Form 10-QSB
UNITED STATES
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, 2005
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 the issuer's revenues for the most recent fiscal year: $3,364,344.
The number of Limited Partnership Units outstanding as of March 31, 2005 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, 2005.
Statements of Operations for the three month periods ended March 31,
2005 and 2004.
Statements of Changes in Partners' Capital for the year ended December
31, 2004 and for the three month period ended March 31, 2005.
Statements of Cash Flows for the three month periods ended March 31,
2005 and 2004.
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. 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, 2005
(Unaudited)
ASSETS
Cash and cash equivalents $ 1,212,750
Accounts receivable, net of allowance for doubtful accounts of $113,285 196,716
Investments in leases 12,215,107
-----------------
Total assets $ 13,624,573
=================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 3,943,640
Accounts payable and accruals:
General Partner 93,005
Other 459,845
Accrued interest payable 16,823
Unearned lease income 37,714
-----------------
Total liabilities 4,551,027
Partners' capital:
General Partner 198,640
Limited Partners 8,874,906
-----------------
Total Partners' capital 9,073,546
-----------------
Total liabilities and Partners' capital $ 13,624,573
=================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED
MARCH 31, 2005 AND 2004
(Unaudited)
Revenues: 2005 2004
---- ----
Leasing activities:
Operating leases $ 706,942 $ 625,110
Direct financing leases - 46,481
Gain on sales of assets 69,219 8,825
Interest income 11,200 3,988
Other 1,242 916
-------------------- -------------------
788,603 685,320
Expenses:
Depreciation of operating lease assets 279,009 306,081
Cost reimbursements to General Partner 119,763 160,140
Other management fees 24,710 48,280
Railcar maintenance 38,111 43,804
Equipment and incentive management fees to General Partner 27,583 31,643
Professional fees 74,232 27,854
Interest expense 51,226 21,865
Recovery of doubtful accounts - (2,000)
Amortization of initial direct costs 1,286 1,286
Other 36,458 31,618
-------------------- -------------------
652,378 670,571
-------------------- -------------------
Net income $ 136,225 $ 14,749
==================== ===================
Net income:
General Partner $ 1,362 $ 147
Limited Partners 134,863 14,602
-------------------- -------------------
$ 136,225 $ 14,749
==================== ===================
Net income per Limited Partnership unit $ 0.01 $ 0.00
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, 2004
AND FOR THE
THREE MONTH PERIOD
ENDED MARCH 31, 2005
(Unaudited)
Limited Partners General
Units Amount Partner Total
Balance December 31, 2003 12,471,600 $ 14,317,260 $ 193,742 $ 14,511,002
Distributions to Limited Partners
($0.28 per Unit) (3,433,577) - (3,433,577)
Net income 350,080 3,536 353,616
----------------- ------------------ ---------------- ------------------
Balance December 31, 2004 12,471,600 11,233,763 197,278 11,431,041
Distributions to Limited Partners
($0.20 per Unit) (2,493,720) - (2,493,720)
Net income 134,863 1,362 136,225
----------------- ------------------ ---------------- ------------------
Balance March 31, 2005 12,471,600 $ 8,874,906 $ 198,640 $ 9,073,546
================= ================== ================ ==================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2005 AND 2004
(Unaudited)
2005 2004
---- ----
Operating activities:
Net income $ 136,225 $ 14,749
Adjustment to reconcile net income to cash provided by operating
activities:
Depreciation of operating lease assets 279,009 306,081
Amortization of initial direct costs 1,286 1,286
Recovery of for doubtful accounts - (2,000)
Gain on sales of lease assets (69,219) (8,825)
Changes in operating assets and liabilities:
Accounts receivable 101,931 136,796
Accounts payable, General Partner (992) (100,165)
Accounts payable, other (166,010) 2,873
Accrued interest payable (754) (591)
Other assets 120,000 -
Unearned operating lease income 36,825 3,790
--------------------- -------------------
Net cash provided by operating activities 438,301 353,994
--------------------- -------------------
Investing activities:
Reduction of net investment in direct financing leases - 141,018
Proceeds from sales of lease assets 165,641 41,462
Investment in equipment on operating lease (156,329) -
--------------------- -------------------
Net cash provided by investing activities 9,312 182,480
--------------------- -------------------
Financing activities:
Distributions to Limited Partners (2,493,720) (1,875,000)
Repayments of non-recourse debt (163,069) (118,194)
--------------------- -------------------
Net cash used in financing activities (2,656,789) (1,993,194)
--------------------- -------------------
Net decrease in cash and cash equivalents (2,209,176) (1,456,720)
Cash and cash equivalents at beginning of period 3,421,926 2,440,803
--------------------- -------------------
Cash and cash equivalents at end of period $ 1,212,750 $ 984,083
===================== ===================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 51,980 $ 22,456
===================== ===================
See accompanying notes.
6
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(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, 2005 are not necessarily indicative of
the results for the year ending December 31, 2005.
Certain prior year balances have been reclassified to conform to the current
period presentation.
These unaudited interim financial statements should be read in conjunction
with the financial statements and notes thereto contained in the report on
Form 10-KSB for the year ended December 31, 2004, filed with the Securities
and Exchange Commission.
Equipment on operating leases:
Equipment on operating leases is stated at cost. Depreciation is being
provided by use of the straight-line method over the terms of the related
leases to the equipment's estimated residual values at the end of the leases.
Asset Valuation:
Recorded values of the Partnership's asset portfolio are periodically reviewed
for impairment in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book
value. The estimated undiscounted future cash flows are the sum of the
estimated residual value of the asset at the end of the asset's expected
holding period and estimates of undiscounted future rents. The residual value
assumes, among other things, that the asset is utilized normally in an open,
unrestricted and stable market. Short-term fluctuations in the market place
are disregarded and it is assumed that there is no necessity either to dispose
of a significant number of the assets, if held in quantity, simultaneously or
to dispose of the asset quickly. Impairment is measured as the difference
between the fair value (as determined by the discounted estimated future cash
flows) of the assets and its carrying value on the measurement date.
7
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
1. Summary of significant accounting policies (continued):
Revenue recognition:
Operating leases
Operating lease revenue is recognized on a straight-line basis over the term
of the underlying leases. The initial lease terms will vary as to the type of
equipment subject to the leases, the needs of the lessees and the terms to be
negotiated, but initial leases are generally expected to be for 36 to 84
months. Income from step rent provisions, escalation clauses, capital
improvement funding provisions or other lease concessions in lease contracts,
and lease rates subject to variation based on changes in market indexes or
interest rates are recognized on a straight line basis.
Direct finance leases
Income from direct financing lease transactions is reported using the
financing method of accounting, in which the Partnership's investment in the
leased property is reported as a receivable from the lessee to be recovered
through future rentals. The income portion of each rental payment is
calculated so as to generate a constant rate of return on the net receivable
outstanding.
Notes receivable
Income from notes receivable is reported using the financing method of
accounting. The Partnership's investment in notes receivable is reported as
the present value of the future note payments. The income portion of each note
payment is calculated so as to generate a constant rate of return on the net
balance outstanding.
Initial direct costs:
The Partnership capitalizes initial direct costs associated with the
acquisition of lease assets. These costs are amortized over a five year
period, which approximates average lease term, using a straight line method.
Segment Reporting:
The Partnership adopted the provisions of SFAS No. 131 Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131 establishes
annual and interim standards for operating segments of a Partnership. It also
requires entity-wide disclosures about the products and services an entity
provides, the material countries in which it holds assts and reports revenue,
and its major customers. The Partnership is not organized by multiple
operating segments for the purpose of making operating decisions or assessing
performance. Accordingly the Partnership operates in one reportable operating
segment in the United States.
8
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
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
(120,000 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.
The Partnership is in the final stage of its liquidation and is making
distributions on an annual basis.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Balance Depreciation/ Reclassifi-cations Balance
December 31, Amortization March, 31,
2004 Additions Expense & Dispositions 2005
---- --------- -------- ------------ ----
Net investment in operating
leases $ 12,146,968 $ 156,329 $ (279,009) $ (161,469) $ 11,862,819
Assets held for sale or
lease, net of accumulated
depreciation of $0 in 2005
and $306,133 in 2004 402,953 - - (54,953) 348,000
Initial direct costs, net of
accumulated amortization of
$222,186 in 2005 and
$220,900 in 2004 5,574 - (1,286) 4,288
------------------ -------------- ---------------- --------------- -----------------
$ 12,555,495 $ 156,329 $ (280,295) $ (216,422) $ 12,215,107
================== ============== ================ =============== =================
9
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
3. Investment in leases (continued):
Management periodically reviews the carrying values of its assets on leases
and assets held for lease or sale. Impairment losses are recorded as an
addition to accumulated depreciation of the impaired assets. As of March 31,
2005 and 2004, no assets were identified as impaired. 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:
2005 2004
---- ----
Depreciation expense $ 279,009 $ 306,081
================ ================
Net investment in operating leases
Property on operating leases consists of the following:
Balance December Additions Reclass-ifications Balance March
---------
31, 2004 & Dispositions 31, 2005
---- ------------ ----
Transportation $ 23,848,859 $ 156,329 $ (271,682) $ 23,733,506
Manufacturing 1,470,000 - - 1,470,000
Materials handling 36,024 - - 36,024
--------------------- ---------------- ----------------- -------------------
25,354,883 156,329 (271,682) 25,239,530
Less accumulated depreciation (13,207,915) (279,009) 110,213 (13,376,711)
--------------------- ---------------- ----------------- -------------------
$ 12,146,968 $ (122,680) $ (161,469) $ 11,862,819
===================== ================ ================= ===================
At March 31, 2005, the aggregate amounts of future minimum lease payments
under operating leases are as follows:
Nine months ending December 31, 2005 $ 1,637,908
Year ending December 31, 2006 1,923,541
2007 1,481,929
2008 1,145,899
2009 1,142,749
2010 483,700
---------------
$ 7,815,726
===============
The Partnership utilizes a straight line depreciation method for equipment in
all of the categories currently in its portfolio of lease transactions. The
useful lives for investment in leases by category are as follows:
Equipment category Useful Life
------------------ -----------
Manufacturing 10 - 20
Materials Handling 7 - 10
Transportation 7 - 10
10
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(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%. As of March 31, 2005, the carrying value of
the pledged assets was approximately $3,770,562 The notes mature from 2006 to
2010.
As of March 31, 2005, future minimum payments of non-recourse debt are as
follows:
Principal Interest Total
Nine months ending December 31, 2005 $ 593,639 $ 141,044 $ 734,683
Year ending December 31, 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
2010 347,362 4,396 351,758
---------------- -------------- ---------------
$ 3,943,640 $ 533,800 $ 4,477,440
================ ============== ===============
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 administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. AFS is not
reimbursed for services whereby it is entitled to receive a separate fee as
compensation for such services, such as acquisition and disposition of
equipment. Reimbursable costs incurred by AFS are allocated to the Partnership
based upon an estimated time incurred by employees working on Partnership
business and an allocation of rent and other costs based on utilization
studies.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"),
ATEL Investor Services ("AIS") and ATEL Financial Services LLC is a
wholly-owned subsidiary of ATEL Capital Group and performs services for the
Partnership. Acquisition services are performed for the Partnership by ALC,
equipment management, lease administration and asset disposition services are
performed by AEC, investor relations and communications services are performed
by AIS and general administrative services for the Partnership are performed
by AFS.
Cost reimbursements to the General Partner are based on costs incurred by AFS
in performing administrative services for the Partnership that are allocated
to each Partnership that AFS manages based on certain criteria such as
existing or new leases, number of investors or equity depending on the type of
cost incurred. 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
administrative services in the same geographic location.
11
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
5. Related party transactions (continued):
Incentive management fees are computed as 5% of distributions of cash from
operations, as defined in the Limited Partnership Agreement. Equipment
management fees are 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, 2005 and 2004, AFS and/or
affiliates earned fees, commissions and reimbursements, pursuant to the
Limited Partnership Agreement, as follows:
2005 2004
---- ----
Costs reimbursed to General Partner $ 119,763 $ 160,140
Incentive and equipment management fees to General Partner 27,583 31,643
------------------ -------------
$ 147,346 $ 191,783
================== =============
The General partner makes certain payments to third parties on behalf of the
Partnership for convenience purposes. During the three month periods ended
March 31, 2005 and 2004, the General Partner made such payments of $45,710 and
$29,748, respectively.
6. Partners' Capital:
As of March 31, 2005, 12,471,600 Units ($124,716,000) were issued and
outstanding (in addition to the Units issued to the Initial Limited Partners).
As defined in the Limited Partnership Agreement, the Partnership's Net Income,
Net Losses, and Tax Credits are to be allocated 99% to the Limited Partners
and 1% to AFS.
Available Cash from Operations and Cash from Sales and Refinancing are to be
distributed as follows:
First, 5% of Distributions of Cash from Operations to AFS as Incentive
Management Fee.
Second, the balance to the Limited Partners until the Limited Partners have
received Aggregate Distributions 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.
Third, AFS will receive as Incentive Management Compensation, the following:
(A) 10% of remaining Cash from Operations and
(B) 15% of remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
12
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
6. Partners' Capital (continued):
Distributions to the Limited Partners were as follows:
Three Months
Ended March 31,
2005 2004
---- ----
Distributions $ 2,493,720 $ 1,875,000
Weighted average number of Units outstanding 12,471,600 12,471,600
Weighted average distributions per Unit $ 0.20 $ 0.15
7. Guarantees
The Partnership enters into contracts that contain a variety of
indemnifications. The Partnership's maximum exposure under these arrangements
is unknown. However, the Partnership has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
In the normal course of business, the Partnership enters into contracts of
various types, including lease contracts, contracts for the sale or purchase
of lease assets, management contracts, loan agreements, credit lines and other
debt facilities. It is prevalent industry practice for most contracts of any
significant value to include provisions that each of the contracting parties -
in addition to assuming liability for breaches of the representations,
warranties, and covenants that are part of the underlying contractual
obligations - also assume an obligation to indemnify and hold the other
contracting party harmless for such breaches, for harm caused by such party's
gross negligence and willful misconduct, including, in certain instances,
certain costs and expenses arising from the contract. The General Partner has
substantial experience in managing similar leasing programs subject to similar
contractual commitments in similar transactions, and the losses and claims
arising from these commitments have been insignificant, if any. Generally, to
the extent these contracts are performed in the ordinary course of business
under the reasonable business judgment of the General Partner, no liability
will arise as a result of these provisions. The General Partner has no reason
to believe that the facts and circumstances relating to the Partnership's
contractual commitments differ from those it has entered into on behalf of the
prior programs it has managed. The General Partner knows of no facts or
circumstances that would make the Partnership's contractual commitments
outside standard mutual covenants applicable to commercial transactions
between businesses. Accordingly, the Partnership believes that these
indemnification obligations are made in the ordinary course of business as
part of standard commercial and industry practice, and that any potential
liability under the Partnership's similar commitments is remote. Should any
such indemnification obligation become payable, the Partnership would
separately record and/or disclose such liability in accordance with GAAP.
13
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 form those projected. In particular, economic
recession and changes in general economic conditions, including, fluctuations
in demand for equipment, lease rates, and interest rates, may result in delays
in investment and reinvestment, delays in leasing, re-leasing, and disposition
of equipment, and reduced returns on invested capital. The Partnership's
performance is subject to risks relating to lessee defaults and the
creditworthiness of its lessees. The Fund's performance is also subject to
risks relating to the value of its equipment at the end of its leases, which
may be affected by the condition of the equipment, technological obsolescence
and the markets for new and used equipment at the end of lease terms.
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
The Partnership's primary activity is to invest in leased equipment. In the
first quarters of 2005 and 2004, the Partnership's main source of cash was
rents from operating leases. The Partnership is in its liquidation phase
therefore the primary source of cash flows for the Partnership going forward
is expected to be from rents from operating leases and proceeds from sales of
equipment. 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 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.
Through March 31, 2005, the Partnership had borrowed $62,498,578 on a
non-recourse basis with remaining unpaid balances of $3,943,640. Non-recourse
debt payments match the rental income received from the underlying leases and
therefore do not represent cash outflows for the Partnership. Borrowings are
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. Refer to Note
4 in the notes to the financial statements in Item 1.
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 2005 and 2004, the Partnership's primary source of
cash from operations was operating lease rents. Operating lease revenues
increased by $81,832, due to a renewal of an existing lease at a higher rate
for a fixed term. The Partnership also invested $156,329 during the first
quarter of 2005 on these assets to improve their condition and to extend their
useful lives.
14
The primary source of cash flows from investing activities in the first
quarter of 2005 was proceeds from sale of assets of $165,641 offset by
investments in equipment on operating lease which was the improvements on
existing rail portfolio. In the first quarter of 2004 the main source of cash
flows from investing activities was direct finance lease rents, the
Partnership did not have any investments in direct finance leases during the
first quarter of 2005.
In the first three months ended for 2005 and 2004, the main reason for cash
used in financing activities was distributions to limited partners. The
Partnership is in the final stages of its liquidation phase and is making
distributions on an annual basis. The distributions are made each year in
January based on the prior year operations. Distributions are not expected to
be consistent from one year to another as the sources of cash flows will be
based on equipment sales and other non recurring factors. As a result of the
new non-recourse debt that was entered into in the second quarter of 2004,
debt repayments have increased slightly in 2005.
Results of operations
First quarter operations resulted in net income of $136,225 in 2005, compared
to a net income of $14,749 in 2004.
Operating lease revenues increased to $706,942 in 2005 as compared to $625,110
in 2004 due to the renewal of one railcar lease. There were no direct finance
leases in 2005 and therefore there were no revenues in relation to these
leases.
Gain on sale of assets has increased to $69,219 in 2005 from $8,825 in 2004
due to more asset sales in 2005. Proceeds from sales of lease assets are not
expected to be consistent from one period to another. The Partnership is a
finite life equipment leasing fund, which acquired leasing transactions during
the period ending six years after completion of its public offering. On the
termination of leases, assets may be re-leased or sold. Sales of assets are
not scheduled and are created by opportunities within the marketplace. The
Partnership acquired and leased a wide variety of assets. Some assets will be
expected to have little or no value upon termination of the related leases,
while others will be expected to have substantial value for re-lease or sale
upon termination of the initial leases, and the anticipated residual values
are a key factor in pricing and terms structured for each lease. The
Partnership's goal is to seek maximum return on its leased assets and will
determine when and under what terms to dispose such assets during the course
of its term.
Depreciation expense decreased to $279,009 in 2005 from $306,081 on 2004 as a
result of sales of operating lease assets during 2004. Cost reimbursements to
the General Partner have decreased due to reduced activity in the Partnership.
Interest expense increased by $29,361 to $51,226 from $21,865 in 2004 due to
the non recourse debt entered into in the second quarter of 2004.
Item 3. 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 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934] was performed as of March 31, 2005. Based
upon this evaluation, the chief executive officer and the chief financial
officer concluded that, as of the evaluation date, 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.
15
As disclosed in the Partnership's annual report on Form 10-K for the year
ended December 31, 2003, the chief executive and chief financial officer of
the General Partner had identified certain enhanced controls needed to
facilitate a more effective closing of the Partnership's financial statements.
Specifically, the Partnership's auditors advised management of a material
weakness surrounding the financial statement closing process that they believe
arose because ATEL's accounting resources were not adequate to complete the
closing of the books and preparation of financial statements in a timely
manner. However, it should be noted that the financial statements for that
period were nevertheless issued with an unqualified opinion. Since the
beginning of 2004, ATEL hired a new corporate controller, added two assistant
controllers and additional accounting staff personnel, and has instituted new
procedures or revised existing procedures to ensure that the Partnership's
ability to execute internal controls in accounting and reconciliation in the
closing process is adequate in all respects. In connection with management's
review of the effectiveness of internal disclosure controls and procedures of
the Partnership as of March 31, 2005, including communication with its
auditors regarding the audit process, ATEL management has determined that it
has successfully taken all steps necessary to resolve any outstanding issues
with respect to its annual financial statement closing process and that its
accounting resources are adequate to perform this process in a timely and
accurate manner. In connection with their audit of the Partnership and related
programs for the year ended December 31, 2004, the independent accountants
issued a no material weakness letter which indicates that no matters were
noted involving internal control and its operation that the auditor considered
to be material weaknesses as defined by the Public Company Accounting
Oversight Board (United States). Furthermore, all financial statements for the
Partnership and related programs for 2004 were issued with unqualified
opinions of the independent accountants. The General Partner will continue to
review its accounting procedures and practices to determine their
effectiveness and adequacy and will take any steps deemed necessary in the
opinion of the General Partner's chief executive and chief financial officers
to ensure the adequacy of the Partnership's disclosure and 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.
16
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. Below is a discussion of legal matters involving the Partnership;
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, as a result of a
cross-complaint for breach of fiduciary duty, that the amount owed under the
contract is approximately $0 to $250,000 and has recorded a liability in the
financial statements in 2004.
Item 2. Unregistered Sales of Equity 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.
Item 6. Exhibits.
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
17
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 13, 2005
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
By: /s/ Elif A Kuvvetli________
Elif A Kuvvetli
Vice President and
Corporate Controller
18