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 000-23842
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.)
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: $3,019,440
The number of Limited Partnership Units outstanding as of March 31, 2004 was
12,471,600.
DOCUMENTS INCORPORATED BY REFERENCE
None
1
ATEL CASH DISTRIBUTION FUND V, 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 V, L.P.
BALANCE SHEET
MARCH 31, 2004
(Unaudited)
ASSETS
Cash and cash equivalents $ 893,004
Accounts receivable, net of allowance for doubtful
accounts of $97,285 243,924
Investments in leases 12,038,749
-----------------
Total assets $13,175,677
=================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 345,420
Accounts payable:
General Partner 71,787
Other 78,420
Accrued interest expense 1,970
Unearned operating lease income 27,329
-----------------
Total liabilities 524,926
Partners' capital:
General Partner 193,889
Limited Partners 12,456,862
-----------------
Total partners' capital 12,650,751
-----------------
Total liabilities and partners' capital $13,175,677
=================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED
MARCH 31, 2004 AND 2003
(Unaudited)
Revenues: 2004 2003
Leasing activities:
Operating leases $ 625,110 $ 595,244
Direct financing leases 46,481 88,185
Leveraged leases - 2,356
Gain on sales of assets 8,825 64,135
Interest income 3,988 6,943
Other 916 1,003
------------------- -----------------
685,320 757,866
Expenses:
Depreciation of operating lease assets 306,081 387,992
Cost reimbursements to General Partner 160,140 147,440
Other management fees 48,280 11,900
Railcar maintenance 43,804 156,255
Equipment and incentive management fees to General Partner 31,643 32,496
Professional fees 27,854 20,632
Interest expense 21,865 9,633
(Recovery of) provision for doubtful accounts (2,000) 10,000
Amortization of initial direct costs 1,286 8,909
Impairment losses - 543,426
Other 31,618 64,799
------------------- -----------------
670,571 1,393,482
------------------- -----------------
Net income (loss) $ 14,749 $ (635,616)
=================== =================
Net income (loss):
General Partner $ 147 $ (6,356)
Limited Partners 14,602 (629,260)
------------------- -----------------
$ 14,749 $ (635,616)
=================== =================
Net income (loss) per Limited Partnership Unit $ 0.00 $ (0.05)
Weighted average number of Units outstanding 12,471,600 12,471,600
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND V, 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 12,471,600 $18,662,098 $ 202,907 $18,865,005
Distributions to Limited Partners - (3,437,499) - (3,437,499)
Net loss - (907,339) (9,165) (916,504)
----------------- ----------------- ------------------- -----------------
Balance December 31, 2003 12,471,600 14,317,260 193,742 14,511,002
Distributions to Limited Partners - (1,875,000) - (1,875,000)
Net income - 14,602 147 14,749
----------------- ----------------- ------------------- -----------------
Balance March 31, 2004 12,471,600 $12,456,862 $ 193,889 $12,650,751
================= ================= =================== =================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2004 AND 2003
(Unaudited)
2004 2003
Operating activities:
Net income (loss) $ 14,749 $ (635,616)
Adjustment to reconcile net income (loss) to net cash provided by operating
activities:
Impairment losses - 543,426
Depreciation of operating lease assets 306,081 387,992
Amortization of initial direct costs 1,286 8,909
(Recovery of) provision for doubtful accounts (2,000) 10,000
Gain on sales of lease assets (8,825) (64,135)
Leveraged lease income - (2,356)
Changes in operating assets and liabilities:
Accounts receivable 136,796 (121,256)
Accounts payable, General Partner (100,165) (93,908)
Accounts payable, other (88,206) (12,519)
Accrued interest expense (591) (1,036)
Unearned operating lease income 3,790 448
------------------- -----------------
Net cash provided by operating activities 262,915 19,949
------------------- -----------------
Investing activities:
Reduction of net investment in direct financing leases 141,018 108,032
Proceeds from sales of lease assets 41,462 150,549
Reduction of net investment in leveraged leases - 46,368
------------------- -----------------
Net cash provided by investing activities 182,480 304,949
------------------- -----------------
Financing activities:
Distributions to Limited Partners (1,875,000) (1,875,004)
Repayments of non-recourse debt (118,194) (174,084)
------------------- -----------------
Net cash used in financing activities (1,993,194) (2,049,088)
------------------- -----------------
Net decrease in cash and cash equivalents (1,547,799) (1,724,190)
Cash and cash equivalents at beginning of period 2,440,803 3,806,560
------------------- -----------------
Cash and cash equivalents at end of period $ 893,004 $2,082,370
=================== =================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 22,456 $ 10,669
=================== =================
See accompanying notes.
6
ATEL CASH DISTRIBUTION FUND V, 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 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 Partnership
shall continue until December 31, 2013.
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 19, 1993,
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 V, 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 /
Amortization
Expense or
Balance Amortization of Balance
December 31, Direct Financing Reclassifications March 31,
2003 Leases & Dispositions 2004
Net investment in operating leases $ 11,027,461 $ (306,081) $ (49,233) $10,672,147
Net investment in direct financing lease 644,651 (141,018) - 503,633
Assets held for sale or lease, net of accumulated
depreciation of $694,260 in 2004 and $719,138
in 2003 836,940 - 16,596 853,536
Initial direct costs, net of accumulated amortization
of $217,041 in 2004 and $215,755 in 2003 10,719 (1,286) - 9,433
----------------- ----------------- ------------------- -----------------
$ 12,519,771 $ (448,385) $ (32,637) $12,038,749
================= ================= =================== =================
Management periodically reviews the carrying values of its assets on leases and
assets held for lease or sale. As a result of the review for the three month
period ended March 31, 2003, management determined that the value of a fleet of
jumbo covered hopper rail cars had declined in value to the extent that the
carrying values had become impaired. This decline was the result of decreased
long-term demand for these types of assets and a corresponding reduction in the
amounts of rental payments that these assets commanded. Management recorded a
provision for the declines in value of those assets in the amount of $539,000
for the three months ended March 31, 2003. There were no such impairments in
2004.
The provision of $539,000 recorded for the three months ended March 31, 2003
corrected for an understatement of the provision recorded for the year ended
December 31, 2002 related to jumbo covered hopper rail cars. The Partnership
does not believe that this amount is material to the period in which it should
have been recorded, nor that it is material to the Partnership's operating
results for the year ending December 31, 2003 or three months ending March 31,
2003. The effect of the additional provision recorded in the three months ended
March 31, 2003 was to increase the loss in the three months ended March 31, 2003
by $0.04 per Unit.
Impairment losses are recorded as an addition to accumulated depreciation of the
impaired assets. Depreciation expense and impairment losses on property subject
to operating leases and assets held for lease or sale consist of the following
for the three month periods ended March 31:
2004 2003
Depreciation of operating lease assets $ 306,081 $ 387,992
Impairment losses - 543,426
----------------- -----------------
$ 306,081 $ 931,418
================= =================
8
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
3. Investment in leases (continued):
Property subject to operating leases consists of the following:
Balance Balance
December 31, Depreciation Reclassifications March 31,
2003 Expense & Dispositions 2004
Transportation $ 22,978,415 $ - $ (174,553) $22,803,862
Manufacturing 1,470,000 - - 1,470,000
Construction 1,578,088 - - 1,578,088
Materials handling 35,624 - - 35,624
----------------- ----------------- ------------------- -----------------
26,062,127 - (174,553) 25,887,574
Less accumulated depreciation (15,034,666) (306,081) 125,320 (15,215,427)
----------------- ----------------- ------------------- -----------------
$ 11,027,461 $ (306,081) $ (49,233) $10,672,147
================= ================= =================== =================
Direct financing leases:
As of March 31, 2004, investment in direct financing leases consists of mining
equipment. The following lists the components of the Partnership's investment in
direct financing leases as of March 31, 2004:
Total minimum lease payments receivable $ 562,500
Estimated residual values of leased equipment (unguaranteed) 401
-------------------
Investment in direct financing leases 562,901
Less unearned income (59,268)
-------------------
Net investment in direct financing leases $ 503,633
===================
At March 31, 2004, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Operating Financing
Leases Leases Total
Nine months ending December 31, 2004 $1,272,753 $ 562,500 $1,835,253
Year ending December 31, 2005 1,357,606 - 1,357,606
2006 1,103,704 - 1,103,704
2007 840,382 - 840,382
2008 840,382 - 840,382
Thereafter 1,190,541 - 1,190,541
----------------- ------------------- -----------------
$6,605,368 $ 562,500 $7,167,868
================= =================== =================
All of the property on leases was acquired in 1993, 1994, 1995, 1996 and 1997.
9
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
5.5% to 7.1%. The notes mature from 2004 through 2006.
Future minimum principal payments of non-recourse debt are as follows:
Principal Interest Total
Nine months ending December 31, 2004 $ 169,214 $ 13,169 $ 182,383
Year ending December 31, 2005 162,167 7,301 169,468
2006 14,039 83 14,122
----------------- ------------------- -----------------
$ 345,420 $ 20,553 $ 365,973
================= =================== =================
5. 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.
10
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
5. Related party transactions (continued):
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).
During the three month periods ended March 31, 2004 and 2003, AFS and/or
affiliates earned fees, commissions and reimbursements, pursuant to the Limited
Partnership Agreement, as follows:
2004 2003
Costs reimbursed to AFS $ 160,140 $ 147,440
Equipment and incentive management fees to AFS 31,643 32,496
-------------- -------------
$ 191,783 $ 179,936
============== =============
6. Line of credit:
The Partnership participates with AFS and certain of its affiliates in a
$61,400,000 revolving line of credit (comprised of an acquisition facility and a
warehouse facility) with a financial institution that includes certain financial
covenants. As of December 31, 2003, the Partnership was no longer a qualified
borrower under the line of credit as the Partnership's equity had fallen below
the $15,000,000 minimum required in order to borrow. The Partnership was still
contingently liable for any borrowings under the warehouse facility. During the
quarter ended March 31, 2004, the facility was extended for an additional year.
At the same time, the total available under the facility was increased. As of
March 31, 2004, there were no borrowings under the warehouse facility by any of
the Partnership's affiliates. The line of credit expires on June 28, 2005. As of
March 31, 2004, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition facility $ -
Amounts borrowed by affiliated partnerships and limited liability
companies under the acquisition facility 26,500,000
--------------
Total borrowings under the acquisition facility 26,500,000
Amounts borrowed by AFS and its sister corporation under the
warehouse facility -
--------------
Total outstanding balance $ 26,500,000
==============
Total available under the line of credit $ 61,400,000
Total outstanding balance (26,500,000)
--------------
Remaining availability $ 34,900,000
==============
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 affiliated
partnerships and limited liability companies, the Partnership and AFS.
11
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
7. Partners' Capital:
As of March 31, 2004, 12,471,600 Units ($124,716,000) 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 $1,875,000 $ 1,875,004
Weighted average number of Units outstanding 12,471,600 12,471,600
Weighted average distributions per Unit $ 0.15 $ 0.15
12
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 cash was operating lease rents.
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases and proceeds from asset sales exceed expenses, and
decreasing as distributions are made to the Limited Partners and to the extent
expenses exceed cash flows from leases and proceeds from sales of assets.
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's success in re-leasing or selling the equipment as it comes off
lease.
The Partnership participates with AFS and certain of its affiliates in a
$61,400,000 revolving line of credit (comprised of an acquisition facility and a
warehouse facility) with a financial institution that includes certain financial
covenants. As of December 31, 2003, the Partnership was no longer a qualified
borrower under the line of credit as the Partnership's equity had fallen below
the $15,000,000 minimum required in order to borrow. The Partnership was still
contingently liable for any borrowings under the warehouse facility. During the
quarter ended March 31, 2004, the facility was extended for an additional year.
At the same time, the total available under the facility was increased. As of
March 31, 2004, there were no borrowings under the warehouse facility by any of
the Partnership's affiliates. The line of credit expires on June 28, 2005. As of
March 31, 2004, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition facility $ -
Amounts borrowed by affiliated partnerships and limited liability
companies under the acquisition facility 26,500,000
--------------
Total borrowings under the acquisition facility 26,500,000
Amounts borrowed by AFS and its sister corporation under the
warehouse facility -
--------------
Total outstanding balance $ 26,500,000
==============
Total available under the line of credit $ 61,400,000
Total outstanding balance (26,500,000)
--------------
Remaining availability $ 34,900,000
==============
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 affiliated
partnerships and limited liability companies, the Partnership and AFS.
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 AFS and providing
for cash distributions to the Limited Partners.
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.
13
Through March 31, 2004, the Partnership had borrowed $58,317,911 on a
non-recourse basis with remaining unpaid balances of $345,420. Borrowings are to
be generally non-recourse to the Partnership, that is, the only recourse of the
lender upon a default by the lessee on the underlying lease will be to the
equipment or corresponding lease acquired with the loan proceeds. AFS does not
anticipate any future non-recourse borrowings.
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 Partnership's primary operating
source of cash was revenues from operating leases. Overall, lease revenues
declined as a result of reduced gains recognized on sales of assets as described
below. Operating lease revenues increased by $29,866, primarily as a result of
reclassifications of lease assets over the last year. The reclassifications
occurred as a result of the renewal of leases that had been classified as
leveraged leases. The renewals were classified as operating leases. The effects
of these reclassifications were partially offset by sales of assets over the
same period.
In the first quarter of 2004, the primary source of cash flows from investing
activities was direct finance lease rents. In the first quarter of 2003, the
Partnership's primary source of cash flows from investing activities was
proceeds from sales of lease assets. 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.
In the first quarters of 2004 and 2003, the single largest financing use of cash
was distributions to Limited Partners. The amount of such distributions was
virtually unchanged. 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. As a result of scheduled debt payments, certain notes have been paid
off. This led to an overall reduction in the amounts of cash used to repay debt
in the current period compared to the same period in 2003.
Results of operations
First quarter operations resulted in net income of $14,749 in 2004, compared to
a net loss of $635,616 in 2003.
Operating lease revenues increased slightly in 2004 compared to 2003. The
increase resulted primarily from the reclassification of certain assets which
had previously been on leveraged leases as noted above. The effects of the
reclassifications of those assets were partially offset by sales of operating
lease assets during the last year.
Sales of lease assets decreased in the first quarter of 2004 compared to the
same period in 2003. Gains recognized on these sales decreased from $64,135 in
2003 to $8,825 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.
Depreciation expense has decreased from $387,992 in 2003 to $306,081 in 2004 as
a result of sales of operating lease assets over the last year.
During the first quarter of 2003, the Partnership incurred $156,255 for
maintenance on rail cars. In 2004, the amount of such maintenance was $43,804.
In 2003, approximately $117,000 of the total was incurred in order to place
certain rail cars on a new lease. The remaining amounts in 2003 (approximately
$39,000) related to ongoing, recurring maintenance of rail cars already on
lease. That amount is comparable to the $43,804 incurred in 2004.
14
Management periodically reviews the carrying values of its assets on leases and
assets held for lease or sale. As a result of that review, management determined
that the value of a fleet of jumbo covered hopper rail cars had declined in
value to the extent that the carrying values had become impaired. This decline
is the result of decreased long-term demand for these types of assets and a
corresponding reduction in the amounts of rental payments that these assets
currently command. Management recorded a provision for the decline in value of
those assets in the amount of $539,000 for the quarter ended March 31, 2003.
There were no similar charges in 2004.
The provision of $539,000 recorded for the three months ended March 31, 2003
corrected for an understatement of the provision recorded for the year ended
December 31, 2002 related to jumbo covered hopper rail cars. The Partnership
does not believe that this amount is material to the period in which it should
have been recorded, nor that it is material to the Partnership's operating
results for the year ending December 31, 2003 or three months ending March 31,
2003. The effect of the additional provision recorded in the three months ended
March 31, 2003 was to increase the loss in the three months ended March 31, 2003
by $0.04 per Unit.
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 manages its exposure to interest rate risk by
obtaining fixed rate debt. The fixed rate debt is 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 are 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.
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-K 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.
15
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.
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
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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 V, 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
17