotiated and completed. Cash flows from direct financing
leases increased from $30,014 in the first quarter of 2003 to $65,698 for the
same period in 2004. As direct financing leases mature, an increasing portion of
the payments are treated as recoveries of the net investment in the leases and
the amounts recognized as income decreases.
In the first quarters of 2004 and 2003, there were no financing sources of cash
flows. The Partnership is in the final stage of its liquidation and is making
distributions on an annual basis. The distributions are being paid out each
January based on the cash flows generated in the previous year. Distributions
are no longer expected to be consistent from one year to another as the cash
flows generated in future periods will be dependent on asset sales and other
factors which are not expected to be consistent from one period to another.
Distributions decreased from $1,687,504 in 2003 to $1,124,783 in 2004, a
decrease of $562,721.
Results of Operations
11
Operations in the first quarter of 2003 resulted in a net income of $152,940
compared to net income of $111,214 in 2004. Revenues decreased from $340,510 in
2003 to $228,514 in 2004, a decrease of $111,996. This decrease was partially
offset by decreases in expenses, most notably, depreciation of operating lease
assets. Depreciation decreased by $68,258 in the first quarter of 2004 compared
to the same period in 2003. In general, lease revenues and depreciation have
decreased as a result of leases maturing and sales of assets over the last year.
Gains on sales from lease assets decreased from $30,119 in 2003 to $21,510 in
2004. Sales of assets are not expected to be consistent from one period to
another as such sales do not occur at regular intervals nor are they for
consistent amounts.
In the first quarter of 2004, the Partnership received payments totaling $34,002
for deferred maintenance on assets previously returned to the Partnership by a
former lessee. There were no similar amounts in the comparable period in 2003.
Item 3. Quantitative and Qualitative Disclosures of Market Risk.
The Partnership, like most other companies, is exposed to certain market risks,
including primarily changes in interest rates. The Partnership believes its
exposure to other market risks including foreign currency exchange rate risk,
commodity risk and equity price risk are insignificant to both its financial
position and results of operations.
In general, the Partnership has managed its exposure to interest rate risk by
obtaining fixed rate debt. The fixed rate debt was structured so as to match the
cash flows required to service the debt to the payment streams under fixed rate
lease receivables. The payments under the leases were assigned to the lenders in
satisfaction of the debt. Furthermore, the Partnership has historically been
able to maintain a stable spread between its cost of funds and lease yields in
both periods of rising and falling rates. As of March 31, 2004, the Partnership
had no indebtedness to lenders.
Item 4. Controls and procedures.
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management (ATEL
Financial Services, LLC as General Partner of the registrant, including the
chief executive officer and chief financial officer), an evaluation of the
effectiveness of the design and operation of the Partnership's disclosure
controls and procedures [as defined in Rules 240.13a-14(c) under the Securities
Exchange Act of 1934] was performed as of the date of this report. Based upon
this evaluation, the chief executive officer and the chief financial officer
concluded that, as of the evaluation date, except as noted below, our disclosure
controls and procedures were effective for the purposes of recording,
processing, summarizing, and timely reporting information required to be
disclosed by us in the reports that we file under the Securities Exchange Act of
1934; and that such information is accumulated and communicated to our
management in order to allow timely decisions regarding required disclosure.
As disclosed in the Form 10-KSB for the year ended December 31, 2003, the chief
executive and chief financial officer of the General Partner of the Partnership
had identified certain enhanced controls needed to facilitate a more effective
closing of the Partnership's financial statements. During the first quarter of
2004 and since the end of the quarter, the General Partner hired a new
controller, added additional accounting staff personnel, and has instituted or
revised existing procedures in order to ensure that the Partnership's ability to
execute internal controls in accounting and reconciliation in the closing
process is adequate in all respects. The General Partner will continue to review
its accounting procedures and practices to determine their effectiveness and
adequacy and will take such steps as deemed necessary in the opinion of the
General Partner's chief executive and chief financial officers to ensure the
adequacy of the Partnership's accounting controls and procedures.
The General Partner's chief executive officer and chief financial officer have
determined that no weakness in financial and accounting controls and procedures
had any material effect on the accuracy and completeness of the Partnership's
financial reporting and disclosure included in this report.
Changes in internal controls
There have been no significant changes in our internal controls or in other
factors that could significantly affect our disclosure controls and procedures
subsequent to the evaluation date nor were there any significant deficiencies or
material weaknesses in our internal controls, except as described in the prior
paragraphs.
PART II. OTHER INFORMATION
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. No material
legal proceedings are currently pending against the Partnership or against any
of its assets.
12
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 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.
2. Other Exhibits
31.1 Certification of Paritosh K. Choksi
31.2 Certification of Dean L. Cash
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
(b) Report on Form 8-K
None
13
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:
May 11, 2004
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
Principal Financial Officer
of Registrant
By: /s/ Donald E. Carpenter
------------------------
Donald E. Carpenter
Principal Accounting
Officer of Registrant
14