Form 10-Q
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, 2000
|_| Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number 000-28368
ATEL Cash Distribution Fund VI, L.P.
(Exact name of registrant as specified in its charter)
California 94-3207229
- ---------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
235 Pine Street, 6th Floor, San Francisco, California 94104
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 989-8800
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X|
No |_|
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
2
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
(Unaudited)
ASSETS
2000 1999
---- ----
Cash and cash equivalents $ 7,094,212 $ 390,463
Accounts receivable, net of allowance for
doubtful accounts of $282,991 in 2000 and in 1999 3,186,332 10,368,154
Investments in leases 80,978,299 99,946,381
--------------------- ------------------
Total assets $ 91,258,843 $110,704,998
===================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 36,468,950 $46,490,585
Lines of credit - 8,350,000
Accounts payable:
General Partner 121,491 1,076,757
Equipment purchases 5,452 5,452
Other 615,395 593,862
Accrued interest payable 104,358 1,551,104
Unearned operating lease income 1,460,236 429,486
--------------------- ------------------
Total liabilities 38,775,882 58,497,246
Partners' capital:
General Partner (532,379) (567,944)
Limited Partners 53,015,340 52,775,696
--------------------- ------------------
Total partners' capital 52,482,961 52,207,752
--------------------- ------------------
Total liabilities and partners' capital $ 91,258,843 $110,704,998
===================== ==================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND VI, L.P.
INCOME STATEMENTS
THREE MONTH PERIODS ENDED
MARCH 31, 2000 AND 1999
(Unaudited)
Revenues: 2000 1999
---- ----
Leasing activities:
Operating leases $ 5,945,362 $ 9,508,632
Direct financing leases 25,755 28,220
Gain on sales of assets 4,254,908 70,965
Interest 3,478 1,738
Other 502 6,058
--------------------- ------------------
10,230,005 9,615,613
Expenses:
Depreciation and amortization 5,047,561 6,058,255
Interest expense 1,104,356 1,226,348
Administrative cost reimbursements to General Partner 87,405 43,679
Equipment and incentive management fees to General Partner 205,276 385,195
Other 210,170 215,027
Professional fees 18,701 11,032
--------------------- ------------------
6,673,469 7,939,536
--------------------- ------------------
Net income $ 3,556,536 $ 1,676,077
===================== ==================
Net income:
General Partner $ 35,565 $ 16,761
Limited Partners 3,520,971 1,659,316
--------------------- ------------------
$ 3,556,536 $ 1,676,077
===================== ==================
Net income per Limited Partnership Unit $ 0.28 $ 0.13
Weighted average number of Units outstanding 12,500,050 12,500,050
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTH PERIOD
ENDED MARCH 31, 2000
(Unaudited)
Limited Partners General
Units Amount Partner Total
Balance December 31, 1999 12,500,050 $52,775,696 $ (567,944) $52,207,752
Distributions to partners (3,281,327) - (3,281,327)
Net income 3,520,971 35,565 3,556,536
------------------ ---------------- --------------------- ------------------
Balance March 31, 2000 12,500,050 $53,015,340 $ (532,379) $52,482,961
================== ================ ===================== ==================
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2000 AND 1999
Operating activities: 2000 1999
---- ----
Net income $ 3,556,536 $ 1,676,077
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 5,047,561 6,058,255
Gain on sales of assets (4,254,908) (70,965)
Changes in operating assets and liabilities:
Accounts receivable 2,381,822 379,442
Accounts payable, General Partner (955,266) (2,930)
Accounts payable, other 21,533 1,243,287
Accrued interest payable 327,599 49,617
Unearned lease income 1,030,750 874,276
--------------------- ------------------
Net cash provided by operations 7,155,627 10,207,059
--------------------- ------------------
Investing activities:
Proceeds from sales of assets 18,118,977 456,789
Reduction of net investment in direct financing leases 56,452 48,228
Purchases of equipment on operating leases - (129,852)
--------------------- ------------------
Net cash provided by investing activities 18,175,429 375,165
--------------------- ------------------
Financing activities:
Repayments of non-recourse debt (6,995,980) (7,787,389)
Repayments of borrowings under line of credit (8,350,000) -
Distributions to partners (3,281,327) (3,324,684)
--------------------- ------------------
Net cash used in financing activities (18,627,307) (11,112,073)
--------------------- ------------------
Net increase (decrease) in cash and cash equivalents 6,703,749 (529,849)
Cash and cash equivalents at beginning of period 390,463 744,132
--------------------- ------------------
Cash and cash equivalents at end of period $ 7,094,212 $ 214,283
===================== ==================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 776,757 $ 1,176,731
===================== ==================
Supplemental disclosure of non-cash transactions:
Offset of accounts receivable and debt service per
lease and debt agreement:
Accrued interest payable $ (1,774,345) $ (2,104,036)
Non-recourse debt (3,025,655) (2,695,964)
--------------------- ------------------
Accounts receivable $ (4,800,000) $ (4,800,000)
===================== ==================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
1. Summary of significant accounting policies:
Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the most recent report on Form
10K.
2. Organization and partnership matters:
ATEL Cash Distribution Fund VI, L.P. (the Fund), was formed under the laws of
the State of California on June 29 , 1994, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. Contributions in
the amount of $600 were received as of July 21, 1994, $100 of which represented
the General Partner's (ATEL Financial Corporation's) continuing interest, and
$500 of which represented the Initial Limited Partners' capital investment.
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 January 3,
1995, 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.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Balance Expense and Reclassi- Balance
December 31, Amortization fications and March 31,
1999 of Leases Dispositions 2000
---- --------- - ------------- ----
Net investment in operating leases $102,305,273 $ (4,908,412) $ (17,853,559) $79,543,302
Net investment in direct financing leases 1,019,587 (56,452) - 963,135
Residual interests 379,551 - - 379,551
Assets held for sale or lease 645,593 - 3,989,490 4,635,083
Reserve for losses (5,898,376) - - (5,898,376)
Initial direct costs, net of
accumulated amortization 1,494,753 (139,149) - 1,355,604
------------------ ---------------- --------------------- ------------------
$99,946,381 $ (5,104,013) $ (13,864,069) $80,978,299
================== ================ ===================== ==================
6
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
Balance Reclassi- Balance
December 31, fications and March 31,
1999 Depreciation Dispositions 2000
---- ------------ ------------- ----
Transportation $109,727,891 $ (18,286,459) $91,441,432
Materials handling 19,507,740 (77,768) 19,429,972
Construction 17,753,581 (1,250,021) 16,503,560
Manufacturing 29,440,009 (18,320,603) 11,119,406
Office automation 6,578,010 (741,224) 5,836,786
Other 2,964,538 (347,462) 2,617,076
------------------ ---------------- --------------------- ------------------
185,971,769 (39,023,537) 146,948,232
Less accumulated depreciation (83,666,496) ($4,908,412) 21,169,978 (67,404,930)
------------------ ---------------- --------------------- ------------------
$102,305,273 $ (4,908,412) $ (17,853,559) $79,543,302
================== ================ ===================== ==================
All of the property on leases was acquired in 1995, 1996 and 1997.
At March 31, 2000, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
------------ ------ ------ -----
2000 $13,983,739 $ 211,304 $ 14,195,043
2001 12,156,231 217,181 12,373,412
2002 5,377,885 147,554 5,525,439
2003 3,302,040 98,760 3,400,800
2004 2,810,286 98,760 2,909,046
Thereafter 14,869,905 290,903 15,160,808
------------------ ---------------- ---------------------
$52,500,086 $1,064,462 $ 53,564,548
================== ================ =====================
7
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(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
6.33% to 12.22%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
------------ --------- -------- -----
2000 $ 5,886,869 $8,827,702 $ 14,714,571
2001 8,823,031 2,526,688 11,349,719
2002 5,745,613 1,826,553 7,572,166
2003 5,487,689 1,239,498 6,727,187
2004 822,894 635,737 1,458,631
Thereafter 9,702,854 3,649,283 13,352,137
------------------ ---------------- ---------------------
$36,468,950 $18,705,461 $ 55,174,411
================== ================ =====================
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
management 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.
8
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
5. Related party transactions (continued):
The General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
2000 1999
---- ----
Incentive management fees (computed as 4% 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). $ 205,276 $385,195
Administrative costs reimbursed to General Partner 87,405 43,679
--------------------- ------------------
$ 292,681 $ 428,874
===================== ==================
6. Partner's capital:
As of March 31, 2000, 12,500,050 Units ($125,000,500) were issued and
outstanding.
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, 95.75% of Distributions of Cash from Operations to the Limited Partners,
1% of Distributions of Cash from Operations to the General Partner and 3.25% to
an affiliate of the General Partner as Incentive Management Compensation, 99% of
Distributions of Cash from Sales or Refinancing to the Limited Partners and 1%
of Cash from Sales or Refinancing to the General Partner.
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, an affiliate of the General Partner will receive as Incentive Management
Compensation, 4% of remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
9
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
7. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $95,000,000 revolving credit agreement with a group of financial
institutions which expires on July 28, 2000. 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.
From July 1, 2000 through July 28, 2000, the maximum available under the line of
credit shall be the then current balance or $85,000,000, which ever is less.
At March 31, 2000, the Partnership had no borrowings under the line of credit.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of March 31,
2000.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first quarter of 2000 and 1999, the Partnership's primary activity
was engaging in equipment leasing activities. In the first quarter of 2000, the
Partnership's primary source of cash was proceeds from sales of lease assets. In
1999, the Partnership's primary source of liquidity was rents from operating
leases.
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases 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.
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 $95,000,000 revolving line of credit with a financial
institution. The line of credit expires on July 28, 2000. From July 1, 2000
through July 28, 2000, the maximum available under the line of credit shall be
the then current balance or $85,000,000, which ever is less.
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.
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, 2000, the Partnership had borrowed $100,521,405 on a
non-recourse basis. As of that date, $36,468,950 remained outstanding. The
General Partner expects that aggregate borrowings in the future will not exceed
50% of aggregate equipment cost. In any event, the Agreement of Limited
Partnership limits such borrowings to 50% of the total cost of equipment, in
aggregate.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. As of March 31, 2000, there were no
such commitments.
If inflation in the general economy becomes significant, it may affect the
Partnership inasmuch as the residual (resale) values and rates on re-leases of
the Partnership's leased assets may increase as the costs of similar assets
increase. However, the Partnership's revenues from existing leases would not
increase, as such rates are generally fixed for the terms of the leases without
adjustment for inflation.
If interest rates increase significantly, the lease rates that the Partnership
can obtain on future leases will be expected to increase as the cost of capital
is a significant factor in the pricing of lease financing. Leases already in
place, for the most part, would not be affected by changes in interest rates.
11
Cash Flows
During the first quarters of 2000 and 1999, the Partnership's primary source of
cash from operating activities was rents from operating leases. Cash from
operating activities was almost entirely from operating lease rents in both
years.
Proceeds from the sales of assets and direct financing lease rents accounted for
as reductions of the Partnership's net investment in direct financing leases
were the only investing sources of cash. The only investing use of cash in 1999
was to make a deferred payment on the purchase of assets on operating leases.
Proceeds from sales of lease assets increased from $456,789 in 1999 to
$18,118,977 in 2000. Most of the sales proceeds in 2000 were used to pay down
non-recourse debt and borrowings on the line of credit.
There were no sources of cash from financing activities in 2000 and 1999.
Repayments of non-recourse debt decreased as a result of scheduled debt
payments. These reductions were partially offset by repayments of debt prior to
maturity using the proceeds of sales of lease assets.
Results of operations
Operations resulted in a net income of $7,094,212 in 2000 compared to $1,665,634
in 1999. The Partnership's primary source of revenues is from operating leases.
In 2000, most all of the gains recognized on the sales of lease assets resulted
from the sale of locomotives. There were no similar large sales of assets in
1999.
Interest expense has been reduced due to scheduled payments on the Partnership's
non-recourse debt and due to reductions of the amounts borrowed under the line
of credit. Debt has been reduced from a total of $59,791,399 at March 31, 1999
to $36,468,950 at March 31, 2000.
Depreciation expense has decreased from $5,860,859 in 1999 to $4,908,412 in
2000. Depreciation is related to operating lease assets. The amount of such
assets has decreased from $195,931,435 at January 1, 1999 to $146,948,232 at
March 31, 2000. As operating leases mature and the assets are sold, operating
lease revenues and depreciation expense will continue to decrease.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Inapplicable.
Item 2. Changes In Securities.
Inapplicable.
Item 3. Defaults Upon Senior Securities.
Inapplicable.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Inapplicable.
Item 5. Other Information.
Inapplicable.
Item 6. Exhibits And Reports On Form 8-K.
(a)Documents filed as a part of this report
1. Financial Statements
Included in Part I of this report:
Balance Sheets, March 31, 2000 and December 31, 1999.
Statement of changes in partners' capital for the three
months ended March 31, 2000.
Income statements for the three month periods ended
March 31, 2000 and 1999.
Statements of cash flows for the three month periods
ended March 31, 2000 and 1999.
Notes to the Financial Statements
2. Financial Statement Schedules
All other schedules for which provision is made in the
applicable accounting regulations of the Securities
and Exchange Commission are not required under the
related instructions or are inapplicable, and
therefore have been omitted.
(b) Report on Form 8-K
None
13
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 12, 2000
ATEL CASH DISTRIBUTION FUND VI, L.P.
(Registrant)
By: ATEL Financial Corporation
General Partner of Registrant
By: /s/ A. J. Batt
-----------------------------------
A. J. Batt
President and Chief Executive Officer
of General Partner
By: /s/ Dean L. Cash
-----------------------------------
Dean L. Cash
Executive Vice President
of General Partner
By: /s/ Paritosh K. Choksi
-------------------------------------
Paritosh K. Choksi
Principal financial officer
of registrant
By: /s/ Donald E. Carpenter
-------------------------------------
Donald E. Carpenter
Principal accounting
officer of registrant