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, 2000
|_| 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 0-23842
ATEL Cash Distribution Fund V, L.P.
(Exact name of registrant as specified in its charter)
California 94-3165807
- ---------- ----------
(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 V, L.P.
BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(Unaudited)
ASSETS
2000 1999
---- ----
Cash and cash equivalents $4,079,353 $3,330,065
Accounts receivable 2,125,118 2,772,627
Other receivables, net of allowance for
doubtful accounts of $100,605 in 2000
and 1999 1,150,214 1,309,783
Investments in leases 52,172,962 60,548,669
----------------- ------------------
$59,527,647 $67,961,144
================= ==================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $18,713,190 $22,138,639
Accounts payable
Other 845,253 359,831
General partner 270,226 117,089
Equipment purchases 1,352 1,352
Accrued interest expense 90,499 107,182
Unearned lease income 271,480 416,654
----------------- ------------------
Total liabilities 20,192,000 23,140,747
Partners' capital:
General partner 189,939 169,819
Limited partners 39,145,708 44,650,578
----------------- ------------------
Total partners' capital 39,335,647 44,820,397
----------------- ------------------
Total liabilities and partners' capital $59,527,647 $67,961,144
================= ==================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND V, L.P.
INCOME STATEMENTS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Leasing activities:
Operating lease revenues $5,469,468 $ 7,251,926 $ 2,658,394 $ 3,429,672
Direct financing leases 715,939 914,047 325,811 448,733
Leveraged leases 44,933 49,879 42,523 24,940
Gain (loss) on sales of assets 904,239 492,104 754,161 (40,971)
Interest income 62,975 147,177 23,811 77,646
Other 14,167 (7,369) 8,882 (9,827)
---------------- ---------------- ----------------- ------------------
7,211,721 8,847,764 3,813,582 3,930,193
Expenses:
Depreciation and amortization 3,472,054 4,190,952 1,792,537 1,954,965
Interest 716,903 1,091,068 378,879 524,389
Equipment and incentive management fees 491,787 585,207 375,864 273,526
Administrative cost reimbursements 195,594 144,740 123,244 101,338
Railcar maintenance 138,570 - 43,994 -
Other 115,425 177,239 62,185 179,371
Professional fees 69,372 31,856 48,394 20,813
---------------- ---------------- ----------------- ------------------
5,199,705 6,221,062 2,825,097 3,054,402
---------------- ---------------- ----------------- ------------------
Net income $2,012,016 $ 2,626,702 $ 988,485 $ 875,791
================ ================ ================= ==================
Net income:
General partner $ 20,120 $ 26,267 $ 9,885 $ 8,758
Limited partners 1,991,896 2,600,435 978,600 867,033
---------------- ---------------- ----------------- ------------------
$2,012,016 $ 2,626,702 $ 988,485 $ 875,791
================ ================ ================= ==================
Weighted average number of units
outstanding 12,497,000 12,497,000 12,497,000 12,497,000
Net income per limited partnership unit $0.16 $0.21 $0.08 $0.07
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD ENDED
JUNE 30, 2000
(Unaudited)
Limited Partners General
Units Amount Partners Total
Balance December 31, 1999 12,497,000 $44,650,578 $ 169,819 $ 44,820,397
Distributions to limited partners (7,496,766) - (7,496,766)
Net income 1,991,896 20,120 2,012,016
---------------- ---------------- ----------------- ------------------
Balance June 30, 2000 12,497,000 $39,145,708 $ 189,939 $ 39,335,647
================ ================ ================= ==================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Operating activities:
Net income $2,012,016 $ 2,626,702 $ 988,485 $ 875,791
Adjustments to reconcile net income
to net cash provided by operations
Leveraged lease income (44,933) (49,879) (42,523) (24,940)
Depreciation and amortization 3,472,054 4,190,952 1,792,537 1,954,965
(Gain) loss on sales of assets (904,239) (492,104) (754,161) 40,971
Changes in operating assets and liabilities:
Accounts receivable 647,509 309,243 (93,252) (94,392)
Accounts payable, general partner 153,137 (154,047) 129,373 (244,608)
Accounts payable, other 485,422 58,381 473,390 (312,421)
Accrued interest expense (16,683) (16,333) (6,681) (7,565)
Unearned lease income (145,174) (196,118) (1,505) (144,233)
---------------- ---------------- ----------------- ------------------
Net cash provided by operating activities 5,659,109 6,276,797 2,485,663 2,043,568
---------------- ---------------- ----------------- ------------------
Investing activities:
Proceeds from sales of assets 4,639,702 2,742,607 2,553,842 1,075,296
Reduction in net investment in direct
financing leases 1,213,123 676,176 1,059,230 129,015
Payments received on notes receivable 159,569 - 159,569 -
Reduction in net investment in leveraged
leases - 323,187 (4,820) 42,468
Purchase of equipment on operating leases - (178,200) - (89,952)
---------------- ---------------- ----------------- ------------------
Net cash provided by investing
activities 6,012,394 3,563,770 3,767,821 1,156,827
---------------- ---------------- ----------------- ------------------
6
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Financing activities:
Distributions to limited partners (7,496,766) (7,499,740) (3,748,775) (3,750,349)
Repayment of non-recourse debt (3,425,449) (3,720,448) (1,723,611) (1,705,543)
Repayment of line of credit - (1,000,000) - -
---------------- ---------------- ----------------- ------------------
Net cash used in financing activities (10,922,215) (12,220,188) (5,472,386) (5,455,892)
---------------- ---------------- ----------------- ------------------
Net increase (decrease) in cash and
cash equivalents 749,288 (2,379,621) 781,098 (2,255,497)
Cash at beginning of period 3,330,065 8,872,945 3,298,255 8,748,821
---------------- ---------------- ----------------- ------------------
Cash at end of period $4,079,353 $ 6,493,324 $ 4,079,353 $ 6,493,324
================ ================ ================= ==================
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest $ 733,586 $ 1,107,401 $ 378,879 $ 524,389
================ ================ ================= ==================
Supplemental schedule of non-cash transactions:
Direct financing lease assets reclassified to
notes receivable $ - $ 489,616 $ - $ 489,616
================ ================ ================= ==================
See accompanying notes.
7
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(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 V, L.P. (the Partnership), was formed under the laws
of the State of California on September 23, 1992, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities.
The Fund 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.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Expense or Reclass-
December 31, Amortization ifications & June 30,
1999 of Leases Dispositions 2000
---- --------- - ------------- ----
Net investment in operating leases $43,955,033 $(3,301,232) $(4,162,118) $36,491,683
Net investment in direct financing leases 14,969,534 (1,213,123) (1,834,365) 11,922,046
Net investment in leveraged leases 2,123,085 44,933 (684,665) 1,483,353
Residual interests 835,759 - - 835,759
Reserve for losses (2,254,809) - - (2,254,809)
Assets held for sale or lease 5,008 - 2,945,685 2,950,693
Initial direct costs, net of accumulated
amortization of $1,805,948 in 1999 and
$1,811,167 in 2000 915,059 (170,822) - 744,237
------------------ ---------------- ----------------- ------------------
$60,548,669 $(4,640,244) $(3,735,463) $ 52,172,962
================== ================ ================= ==================
8
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
3. Investments in leases (continued):
The following schedule provides an analysis of the Partnership's investment in
property on operating leases by major classifications as of December 31, 1999,
acquisitions and dispositions during the quarters ended March 31, 2000 and June
30, 2000 and as of June 30, 2000.
Reclassifications
December 31, & Dispositions June 30,
1999 1st Quarter 2nd Quarter 2000
---- ----------- ----------- ----
Transportation $42,798,186 $(3,657,042) $ 3,261,725 $ 42,402,869
Construction 15,399,236 (2,033,221) (750,548) 12,615,467
Materials handling 7,636,308 (564,941) (1,503,469) 5,567,898
Furniture and fixtures 4,709,326 - - 4,709,326
Manufacturing 3,475,585 - - 3,475,585
Mining 6,981,798 (1,880,826) (1,748,000) 3,352,972
Office automation 145,726 - (145,726) -
---------------- ---------------- ----------------- ------------------
81,146,165 (8,136,030) (886,018) 72,124,117
Less accumulated depreciation (37,191,132) 2,305,589 (746,891) (35,632,434)
---------------- ---------------- ----------------- ------------------
$43,955,033 $(5,830,441) $(1,632,909) $ 36,491,683
================ ================ ================= ==================
All of the property on operating leases was acquired during 1993, 1994, 1995,
1996 and 1997.
At June 30, 2000, the aggregate amounts of future minimum lease payments are as
follows:
Year ending Direct
December 31, Financing Operating Total
------------ --------- --------- -----
2000 $1,449,468 $ 4,490,991 $ 5,940,459
2001 2,473,232 5,613,833 8,087,065
2002 2,125,473 3,676,953 5,802,426
2003 428,733 1,561,369 1,990,102
2004 622,851 568,585 1,191,436
Thereafter 5,007,927 5,460,813 10,468,740
---------------- ---------------- -----------------
$12,107,684 $21,372,544 $ 33,480,228
================ ================ =================
9
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly 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
6.33% to 10.53%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
------------ --------- -------- -----
2000 $2,319,823 $ 674,317 $ 2,994,140
2001 4,573,204 1,063,001 5,636,205
2002 2,915,879 700,193 3,616,072
2003 709,048 553,832 1,262,880
2004 453,006 513,642 966,648
Thereafter 7,742,230 2,917,355 10,659,585
---------------- ---------------- -----------------
$18,713,190 $ 6,422,340 $ 25,135,530
================ ================ =================
5. Related party transactions:
The terms of the Agreement of Limited Partnership 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 and commissions,
pursuant to the Agreement of Limited Partnership during the six month periods
ended June 30, 2000 and 1999 as follows:
2000 1999
---- ----
Equipment and incentive management fees $ 491,787 $ 585,207
Reimbursement of administrative costs 195,594 144,740
----------------- ------------------
$687,381 $729,947
================= ==================
10
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
6. Partner's capital:
The Fund is authorized to issue up to 12,500,000 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 Partner.
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. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $77,500,000 revolving credit agreement with a group of financial
institutions which expires on July 28, 2001. The agreement includes an
acquisition facility and a warehouse facility which are used to provide bridge
financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases. Borrowings on the warehouse facility are recourse
jointly to certain of the Affiliates, the Partnership and the General Partner.
At June 30, 2000, the Partnership had no borrowings under the line of credit.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of June 30,
2000.
11
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 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, 2000, the Partnership had borrowed $58,317,911. The remaining
unpaid balance at that date was $18,713,190. Borrowings are to be non-recourse
to the Partnership, that is, the only recourse of the lender is 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.
The Partnership participates with the General Partner and certain of its
affiliates in a $77,500,000 revolving line of credit with a group of financial
institutions. The line of credit expires on July 28, 2001.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. As of June 30, 2000, 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
For both the three and six month periods in 2000 and 1999, the Partnership's
primary source of cash flows from operations was rents from operating leases.
In 2000 and 1999, the most significant source of cash from investing activities
in both the six and three month periods was proceeds from sales of lease assets.
Rents from direct financing leases were also significant in both the three and
six month periods.
In 2000 and 1999, there were no sources of cash from financing activities.
Distributions to the Limited Partners was the primary financing use of cash and
it did not change significantly from the prior year. Cash used to repay
non-recourse debt has decreased as a result of scheduled debt reductions.
12
Results of operations
The primary source of revenues is operating leases and is expected to remain so
in future periods. As leases reach their scheduled terminations, the Partnership
expects to either sell the assets or to re-lease them. Revenues from succeeding
leases are usually lower than the amounts received on earlier leases. As a
result, lease rents are expected to decline in future periods until all of the
assets are sold. Operating lease revenues declined by $1,782,458 (from
$7,251,926 in 1999 to $5,469,468 in 2000) for the six month periods and $771,248
(from $3,429,672 in 1999 to $2,658,394 in 2000) for the three month periods.
Depreciation is the Partnership's largest expense and is related directly to
operating lease assets and revenues. Depreciation also decreased for both the
three and six month periods as a result of these lease terminations.
In 2000, sales of assets resulted in gains ($904,239 for the six month period
and $754,161 for the three month period) compared to a gain of $492,104 for the
six month period and a loss of $40,971 for the three month period in 1999.
Interest expense has declined for both the six and three month periods as a
result of decreased total debt balances compared to 1999. Debt balances have
been reduced as a result of scheduled debt payments.
Management fees are related to lease revenues (equipment management fees) and
the amounts of cash generated from operations which is distributed to the
limited partners (incentive management fees). Lease revenues declined compared
to 1999 as noted above. More of the distributions to the limited partners came
from the proceeds of asset sales (on which no management fees are being paid)
rather than from cash generated from operations. These gave rise to the
decreases in management fees compared to 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No material legal proceedings are currently pending against the Partnership or
against any of its assets.
In October 1997, Schwegmann's Giant Supermarkets, one of the Partnership's
lessees, defaulted on two of five locations of retail grocery store fixtures and
equipment, the lease payments, and certain other obligations under the lease,
with a receivable balance currently totaling approximately $1.7 million. The
remaining portion of the lease payments with respect to three of five stores was
assumed by SGSM Acquisition Company ("SGSM"). Payments with respect to these
leases remained current until February 1999; however, on March 26, 1999, SGSM
filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
The Partnership is currently pursuing damages in the amount of $2.8 million,
representing amounts due under the lease. The lessee claims that it has
sufficient assets to satisfy the claims of all secured creditors of the lessee;
however, as the lessee's assets are primarily relatively illiquid real property
investments, the timing of the liquidation of such assets have resulted in
delays in the payments to the lessee's creditors. As of this date, the General
Partner believes that it has a reasonable basis for asserting a likelihood of
recovering most or all of the amounts claimed.
On January 16, 1998, Pegasus Gold Corporation filed for protection under Chapter
11. The initial meeting of creditors established by the Bankruptcy Court was
held on March 9, 1998. The lessee's lease with the Partnership had previously
been leveraged on a non-recourse basis with The CIT Group/Equipment Financing,
Inc. ("CIT"), and all lease receivables (estimated at $6,032,460) were assigned
to the lender. Consequently, the Partnership's exposure is no greater than the
fair market residual value of the equipment under lease, estimated at
$1,101,803. The reorganized lessee/debtor has assumed the Partnership's lease in
the Bankruptcy Court and, made all past due payments. The Partnership has
entered into an Escrow Agreement with CIT, wherein CIT has agreed not to
foreclose on the Partnership's interest so long as the lessee continues to
perform under the lease.
13
At this time, the lessee is current in its lease obligations. The ultimate
recovery under this lease is dependent on the price of gold remaining at a level
sufficient to make the lessee's operations profitable, and, consequently, any
assessment of the impact of an adverse outcome of this matter remains uncertain.
On December 31, 1997, Quaker Coal Company requested a moratorium on lease
payments from January through March 1998. No lease payments were made through
June of 1998. As a result, the General Partner declared the lease in default.
Subsequently, the lessee made the outstanding payments, however, the General
Partner refused to waive the default and insisted on additional damages in the
range of $993,000 to $1,370,000. The General Partner sued the lessee for damages
and is currently awaiting judgment from the court. The General Partner believes
that an adverse ruling would not have a material impact on the operations of the
Partnership. The amounts of these damages have not been included in the
financial statements included in Item 1 of this report.
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, 2000 and December 31, 1999.
Statements of operations for the six and three month
periods ended June 30, 2000 and 1999.
Statement of changes in partners' capital for the six
months ended June 30, 2000. Statements of cash flows for
the six and three month periods ended June 30, 2000 and
1999.
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
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 11, 2000
ATEL CASH DISTRIBUTION FUND V, 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/ PARITOSH K. CHOKSI
-------------------------------------
Paritosh K. Choksi
Principal financial officer of registrant
By: /s/ DONALD E. CARPENTER
-------------------------------------
Donald E. Carpenter,
Principal accounting officer of
registrant