Form 10K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (fee required) For
the Year Ended December 31, 1996
OR
|_| Transition report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934 (no fee required)
For the transition period from ____ to ____
Commission File number 0-23842
ATEL Cash Distribution Fund V, L.P.
California 94-3165807
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
235 Pine Street, 6th Floor, San Francisco, California 94104
(Address of principal executive offices)
Registrant's telephone number, including area code (415) 989-8800
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 |_|
State the aggregate market value of voting stock held by non-affiliates of the
registrant.
Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
|X|
PART I
Item 1: BUSINESS
General Development of Business
ATEL Cash Distribution Fund V, L.P. (the Partnership), was formed under the laws
of the State of California in September 1992. The Partnership was formed for the
purpose of acquiring equipment to engage in equipment leasing and sales
activities.
The Partnership conducted a public offering of 12,500,000 units of Limited
Partnership interest (Units), at a price of $10 per Unit. As of November 15,
1994, the Partnership had received and accepted subscriptions for 12,500,000
($125,000,000) Limited Partnership Units in addition to the Initial Limited
Partners' Units and the offering was terminated. Of those Units, 12,497,000 were
issued and outstanding as of December 31, 1996. Of the proceeds received,
$11,875,000 was paid to ATEL Securities Corporation, a wholly owned subsidiary
of ATEL Financial Corporation (the General Partner), as sales commissions,
$5,738,415 was paid to the General Partner as reimbursements of organization and
other syndication costs, $1,875,000 was reserved for repurchases of Units and
working capital and $105,511,585 has been used to acquire leased equipment,
including acquisition fees paid or to be paid to the General Partner.
The Partnership's principal objectives are to invest in a diversified portfolio
of equipment which will (i) preserve, protect and return the Partnership's
invested capital; (ii) generate substantial distributions to the partners of
cash from operations and cash from sales or refinancing, with any balance
remaining after certain minimum distributions to be used to purchase additional
equipment during the reinvestment period, ending December 31, 2000; and (iii)
provide significant distributions following the reinvestment period and until
all equipment has been sold. The Partnership is governed by its Limited
Partnership Agreement.
Narrative Description of Business
The Partnership has acquired and intends to acquire various types of equipment
and to lease such equipment pursuant to "Operating" leases and "Full Payout"
leases, where "Operating" leases are defined as being leases in which the
minimum lease payments during the initial lease term do not recover the full
cost of the equipment and "Full Payout" leases recover such cost. It is the
intention of the General Partner that no more than 25% of the aggregate purchase
price of equipment will be subject to "Operating" leases upon final investment
of the Net Proceeds of the Offering and that no more than 20% of the aggregate
purchase price of equipment will be invested in equipment acquired from a single
manufacturer.
The Partnership only purchases equipment for which a lease exists or for which a
lease will be entered into at the time of the purchase. The Partnership has
completed its initial acquisition stage with the investment of the net proceeds
from the public offering of Units. As noted above, however, it intends to
continue to invest any cash flow in excess of certain amounts required to be
distributed to the Limited Partners in additional items of leased equipment
through December 31, 2000.
As of December 31, 1996, the Partnership had purchased equipment with a total
acquisition price of $186,962,134.
The Partnership's objective is to lease a minimum of 75% of the equipment
acquired with the net proceeds of the offering to lessees which (i) have an
aggregate credit rating by Moody's Investor Service, Inc. of Baa or better, or
the credit equivalent as determined by the General Partners, with the aggregate
rating weighted to account for the original equipment cost for each item leased;
or (ii) are established hospitals with histories of profitability or
municipalities. The balance of the original equipment portfolio may include
equipment leased to lessees which, although deemed creditworthy by the General
Partners, would not satisfy the general credit rating criteria for the
portfolio. At December 31, 1996, in excess of 75% of the equipment acquired had
been leased to lessees with an aggregate credit rating of Baa or better or to
such hospitals or municipalities.
During 1996, 1995 and 1994, certain lessees generated significant portions of
the Partnership's total lease revenues as follows:
Percentage of Total Lease
Revenues
Lessee Type of Equipment 1996 1995 1994
------ ----------------- ---- ---- ----
Burlington Northern Railroad Locomotives 16% 14% *
The Pittston Company Mining 11% 12% 14%
Tyson Foods, Inc. Tractors / Trailers * * 10%
* Less than 10%.
These percentages are not expected to be comparable in future periods.
The equipment leasing industry is highly competitive. Equipment manufacturers,
corporations, Partnerships and others offer users an alternative to the purchase
of most types of equipment with payment terms which vary widely depending on the
lease term and type of equipment. The ability of the Partnership to keep the
equipment leased and/or operating and the terms of the acquisitions, leases and
dispositions of equipment depends on various factors (many of which are not in
the control of the General Partner or the Partnership), such as general economic
conditions, including the effects of inflation or recession, and fluctuations in
supply and demand for various types of equipment resulting from, among other
things, technological and economic obsolescence.
The General Partner will seek to limit the amount invested in equipment to any
single lessee to not more than 20% of the aggregate purchase price of equipment
owned at any time during the reinvestment period.
The business of the Partnership is not seasonal.
The Partnership has no full time employees.
Equipment Leasing Activities:
Through December 31, 1996, the Partnership has disposed of certain leased assets
as set forth below:
Original
Equipment Cost, Excess of
Type of Excluding Rents Over
Equipment Acquisition Fees Sale Price Expenses *
- --------- ---------------- ---------- ----------
Furniture & fixtures $4,943,570 $3,019,239 $2,124,081
Mining equipment 4,713,880 4,132,745 1,017,804
Tractors & trailers 4,333,557 2,478,383 2,371,414
Refrigeration units 1,268,656 560,000 1,133,159
Construction 913,073 425,000 647,639
Helicopter 844,525 920,000 308,000
Copiers 712,776 689,530 293,609
Office automation 356,288 188,228 217,433
Containers 195,009 168,046 61,215
Other 70,200 39,000 50,292
Rail cars 35,263 22,425 2,943
--------------- ---------------- ---------------
$18,386,797 $12,642,596 $8,227,589
=============== ================ ===============
* Includes only those expenses directly related to the production of the
related rents.
The Partnership has acquired a diversified portfolio of equipment. The equipment
has been leased to lessees in various industries. The following tables set forth
the types of equipment acquired by the Partnership through December 31, 1996 and
the industries to which the assets have been leased.
Purchase price excluding Percentage of total
Asset types acquisition fees acquisitions
----------- ---------------- ------------
Transportation, over-the-road tractors and trailers $34,546,518 18.48%
Furniture and fixtures 24,112,157 12.90%
Transportation, other 18,454,853 9.87%
Mining 15,986,308 8.55%
Transportation, intermodal containers 15,484,688 8.28%
Construction 15,335,327 8.20%
Materials handling 14,469,358 7.74%
Railroad locomotives 12,350,000 6.61%
Earth moving 11,943,745 6.39%
Transportation, rail cars 7,180,000 3.84%
Printing 4,707,508 2.52%
Office automation 4,075,613 2.18%
Manufacturing, other 3,475,585 1.86%
Agriculture 1,643,101 0.88%
Airport ground support 1,564,975 0.84%
Aircraft, helicopter 844,525 0.45%
Other 508,964 0.27%
Food processing 278,909 0.14%
--------------- ----------------
$186,962,134 100.00%
=============== ================
Purchase price excluding Percentage of total
Industry of lessee acquisition fees acquisitions
------------------ ---------------- ------------
Transportation, rail $45,670,556 24.43%
Mining 29,823,055 15.95%
Oil & gas 21,301,523 11.39%
Retail, foods 11,182,563 5.98%
Food processing 9,828,623 5.26%
Construction 9,410,789 5.03%
Chemicals 9,075,487 4.85%
Retail, restaurant 8,528,067 4.56%
Transportation, other 8,311,346 4.45%
Primary metals 7,526,037 4.03%
Manufacturing, other 6,815,862 3.65%
Manufacturing, auto/truck 6,690,185 3.58%
Printing 4,707,508 2.52%
Retail, apparel 3,365,947 1.80%
Electric appliance manufacturing 1,744,543 0.93%
Business services 1,602,345 0.86%
Retail, general 613,998 0.33%
Other 763,700 0.40%
=============== ================
$186,962,134 100.00%
=============== ================
For further information regarding the Partnership's equipment lease portfolio as
of December 31, 1996, see Note 3 to the financial statements, Investments in
equipment and leases, set forth in Item 8, Financial Statements and
Supplementary Data.
Item 2. PROPERTIES
The Partnership does not own or lease any real property, plant or materially
important physical properties other than the equipment held for lease as set
forth in Item 1.
Item 3. LEGAL PROCEEDINGS
No material legal proceedings are currently pending against the Partnership or
against any of its assets.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
PART II
Item 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS
AND RELATED MATTERS
Market Information
The Units are transferable subject to restrictions on transfers which have been
imposed under the securities laws of certain states. However, as a result of
such restrictions, the size of the Partnership and its investment objectives, to
the General Partner's knowledge, no established public secondary trading market
has developed and it is unlikely that a public trading market will develop in
the future.
Holders
As of December 31, 1996, a total of 7,188 investors were record holders of Units
in the Partnership.
Dividends
The Partnership does not make dividend distributions. However, the Limited
Partners of the Partnership are entitled to certain distributions as provided
under the Limited Partnership Agreement.
The General Partner shall have sole discretion in determining the amount of
distributions; provided, however, that the General Partner will not reinvest in
equipment, but will distribute, subject to payment of any obligations of the
Partnership, such available cash from operations and cash from sales or
refinancing as may be necessary to cause total distributions to the Limited
Partners for each year during the reinvestment period to equal the following
amounts per unit: $1.05 in 1995 and 1996; $1.10 in 1997 and 1998; $1.20 in 1999
and 2000.
The rate for monthly distributions from 1994 operations was $0.0875 per Unit.
The distributions were made in February 1994 through December 1994 and in
January 1995. For each quarterly distribution (made in April, July and October
1994 and in January 1995) the rate was $0.2625 per Unit. Distributions were from
1994 cash flows from operations. The amounts paid to holders of Units were
adjusted based on the length of time within the previous calendar month or
quarter that the Units were outstanding.
The rate for monthly distributions from 1995 operations was $0.0875 per Unit.
The distributions were made in February 1995 through December 1995 and in
January 1996. For each quarterly distribution (made in April, July and October
1995 and in January 1996) the rate was $0.2625 per Unit. Distributions were from
1995 cash flows from operations. The amounts paid to holders of Units were
adjusted based on the length of time within the previous calendar month or
quarter that the Units were outstanding.
The rate for monthly distributions from 1996 operations was $0.09166 per Unit.
The distributions were made in February 1996 through December 1996 and in
January 1997. For each quarterly distribution (made in April, July and October
1996 and in January 1997) the rate was $0.275 per Unit. Distributions were from
1996 cash flows from operations. The amounts paid to holders of Units were
adjusted based on the length of time within the previous calendar month or
quarter that the Units were outstanding.
The following table presents summarized information regarding distributions to
Limited Partners:
1996 1995 1994 1993
---- ---- ---- ----
Distributions of net income (loss) $0.23 $0.13 $0.08 ($0.03)
Return of investment 0.86 0.92 0.89 0.43
--------------- ---------------- --------------- ---------------
Distributions per unit 1.09 1.05 0.97 0.40
Differences due to timing of distributions 0.01 0.00 0.08 0.36
--------------- ---------------- --------------- ---------------
Nominal distribution rates from above $1.10 $1.05 $1.05 $0.76
=============== ================ =============== ===============
Owners of 1,000 or more units may make the election without charge to receive
distributions on a monthly basis. Owners of less than 1,000 units may make the
election upon payment of a $20.00 annual fee.
Item 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Partnership for the
years ended December 31, 1996, 1995 and 1994 and for the period from March 19,
1993 (commencement of operations) to December 31, 1993. This financial data
should be read in conjunction with the financial statements and related notes
included under Item 8 of this report.
1996 1995 1994 1993
---- ---- ---- ----
Gross Revenues $24,987,922 $20,884,669 $10,809,456 $2,173,205
Net income (loss) $2,851,885 $1,627,911 $679,530 ($60,621)
Weighted average Limited Partner Units (Units)
outstanding 12,497,713 12,498,550 8,437,365 2,280,173
Net income (loss) per Unit, based on weighted
average Units outstanding $0.2259 $0.1289 $0.0797 ($0.0263)
Distributions per Unit, based on weighted average
Units outstanding $1.09 $1.05 $0.97 $0.40
Total Assets $130,546,718 $136,475,349 $108,090,539 $41,256,114
Total Non-recourse Debt $41,496,203 $19,129,298 $6,136,233 None
Total Partners' Capital $76,545,683 $87,372,135 $98,949,871 $36,832,316
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
For the Partnership, 1996 was an active investment year. Funds which have been
received, but which have not yet been invested in leased equipment, are invested
in interest-bearing accounts or high-quality/short-term commercial paper. The
Partnership's public offering provided for a total maximum capitalization of
$125,000,000.
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 lease assets are acquired, as distributions are made to the
limited partners and to the extent expenses exceed cash flows from leases and
proceeds from asset sales.
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 the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $90,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on October 28, 1997. As of December 31, 1996, the Partnership had
$9,921,190 of borrowings under this line of credit and the remaining
availability was $38,857,117.
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 the General Partner
and providing for cash distributions to the Limited Partners. At December 31,
1996, commitments to purchase lease assets totaled $1,964,818.
As of December 31, 1996, cash balances consisted of amounts reserved for
distributions in January 1997, generated from operations in 1996 ($1,585,776)
and working capital reserves.
The Partnership currently has available adequate reserves to meet its immediate
cash requirements, 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 December 31, 1996, the Partnership had borrowed $51,500,460. The remaining
unpaid balance as of that date was $41,496,203. As of that date, the Partnership
also had outstanding balances of $9,921,190 on a line of credit.
The Partnership's expected long-term borrowings are to be non-recourse to the
Partnership, that is, the only recourse of the lender will be to the equipment
or corresponding lease acquired with the loan proceeds. The Partnership may only
incur additional debt to the extent that the then outstanding balance of all
such debt, including the additional debt, does not exceed 40% of the original
cost of the lease assets then owned by the Partnership, including any such
assets purchased with the proceeds of such additional debt.
The Partnership commenced regular distributions, based on cash flows from
operations, beginning with the second quarter of 1993. See Items 5 and 6 of this
report for additional information regarding the distributions.
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.
In future periods, cash flows from operating leases are expected to be the
Partnership's primary source of cash flows from operations.
Cash Flows:
1996 vs. 1995:
In 1996, the Partnership's primary source of cash from operations was rents from
operating leases. Revenues from operating and direct financing leases increased
by $3,786,126 and interest expense increased by $2,740,810. The net effect of
these increases was offset by fluctuations in the Partnership's operating assets
and liabilities.
Sources of cash from investing activities consisted primarily of proceeds from
sales of lease assets ($5,900,451) and cash flows from direct financing leases
($4,396,705). Cash flows from those leases increased by $1,792,188 compared to
1995 as a result of acquisitions of assets placed on financing leases in 1995
and in 1996. The primary investing uses of cash were purchases of operating and
direct financing lease assets.
In 1996, the only sources of cash from financing activities were proceeds from
non-recourse debt ($30,770,985) and borrowings under the line of credit
($18,098,333). Most, if not all, of the borrowings under the line of credit are
expected to be repaid with the proceeds of non-recourse debt in 1997. The
primary financing uses of cash were scheduled payments of non-recourse debt,
repayments on the line of credit and distributions to the limited partners.
1995 vs. 1994:
In 1995, the Partnership's primary source of cash from operating activities was
rents from operating leases. Such lease rents are expected to remain the
Partnership's primary source of cash from operating activities in future
periods.
Sources of cash flows from investing activities consisted of direct financing
lease rents accounted for as reductions of the Partnership's net investment in
direct financing leases and proceeds from sales of lease assets. A smaller
amount of cash was received from leveraged leases. The primary use of cash in
investing activities was the purchase of assets on operating, direct financing
and leveraged leases and related initial direct costs.
In 1995, the Partnership's sources of cash from financing activities consisted
of non-recourse debt borrowings and borrowings on lines of credit. The primary
uses of cash in financing activities were repayments of such borrowings and to
make distributions to the Limited Partners.
Results of Operations
As of March 19, 1993, subscriptions for the minimum amount of the offering
($1,200,000) had been received and accepted by the Partnership. As of that date,
the Partnership commenced operations in its primary business (leasing
activities). Because of the timing of the commencement of operations, the fact
that the offering continued through November 15, 1994 and the fact that the
initial portfolio acquisitions were not completed until 1996, the results of
operations in 1994 and 1995 are not comparable and are not expected to be
comparable to future periods.
As of December 31, 1996, 24% of total equipment at cost (19% at December 31,1995
and 26% at December 31, 1994) was leased to lessees in the rail transportation
industry. As of December 31, 1996, 16% of total equipment at cost (20% at
December 31, 1995 and 17% at December 31, 1994) was leased to lessees in the
mining industry. As of December 31, 1996, 11% of total equipment cost (13% at
December 31, 1995 and less than 10% at December 31, 1994) was leased to lessees
in the oil and gas industry. Leases are subject to the general partners' credit
committee review. The leases provide for the return of the equipment upon
default. The concentration of the Partnership's assets in these industries is
not known to have had any effect on the Partnership's results of operations nor
is there any known trend regarding these industries that would effect its
operations in future periods.
1996 vs. 1995:
Operations in 1996 resulted in net income of $2,851,885 compared to $1,627,911
in 1995. Total revenues increased by $4,103,253 while expenses increased by
$3,040,234.
Operating lease revenues and direct financing lease revenues increased by
$2,281,557 and $1,504,569, respectively. Both of these increases were the result
of lease asset acquisitions in 1995 and in 1996.
Gains on sales of assets increased by $391,843. The 1996 gains included $689,237
realized on the sale of assets leased to Barney's, Inc. (Barney's). See
additional discussion below relating to this transaction.
Depreciation and amortization expense increased by $751,100 due to the asset
acquisitions in 1995 and 1996 noted above.
Equipment management fees are related to the Partnership's gross lease rents and
incentive management fees are related to the amounts distributed to the Limited
Partners from "Operations", as defined in the Agreement of Limited Partnership.
Both gross rents and such distributions increased in 1996 compared to 1995.
These underlying increases gave rise to the increase in management fees.
The increase in interest expense is directly related to increased debt balances
in 1996 compared to 1995.
The Partnership's provision for losses and impairments declined $731,719
compared to 1995. In 1995, a specific provision was made relating to the
Barney's lease assets in the amount of $778,169. There were no similar defaults
in 1996 for which specific reserves were considered necessary.
1995 vs. 1994:
Operations in 1995 resulted in net income of $1,627,911 compared to $679,530 in
1994. As in 1994, the Partnership's main source of revenues was rents from
operating leases. These rents increased from $9,773,188 in 1994 to $18,195,191
in 1995, an increase of 86%. The increase from 1994 to 1995 is due to the
acquisition of operating lease assets during 1994 and 1995.
Direct financing lease revenues also increased compared to 1994. This increase
was also due to 1994 and 1995 asset acquisitions.
For the first time, in 1995, the Partnership started to have significant amounts
of assets come off lease due to scheduled lease terminations. The amount of
assets sold was significant in 1995 whereas it had not been in 1994. Asset sales
are expected to become more significant over the years as more of the
Partnership's leases mature. In 1995, sales of such assets resulted in net gains
of $933,289 compared to $2,564 in 1994. Gains or losses on such sales are not
expected to be comparable from one year to another.
Depreciation of operating lease assets is the Partnership's largest expense and
is expected to remain so in the future. Depreciation and amortization increased
from $8,135,951 in 1994 to $14,600,474 in 1995, a 79% increase. The increase is
comparable to the increase noted above relating to operating lease revenues and
is due to the same acquisitions of operating lease assets in 1994 and 1995.
Interest expense has increased dramatically from $61,036 in 1994 to $1,222,050
in 1995. In 1995, the Partnership borrowed $14,593,242 on a non-recourse basis
and borrowed $33,994,956 on lines of credit. In 1994, the Partnership had
borrowed only $6,136,233, most of which was borrowed in the fourth quarter of
that year. The timing of the borrowings and the increased amounts outstanding in
1995 compared to 1994 gave rise to the increase in interest expense noted in
1995.
Equipment management fees are related to the Partnership's gross lease rents and
incentive management fees are related to the amounts distributed to the Limited
Partners from "Operations", as defined in the Agreement of Limited Partnership.
Both gross rents and such distributions increased in 1995 compared to 1994.
These underlying increases gave rise to the increase in management fees.
The administrative costs of the Partnership tend to be the greatest during its
initial years of operations. The offering was completed in late 1994 and these
costs have declined somewhat since that time.
In January 1996, Barney's, Inc. (Barney's), one of the Partnership's lessees,
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The
Partnership's lease transaction had been financed primarily with non-recourse
debt. In addition, the Partnership held certain deposits which it ultimately
retained.
The following table summarizes the cash flows relating to the lease transaction
with Barney's through December 31, 1995:
Purchase of lease assets, at cost ($3,365,947)
Rents received and retained by the Partnership 1,241,443
Non-recourse debt proceeds received by the Partnership 2,021,084
----------------
(103,420)
Deposits received from lessee which were retained by
the Partnership 124,235
----------------
Net cash flows $20,815
================
Effective January 1, 1995, the Partnership adopted Financial Accounting
Standards Board Statement Number 121 (FAS 121). As a result, the Partnership
established a reserve for the impairment of the value of assets leased to
Barney's in the amount of $778,169. Of this amount, $557,563 related to the
adoption of FAS 121. See Note 9 to the financial statements included as Item 8
of Part I of this report for additional information regarding the reserve.
The Partnership's provision for losses and impairments increased by $952,855.
The reserve related to Barney's constitutes the majority of the Partnership's
provision for losses and impairments. The remainder was a general reserve.
Reserves for losses were first established in the fourth quarter of 1994. The
amounts provided, exclusive of the amounts related to Barney's, increased over
1994. Provisions for losses and impairments were made in one quarter in 1994 and
were made in all four quarters in 1995.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Notes to Financial Statements attached hereto at
pages 11 through 26.
REPORT OF INDEPENDENT AUDITORS
The Partners
ATEL Cash Distribution Fund V, L.P.
We have audited the accompanying balance sheets of ATEL Cash Distribution Fund
V, L.P. as of December 31, 1996 and 1995 and the related statements of
operations, changes in partners' capital, and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ATEL Cash Distribution Fund V,
L.P. at December 31, 1996 and 1995 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Francisco, California
February 7, 1997
ATEL CASH DISTRIBUTION FUND V, L.P.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
---- ----
Cash and cash equivalents $1,917,349 $2,401,318
Accounts receivable 2,889,713 2,377,496
Other assets 10,000 10,000
Investments in equipment and leases 125,729,656 131,686,535
---------------- ---------------
Total assets $130,546,718 $136,475,349
================ ===============
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $41,496,203 $19,129,298
Line of credit 9,921,190 26,292,088
Accounts payable:
Equipment purchases 464,604 14,097
General Partner 295,705 1,026,433
Other 284,929 814,853
Deposits due to lessees - 627,508
Accrued interest payable 232,808 381,631
Unearned lease income 1,305,596 817,306
---------------- ---------------
Total liabilities 54,001,035 49,103,214
Partners' capital:
General Partner 51,087 22,568
Limited Partners 76,494,596 87,349,567
---------------- ---------------
Total partners' capital 76,545,683 87,372,135
---------------- ---------------
Total liabilities and partners' capital $130,546,718 $136,475,349
================ ===============
See accompanying notes.
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Revenues:
Leasing activities:
Operating leases $20,476,748 $18,195,191 $9,773,188
Direct financing leases 2,911,529 1,406,960 553,302
Leveraged leases 178,390 217,129 180,284
Gain on sales of assets 1,325,132 933,289 2,564
Interest income 39,898 124,308 294,207
Other 56,225 7,792 5,911
---------------- --------------- ---------------
24,987,922 20,884,669 10,809,456
Expenses:
Depreciation and amortization 15,351,574 14,600,474 8,135,951
Equipment and incentive management fees to General Partner 1,725,751 1,623,818 1,013,448
Interest expense 3,962,860 1,222,050 61,036
Provision for losses and impairments 255,294 987,013 34,158
Administrative cost reimbursements to General Partner 455,316 535,812 706,324
Professional fees 117,566 110,744 65,028
Other 428,631 176,847 113,981
---------------- --------------- ---------------
22,296,992 19,256,758 10,129,926
---------------- --------------- ---------------
Income before extraordinary item 2,690,930 1,627,911 679,530
Extraordinary gain on early extinguishment of debt 160,955 - -
---------------- --------------- ---------------
Net income $2,851,885 $1,627,911 $679,530
================ =============== ===============
Net income:
General Partner $28,519 $16,279 $6,795
Limited Partners 2,823,366 1,611,632 672,735
---------------- --------------- ---------------
$2,851,885 $1,627,911 $679,530
================ =============== ===============
Income before extraordinary item per limited partnership unit $0.21 $0.13 $0.08
Extraordinary gain on early extinguishment of debt per limited
partnership unit 0.02 - -
--------------- ---------------- ---------------
Net income per Limited Partnership unit $0.23 $0.13 $0.08
=============== ================ ===============
Weighted average number of units outstanding 12,497,713 12,498,550 8,437,365
See accompanying notes.
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Limited Partners
---------------- General
Units Amount Partner Total
----- ------ ------- -----
Balance January 1, 1994 4,412,259 $36,832,822 ($506) $36,832,316
Capital contributions 8,087,791 80,877,910 80,877,910
Less selling commissions to affiliates (7,683,401) (7,683,401)
Other syndication costs to affiliates (3,533,403) (3,533,403)
Distributions to Limited Partners ($0.97 per Unit) (8,223,081) (8,223,081)
Net loss 672,735 6,795 679,530
--------------- ---------------- --------------- ---------------
Balance December 31, 1994 12,500,050 98,943,582 6,289 98,949,871
Other syndication costs to affiliates (89,139) (89,139)
Capital contributions rescinded (1,500) (15,000) (15,000)
Distributions to Limited Partners ($1.05 per Unit) (13,101,508) (13,101,508)
Net income 1,611,632 16,279 1,627,911
--------------- ---------------- --------------- ---------------
Balance December 31, 1995 12,498,550 87,349,567 22,568 87,372,135
Limited Partnership Units repurchased (1,550) (5,512) (5,512)
Distributions to Limited Partners ($1.09 per Unit) (13,672,825) (13,672,825)
Net income 2,823,366 28,519 2,851,885
--------------- ---------------- --------------- ---------------
Balance December 31, 1996 12,497,000 $76,494,596 $51,087 $76,545,683
=============== ================ =============== ===============
See accompanying notes.
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Operating activities:
Net income $2,851,885 $1,627,911 $679,530
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,351,574 14,600,474 8,135,951
Provision for losses and impairments 255,294 987,013 34,158
Leveraged lease income (178,390) (217,129) (82,407)
Gain on sales of assets (1,325,132) (933,289) (2,564)
Extraordinary gain on early extinguishment of debt (160,955) - -
Changes in operating assets and liabilities:
Accounts receivable (512,217) (1,015,951) (692,153)
Other assets - - (10,000)
Accounts payable, General Partner (730,728) (362,779) 588,788
Accounts payable, other (529,924) 723,603 17,886
Accrued interest payable (148,823) 334,642 46,989
Deposits due to lessees (627,508) (217) 627,725
Unearned lease income 488,290 56,670 709,317
---------------- --------------- ---------------
Net cash provided by operating activities 14,733,366 15,800,948 10,053,220
Investing activities:
Purchases of equipment on operating leases (16,665,304) (26,990,580) (56,464,037)
Proceeds from sales of assets 5,900,451 6,930,477 22,572
Decrease (increase) of net investment in leveraged leases 458,388 (105,594) -
Purchases of equipment on direct financing leases (1,639,128) (23,121,223) (13,324,151)
Reduction of net investment in direct financing leases 4,396,705 2,604,517 1,513,782
Purchases of equipment on leveraged leases - (2,099,438) (3,444,120)
Initial direct lease costs paid to General Partner (147,072) (1,818,287) (2,738,556)
Purchase of residual value interests - (835,760) -
---------------- --------------- ---------------
Net cash used in investing activities (7,695,960) (45,435,888) (74,434,510)
Financing activities:
Borrowings under line of credit 18,098,333 33,994,956 -
Repayments of borrowings under line of credit (34,469,231) (7,702,868) (2,305,623)
Proceeds of non-recourse debt 30,770,985 14,593,242 6,136,233
Repayments of non-recourse debt (8,243,125) (1,600,177) -
Distributions to Limited Partners (13,672,825) (13,101,508) (8,223,081)
Payment of syndication costs to General Partner - (89,139) (11,216,804)
Limited Partnership Units repurchased (5,512) - -
Capital contributions rescinded - (15,000) -
Capital contributions received - - 80,877,910
Unadmitted subscriptions for Limited Partnership units - - (103,980)
---------------- --------------- ---------------
Net cash (used in) provided by financing activities (7,521,375) 26,079,506 65,164,655
---------------- --------------- ---------------
Net (decrease) increase in cash and cash equivalents (483,969) (3,555,434) 783,365
Cash and cash equivalents at beginning of period 2,401,318 5,956,752 5,173,387
---------------- --------------- ---------------
Cash and cash equivalents at end of period $1,917,349 $2,401,318 $5,956,752
================ =============== ===============
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(CONTINUED)
1996 1995 1994
---- ---- ----
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $4,111,683 $887,408 $14,047
================ =============== ===============
Schedule of non-cash transactions:
Operating lease assets reclassified to direct financing leases $2,798,303
Less accumulated depreciation (773,303)
----------------
$2,025,000
================
Operating lease assets reclassified to assets held for sale or lease $35,262
Less accumulated depreciation (1,070)
----------------
$34,192
================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Organization and Partnership matters:
ATEL Cash Distribution Fund V, L.P. (the Partnership), was formed under the laws
of the State of California in September 1992, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. Contributions in
the amount of $600 were received as of October 6, 1992, $100 of which
represented the General Partner's continuing interest, and $500 of which
represented the Initial Limited Partners' capital investment (no other financial
activity occurred in 1992).
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 or the General Partner on behalf of the Partnership, incurred
costs in connection with the organization, registration and issuance of the
Units. The amount of such costs to be born by the Partnership was limited to 15%
of Gross Proceeds of up to $25,000,000 and 14% of Gross Proceeds in excess of
$25,000,000.
The Partnership's business consists of leasing various types of equipment. As of
December 31, 1996, the original terms of the leases ranged from one to twenty
years.
Pursuant to the Limited Partnership Agreement, the General Partner receives
compensation and reimbursements for services rendered on behalf of the
Partnership (Note 5). The General Partner is required to maintain in the
Partnership reasonable cash reserves for working capital, the repurchase of
Units and contingencies.
2. Summary of significant accounting policies:
Equipment on operating leases:
Revenues from operating leases are recognized evenly over the life of the
related 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.
Direct financing leases:
Income from direct financing lease transactions is reported on 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.
Investment in leveraged leases:
Leases which are financed principally with non-recourse debt at lease inception
and which meet certain other criteria are accounted for as leveraged leases.
Leveraged lease contracts receivable are stated net of the related
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
2. Summary of significant accounting policies (continued):
non-recourse debt service (which includes unpaid principal and aggregate
interest on such debt) plus estimated residual values. Unearned income
represents the excess of anticipated cash flows (after taking into account the
related debt service and residual values) over the investment in the lease and
is amortized using a constant rate of return applied to the net investment when
such investment is positive.
Statements of cash flows:
For purposes of the Statements of Cash Flows, cash and cash equivalents includes
cash in banks and cash equivalent investments with original maturities of ninety
days or less.
Income taxes:
The Partnership does not provide for income taxes since all income and losses
are the liability of the individual partners and are allocated to the partners
for inclusion in their individual tax returns.
The tax basis of the Partnership's net assets and liabilities varies from the
amounts presented in these financial statements.
1996 1995
---- ----
Financial statement basis of net assets and
liabilities $76,545,683 $87,372,135
Tax basis of net assets and liabilities 51,668,477 72,840,637
---------------- ---------------
Difference $24,877,206 $14,531,498
================ ===============
The following reconciles the net income reported in these financial statements
to the loss reported on the Partnership's federal tax return (unaudited):
1996 1995
---- ----
Net income per financial statements $2,851,885 $1,627,911
Adjustment to depreciation expense (18,949,366) (19,492,254)
Adjustments to lease revenues 8,509,318 5,045,571
Extraordinary gain on extinguishment of debt (160,955) -
Provision for losses 255,294 987,013
Adjustments to interest expense - (21,110)
Other - 21,110
---------------- ---------------
Net loss per federal tax return ($7,493,824) ($11,831,759)
================ ===============
Credit Risk:
Financial instruments which potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents. The Partnership
places its cash deposits and temporary cash investments with creditworthy, high
quality financial institutions. The concentration of such deposits and temporary
cash investments is not deemed to create a significant risk to the Partnership.
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
2. Summary of significant accounting policies (continued):
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Per unit data:
Net income and distributions per unit are based upon the weighted average number
of units outstanding during the period.
3. Investments in equipment and leases:
As of December 31, 1996, the Partnership's investments in equipment and leases
consist of the following:
Depreciation
Expense or Reclass-
Amortization ifications or
1995 Additions of Leases Dispositions 1996
---- --------- --------- ------------ ----
Net investment in operating leases $90,328,014 $17,115,811 ($14,163,444) ($5,968,276) $87,312,105
Net investment in direct financing
leases 32,688,774 1,639,128 (4,396,705) 717,165 30,648,362
Net investment in leveraged leases 4,854,410 - (279,998) (262,125) 4,312,287
Assets held for sale or lease - - (4,992) 159,750 154,758
Residual value interests 835,760 - - - 835,760
Reserve for losses (1,021,171) (255,294) - 778,167 (498,298)
Initial direct costs, net of accumulated
amortization of $2,189,959 in 1996
and $1,497,737 in 1995 4,000,748 147,072 (1,183,138) - 2,964,682
--------------- --------------- ---------------- --------------- ---------------
$131,686,535 $18,646,717 ($20,028,277) ($4,575,319) $125,729,656
=============== =============== ================ =============== ===============
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. Investments in equipment and leases (continued):
Operating leases:
Property on operating lease consists of the following as of December 31, 1995,
additions and dispositions during 1996 and as of December 31, 1996:
Reclass-
ifications or
1995 Additions Dispositions 1996
---- --------- ------------ ----
Transportation $34,422,258 $15,656,550 ($8,396,995) $41,681,813
Construction 24,075,113 - - 24,075,113
Materials handling 17,778,985 278,117 - 18,057,102
Mining 15,164,692 - - 15,164,692
Furniture and fixtures 10,475,743 - (3,365,947) 7,109,796
Manufacturing 2,834,155 641,430 - 3,475,585
Printing 2,325,000 - - 2,325,000
Office automation 2,076,126 539,714 (237,685) 2,378,155
Food processing 1,826,162 - - 1,826,162
Other 353,612 - (70,200) 283,412
--------------- ---------------- --------------- ---------------
111,331,846 17,115,811 (12,070,827) 116,376,830
Less accumulated depreciation (21,003,832) (14,163,444) 6,102,551 (29,064,725)
--------------- ---------------- --------------- ---------------
$90,328,014 $2,952,367 ($5,968,276) $87,312,105
=============== ================ =============== ===============
Direct financing leases:
As of December 31, 1996, investment in direct financing leases consists of
railroad auto racks, railroad tank cars and retail store fixtures. The following
lists the components of the Partnership's investment in direct financing leases
as of December 31, 1996 and 1995:
1996 1995
---- ----
Total minimum lease payments receivable $34,535,417 $35,859,268
Estimated residual values of leased equipment (unguaranteed) 8,936,243 7,195,484
---------------- ---------------
Investment in direct financing leases 43,471,660 43,054,752
Less unearned income (12,823,298) (10,365,978)
---------------- ---------------
Net investment in direct financing leases $30,648,362 $32,688,774
================ ===============
All of the property on leases was acquired in 1996, 1995, 1994 and 1993.
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. Investments in equipment and leases (continued):
At December 31, 1996, the aggregate amounts of future minimum lease payments
under operating and direct financing leases are as follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
------------ ------ ------ -----
1997 $17,030,636 $8,074,041 $25,104,677
1998 13,156,989 5,478,854 18,635,843
1999 8,864,598 4,949,017 13,813,615
2000 5,787,881 3,744,308 9,532,189
2001 3,941,207 3,003,681 6,944,888
Thereafter 9,061,351 9,285,516 18,346,867
--------------- --------------- ----------------
$57,842,662 $34,535,417 $92,378,079
=============== =============== ================
Leveraged leases:
As of December 31, 1996, investment in leveraged leases consists of an air
separation plant and materials handling equipment. The following lists the
components of the Partnership's investment in leveraged leases as of December
31, 1996 and 1995:
1996 1995
---- ----
Aggregate rentals receivable $5,149,595 $7,482,839
Less aggregate principal and interest payable on non-recourse loans (3,046,744) (4,915,644)
Estimated residual value of leased assets 2,731,886 2,994,011
Less unearned income (522,450) (706,796)
---------------- ---------------
Net investment in leveraged leases $4,312,287 $4,854,410
================ ===============
4. Non-recourse debt:
At December 31, 1996, non-recourse debt, other than that related to leveraged
leases which is accounted for as a part of the net investment in leveraged
leases, consists of notes payable to financial institutions. The notes are due
in varying monthly, quarterly and semi-annual payments. Interest on the notes is
at rates from 6.50% to 10.53%. The notes are secured by assignments of lease
payments and pledges of assets. At December 31, 1996, the carrying value of the
pledged assets is approximately $54,865,142. The notes mature from 1997 through
2015.
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
4. Non-recourse debt (continued):
Future minimum payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
------------ --------- -------- -----
1997 $7,318,530 $3,007,584 $10,326,114
1998 7,987,836 2,416,170 10,404,006
1999 6,149,056 1,831,354 7,980,410
2000 4,499,170 1,377,666 5,876,836
2001 4,337,075 1,005,577 5,342,652
Thereafter 11,204,536 4,616,457 15,820,993
--------------- ---------------- ---------------
$41,496,203 $14,254,808 $55,751,011
=============== ================ ===============
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
The Limited Partnership Agreement allows for the reimbursement of costs incurred
by the General Partner in providing administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. The General
Partner is not reimbursed for services where it is entitled to receive a
separate fee as compensation for such services, such as acquisition and
disposition of equipment. Reimbursable costs incurred by the General Partner are
allocated to the Partnership based upon 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 the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. The General Partner 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 and are
reimbursable in accordance with the Limited Partnership Agreement.
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
5. Related party transactions (continued):
The General Partner and/or Affiliates earned fees, commissions and
reimbursements pursuant to the Limited Partnership Agreement as follows during
1996, 1995 and 1994:
1996 1995 1994
---- ---- ----
Selling commissions (equal to 9.5% of the selling price of the
Limited Partnership units, deducted from Limited Partners' capital) $7,683,401
Reimbursement of other syndication costs $89,139 3,533,403
Acquisition fees equal to 3.5% of the equipment purchase price, for evaluating
and selecting equipment to be acquired (not to exceed approximately 4.75% of
Gross Proceeds, included in
investment in leases) $147,072 1,818,287 2,738,556
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). 1,725,751 1,623,818 1,013,448
Administrative costs reimbursed to General Partner 455,316 535,812 706,324
---------------- --------------- ---------------
$2,328,139 $4,067,056 $15,675,132
================ =============== ===============
6. Partners' capital:
As of December 31, 1996, 12,497,000 Units were issued and outstanding (in
addition to the Units issued to the Initial Limited Partners). The Partnership
is authorized to issue up to 12,500,000 Units of Limited Partnership interest in
addition to those issued to the initial Limited Partners.
The Partnership Net Profits, Net Losses, and Tax Credits are to be allocated 99%
to the Limited Partners and 1% to the General Partner.
Available Cash from Operations and Cash from Sales and Refinancing, as defined
in the Limited Partnership Agreement, shall be distributed as follows:
First, 5% of Distributions of Cash from Operations to the General Partner
as Incentive Management Compensation.
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.
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
6. Partners' capital (continued):
Third, the General Partner will receive as Incentive Management
Compensation, the following:
(A) 10% of remaining Cash from Operations,
(B) 15% of remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
7. Concentration of credit risk and major customers:
The Partnership leases equipment to lessees in diversified industries. Leases
are subject to the General Partner's credit committee review. The leases provide
for the return of the equipment upon default.
As of December 31, 1996, 1995 and 1994, there were concentrations (greater than
10%) of equipment leased to lessees in certain industries (as a percentage of
total equipment cost) as follows:
1996 1995 1994
---- ---- ----
Rail transportation 24% 19% 26%
Mining 16% 20% 17%
Petroleum and coal products 11% 13% *
Food processing * 10% *
* Less than 10%.
During 1996, two customers comprised 16% and 11% of the Partnership's revenues
from leases. During 1995, two customers comprised 14% and 12% of the
Partnership's revenues from leases. During 1994, two customers comprised 14% and
10% of the Partnership's revenues from leases.
8. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $90,000,000 revolving credit agreement with a group of financial
institutions which expires on October 28, 1997. The agreement includes an
acquisition facility and a warehouse facility which are used to provide bridge
financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases. Borrowings on the warehouse facility are recourse
jointly to certain of the Affiliates, the Partnership and the General Partner.
During 1996, the Partnership had borrowed $18,098,333 under the line of credit.
Repayments on the line of credit were $34,469,231 during 1996 and $9,921,190
remained outstanding as of December 31, 1996. At December 31, 1996, the rates on
such borrowings varied from 7.12% to 8.25%.
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
8. Line of credit (continued):
In addition, certain of the Affiliates had borrowed an aggregate of $9,821,300
under the warehouse facility as of December 31, 1996.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of December
31, 1996. At December 31, 1996, $38,857,117 was available under this agreement.
During 1995, the Partnership had borrowed $33,994,956 under the line of credit.
Of those amounts, $7,702,868 was repaid during 1995 and $26,292,088 remained
outstanding as of December 31, 1995.
9. Extraordinary gain on extinguishment of debt:
In January 1996, Barney's, Inc., one of the Partnership's lessees filed for
reorganization under Chapter 11 of the United States Bankruptcy Code. In
accordance with Financial Accounting Standards Board Statement No. 121 (FAS 121)
the Partnership determined that the assets under an operating lease to this
particular lessee were impaired as of December 31, 1995. The Partnership
estimated that only a portion of the contractual cash flows would be received
under the lease. Under FAS 121, the estimated cash flows were discounted at the
effective rate of the non-recourse debt related to the lease and the assets were
written down to the present value of those cash flows.
Assets and liabilities related to the lease transaction were as follows as of
December 31, 1995:
Assets at cost $3,365,947
Accumulated depreciation (1,287,475)
----------------
Book value of lease assets 2,078,472
Deposits from lessee (124,235)
Non-recourse debt (1,733,741)
----------------
Net assets included in the Partnership's balance sheet as of
December 31, 1995 before provision for impairment 220,496
Reserve for impairment (778,169)
----------------
Excess of non-recourse debt over net assets ($557,673)
================
On July 19, 1996, the assets subject to the lease were purchased by a third
party. As part of the purchase and transaction restructure, the related
non-recourse debt was extinguished by the lender and the Partnership received a
small amount of cash proceeds. The sale resulted in a gain on the sale of the
assets and a gain on the extinguishment of the related non-recourse debt. The
following summarizes this transaction:
Assets at cost $3,365,947
Accumulated depreciation at June 30, 1996 (1,573,580)
----------------
Book value of lease assets at June 30, 1996 1,792,367
Reserve for impairment (778,169)
----------------
Carrying value at June 30, 1996 1,014,198
Deposits from lessee retained by Partnership (124,235)
----------------
Excess of carrying value over deposits from lessee 889,963
Gross sales proceeds 1,579,200
----------------
Gain on sale of assets $689,237
================
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
9. Extraordinary gain on extinguishment of debt (continued):
Non-recourse debt $1,733,741
Gross sales proceeds used to extinguish non-recourse debt (1,572,786)
----------------
Extraordinary gain on extinguishment of debt $160,955
================
Gross sales proceeds $1,579,200
Gross sales proceeds used to extinguish non-recourse debt (1,572,786)
----------------
Net cash proceeds to Partnership $6,414
================
10. Fair value of financial instruments:
The Partnership has adopted Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," which requires
disclosure of the fair value of financial instruments for which it is
practicable to estimate fair value. The following methods and assumptions were
used to estimate the fair value of each class of financial instrument for which
it is practicable to estimate that value.
Cash and cash equivalents:
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.
Accounts payable, accrued interest and customer deposits:
The carrying amounts of accounts payable, accrued interest and customer deposits
approximate fair value because of the short maturity of these instruments.
Non-recourse debt:
The fair value of the Partnership's non-recourse debt is estimated using
discounted cash flow analyses, based on the Partnership's current incremental
borrowing rates for similar types of borrowing arrangements. The estimated fair
value of the Partnership's non-recourse debt at December 31, 1996 is
$39,629,318.
Line of credit:
The carrying amount of the Partnership's variable rate line of credit
approximates fair value.
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
Inapplicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The registrant is a Limited Partnership and, therefore, has no officers or
directors.
All of the outstanding capital stock of ATEL Financial Corporation (the General
Partner) is held by ATEL Capital Group ("ACG"), a holding company formed to
control the General Partner and affiliated companies pursuant to a corporate
restructuring completed in July 1994. The outstanding capital stock of ATEL
Capital Group is owned 75% by A. J. Batt and 25% by Dean Cash, and was obtained
in the restructuring in exchange for their capital interests in ATEL Financial
Corporation.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"),
ATEL Investor Services ("AIS") and ATEL Financial Corporation ("AFC") 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
AFC. ATEL Securities Corporation ("ASC"), is a wholly-owned subsidiary of ATEL
Financial Corporation.
The officers and directors of ATEL Capital Group, ATEL Financial Corporation and
their affiliates are as follows:
A. J. Batt . . . . . . . . Chairman of the Board of Directors of ACG, AFC, ALC,
AEC, AIS and ASC; President and Chief Executive
Officer of ACG, AFC and AEC
Dean L. Cash . . . . . . . Director, Executive Vice President and Chief
Operating Officer of ACG, AFC, and AEC; Director,
President and Chief Executive Officer of ALC, AIS
and ASC
F. Randall Bigony . . . . Senior Vice President and Chief Financial Officer of
ACG, AFC, ALC, AIS and AEC
Donald E. Carpenter . . . Vice President and Controller of ACG, AFC, ALC, AEC
and AIS; Chief Financial Officer of ASC
Vasco H. Morais . . . . . General Counsel for ACG, AFC, ALC, AIS and AEC
William J. Bullock . . . . Director of Asset Management of AEC
Jeffrey A. Schwager . . . Vice President - Syndication of ALC
Russell H. Wilder . . . . Vice President - Credit of AEC
John P. Scarcella . . . . Vice President of ASC
A. J. Batt, age 60, founded ATEL in 1977 and has been its president and chairman
of the board of directors since its inception. From 1973 to 1977, he was
employed by GATX Leasing Corporation as manager-data processing and equity
placement for the lease underwriting department, which was involved in equipment
financing for major corporations. From 1967 to 1973 Mr. Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support services for computer time-sharing applications for corporations and
financial institutions. Prior to that time, he was employed by North American
Aviation as an engineer involved in the Apollo project. Mr. Batt received a
B.Sc. degree with honors in mathematics and physics from the University of
British Columbia in 1961.
Dean L. Cash, age 46, joined ATEL as director of marketing in 1980 and has been
a vice president since 1981, executive vice president since 1983 and a director
since 1984. Prior to joining ATEL, Mr. Cash was a senior marketing
representative for Martin Marietta Corporation, data systems division, from 1979
to 1980. From 1977 to 1979, he was employed by General Electric Corporation,
where he was an applications specialist in the medical systems division and a
marketing representative in the information services division. Mr. Cash was a
systems engineer with Electronic Data Systems from 1975 to 1977, and was
involved in maintaining and developing software for commercial applications. Mr.
Cash received a B.S. degree in psychology and mathematics in 1972 and an M.B.A.
degree with a concentration in finance in 1975 from Florida State University.
Mr. Cash is an arbitrator with the American Arbitration Association.
F. Randall Bigony, age 39, joined ATEL in 1992 to review administrative
operations within ATEL Financial Corporation and to develop and implement
functional plans to support company growth. He currently oversees ATEL's
accounting, MIS and treasury functions. From 1987 until joining ATEL, Mr. Bigony
was president of F. Randall Bigony & Co., a consulting firm that provided
financial and strategic planning services to emerging growth companies. From
1983 to 1987, he was a manager with the accounting firm of Ernst & Whinney,
serving clients in its management consulting practice. Mr. Bigony received a
B.A. degree in business from the University of Massachusetts and an M.B.A.
degree in finance from the University of California, Berkeley. He is a founding
board member and acting treasurer of the I Have a Dream Foundation Bay Area
Chapter.
Donald E. Carpenter, age 48, joined ATEL in 1986 as controller. Prior to joining
ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath, certified
public accountants in San Francisco, California, from 1983 to 1986. From 1979 to
1983, Mr. Carpenter was an audit senior with Deloitte, Haskins & Sells,
certified public accountants, in San Jose, California. From 1971 to 1975, Mr.
Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter received a
B.S. degree in mathematics (magna cum laude) from California State University,
Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter
has been a California certified public accountant since 1981.
Vasco H. Morais, age 38, joined ATEL in 1989 as general counsel to provide legal
support in the drafting and reviewing of lease documentation, advising on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of
America's equipment leasing subsidiaries, providing in-house legal support on
the documentation of tax-oriented and non-tax oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital
Companies in the Corporate and Securities Legal Department involved in drafting
and reviewing contracts, advising on corporate law matters and securities law
issues. Mr. Morais received a B.A. degree in 1982 from the University of
California in Berkeley and a J.D. degree in 1986 from Golden Gate University Law
School. Mr. Morais has been an active member of the State Bar of California
since 1986.
William J. Bullock, age 33, joined ATEL in 1991, as the director of asset
management. He assumed responsibility for the disposition of off-lease equipment
and residual valuation analysis on new lease transactions. Prior to joining
ATEL, Mr. Bullock was a senior member of the equipment group at McDonnell
Douglas Finance Corporation("MDFC") responsible for managing its $4 billion
portfolio of leases. Mr. Bullock was involved in negotiating sales and renewals
as well as preparing and inspecting equipment. Prior to joining MDFC in 1989,
Mr. Bullock was the Senior Negotiator at Equitable Leasing (a subsidiary of GE
Capital Equipment Corp.) in San Diego. At Equitable, he handled the end-of-lease
negotiations and equipment dispositions of a portfolio comprised of equipment
leased primarily to Fortune 200 companies. Mr. Bullock has been a member of the
Equipment Lessors Association ("ELA") since 1987 and has authored ELA industry
articles. He received a B.S. degree in Finance in 1987 from San Diego State
University and is pursuing his M.B.A.
Jeffrey A. Schwager, age 36, joined ATEL in 1991 as vice president - syndication
and is responsible for acquiring transactions from intermediaries as well as
debt and equity placement. Prior to joining ATEL, Mr. Schwager was a member of
General Electric Capital Corporation's Institutional Financing Group. There, he
was responsible for originating equipment lease and corporate finance
opportunities, as well as soliciting equipment portfolios in conjunction with
marketing a proprietary capital enhancement product. From 1985 through 1990, Mr.
Schwager held several positions with Bank Ireland/First Financial, most recently
Vice President Marketing, where he was responsible for originating and
negotiating tax-oriented leveraged lease financings for Fortune 500 companies.
From 1983 to 1985 Mr. Schwager was an Associate Consultant with The Bigelow
Company, a middle market investment banking and management consulting firm,
developing and implementing strategic plans for a number of clients. Prior to
The Bigelow Company, he worked for Petro-Lewis Corporation as a joint-interest
accountant. Mr. Schwager received his B.S. in Business Administration from
Babson College in 1982, majoring in Finance and Entrepreneurial Studies.
Russell H. Wilder, age 42, joined ATEL in 1992 as Vice President of ATEL
Business Credit, a wholly-owned subsidiary of ACG. Immediately prior to joining
ATEL, Mr. Wilder was a personal property broker specializing in equipment
leasing and financing and an outside contractor in the areas of credit and
collections. From 1985 to 1990 he was Vice President and Manager of Leasing for
Fireside Thrift Co., a Teledyne subsidiary, and was responsible for all aspects
of setting up and managing the department, which operated as a small ticket
lease funding source. From 1983 to 1985 he was with Wells Fargo Leasing
Corporation as Assistant Vice President in the credit department where he
oversaw all credit analysis on transactions in excess of $2 million. From 1978
to 1983 he was District Credit Manager with Westinghouse Credit Corporation's
Industrial Group and was responsible for all non-marketing operations of various
district offices. Mr. Wilder holds a B.S. with Honors in Agricultural Economics
and Business Management from the University of California at Davis. He has been
awarded the Certified Lease Professional designation by the Western Association
of Equipment Lessors.
John P. Scarcella, age 35, joined ATEL Securities as vice president in 1992. He
is involved in the marketing of securities offered by ASC. Prior to joining ASC,
from 1987 to 1991, he was employed by Lansing Pacific Fund, a real estate
investment trust in San Mateo, California and acted as director of investor
relations. From 1984 to 1987, Mr. Scarcella acted as broker dealer
representative for Lansing Capital Corporation, where he was involved in the
marketing of direct participation programs and REITs. Mr. Scarcella received a
B.S.C. degree with emphasis in investment finance in 1983 and an M.B.A. degree
with a concentration in marketing in 1991 from Santa Clara University.
Item 11. EXECUTIVE COMPENSATION
The registrant is a Limited Partnership and, therefore, has no officers or
directors.
Set forth hereinafter is a description of the nature of remuneration paid and to
be paid to the General Partner and their affiliates. The amount of such
remuneration paid through December 31, 1996 is set forth in Item 8 of this
report under the caption "Financial Statements and Supplementary Data - Notes to
the Financial Statements - Related party transactions," at Note 5 thereof which
information is hereby incorporated by reference.
Selling Commissions
The Partnership paid selling commissions in the amount of 9.5% of Gross
Proceeds, as defined, ($11,875,000) to ATEL Securities Corporation, an affiliate
of the General Partner. Of this amount, $10,170,534 was reallowed to other
broker/dealers.
Acquisition Fees
Acquisition fees are to be paid to the General Partner for services rendered in
finding, reviewing and evaluating equipment to be purchased by the Partnership
and rejecting equipment not to be purchased by the Partnership. The total amount
of acquisition fees to be paid to the General Partner or their Affiliates is not
to exceed 3.5% of the aggregate purchase piece of equipment acquired, not to
exceed approximately 4.75% of the Gross Proceeds of the Offering.
The maximum amount of such fees to be paid is $5,929,583, all of which had been
paid as of December 31, 1996.
Equipment Management Fees
As compensation for its services rendered generally in managing or supervising
the management of the Partnership's equipment and in supervising other ongoing
services and activities including, among others, arranging for necessary
maintenance and repair of equipment, collecting revenue, paying operating
expenses, determining the equipment is being used in accordance with all
operative contractual arrangements, property and sales tax monitoring and
preparation of financial data, the General Partner or its affiliates are
entitled to receive management fees which are payable for each fiscal quarter
and are to be in an amount equal to (i) 5% of the gross revenues from
"operating" leases and (ii) 2% of gross revenues from "full payout" leases which
contain net lease provisions. See Note 5 to the financial statements included at
Item 8 of this report for amounts paid.
Incentive Management Fees
As compensation for its services rendered in establishing and maintaining the
composition of the Partnership's equipment portfolio and its acquisition and
debt strategies and supervising fund administration including supervising the
preparation of reports and maintenance of financial and operating data of the
Partnership, Securities and Exchange Commission and Internal Revenue Service
filings, returns and reports, the General Partner shall be entitled to receive
the Partnership management fee which shall be payable for each fiscal quarter
and shall be an amount equal to 5% of distributions of cash from operations
until such time as the Limited Partners have received aggregate distributions of
cash from operations in an amount equal to their original invested capital plus
a 10% per annum return on their average adjusted invested capital (as defined in
the Limited Partnership Agreement). Thereafter, the incentive management fee
shall be 15% of all distributions of cash from operations, sales or refinancing.
See Note 5 to the financial statements included at Item 8 of this report for
amounts paid.
Equipment Resale Fees
As compensation for services rendered in connection with the sale of equipment,
the General Partner shall be entitled to receive an amount equal to the lesser
of (i) 3% of the sales price of the equipment, or (ii) one-half the normal
competitive equipment sales commission charged by unaffiliated parties for such
services. Such fee is payable only after the Limited Partners have received a
return of their adjusted invested capital (as defined in the Limited Partnership
Agreement) plus 10% of their adjusted invested capital per annum calculated on a
cumulative basis, compounded daily, commencing the last day of the quarter in
which the limited partner was admitted to the Partnership. To date, none have
been accrued or paid.
Equipment Re-lease Fee
As compensation for providing re-leasing services, the General Partner shall
receive fees equal to 2% of the gross rentals or the comparable competitive rate
for such services relating to comparable equipment, whichever is less, derived
from the re-lease provided that (i) the General Partner or their affiliates have
and will maintain adequate staff to render such services to the Partnership,
(ii) no such re-lease fee is payable in connection with the re-lease of
equipment to a previous lessee or its affiliates, (iii) the General Partner or
its affiliates have rendered substantial re-leasing services in connection with
such re-lease and (iv) the General Partner or its affiliates are compensated for
rendering equipment management services.
General Partner's Interest in Operating Proceeds
Net income, net loss and investment tax credits are allocated 99% to the Limited
Partners and 1% to the general partner. See the statements of income included in
Item 8 of this report for the amounts allocated to the general and Limited
Partners in 1996, 1995 and 1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
At December 31, 1996 no investor is known to the Partnership to hold
beneficially more than 5% of the issued and outstanding Units.
Security Ownership of Management
The shareholders of the General Partner are beneficial owners of Limited
Partnership Units as follows:
(1) (2) (3) (4)
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
Limited Partnership Units A. J. Batt Initial Limited Partner Units 0.0002%
235 Pine Street, 6th Floor 25 Units ($250)
San Francisco, CA 94104 (owned by wife)
Limited Partnership Units Dean Cash Initial Limited Partner Units 0.0002%
235 Pine Street, 6th Floor 25 Units ($250)
San Francisco, CA 94104 (owned by wife)
Changes in Control
The Limited Partners have the right, by vote of the Limited Partners owning more
than 50% of the outstanding limited Partnership units, to remove a General
Partner.
The General Partner may at any time call a meeting of the Limited Partners or a
vote of the Limited Partners without a meeting, on matters on which they are
entitled to vote, and shall call such meeting or for vote without a meeting
following receipt of a written request therefor of Limited Partners holding 10%
or more of the total outstanding Limited Partnership units.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to Item 1 of this report under the caption "Equipment Leasing
Activities," Item 8 of this report under the caption "Financial Statements and
Supplemental Data - Notes to the Financial Statements - Related party
transactions" at Note 5 thereof, and Item 11 of this report under the caption
"Executive Compensation," are hereby incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) Financial Statements and Schedules
1.Financial Statements
Included in Part II of this report: Report of
Independent Auditors Balance Sheets at December 31,
1996 and 1995 Statements of Operations for the years
ended December 31, 1996, 1995 and 1994 Statements of
Changes in Partners' Capital for the years ended
December 31, 1996, 1995
and 1994
Statements of Cash Flows for the years ended December
31, 1996, 1995 and 1994 Notes to Financial Statements
2.Financial Statement Schedules
All schedules for which provision is made in the
applicable accounting regulations of the Securities
and Exchange Commission are not required under the
related instructions or are inapplicable, and
therefore have been omitted.
(b) Reports on Form 8-K for the fourth quarter of 1996
None
(c) Exhibits
(3) and (4) Agreement of Limited Partnership,
included as Exhibit B to Prospectus (Exhibit 28.1),
is incorporated herein by reference to the Report on
From 10K for the period ended December 31, 1993 (File
No. 33-53162)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: 3/27/1997
ATEL Cash Distribution Fund V, L.P.
(Registrant)
By: ATEL Financial Corporation,
General Partner of Registrant
By: /s/ A. J. Batt
------------------------------------
A. J. Batt,
President and Chief Executive Officer
of ATEL Financial Corporation
(General Partner)
By: /s/ Dean Cash
------------------------------------
Dean Cash,
Executive Vice President of ATEL
Financial Corporation (General
Partner)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the persons in the capacities and on the dates
indicated.
SIGNATURE CAPACITIES DATE
/s/ A. J. Batt President, chairman and 3/27/1997
- --------------------- chief executive officer of
A. J. Batt ATEL Financial Corporation
/s/ Dean Cash Executive vice president and 3/27/1997
- --------------------- director of ATEL Financial
Dean Cash Corporation
/s/ F. Randall Bigony Principal financial officer 3/27/1997
- ----------------------- of registrant; principal
F. Randall Bigony financial officer of ATEL
Financial Corporation
/s/ Donald E. Carpenter Principal accounting officer 3/27/1997
- ------------------------ of registrant; principal
Donald E. Carpenter accounting officer of ATEL
Financial Corporation
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act:
No proxy materials have been or will be sent to security holders. An annual
report will be furnished to security holders subsequent to the filing of this
report on Form 10-K, and copies thereof will be furnished supplementally to the
Commission when forwarded to the security holders.