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
June 30, 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 June 30, 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, June 30, 2004.
Income Statements for the six and three month periods ended June 30, 2004 and
2003.
Statements of Changes in Partners' Capital for the year ended December 31, 2003
and for the six month period ended June 30, 2004.
Statements of Cash Flows for the six and three month periods ended June 30, 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. Changes in 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
JUNE 30, 2004
(Unaudited)
ASSETS
Cash and cash equivalents $ 5,151,200
Accounts receivable, net of allowance for doubtful accounts
of $108,285 205,636
Investments in leases 12,109,118
----------------
Total assets $17,465,954
================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 4,433,751
Accounts payable:
General Partner 71,818
Other 355,528
Accrued interest expense 11,463
Unearned operating lease income 59,835
----------------
Total liabilities 4,932,395
Partners' capital:
General Partner 192,718
Limited Partners 12,340,841
----------------
Total partners' capital 12,533,559
----------------
Total liabilities and partners' capital $17,465,954
================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF OPERATIONS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2004 AND 2003
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
Revenues: 2004 2003 2004 2003
---- ---- ---- ----
Leasing activities:
Operating leases $ 1,374,884 $ 1,381,010 $ 749,774 $ 785,766
Direct financing leases 80,368 166,586 33,887 78,401
Gain (loss) on sales of assets 3,736 93,987 (5,089) 29,852
Leverage leases - 2,356 - -
Interest income 6,497 12,844 2,509 5,901
Other 1,019 10,299 103 9,296
----------------- ----------------- ---------------- ----------------
1,466,504 1,667,082 781,184 909,216
Expenses:
Depreciation of operating lease assets 604,616 738,686 298,535 350,693
Cost reimbursements to General Partner 278,773 357,723 118,633 210,283
Remarketing fees 250,000 - 250,000 -
Railcar maintenance 134,393 276,029 90,589 119,774
Other management fees 85,465 44,725 37,185 32,825
Equipment and incentive management fees
to General Partner 62,912 64,041 31,269 31,545
Professional fees 40,958 63,001 13,104 42,369
Interest expense 36,671 16,921 14,806 7,288
Amortization of initial direct costs 2,573 14,570 1,287 5,662
Provision for doubtful accounts 3,393 40,000 5,393 30,000
Other 69,193 178,915 37,575 114,116
Impairment losses - 543,426 - -
----------------- ----------------- ---------------- ----------------
1,568,947 2,338,037 898,376 944,555
----------------- ----------------- ---------------- ----------------
Net loss $ (102,443) $ (670,955) $ (117,192) $ (35,339)
================= ================= ================ ================
Net loss:
General Partner $ (1,024) $ (6,710) $ (1,172) $ (353)
Limited Partners (101,419) (664,245) (116,020) (34,986)
----------------- ----------------- ---------------- ----------------
$ (102,443) $ (670,955) $ (117,192) $ (35,339)
================= ================= ================ ================
Net loss per Limited Partnership Unit ($0.01) ($0.05) ($0.01) ($0.00)
Weighted average number of Units outstanding 12,471,600 12,471,600 12,471,600 12,471,600
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2003
AND FOR THE SIX MONTH PERIOD
ENDED JUNE 30, 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 loss - (101,419) (1,024) (102,443)
----------------- ----------------- ---------------- ----------------
Balance June 30, 2004 12,471,600 $12,340,841 $ 192,718 $12,533,559
================= ================= ================ ================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2004 AND 2003
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2004 2003 2004 2003
---- ---- ---- ----
Operating activities:
Net loss $ (102,443) $ (670,955) $ (117,192) $ (35,339)
Adjustment to reconcile net loss to
cash provided by operating activities:
(Gain) loss on sales of lease assets (3,736) (93,987) 5,089 (29,852)
Leveraged lease income - (2,356) - -
Depreciation of operating lease assets 604,616 738,686 298,535 350,693
Provision for doubtful accounts 3,393 40,000 5,393 30,000
Amortization of initial direct costs 2,573 14,570 1,287 5,662
Impairment losses - 543,426 - -
Changes in operating assets and liabilities:
Accounts receivable 169,691 (234,228) 32,895 (112,972)
Accounts payable, General Partner (100,134) (62,363) 31 31,545
Accounts payable, other 188,902 38,380 277,108 50,899
Accrued interest expense 8,902 (1,243) 9,493 (207)
Unearned operating lease income 36,296 46,460 32,506 46,012
----------------- ----------------- ---------------- ----------------
Net cash provided by operating activities 808,060 356,390 545,145 336,441
----------------- ----------------- ---------------- ----------------
Investing activities:
Investments in operating leases (742,281) - (742,281) -
Reduction of net investment in direct
financing leases 295,031 217,131 154,013 109,099
Proceeds from sales of lease assets 254,450 358,877 212,988 208,328
Reduction of net investment in leveraged leases - 46,368 - -
----------------- ----------------- ---------------- ----------------
Net cash (used in) provided by investing activities (192,800) 622,376 (375,280) 317,427
----------------- ----------------- ---------------- ----------------
Financing activities:
Proceeds of non-recourse debt 4,180,667 - 4,180,667 -
Distributions to Limited Partners (1,875,000) (3,437,499) - (1,562,495)
Repayments of non-recourse debt (210,530) (268,546) (92,336) (94,462)
----------------- ----------------- ---------------- ----------------
Net cash provided by (used in) financing activities 2,095,137 (3,706,045) 4,088,331 (1,656,957)
----------------- ----------------- ---------------- ----------------
Net increase (decrease) in cash and
cash equivalents 2,710,397 (2,727,279) 4,258,196 (1,003,089)
Cash and cash equivalents at
beginning of period 2,440,803 3,806,560 893,004 2,082,370
----------------- ----------------- ---------------- ----------------
Cash and cash equivalents at
end of period $ 5,151,200 $ 1,079,281 $ 5,151,200 $ 1,079,281
================= ================= ================ ================
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $ 27,769 $ 16,921 $ 5,313 $ 6,252
================= ================= ================ ================
See accompanying notes.
6
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 six and three month periods ended
June 30, 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
may 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
JUNE 30, 2004
(Unaudited)
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation /
Amortization
Expense or
Balance Amortization of Reclass- Balance
December 31, Direct Financing ifications June 30,
2003 Additions Leases & Dispositions 2004
---- --------- ------ -------------- ----
Net investment in operating leases $ 11,027,461 $ 742,281 $ (604,616) $ (184,020) $10,981,106
Net investment in direct financing
lease 644,651 - (295,031) - 349,620
Assets held for sale or lease, net
of accumulated depreciation of
$140,204 in 2004 and $719,138
in 2003 836,940 - - (66,694) 770,246
Initial direct costs, net of
accumulated amortization of
$218,328 in 2004 and $215,755 in
2003 10,719 - (2,573) - 8,146
------------------ ----------------- ----------------- ---------------- ----------------
$ 12,519,771 $ 742,281 $ (902,220) $ (250,714) $12,109,118
================== ================= ================= ================ ================
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 and six month periods ended June 30:
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2004 2003 2004 2003
---- ---- ---- ----
Depreciation of operating lease assets $ 604,616 $ 738,686 $ 298,535 $ 350,693
Impairment losses - 543,426 - -
----------------- ----------------- ---------------- ----------------
$ 604,616 $ 1,282,112 $ 298,535 $ 350,693
================= ================= ================ ================
8
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
(Unaudited)
3. Investment in leases (continued):
Net investment in operating leases:
Property subject to operating leases consists of the following:
Balance Reclass- Balance
December 31, Depreciation ifications June 30,
2003 Additions Expense & Dispositions 2004
---- --------- ------- -------------- ----
Transportation $ 22,978,415 $ 742,281 $ - $ (522,529) $23,198,167
Manufacturing 1,470,000 - - 1,470,000
Materials handling 35,624 - - 400 36,024
Construction 1,578,088 - - (1,578,088) -
------------------ ----------------- ----------------- ---------------- ----------------
26,062,127 742,281 - (2,100,217) 24,704,191
Less accumulated depreciation (15,034,666) - (604,616) 1,916,197 (13,723,085)
------------------ ----------------- ----------------- ---------------- ----------------
$ 11,027,461 $ 742,281 $ (604,616) $ (184,020) $10,981,106
================== ================= ================= ================ ================
Net investment in direct financing leases:
As of June 30, 2004, net investment in direct financing leases consists of
mining equipment. The following lists the components of the Company's net
investment in direct financing leases as of June 30, 2004:
Total minimum lease payments receivable $ 375,000
Estimated residual values of leased equipment (unguaranteed) 1
-----------
Investment in direct financing leases 375,001
Less unearned income (25,381)
-----------
Net investment in direct financing leases $ 349,620
===========
At June 30, 2004, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Operating Financing
Leases Leases Total
Six months ending December 31, 2004 $ 899,019 $ 375,000 $ 1,274,019
Year ending December 31, 2005 1,691,658 - 1,691,658
2006 1,437,541 - 1,437,541
2007 1,124,629 - 1,124,629
2008 1,108,099 - 1,108,099
2009 1,108,099 - 1,108,099
Thereafter 483,698 - 483,698
----------------- ---------------- ----------------
$ 7,852,743 $ 375,000 $ 8,227,743
================= ================ ================
All of the property on leases was acquired in 1993, 1994, 1995, 1996, 1997 and
2004.
9
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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
5.048% to 7.1%.
Future minimum principal payments of non-recourse debt are as follows:
Principal Interest Total
Six months ending December 31, 2004 $ 327,042 $ 103,057 $ 430,099
Year ending December 31, 2005 756,709 193,024 949,733
2006 705,716 152,625 858,341
2007 727,412 116,807 844,219
2008 764,994 79,226 844,220
2009 804,517 39,702 844,219
Thereafter 347,361 4,396 351,757
----------------- ---------------- ----------------
$ 4,433,751 $ 688,837 $ 5,122,588
================= ================ ================
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that AFS and/or its
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
JUNE 30, 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 six months ended June 30, 2004 and 2003, AFS and/or its affiliates
earned fees, commissions and reimbursements, pursuant to the Limited Partnership
Agreement, as follows:
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2004 2003 2004 2003
---- ---- ---- ----
Costs reimbursed to AFS $ 278,773 $ 357,723 $ 118,633 $ 210,283
Equipment and incentive management fees to AFS 62,912 64,041 31,269 31,545
----------------- ----------------- ---------------- ----------------
$ 341,685 $ 421,764 $ 149,902 $ 241,828
================= ================= ================ ================
6. Line of credit:
The Partnership participates with AFS and certain of its affiliates in a
$61,945,455 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
June 30, 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
June 30, 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 18,000,000
----------------
Total borrowings under the acquisition facility 18,000,000
Amounts borrowed by AFS and its sister corporation under the
warehouse facility -
----------------
Total outstanding balance $ 18,000,000
================
Total available under the line of credit $ 61,945,455
Total outstanding balance (18,000,000)
----------------
Remaining availability $ 43,945,455
================
11
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
(Unaudited)
6. Line of credit (continued):
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 credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of June 30,
2004.
7. Partners' Capital:
As of June 30, 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:
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2004 2003 2004 2003
---- ---- ---- ----
Distributions $ 1,875,000 $ 3,437,499 $ - $ 1,562,495
Weighted average number of Units outstanding 12,471,600 12,471,600 12,471,600 12,471,600
Weighted average distributions per Unit $ 0.15 $ 0.28 $ - $ 0.13
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
In 2004, the Partnership's primary source of cash was the proceeds of a new
non-recourse note payable. In 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
$61,945,455 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
June 30, 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
June 30, 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 18,000,000
----------------
Total borrowings under the acquisition facility 18,000,000
Amounts borrowed by AFS and its sister corporation under the
warehouse facility -
----------------
Total outstanding balance $ 18,000,000
================
Total available under the line of credit $ 61,945,455
Total outstanding balance (18,000,000)
----------------
Remaining availability $ 43,945,455
================
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 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, 2004, the Partnership had cumulatively borrowed $62,498,578 on a
non-recourse basis with a remaining unpaid balance of $4,433,751. 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. The General
Partner 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.
13
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 2004 and 2003, the Partnership's primary operating source of cash was
operating lease rents. Operating lease revenues decreased by $6,126 for the six
month period and by $35,992 for the three month period, primarily as a result of
sales of operating lease assets over the last year.
Sources of cash from investing activities in the three and six month periods in
2004 consisted of proceeds from sales of lease assets and direct financing lease
payments. In 2003, there was also $46,368 provided by reductions of investments
in leveraged leases. Proceeds from the sales of lease assets are not expected to
be consistent from one period to another. Asset sales are made as leases expire,
as purchasers can be found and as the sales can be negotiated and completed.
Cash flows from direct financing leases has increased. The single direct
financing lease is nearing its maturity and as a result, a larger portion of the
gross lease payment is accounted for as a reduction of the net investment in
direct financing leases.
The largest financing uses of cash were distributions to limited partners and
repayment of non-recourse debt for the six and three month periods ended June
30. 2004. During the three month period ended June 30, 2004, the Partnership
borrowed an additional $4,180,667 on a non-recourse note payable. The
Partnership entered into a long-term lease renewal for certain rail car assets
in the second quarter. As the Partnership is in its liquidation phase, the
Partnership borrowed on a non-recourse basis against the renewal rents in order
to be able to distribute the cash to the limited partners in the near term
rather than over a period of up to six years. There were no similar borrowings
in 2003.
Results of operations
In 2003, operations resulted in a net loss of $670,955 for the six month period
and a net loss of $35,399 for the three month period. In 2004, operations
resulted in a net loss of $102,443 for the six month period and $117,192 for the
three month period. The Partnership's primary source of revenue is from
operating leases. Operating lease revenues in 2004 were largely unchanged from
the same periods in 2003. Direct financing lease revenues have decreased
compared to the prior year. There is a single direct financing lease at June 30,
2004 and as it reaches maturity, a decreasing portion of the gross rents are
recognized as income.
Operating lease revenues (and the related depreciation expense) have decreased
as a result of sales of lease assets over the last year. This decrease has been
partially offset (in the case of lease revenues) by lease renewals. The original
cost of assets on operating leases has declined from $26,444,781 at June 30,
2003 to $24,704,191 at June 30, 2004.
During the second quarter of 2004, the Partnership borrowed an additional
$4,180,667 on a non-recourse basis. As a result of the new debt, interest
expense increased for both the three and six month periods in 2004 compared to
the same periods in 2003.
In 2003, there were charges to net income for impairments of operating lease
assets in the amount of $543,426. The charges related to covered grain hopper
cars on lease to various lessees. The impairment resulted from decreased
estimated cash flows expected to be generated by the assets over their remaining
lives. There were no similar charges in 2004.
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.
14
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.
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, except as noted below.
Railroad Technology Corporation:
Railroad Technology Corporation ("RTC") was engaged by the Partnership to
perform remarketing of certain rail car assets. The dispute involves the amount
that is due under the contract and how that amount is to be determined. RTC has
filed a claim for $1,131,254. The General Partner believes that the amount owed
under the contract is approximately $250,000 and has recorded a liability for
that amount in the financial statements of the Partnership as of June 30, 2004.
Item 2. Changes in Securities and Use of Proceeds
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.
15
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:
August 11, 2004
ATEL CASH DISTRIBUTION FUND V, L.P.
(Registrant)
By:
ATEL Financial Corporation
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