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 June 30, 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 0-28368
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
JUNE 30, 2000 AND DECEMBER 31, 1999
(Unaudited)
ASSETS
2000 1999
---- ----
Cash and cash equivalents $ 5,298,630 $ 390,463
Accounts receivable 5,197,048 10,368,154
Investments in leases 76,012,297 99,946,381
------------------ -----------------
Total assets $ 86,507,975 $110,704,998
================== =================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $35,496,235 $46,490,585
Line of credit - 8,350,000
Accounts payable:
General Partner 293,070 1,076,757
Other 529,385 593,862
Equipment purchases 5,452 5,452
Accrued interest payable 426,732 1,551,104
Unearned operating lease income 192,807 429,486
------------------ -----------------
Total liabilities 36,943,681 58,497,246
Partners' capital:
General Partner (528,755) (567,944)
Limited Partners 50,093,049 52,775,696
------------------ -----------------
Total partners' capital 49,564,294 52,207,752
------------------ -----------------
Total liabilities and partners' capital $ 86,507,975 $110,704,998
================== =================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Leasing activities:
Operating lease revenues $ 11,629,783 $ 18,054,921 $ 5,684,421 $ 8,546,289
Direct financing leases 50,008 56,606 24,253 28,386
Gain on sales of assets 4,103,425 157,439 (151,483) 86,474
Interest income 69,109 3,447 65,631 1,709
Other 4,295 12,519 3,793 6,461
----------------- ------------------ ------------------ -----------------
15,856,620 18,284,932 5,626,615 8,669,319
Expenses:
Depreciation and amortization 9,070,151 11,856,615 4,022,590 5,798,360
Interest 1,730,157 2,517,878 625,801 1,291,530
Equipment and incentive management fees 490,528 576,016 285,252 190,821
Other 363,011 350,286 152,841 135,259
Administrative cost reimbursements 214,927 150,308 127,522 106,629
Professional fees 68,930 38,661 50,229 27,629
----------------- ------------------ ------------------ -----------------
11,937,704 15,489,764 5,264,235 7,550,228
----------------- ------------------ ------------------ -----------------
Net income $ 3,918,916 $ 2,795,168 $ 362,380 $ 1,119,091
================= ================== ================== =================
Net income:
General partner $ 39,189 $ 27,952 $ 3,624 $ 11,191
Limited partners 3,879,727 2,767,216 358,756 1,107,900
----------------- ------------------ ------------------ -----------------
$ 3,918,916 $ 2,795,168 $ 362,380 $ 1,119,091
================= ================== ================== =================
Weighted average number of units
outstanding 12,500,050 12,500,050 12,500,050 12,500,050
Net income per limited partnership unit $0.31 $0.22 $0.03 $0.09
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD ENDED
JUNE 30, 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 (6,562,374) - (6,562,374)
Net income 3,879,727 39,189 3,918,916
----------------- ------------------ ------------------ -----------------
Balance June 30, 2000 12,500,050 $ 50,093,049 $ (528,755) $49,564,294
================= ================== ================== =================
See accompanying notes.
STATEMENT OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Operating activities:
Net income $ 3,918,916 $ 2,795,168 $ 362,380 $ 1,119,091
Adjustments to reconcile net income to net
cash provided by operations
Depreciation and amortization 9,070,151 11,856,615 4,022,590 5,798,360
Gain on sales of assets (4,103,425) (157,439) 151,483 (86,474)
Changes in operating assets and liabilities:
Accounts receivable 5,171,106 2,928,366 2,789,284 2,548,924
Accounts payable, general partner (783,687) 856,520 171,579 859,450
Accounts payable, other (64,477) 87,590 (86,010) (1,155,697)
Accrued interest expense (1,124,372) (1,466,721) (1,451,971) (1,516,338)
Unearned lease income (236,679) 70,413 (1,267,429) (803,863)
----------------- ------------------ ------------------ -----------------
Net cash provided by operating activities 11,847,533 16,970,512 4,691,906 6,763,453
----------------- ------------------ ------------------ -----------------
Investing activities:
Proceeds from sales of assets 18,853,784 871,191 734,807 414,402
Reduction in net investment in direct
financing leases 113,574 103,867 57,122 55,639
Purchase of equipment on operating leases - (124,400) - 5,452
----------------- ------------------ ------------------ -----------------
Net cash provided by investing activities 18,967,358 850,658 791,929 475,493
----------------- ------------------ ------------------ -----------------
5
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Financing activities:
Repayment of long-term non-recourse debt (10,994,350) (12,760,252) (3,998,370) (4,972,863)
Distributions to partners (6,562,374) (6,607,065) (3,281,047) (3,282,381)
Repayment of line of credit (8,350,000) - - -
Borrowings on line of credit - 1,250,000 - 1,250,000
----------------- ------------------ ------------------ -----------------
Net cash provided by financing activities (25,906,724) (18,117,317) (7,279,417) (7,005,244)
----------------- ------------------ ------------------ -----------------
Net increase (decrease) in cash and
cash equivalents 4,908,167 (296,147) (1,795,582) 233,702
Cash at beginning of period 390,463 744,132 7,094,212 214,283
----------------- ------------------ ------------------ -----------------
Cash at end of period $ 5,298,630 $ 447,985 $ 5,298,630 $ 447,985
================= ================== ================== =================
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest $ 1,080,184 $ 1,880,563 $ 303,427 $ 703,832
================= ================== ================== =================
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) $ 0 $ 0
Non-recourse debt (3,025,655) (2,695,964) - -
----------------- ------------------ ------------------ -----------------
Accounts receivable $(4,800,000) $(4,800,000) $ 0 $ 0
================= ================== ================== =================
See accompanying notes.
6
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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.
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
Expense or Reclass-
December 31, Amortization ifications & June 30,
1999 of Leases Dispositions 2000
---- --------- - ------------- ----
Net investment in operating leases $102,305,273 $(8,795,965) $(18,163,064) $75,346,244
Net investment in direct financing leases 1,019,587 (113,574) 4,565 910,578
Assets held for sale or lease 645,593 - 3,408,140 4,053,733
Residual interests 379,551 - - 379,551
Reserve for losses (5,898,376) - - (5,898,376)
Initial direct costs, net of accumulated
amortization 1,494,753 (274,186) - 1,220,567
----------------- ------------------ ------------------ -----------------
$ 99,946,381 $(9,183,725) $(14,750,359) $76,012,297
================= ================== ================== =================
7
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
Reclassifications & Balance
December 31, Dispositions June 30,
1999 1st Quarter 2nd Quarter 2000
---- ----------- ----------- ----
Transportation $109,727,891 $(18,286,459) $ 5,238,438 $96,679,870
Materials handling 19,507,740 (77,768) (2,717,599) 16,712,373
Construction 17,753,581 (1,250,021) (756,654) 15,746,906
Manufacturing 29,440,009 (18,320,603) - 11,119,406
Office automation 6,578,010 (741,224) (2,645,923) 3,190,863
Other 2,964,538 (347,462) (1,345,729) 1,271,347
----------------- ------------------ ------------------ -----------------
185,971,769 (39,023,537) (2,227,467) 144,720,765
Less accumulated depreciation (83,666,496) 16,261,566 (1,969,591) (69,374,521)
----------------- ------------------ ------------------ -----------------
$102,305,273 $(22,761,971) $(4,197,058) $75,346,244
================= ================== ================== =================
All of the property on leases was acquired in 1995, 1996 and 1997.
At June 30, 2000, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
------------ ------ ------ -----
2000 $ 9,480,073 $ 103,654 $ 9,583,727
2001 12,232,020 231,853 12,463,873
2002 5,375,611 158,720 5,534,331
2003 3,299,765 98,760 3,398,525
2004 2,808,012 98,760 2,906,772
Thereafter 14,867,061 296,280 15,163,341
----------------- ------------------ ------------------
$ 48,062,542 $ 988,027 $ 49,050,569
================= ================== ==================
8
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly 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 $ 4,918,455 $ 895,736 $ 5,814,191
2001 8,823,031 2,526,688 11,349,719
2002 5,745,613 1,828,731 7,574,344
2003 5,487,689 1,239,498 6,727,187
2004 822,894 635,737 1,458,631
Thereafter 9,698,553 3,649,283 13,347,836
----------------- ------------------ ------------------
$ 35,496,235 $ 10,775,673 $ 46,271,908
================= ================== ==================
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 General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement during the six
month periods ended June 30, 2000 and 1999 as follows:
2000 1999
---- ----
Incentive management fees (computed as 3.25% of distributions of cash from
operations, as defined in the Limited Partnership Agreement) and equipment
management fees (computed as 3.5% 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). $ 490,528 $ 576,016
Reimbursement of administrative costs 214,927 150,308
------------------ -----------------
$ 705,455 $ 726,324
================== =================
9
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
6. Partner's capital:
As of June 30, 1997, 12,500,050 Units ($125,000,500) were issued and
outstanding. The Fund's registration statement with the Securities and Exchange
Commission became effective November 23, 1994 and its offering was concluded on
November 23, 1996. The Fund is authorized to issue up to 12,500,050 Units,
including the 50 Units 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, 95% (95.75% after June 30, 1995) of Distributions of Cash from Operations
to the Limited Partners, 1% of Distributions of Cash from Operations to the
General Partner and 4% (3.25% after June 30, 1995) ( 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 8% 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% (3.25% after June 30, 1995) of remaining Cash from Sales or
Refinancing.
Fourth, the balance to the Limited Partners.
7. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $77,500,000 revolving credit agreement with a group of financial
institutions which expires on July 28, 2001. 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.
At June 30, 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 incompliance with its covenants as of June 30,
2000.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first half of 2000, the Partnership's primary activity was engaging
in equipment leasing activities.
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 $77,500,000 revolving line of credit with a group of financial
institutions. The line of credit expires on July 28, 2001.
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.
As of June 30, 2000, the Partnership had borrowed $100,521,405 with a remaining
unpaid balance of $35,496,235. 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. There were no such commitments as of
June 30, 2000.
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, 2000 vs. 1999:
Six months:
In 2000 and 1999, the Partnership's primary source of cash was rents from
operating leases. Cash provided by operations decreased by $5,122,979 (from
$17,101,364 in 1999 to $11,847,533 in 2000).
The only significant source of cash from investing activities in 2000 was
proceeds from sales of lease assets. Asset sales were particularly significant
in the first quarter of 2000. Most of the sales proceeds were used to pay off
the line of credit and to pay down the Partnership's non-recourse debt. Cash
flows from direct financing leases were not significant in either period.
In 2000, there were no sources of cash flows from financing activities. In 1999,
the only source of cash from financing activities was borrowings on the line of
credit. Payments of non-recourse debt have decreased as a result of scheduled
debt payments.
Three months:
Operating lease rents were the primary source of cash from operating activities
in 2000 and 1999.
As noted above for the six month period, proceeds from asset sales and direct
financing lease rents were the only sources of cash from investing activities in
2000 and 1999 and were not as significant as cash flows from operations.
There were no sources of cash from financing activities in 2000. Debt payments
have decreased for the same reasons noted above for the six month periods.
Results of operations
In 2000, operations resulted in net income of $3,918,916 (six months) and
$362,380 (three months). In 1999, operations resulted in net income of
$2,795,168 (six months) and $1,119,091 (three months). The Partnership's primary
source of revenues is from operating leases. This is expected to remain true in
future periods. Gains and losses on sales of lease assets are not expected to be
consistent from one period to another. Depreciation expense is the single
largest expense of the Partnership and is expected to remain so in future
periods. Operating lease rents decreased compared to 1999 due to sales of lease
assets over the last year. As Interest expense is related to the borrowings
under the line of credit and non-recourse debt and has decreased because of
decreased debt balances compared to 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On December 31, 1997, Quaker Coal Company requested a moratorium on lease
payments from January through March 1998. No lease payments were made through
June of 1998. As a result, the General Partner declared the lease in default.
Subsequently, the lessee made the outstanding payments, however, the General
Partner refused to waive the default and insisted on additional damages in the
range of $1,428,000 to $1,743,000. The General Partner sued the lessee for
damages and is currently awaiting judgment from the court. The General Partner
believes that an adverse ruling would not have a material impact on the
operations of the Partnership. The amounts of these damages have not been
included in the financial statements included in Item 1 of this report.
12
In January 2000, Applied Magnetics Corporation, a lessee of the Partnership,
filed for protection from creditors under Chapter 11 of the U. S. Bankruptcy
Act. The Partnership has assets with a total net book value of $5,113,290 leased
to Applied Magnetics Corporation. On January 31, 2000, the General Partner was
appointed to the Official Committee of Unsecured Creditors. Procedures are under
way for the liquidation of the Partnership's leased equipment. Recoveries by the
Partnership, resulting from this default, are fairly certain in the range of 10%
to 20% due to the liquidation of the Partnership's equipment. Recoveries above
this amount are more uncertain; however, the Partnership anticipates an
additional 6% to 15% to be recoverable through the liquidation or reorganization
of the lessee's business. Any recoveries above these amounts are highly
uncertain and speculative. As of June 30, 2000, liquidation of the assets was
under way.
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, June
30, 2000 and December 31, 1999.
Statements of operations for the six and three month
periods ended June 30, 2000 and 1999.
Statement of changes in partners' capital for the six
month period ended June 30, 2000.
Statements of cash flows for the six and three month
periods ended June 30, 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:
August 11, 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