Form 10-Q
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, 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 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 SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
---- ----
Cash and cash equivalents $311,025 $1,355,258
Accounts receivable 521,546 682,207
Notes receivable 67,511 135,022
Investments in leases 59,321,966 63,967,204
---------------- ----------------
$60,222,048 $66,139,691
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $22,131,127 $25,298,767
Lines of credit 2,500,000 -
Accounts payable:
Equipment purchases 42,228 42,227
General partners 156,768 216,347
Other 114,848 201,642
Deposit due to lessee 213,189 984,213
Accrued interest payable 140,994 123,629
Unearned operating lease income 317,661 413,106
---------------- ----------------
Total liabilities 25,616,815 27,279,931
Partners' capital:
General partners 53,810 44,831
Limited partners 34,551,423 38,814,929
---------------- ----------------
Total partners' capital 34,605,233 38,859,760
---------------- ----------------
$60,222,048 $66,139,691
================ ================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND IV, L.P.
INCOME STATEMENTS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1996 AND 1995
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Revenues:
Operating leases $5,187,709 $5,797,769 $2,455,382 $2,902,302
Direct financing leases 593,495 457,366 302,313 234,100
Leveraged leases 94,266 97,458 47,133 48,729
Gain on sale of assets 790,390 55,597 757,992 3,681
Interest income 11,665 35,880 4,362 3,061
Other income 2,601 2,281 1,679 949
---------------- ---------------- ---------------- ----------------
6,680,126 6,446,351 3,568,861 3,192,822
Expenses:
Depreciation 3,798,393 3,968,408 1,898,714 2,056,713
Interest 986,666 917,844 481,182 403,324
Equipment and incentive management fees 483,298 525,700 260,607 315,100
Amortization 248,713 343,151 120,238 144,251
Administrative cost reimbursements 116,694 155,569 70,874 91,099
Provision for losses 66,796 63,452 35,689 31,928
Other 58,388 57,963 37,927 35,475
Professional fees 23,261 54,783 16,401 17,147
---------------- ---------------- ---------------- ----------------
5,782,209 6,086,870 2,921,632 3,095,037
---------------- ---------------- ---------------- ----------------
Net income $897,917 $359,481 $647,229 $97,785
================ ================ ================ ================
Net income:
General partners $8,979 $3,595 $6,472 $978
Limited partners 888,938 355,886 640,757 96,807
---------------- ---------------- ---------------- ----------------
$897,917 $359,481 $647,229 $97,785
================ ================ ================ ================
Net income per limited partnership unit $0.12 $0.05 $0.09 $0.01
Weighted average number of units
outstanding 7,488,100 7,490,850 7,487,350 7,488,850
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD ENDED JUNE 30, 1996
(Unaudited)
Limited Partners General
Units Amount Partners Total
Balance December 31, 1995 7,488,850 $38,814,929 $44,831 $38,859,760
Distributions to limited partners (5,149,515) - (5,149,515)
Repurchase of units (1,500) (2,929) - (2,929)
Net income 888,938 8,979 897,917
================ ================ ================ ================
Balance June 30, 1996 7,487,350 $34,551,423 $53,810 $34,605,233
================ ================ ================ ================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1996 AND 1995
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Operating activities:
Net income $897,917 $359,481 $647,229 $97,785
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 3,798,393 3,968,408 1,898,714 2,056,713
Amortization 248,713 343,151 120,238 144,251
Leveraged lease income (94,266) (97,458) (50,851) (48,729)
Gain on sale of assets (790,390) (55,597) (757,992) (3,681)
Provision for losses 66,796 63,452 35,689 31,928
Changes in operating assets and liabilities:
Accounts receivable 160,661 20,586 189,554 (86,144)
Notes receivable 67,511 67,510 33,755 33,755
Bank overdrafts - - (334,627) -
Accounts payable, general partner (59,579) (866,510) 41,084 (232,911)
Accounts payable, other (86,794) 99,779 (23,604) 79,927
Accrued interest payable 17,365 (9,482) 36,117 (50,660)
Deposits due to lessees (771,024) - - -
Unearned operating lease income (95,445) 60,211 (56,467) 117,260
---------------- ---------------- ---------------- ----------------
Net cash from operations 3,359,858 3,953,531 1,778,839 2,139,494
---------------- ---------------- ---------------- ----------------
Investing activities:
Purchase of equipment on operating leases (1,569,753) (7,324,838) 42,228 (1,911,599)
Purchase of equipment on direct financing
leases (898,949) (616,307) - (184,362)
Purchase of residual value interests - (175,974) - -
Reduction in investment in direct financing
leases 1,719,468 1,015,951 695,706 542,385
Reduction in investment in leveraged leases 13,007 393,302 13,007 14,670
Proceeds from sales of assets 2,152,220 398,764 1,515,825 23,184
Initial direct lease costs paid to General
Partner - (171,924) - 86,344
Initial direct costs paid to others - (64,940) - -
---------------- ---------------- ---------------- ----------------
Net cash provided by (used in) investing
activities 1,415,993 (6,545,966) 2,266,766 (1,429,378)
---------------- ---------------- ---------------- ----------------
6
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1996 AND 1995
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Financing activities:
Borrowings under lines of credit 2,500,000 3,798,001 500,000 2,978,652
Payments of non-recourse debt (3,167,640) (1,647,965) (1,660,045) (130,194)
Distributions to limited partners (5,149,515) (4,868,788) (2,619,728) (2,435,370)
Repurchase of units (2,929) (15,501) (2,929) (15,501)
Payment of syndication costs - (5,368) - -
---------------- ---------------- ---------------- ----------------
Net cash (used in) provided by financing
activities (5,820,084) (2,739,621) (3,782,702) 397,587
---------------- ---------------- ---------------- ----------------
Net (decrease) increase in cash and cash
equivalents (1,044,233) (5,332,056) 262,903 1,107,703
Cash at beginning of period 1,355,258 7,152,081 48,122 712,322
================ ================ ================ ================
Cash at end of period $311,025 $1,820,025 $311,025 $1,820,025
================ ================ ================ ================
Supplemental disclosures of cash flow information:
Cash paid during period for interest $969,301 $927,326 $445,065 $783,428
================ ================ ================ ================
Supplemental schedule of non-cash transactions:
Operating lease assets reclassified to direct
financing lease assets $260,600 $260,600
================ ================
Operating lease assets reclassified to assets
held or sale or lease $133,552
================
7
See accompanying notes.
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(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 Fund or the General Partner on behalf
of the Fund, will incur costs in connection with the organization, registration
and issuance of the Units. The amount of such costs to be born by the Fund is
limited by certain provisions in the Agreement of Limited Partnership.
As of February 3, 1993, the Fund had received subscriptions for 7,500,000
Limited Partnership Units ($75,000,000) in addition to the Initial Limited
Partners' 50 Units and the Partnership's offering was closed.
The Partnership's business consists of leasing various types of equipment. As of
June 30, 1996, the original terms of the leases was from two to eight years.
8
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Expense or Reclass-
December 31, Amortization ifications & June 30,
1995 Additions of Leases Dispositions 1996
---- --------- --------- -------------- ----
Net investment in operating
leases $45,593,701 $1,569,754 ($3,798,393) ($1,489,678) $41,875,384
Net investment in direct
financing leases 11,948,261 898,949 (1,719,468) (5,704) 11,122,038
Net investment in leveraged
leases 4,675,926 - 81,259 - 4,757,185
Residual value interests 610,878 - - - 610,878
Equipment held for lease - - - 133,552 133,552
Initial direct costs, net of
accumulated amortization
of $1,318,238 in 1995 and
$1,409,039 in 1996 1,852,577 - (248,713) - 1,603,864
Reserve for losses (714,139) (66,796) - - (780,935)
-------------------- --------------- ---------------- ---------------- ----------------
$63,967,204 $2,401,907 ($5,685,315) ($1,361,830) $59,321,966
==================== =============== ================ ================ ================
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 quarters ended March 31, 1996 and June
30, 1996 and as of June 30, 1996.
Acquisitions &
December 31, Dispositions June 30,
1995 1st Quarter 2nd Quarter 1996
---- ----------- ----------- ----
Transportation $24,984,962 ($1,847,200) ($210,277) $22,927,485
Corporate aircraft 9,635,969 - - 9,635,969
Mining 6,570,460 - (2,222,500) 4,347,960
Printing 5,523,249 - - 5,523,249
Other 4,726,040 - - 4,726,040
Construction equipment 4,985,297 - - 4,985,297
Materials handling 3,915,999 - - 3,915,999
Furniture and fixtures 2,353,608 - - 2,353,608
Ground support equipment 1,127,988 - - 1,127,988
Data processing 694,308 157,254 - 851,562
Manufacturing 1,587,670 1,412,500 - 3,000,170
Office equipment 216,080 - - 216,080
---------------- ---------------- ---------------- ----------------
66,321,630 (277,446) (2,432,777) 63,611,407
Less accumulated depreciation (20,727,929) (790,028) (218,066) (21,736,023)
---------------- ---------------- ---------------- ----------------
$45,593,701 ($1,067,474) ($2,650,843) $41,875,384
================ ================ ================ ================
9
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
3. Investments in leases (continued):
All of the property on operating leases was acquired during 1992, 1993, 1994,
1995 and 1996.
At June 30, 1996, the aggregate amounts of future minimum lease payments are as
follows:
Year ending Direct
December 31, Financing Operating Total
1996 $1,969,285 $5,247,689 $7,216,974
1997 3,580,151 9,241,518 12,821,669
1998 3,047,409 7,360,169 10,407,578
1999 1,792,719 6,142,265 7,934,984
2000 819,169 2,547,270 3,366,439
Thereafter 960,907 3,790,590 4,751,497
---------------- ---------------- ----------------
$12,169,640 $34,329,501 $46,499,141
================ ================ ================
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
6.25% to 10.57%.
Future minimum principal payments of long-term non-recourse debt as of June 30,
1996 are as follows:
Year ending
December 31, Principal Interest Total
1996 $3,528,601 $859,377 $4,387,978
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
---------------- ---------------- ----------------
$22,131,127 $3,897,268 $26,028,395
================ ================ ================
10
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
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 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 approximately 4.75% of
Gross Proceeds, included in investments in
leases in the balance sheet) 171,924
Reimbursement of administrative costs $116,694 155,569
Incentive and equipment management fees 483,298 525,700
---------------- ----------------
$599,992 $858,561
================ ================
The amounts above are gross amounts incurred by the General Partners and/or
Affiliates, including commissions to broker-dealers for the sales of Partnership
Units.
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.
11
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
6. Partner's capital (continued):
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. 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 July 18, 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.
8. Subsequent event:
On July 19, 1996, the Partnership's interest in the bankruptcy of Barney's, Inc.
(Barney's), a former lessee of the Partnership was settled. The terms of the
settlement provided for the sale of the assets which had been leased to
Barney's, for the repayment of the non-recourse debt used by the Partnership to
finance the assets and for net cash proceeds to the Partnership. The settlement
resulted in a gain on the sale of the assets of $481,942 and an extraordinary
gain on the extinguishment of the debt of $112,546.
12
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, 1992, the Partnership had
received and accepted subscriptions for a total of 7,500,000 Units ($75,000,000)
and the offering was closed.
The Partnership's primary source of liquidity during 1996 were lease revenues,
proceeds from the sales of lease assets and borrowings under the line of credit.
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.
The Partnership participates with the General Partner and certain of its
affiliates in a $40,000,000 revolving line of credit with a financial
institution. The line of credit expires on January 31, 1996.
As of June 30, 1996, the Partnership had borrowed approximately $35,494,000,
with a remaining unpaid balance of $21,131,127. 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 other than for
the acquisition of additional equipment. As of June 30, 1996, 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.
1996 vs. 1995:
Six months:
During the first six months of 1995, operating lease revenues, proceeds from the
sales of lease assets and borrowings under the line of credit were the primary
sources of cash flows.
13
Cash flows from operations declined by $593,673 from $3,953,531 in 1995 to
$3,359,858 in 1996. The decrease is a result of decreased operating lease
revenues. Such revenues declined by $610,060 from 1995 to 1996.
Sources of cash from investing activities consisted almost exclusively 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.
In 1996 and 1995, the only source of cash from financing activities was
borrowings under the line of credit. The borrowings under the line of credit are
being used as bridge financing until long-term non-recourse debt is secured.
Three months:
The two major sources of cash for the second quarter were proceeds form lease
asset sales and lease rents.
Lease rents have decreased by $380,303 from the prior year due to asset sales
(in excess of acquisitions) during the preceding twelve months.
Proceeds from lease assets sales were the most significant source of cash from
investing activities. They increased from $23,184 in 1995 to $1,515,825 on 1996
due to increased amounts of scheduled lease terminations and subsequent asset
sales.
During the second quarter of 1996 and 1995, the only financing source of cash
was the borrowings under the line of credit noted above.
Results of Operations
In 1996, operations resulted in net income of $897,917 for the six month period
and $647,229 for the three month period. Operations in the second quarter of
1995 resulted in net income of $359,481 for the six month period and $97,785 for
the three month period.
1996 vs. 1995:
Revenues increased from $6,446,351 in 1995 to $6,680,126 in 1996, an increase of
$233,775. This change was the result of three factors. Operating lease revenues
declined by $610,060 due to scheduled lease terminations and sales of the
related assets. Direct financing lease revenues increased by $136,126 due to
asset acquisitions over the last year. Gains on sales of lease assets increased
from $55,597 in 1995 to $790,390 in 1996, an increase of $734,793. Most of the
assets sold were assets which had come off operating leases. The original cost
of operating lease assets sold increased from $470,490 in 1995 to $4,279,977 in
1996.
The Partnership's operating expenses decreased by $304,661 compared to 1995.
Combined, depreciation and amortization expenses decreased by $264,453. These
decreases resulted from the lease terminations and asset sales noted above.
Interest expense increased compared to 1995 as a result of borrowings since the
second quarter of 1995.
14
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, June 30, 1996 and December 31, 1995.
Income statements for the six and three month periods
ended June 30, 1996 and 1995.
Statement of changes in partners' equity for the six
months ended June 30, 1996.
Statements of cash flows for the six and three month
periods ended June 30, 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
15
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 13, 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
16