Form 10-Q
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, 1996
|_| 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.)
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 IV, L.P.
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
---- ----
Cash and cash equivalents $48,122 $1,355,258
Accounts receivable 711,100 682,207
Investments in leases 62,792,302 63,967,204
Notes receivable 101,266 135,022
--------------- ---------------
Total assets $63,652,790 $66,139,691
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $23,791,172 $25,298,767
Lines of credit 2,000,000 -
Bank overdrafts 334,627 -
Accounts payable:
Equipment purchases - 42,227
General Partner 115,684 216,347
Other 138,452 201,642
Deposit due to lessee 213,189 984,213
Accrued interest payable 104,877 123,629
Unearned operating lease income 374,128 413,106
--------------- ---------------
Total liabilities 27,072,129 27,279,931
Partners' capital:
General Partner 47,338 44,831
Limited Partners 36,533,323 38,814,929
--------------- ---------------
Total partners' capital 36,580,661 38,859,760
--------------- ---------------
Total liabilities and partners' capital $63,652,790 $66,139,691
=============== ===============
See accompanying notes.
ATEL CASH DISTRIBUTION FUND IV, L.P.
INCOME STATEMENTS
THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
Revenues:
Leasing activities:
Operating leases $2,732,327 $2,895,467
Direct financing leases 291,182 223,266
Leveraged leases 47,133 48,729
Gain on sale of assets 32,398 51,916
Interest 7,303 32,819
Other 922 1,332
--------------- ---------------
3,111,265 3,253,529
--------------- ---------------
Expenses:
Depreciation and amortization 2,028,154 2,110,596
Interest 505,484 514,520
Equipment and incentive management fees
to General Partner 222,691 210,600
Administrative cost reimbursements to
General Partner 45,820 64,470
Professional fees 6,860 37,636
Provision for losses 31,107 31,524
Other 20,461 22,487
--------------- ---------------
2,860,577 2,991,833
--------------- ---------------
Net income $250,688 $261,696
=============== ===============
Net income:
General Partner $2,507 $2,617
Limited Partners 248,181 259,079
--------------- ---------------
$250,688 $261,696
=============== ===============
Net income per Limited Partnership unit $0.03 $0.03
Weighted average number of units outstanding 7,488,850 7,492,850
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTH PERIOD
ENDED MARCH 31, 1996
(Unaudited)
Limited Partners General
Units Amount Partner Total
Balance December 31, 1995 7,488,850 $38,814,929 $44,831 $38,859,760
Distributions to limited partners (2,529,787) (2,529,787)
Net income 248,181 2,507 250,688
----------------- ---------------- --------------- ---------------
Balance March 31, 1996 7,488,850 $36,533,323 $47,338 $36,580,661
================= ================ =============== ===============
See accompanying notes.
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1995
(Unaudited)
Operating activities: 1996 1995
---- ----
Net income $250,688 $261,696
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 2,028,154 2,110,596
Leveraged lease revenues (43,415) -
Gain on sale of asset (32,398) (51,916)
Provision for losses 31,107 31,524
Changes in operating assets and liabilities:
Accounts receivable (28,893) 106,730
Notes receivable 33,756 33,755
Bank overdrafts 334,627 -
Accounts payable, General Partner (100,663) (633,599)
Accounts payable, other (63,190) 19,852
Deposits due to lessees (771,024) -
Accrued interest payable (18,752) 41,178
Unearned operating lease income (38,978) (57,049)
--------------- ---------------
Net cash from operations 1,581,019 1,862,767
--------------- ---------------
Investing activities:
Purchase of equipment on operating leases (1,611,981) (5,413,239)
Reduction in investment in direct financing
leases 1,023,762 473,566
Purchase of equipment on direct financing leases (898,949) (431,945)
Proceeds from sales of lease assets 636,395 375,580
Reduction in investment in leveraged leases - 329,903
Initial direct costs paid to General Partner (258,269)
Purchase of residual value interests - (175,974)
Initial direct costs paid to others - (64,940)
--------------- ---------------
Net cash (used in) provided by investing
activities (850,773) (5,165,318)
--------------- ---------------
Financing activities:
Distributions to limited partners (2,529,787) (2,433,418)
Borrowings on line of credit 2,000,000 819,349
Repayment of non-recourse debt (1,507,595) (1,517,771)
Payment of syndication costs to General Partner - (5,368)
--------------- ---------------
Net cash used in financing activities (2,037,382) (3,137,208)
--------------- ---------------
Net decrease in cash and cash equivalents (1,307,136) (6,439,759)
Cash and cash equivalents at beginning of period 1,355,258 7,152,081
--------------- ---------------
Cash and cash equivalents at end of period $48,122 $712,322
=============== ===============
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
Supplemental disclosures of cash flow
information:
Cash paid during period for interest $524,236 $473,342
=============== ===============
Supplemental schedule of non-cash transactions:
Operating lease assets reclassified to
assets held for sale or lease $439,677
Less accumulated depreciation (306,125)
----------------
$133,552
================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(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.
Contributions in the aggregate of $600 were received as of October 8, 1991, $100
of which represented the General Partner's continuing interest, and $500 of
which represented the Initial Limited Partners' capital investment.
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 or the General Partner on
behalf of the Partnership, will incur costs in connection with the organization,
registration and issuance of the Units. The amount of such costs to be born by
the Partnership is limited by certain provisions in the Partnership Agreement.
As of February 3, 1993, the Partnership had received subscriptions for 7,500,000
Limited Partnership Units ($75,000,000) in addition to the Initial Limited
Partners' 50 Units. Of those subscriptions, 7,488,850 Units ($74,888,500) were
issued and outstanding as of March 31, 1996.
The Partnership's business consists of leasing various types of equipment. As of
March 31, 1996, the original terms of the Partnership's leases were from two to
ten years.
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(Unaudited)
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Expense or Reclassi-
December 31, Amortization fications or March 31,
1995 Additions of Leases Dispositions 1996
---- --------- --------- -------------- ----
Net investment in operating leases $45,593,701 $1,569,754 ($1,899,679) ($737,549) $44,526,227
Net investment in direct financing
leases 11,948,261 898,949 (1,023,762) - 11,823,448
Net investment in leveraged leases 4,675,926 - 43,415 - 4,719,341
Residual value interests 610,878 - - - 610,878
Reserve for losses (714,139) (31,107) - (745,246)
Assets held for sale or lease - - - 133,552 133,552
Initial direct costs, net of
accumulated amortization of
$1,318,238 in 1995 and
$1,393,418 in 1996 1,852,577 - (128,475) - 1,724,102
----------------- ---------------- ---------------- --------------- ---------------
$63,967,204 $2,437,596 ($3,008,501) ($603,997) $62,792,302
================= ================ ================ =============== ===============
The following schedule provides an analysis of the Partnership's investment in
property on operating leases by major classifications as of December 31, 1995,
acquisitions and dispositions during the quarter ended March 31, 1996 and as of
March 31, 1996.
December 31, 1st Quarter March 31,
1995 Acquisitions Dispositions 1996
---- ------------ ------------ ----
Transportation $24,984,962 ($1,847,200) $23,137,762
Corporate aircraft 9,635,969 - 9,635,969
Mining 6,570,460 - 6,570,460
Printing 5,523,249 - 5,523,249
Construction 4,985,297 - 4,985,297
Other 4,726,040 - 4,726,040
Materials handling 3,915,999 - 3,915,999
Manufacturing 1,587,670 $1,412,500 - 3,000,170
Furniture and fixtures 2,353,608 - - 2,353,608
Ground support 1,127,988 - - 1,127,988
Data processing 694,308 157,254 - 851,562
Office equipment 216,080 - - 216,080
----------------- ---------------- --------------- ---------------
66,321,630 1,569,754 (1,847,200) 66,044,184
Less accumulated depreciation (20,727,929) (1,899,679) 1,109,651 (21,517,957)
----------------- ---------------- --------------- ---------------
$45,593,701 ($329,925) ($737,549) $44,526,227
================= ================ =============== ===============
All of the property on operating leases was acquired during 1992, 1993, 1994,
1995 and 1996.
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(Unaudited)
3. Investment in leases (continued):
At March 31, 1996, the aggregate amounts of future minimum lease payments are as
follows:
Year ending Operating Direct Financing
December 31, Leases Leases Total
1996 $8,116,645 $2,952,328 $11,068,973
1997 9,241,518 3,583,271 12,824,789
1998 7,360,169 3,050,529 10,410,698
1999 6,142,265 1,795,839 7,938,104
2000 2,547,270 822,289 3,369,559
Thereafter 3,790,590 967,407 4,757,997
----------------- ---------------- ---------------
$37,198,457 $13,171,663 $50,370,120
================= ================ ===============
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
6.81% to 11.2%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1996 $5,188,646 $1,279,567 $6,468,213
1997 5,751,246 1,297,574 7,048,820
1998 4,964,117 867,372 5,831,489
1999 4,451,560 490,837 4,942,397
2000 1,668,488 227,786 1,896,274
Thereafter 1,767,115 154,322 1,921,437
----------------- ---------------- ---------------
$23,791,172 $4,317,458 $28,108,630
================= ================ ===============
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(Unaudited)
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
The General Partner and/or Affiliates earned the following fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
1996 1995
---- ----
Reimbursement of other syndication costs $5,368
Acquisition fees equal to 3.5% of the
equipment purchase price, for evaluating
and selecting equipment to be acquired (not
to exceed 4.75% of Gross Proceeds, included in
net investment in direct financing leases and
property on operating leases in the balance sheet) 258,269
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). $222,691 210,600
Administrative costs reimbursed to General
Partner 45,820 64,470
--------------- ---------------
$268,511 $538,707
=============== ===============
6. Line of credit:
The Partnership participates with ATEL and certain of its Affiliates in a
$70,000,000 revolving line of credit with a financial institution that includes
certain financial covenants. The line of credit expires on January 31, 1997.
The current line of credit, when used, is collateralized by (i) specific lease
assets assigned or (ii) all lease receivables and other lease related proceeds
owned by the Partnership, all equipment subject to leases and related insurance
policies and maintenance contracts owned by the Partnership and all deposit
accounts with the lender and all cash on deposit.
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 public offering provided for a total maximum
capitalization of $75,000,000. As of February 3, 1993, the Partnership had
received subscriptions for a total of 7,500,000 Units ($75,000,000) and the
offering was completed. As of March 31, 1996, 7,488,850 Units were issued and
outstanding.
During 1996 and 1995, the Partnership's primary source of liquidity was rents
from 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 lease assets are acquired, 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 the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $70,000,000 revolving line of credit with a financial
institution. The line of credit expires on January 31, 1997.
The current line of credit, when used, is collateralized by (i) specific lease
assets assigned or (ii) all lease receivables and other lease related proceeds
owned by the Partnership, all equipment subject to leases and related insurance
policies and maintenance contracts owned by the Partnership and all deposit
accounts with the lender and all cash on deposit.
The Partnership anticipates reinvesting a portion of lease payments from assets
owned in new leasing transactions. Such reinvestment will occur only after the
payment of all obligations, including debt service (both principal and
interest), the payment of management and acquisition fees to the General Partner
and providing for cash distributions to the Limited Partners.
The Partnership would likely be in a position to borrow against its current
portfolio to meet such requirements if its current reserves were found to be
inadequate to meet contingencies. 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.
Through March 31, 1996, the Partnership had borrowed approximately $35,494,000
with a remaining unpaid balance of approximately $23,791,000. Borrowings are to
be generally non-recourse to the Partnership, that is, the only recourse of the
lender for a default by the lessee on the underlying lease will be to the
equipment or corresponding lease acquired with the loan proceeds. The General
Partners expect that aggregate borrowings in the future will not exceed 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 other than for
the acquisition of additional equipment. At March 31, 1996, there were no
commitments to purchase additional lease assets.
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.
The Partnership made distributions of cash from 1996 first quarter operations in
February, March and April 1996. The amount of the distributions totaled $.35 per
Unit. This was paid in either monthly amounts of $.11667 per Unit or in one
quarterly payment of $.35 per Unit in April 1995. These distributions are equal
to an annualized distribution rate of 14%.
Rents from operating leases were the primary sources of cash flows from
operations in the first quarter of both 1995 and 1996. The amounts of such rents
did not change significantly from 1995 to 1996.
Sources of cash from investing activities in 1996 consisted of the proceeds of
the sales of lease assets and cash flows from direct financing leases. Proceeds
from the sales of lease assets are not expected to be consistent from one period
to another. Cash flows from direct financing leases increased by $550,196, or
about 116%. The increase is due to direct financing lease asset acquisitions
since the beginning of 1995. The most important use of cash for investing
activities was the purchase of assets on operating and direct financing leases.
In the first quarter of 1995 and 1996, the only financing source of cash was
borrowings under the line of credit. The funds were used to partially fund the
acquisitions of lease assets.
Results of Operations
Operations in the first quarter of 1996 resulted in net income of $250,688
compared to $261,696 in 1995.
Overall, the results of operations were virtually unchanged. Revenues decreased
by $142,264. The decrease was due to decreased operating lease revenues
($163,140).
The decreases in revenues were matched almost exactly by decreases of certain
expenses, primarily depreciation and amortization expense and interest expense.
Depreciation has decreased as operating lease assets have been sold after
scheduled lease terminations. Interest expense has declined due to scheduled
debt repayments.
In January 1996, Barney's, Inc. (Barney's), one of the Partnership's lessees,
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The
Partnership's lease transaction has been financed primarily with non-recourse
debt. In addition, the Partnership holds certain deposits which may accrue to it
in the event of a default. As of December 31, 1995, the Partnership had
established certain reserves with regard to this transaction. The bankruptcy
proceedings are still in the preliminary stages and no additional information
has become available that would require any changes to those reserves through
the end of the first quarter of 1996.
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, March 31, 1996 and
December 31, 1995.
Income statements for the three month
periods ended March 31, 1996 and
1995.
Statement of changes in partners'
capital for the three months ended
March 31, 1996.
Statements of cash flows for the three
month periods ended March 31, 1996
and 1995.
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:
May 10, 1996
ATEL CASH DISTRIBUTION FUND IV, L.P.
(Registrant)
By: ATEL Financial Corporation
General Partner of Registrant
By: /s/ A. J. Batt
A. J. Batt
President and Chief Executive Officer
of General Partner
By: /s/ Dean L. Cash
Dean L. Cash
Executive Vice President
of General Partner
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