Form 10-K
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 (no fee required) For
the Year Ended December 31, 2001
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 000-28368
ATEL Cash Distribution Fund VI, L.P.
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
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
Prospectus dated November 23, 1994, filed pursuant to Rule 424(b) (Commission
File No. 33-81952) is hereby incorporated by reference into Part IV hereof.
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|
1
PART I
Item 1: BUSINESS
General Development of Business
ATEL Cash Distribution Fund VI, L.P. (the Partnership) was formed under the laws
of the state of California in June 1994. The Partnership was formed for the
purpose of acquiring equipment to engage in equipment leasing and sales
activities. The General Partner of the Partnership is ATEL Financial Services
LLC (ATEL). Prior to converting to a limited liability company structure, the
General Partner was formerly known as ATEL Financial Corporation.
The Partnership conducted a public offering of 12,500,000 units of Limited
Partnership Interest (Units) at a price of $10 per Unit. On January 3, 1995, the
Partnership commenced operations in its primary business (leasing activities).
As of November 23, 1996, the Partnership had received subscriptions for
12,500,000 ($125,000,000) Limited Partnership Units in addition to the Initial
Limited Partners' Units and terminated its offering.
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, 2002 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 ATEL that no more than 50% 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. During early 1997, the
Partnership 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, 2002.
As of December 31, 2001, the Partnership had purchased equipment with a total
acquisition price of $208,275,158.
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 ATEL, 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 ATEL, would not satisfy the
general credit rating criteria for the portfolio. In excess of 75% of the
equipment acquired with the net proceeds of the offering (based on original
purchase cost) had been leased to lessees with an aggregate credit rating of Baa
or better or to such hospitals or municipalities.
2
ATEL 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.
During 2001, 2000 and 1999, certain lessees generated significant portions of
the Partnership's total lease revenues as follows:
2001 2000 1999
---- ---- ----
Lessee Type of Equipment
Consolidated Rail Corporation Locomotives & intermodal
containers 13% * 11%
National Steel Corporation Steel manufacturing 12% * *
Daimler Chrysler Corporation Automobile manufacturing 11% * *
Tarmac America Construction 10% * *
NEC Electronics Semiconductor manufacturing * 18% 13%
* Less than 10%
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 ATEL 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 business of the Partnership is not seasonal.
The Partnership has no full time employees.
Equipment Leasing Activities
Through December 31, 2001, 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 Sales Price Expenses *
--------- ---------------- ----------- ----------
Manufacturing $32,373,226 $ 7,856,010 $26,807,581
Office automation 13,845,760 1,671,685 13,780,943
Railcars and locomotives 13,388,161 11,269,814 7,919,319
Transportation 11,425,260 4,660,983 9,911,722
Mining 6,388,907 1,455,712 6,489,993
Materials handling 4,614,716 761,648 5,021,539
Construction 2,256,495 485,592 2,523,010
Other 2,151,474 404,813 1,746,679
Containers 375,471 334,853 212,271
----------------- ---------------- ----------------
$86,819,470 $28,901,110 $74,413,057
================= ================ ================
* Includes only those expenses directly related to the production of the related
rents.
3
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, 2001 and
the industries to which the assets have been leased.
Purchase Price Excluding Percentage of Total
Asset Types Acquisition Fees Acquisitions
----------- ---------------- ------------
Transportation, rail cars $39,275,195 18.86%
Manufacturing 30,469,834 14.63%
Transportation, other 24,476,511 11.75%
Materials handling 24,043,881 11.54%
Railroad locomotives 22,353,332 10.73%
Transportation, intermodal containers 21,694,688 10.42%
Mining equipment 18,557,225 8.91%
Office automation 13,824,024 6.64%
Construction 9,259,221 4.45%
Other 4,321,247 2.07%
---------------- ----------------
$208,275,158 100.00%
================ ================
Purchase Price Excluding Percentage of Total
Industry of Lessee Acquisition Fees Acquisitions
------------------ ---------------- ------------
Transportation, rail $55,950,904 26.86%
Electronics manufacturing 29,030,626 13.94%
Business services 28,360,969 13.62%
Mining 24,793,242 11.90%
Transportation, other 23,217,066 11.15%
Manufacturing, other 18,922,229 9.09%
Oil & gas 16,535,633 7.94%
Communications 5,282,291 2.54%
Other 6,182,198 2.96%
---------------- ----------------
$208,275,158 100.00%
================ ================
For further information regarding the Partnership's equipment lease portfolio as
of December 31, 2001, 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 material
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. The following is a discussion of legal matters
involving the Partnership but which do not represent claims against the
Partnership or its assets.
4
Quaker Coal Company:
On December 31, 1997, Quaker Coal Company, one of the Partnership's lessees,
requested a moratorium on lease payments from January through March 1998. No
lease payments were made by the lessee through June of 1998, and as a result,
the General Partner declared the lease in default. Subsequently, the lessee
cured the outstanding payments and eventually satisfied substantially all lease
payments due under the lease; however, the General Partner refused to waive the
default and insisted on contractual damages. The General Partner filed a suit
against the lessee for its contractual damages in the U.S. District Court of
Northern California (the "Court"). On June 16, 2000, the lessee filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. The amounts of these
damages have not been included in the financial statements included in Part II,
Item 8.
The Partnership obtained a stipulation for relief from the automatic bankruptcy
stay to allow the Court to issue its ruling, and filed a request to participate
on the Official Committee of Unsecured Creditors in the bankruptcy proceedings.
The Partnership succeeded in securing the return of its equipment, which has
been liquidated, netting approximately 17% of the original equipment cost. The
Court issued a ruling on March 4, 2001, denying the Partnership's claim for
damages. The lessee subsequently filed a claim against the Partnership, for
reimbursement of its legal expenses. The General Partner believes the Court's
decision is erroneous, as a matter law, and has filed an appeal of the decision
in the U.S. District Court of Appeals.
The lessee filed a plan of reorganization, which has been objected to by several
large creditors, including the General Partner.
Upon the termination of the debtor's exclusivity period, competing plans were
filed by other creditors to the plan, and voting on the competing plans occurred
October 8, 2001. The results of the vote were that American Electric Power's
("AEP") Plan of Reorganization ("AEP Plan") was successful. Under the AEP Plan,
the claim of the Partnership has been assigned to a liquidating trustee for
resolution and satisfaction from the debtor's estate.
In January 2002, ATEL attended an appellate settlement conference seeking to
resolve the outstanding disputed claim. A reserve has been set aside by the
liquidating trustee in the amount of $1.2 million in satisfaction of the
Partnership's claims and those of its affiliates, although this claim amount
remains in dispute. Currently, the likelihood of recovery of amounts above the
payment of the lease rent and the liquidation of the equipment already received
remains speculative and highly uncertain.
Elkay Mining Company:
On December 17, 1999, Elkay Mining Company, a subsidiary of The Pittston
Company, filed a suit for declaratory relief in response to a notice of event of
default sent by the Partnership. The dispute surrounds the treatment by the
lessee of a defect in the leased equipment, and the lessee's failure to notify
that lessor of the defect in the equipment. All lease payments under that lease
were made in a timely manner, and the equipment was returned and liquidated by
the Partnership for $112,501.04, which is approximately 6% of the original
equipment cost. The Partnership believes that it has suffered damages and loss
as a result of actions of the lessee, in the amount of $773,402, which
represents the difference in the proceeds netted from the sale of the equipment
and the liquidated damages due under the lease. This matter has been litigated
and the parties are awaiting decision from the Court.
The General Partner has filed for arbitration against the guarantor in San
Francisco, as mandated by the lease. The General Partner believes that it has a
reasonable basis for prevailing with respect to this matter, and will
aggressively assert its defense.
5
Applied Magnetics Corporation:
In January 2000, Applied Magnetics Corporation filed for protection from
creditors under Chapter 11 of the U. S. Bankruptcy Code. The Partnership had
assets with a total net book value of $5,113,290 leased to Applied Magnetics
Corporation at the bankruptcy filing date. On January 31, 2000, the General
Partner was appointed to the Official Committee of Unsecured Creditors and
served as the Chairperson of the Committee. Procedures were quickly undertaken
for the liquidation of the Partnership's leased equipment, which proceeds
resulted in the satisfaction of a portion of the non-recourse debt secured by
the equipment. As of November 1, 2000, liquidation of the assets was completed.
The debtor filed a Plan of Reorganization (the "Plan"), which was approved by a
vote of the creditors of the debtor in October 2001. The Plan provided that the
debtor change its name to "Integrated Micro-Technology", and enter into a new
line of business, the manufacture and production of "micro-machines". As part of
the Plan the Partnership, along with the other unsecured creditors, receive a
proportionate share of their unsecured claims, in the form of ownership shares
and warrants in the newly formed business. The success of this new business plan
is highly uncertain.
The Partnership anticipates additional amounts may be recoverable through its
equity interests in the reorganized lessee's business, however, any recoveries
above the amounts received upon liquidation of the Partnership's equipment are
highly uncertain and speculative.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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, 2001, a total of 6,553 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 rate for monthly distributions from 2001 operations was $0.0875 per Unit.
The distributions were paid in February 2001 through December 2001 and in
January 2002. For each quarterly distribution (paid in April, July and October
2001 and in January 2002) the rate was $0.2625 per Unit. Distributions were from
2001 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.
6
The rate for monthly distributions from 2000 operations was $0.0875 per Unit.
The distributions were paid in February 2000 through December 2000 and in
January 2001. For each quarterly distribution (paid in April, July and October
2000 and in January 2001) the rate was $0.2625 per Unit. Distributions were from
2000 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 1999 operations was $0.0875 per Unit.
The distributions were paid in February 1999 through December 1999 and in
January 2000. For each quarterly distribution (paid in April, July and October
1999 and in January 2000) the rate was $0.2625 per Unit. Distributions were from
1999 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.
ATEL has 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: $1.00 in
1997 and 1998; $1.05 in 1999 and 2000; and $1.10 in 2001 and 2002.
Holders of Units may make the election without charge to receive distributions
on a monthly basis rather than on a quarterly basis.
The following table presents summarized information regarding distributions to
Limited Partners:
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Distributions of net income (loss) $ 0.17 $ 0.76 $ (0.07) $ 0.06 $ (0.18)
Return of investment 0.88 0.30 1.11 0.94 1.18
----------------- --------------- ---------------- ---------------- ----------------
Distributions per unit 1.05 1.06 1.04 1.00 1.00
Differences due to timing of
distributions - (0.01) 0.01 - -
----------------- --------------- ---------------- ---------------- ----------------
Nominal distribution rates from above $ 1.05 $ 1.05 $ 1.05 $ 1.00 $ 1.00
================= =============== ================ ================ ================
7
Item 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Partnership at
December 31, 2001, 2000, 1999, 1998 and 1997. This financial data should be read
in conjunction with the financial statements and related notes included under
Part II Item 8.
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Gross revenues $16,549,229 $27,796,597 $34,400,228 $36,149,061 $36,485,165
Net income (loss) $ 2,838,363 $ 9,533,716 $ (906,676) $ 710,923 $ (2,297,964)
Weighted average Units 12,500,050 12,500,050 12,500,050 12,500,050 12,500,050
Net income (loss) allocated to
Limited Partners $ 2,123,116 $ 9,438,379 $ (897,609) $ 703,814 $ (2,274,984)
Net income (loss) per Unit, based on
weighted average Units
outstanding $ 0.17 $ 0.76 $ (0.07) $ 0.06 $ (0.18)
Distributions per Unit, based on
weighted average Units
outstanding $ 1.05 $ 1.06 $ 1.04 $ 1.00 $ 1.00
Total Assets $65,841,842 $79,350,099 $110,704,998 $140,096,180 $170,290,581
Non-recourse Debt $21,712,993 $28,971,912 $46,490,585 $65,164,309 $77,647,591
Total Partners' Capital $38,008,680 $48,537,398 $52,207,752 $66,322,437 $78,274,435
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
The Partnership's public offering provided for a total maximum capitalization of
$125,000,000 and was completed as of November 23, 1996. As of that date,
subscriptions had been received and accepted for $125,000,000.
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases and proceeds of 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 ATEL's success in re-leasing or selling the equipment as it comes off
lease.
8
The Partnership participates with the General Partner and certain of its
affiliates in a $62,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on April 12, 2002. The General Partner is currently negotiating a new
line of credit and anticipates that the current line of credit will either be
replaced upon its expiration or that the current line of credit will be extended
until the new one is finalized. As of December 31, 2001, borrowings under the
facility were as follows:
Amount borrowed by the Partnership under the acquisition facility $ 4,500,000
Amounts borrowed by affiliated partnerships and limited liability companies under the
acquisition facility 13,100,000
----------------
Total borrowings under the acquisition facility 17,600,000
Amounts borrowed by the General Partner and its sister corporation under the warehouse facility * 10,999,501
----------------
Total outstanding balance $ 28,599,501
================
Total available under the line of credit $ 62,000,000
Total outstanding balance (28,599,501)
----------------
Remaining availability $ 33,400,499
================
* (Unaudited) The carrying value of the assets pledged as collateral and
financed at December 31, 2001 was $17,955,014.
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Partnership and the General
Partner.
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 ATEL and providing
for cash distributions to the Limited Partners. At December 31, 2001, the
Partnership had no commitments to purchase lease assets.
As of December 31, 2001, cash balances consisted of working capital and amounts
reserved for distributions in January 2002, generated from operations in 2001.
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. ATEL envisions no such requirements for
operating purposes.
As of December 31, 2001, the Partnership had borrowed $100,521,405 of
non-recourse debt. The remaining unpaid balance as of that date was $21,712,993.
The Partnership's long-term borrowings are generally non-recourse to the
Partnership, that is, the only recourse of the lender is to the equipment or
corresponding lease acquired with the loan proceeds. ATEL expects that aggregate
borrowings in the future will be approximately 40%-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. 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 50% 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.
9
See Note 4 to the financial statements for additional information regarding
non-recourse debt.
The Partnership commenced regular distributions, based on cash flows from
operations, beginning with the month of January 1995. 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.
Cash Flows
2001 vs. 2000:
In 2001 and 2000, the Partnership's primary source of cash was the rents from
operating leases. Cash flows from operations decreased from $15,929,861 in 2000
to $8,520,901 in 2001, a decrease of $7,408,960. The decrease resulted from
decreased operating lease rents.
In 2001 and 2000, sources of cash from investing activities consisted of
proceeds from sales of lease assets and cash flows from direct financing leases.
The cash flows from direct financing leases decreased slightly from $269,437 in
2000 to $259,277 in 2001. Proceeds from asset sales decreased from $18,083,829
in 2000 to $2,709,345 in 2001. Proceeds from sales of lease assets are not
expected to be consistent from one year to another.
In 2001, the only source of cash from financing activities was funds borrowed
under the line of credit. In 2000, there were no financing sources of cash. In
1999, the only source of cash from financing activities was borrowings under the
line of credit. Repayments of non-recourse debt decreased (from $11,172,244 in
2000 to $3,863,254 in 2001) as a result of scheduled debt payments.
2000 vs. 1999:
In 2000 and 1999, the Partnership's primary source of cash was the rents from
operating leases. Cash flows from operations decreased from $23,773,594 in 1999
to $15,929,861 in 2000, a decrease of $7,843,733. The decrease resulted from
decreased operating lease rents.
In 2000, sources of cash from investing activities consisted of proceeds from
sales of lease assets and cash flows from direct financing leases. The cash
flows from direct financing leases increased slightly from $255,610 in 1999 to
$269,437 in 2000. Proceeds from asset sales increased from $1,802,696 in 1999 to
$18,083,829 in 2000. Proceeds from sales of lease assets are not expected to be
consistent from one year to another.
In 2000, there were no financing sources of cash. In 1999, the only source of
cash from financing activities was borrowings under the line of credit.
Distributions to the Limited Partners increased as a result of an increase in
the per Unit distribution rate effective with distributions made starting in
February 1999 (see Item 5 of this report). Repayments of non-recourse debt
decreased (from $15,977,760 in 1999 to $11,172,244 in 2000) as a result of
scheduled debt payments.
10
Results of Operations
As of January 3, 1995, 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).
2001 vs. 2000:
Revenues in 2001 decreased to $16,549,229 compared to $27,796,597 in 2000. Most
of the Partnership's revenues are generated from operating leases. These rents
have decreased as a result of 2000 and 2001 asset sales.
Depreciation and interest are the most significant ongoing Partnership expenses.
Depreciation expense is directly related to the Partnership's investment in
operating leases and is, therefore, also directly related to the revenues
generated by those assets. The 2000 and 2001 sales which led to 2001 revenue
decreases also gave rise to the decrease in depreciation expense from
$15,540,231 in 2000 to $8,401,319 in 2001.
Interest expense has decreased as a result of scheduled debt payments.
Equipment management fees are related to lease revenues. In 2001, revenues
decreased as noted above and, as a result, the management fees also decreased
from $569,141 in 2000 to $371,281 in 2001, a decrease of $197,860.
Cost reimbursements to the general Partner increased as a result of a revised
analysis of the costs incurred by the General Partners and allocated to the
Partnership.
2000 vs. 1999:
Revenues in 2000 decreased to $27,796,597 compared to $34,400,228 in 1999. Most
of the Partnership's revenues are generated from operating leases. These rents
have decreased as a result of 1999 and 2000 asset sales.
Depreciation and interest are the most significant ongoing Partnership expenses.
Depreciation expense is directly related to the Partnership's investment in
operating leases and is, therefore, also directly related to the revenues
generated by those assets. The 1999 and 2000 sales which led to 2000 revenue
decreases also gave rise to the decrease in depreciation expense from
$22,002,111 in 1999 to $15,540,231 in 2000.
In 1999, Applied Magnetics, one of the Partnership's lessees, defaulted on its
lease obligations to the Partnership. In 1999, a provision for lease losses of
$5,113,290 was provided in relation to this lessee. The assets under the
operating leases with Applied Magnetics were financed primarily with
non-recourse debt. The balance of the debt was $3,320,774 at December 31, 1999.
Upon the foreclosure by the lender in 2000, the Partnership recognized an
extraordinary gain on extinguishment of debt in the amount of the unpaid debt.
Interest expense has decreased as a result of scheduled debt payments.
Equipment management fees are related to lease revenues. In 2000, revenues
decreased as noted above and, as a result, the management fees also decreased
from $959,511 in 1999 to $569,141 in 2000, a decrease of $390,370.
Recent accounting pronouncement:
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a
segment of a business. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, with earlier application encouraged. The Partnership expects
to adopt SFAS 144 as of January 1, 2002 and it does not expect that the adoption
of the Statement will have a significant impact on the Partnership's financial
position and results of operations.
11
Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership, like most other companies, is exposed to certain market risks,
including primarily changes in interest rates. The Partnership believes its
exposure to other market risks including foreign currency exchange rate risk,
commodity risk and equity price risk are insignificant to both its financial
position and results of operations.
In general, the Partnership manages its exposure to interest rate risk by
obtaining fixed rate debt. The fixed rate debt is structured so as to match the
cash flows required to service the debt to the payment streams under fixed rate
lease receivables. The payments under the leases are assigned to the lenders in
satisfaction of the debt. Furthermore, the Partnership has historically been
able to maintain a stable spread between its cost of funds and lease yields in
both periods of rising and falling rates. Nevertheless, the Partnership
frequently funds leases with its floating rate line of credit and is, therefore,
exposed to interest rate risk until fixed rate financing is arranged, or the
floating rate line of credit is repaid. As of December 31, 2001, there was
$4,500,000 outstanding on the floating rate line of credit and the effective
interest rates of the borrowings ranged from 3.92% to 3.93%.
To hedge its interest rate risk related to this variable rate debt, the
Partnership may enter into interest rate swaps. As of December 31, 2001, no
swaps or other derivative financial instruments were held by the Partnership.
The Partnership does not hold or issue derivative financial instruments for
speculative purposes.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Report of Independent Auditors, Financial Statements and Notes to
Financial Statements attached hereto at pages 13 through 27.
12
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Partners
ATEL Cash Distribution Fund VI, L.P.
We have audited the accompanying balance sheets of ATEL Cash Distribution Fund
VI, L.P. (Partnership) as of December 31, 2001 and 2000, 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, 2001. 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 auditing standards generally accepted
in the United States. 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 VI,
L.P. at December 31, 2001 and 2000, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
San Francisco, California
February 1, 2002
13
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
ASSETS
2001 2000
---- ----
Cash and cash equivalents $ 701,012 $ 1,947,276
Accounts receivable, net of allowance for
doubtful accounts of $861,253 in 2001
and $585,186 in 2000 7,200,988 7,595,825
Investments in equipment and leases 57,939,842 69,806,998
---------------- ----------------
Total assets $65,841,842 $79,350,099
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $21,712,993 $28,971,912
Line of credit 4,500,000 -
Accounts payable and accruals:
General Partner 208,687 264,395
Equipment purchases - 5,452
Other 585,993 331,385
Accrued interest payable 762,476 1,102,361
Unearned lease income 63,013 137,196
---------------- ----------------
27,833,162 30,812,701
Partners' capital (deficit):
General Partner - (472,607)
Limited Partners 38,008,680 49,010,005
---------------- ----------------
Total partners' capital 38,008,680 48,537,398
---------------- ----------------
Total liabilities and partners' capital $65,841,842 $79,350,099
================ ================
See accompanying notes.
14
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
---- ---- ----
Revenues:
Leasing activities:
Operating leases $16,849,677 $23,443,137 $33,987,395
Direct financing leases 197,224 86,858 111,799
(Loss) gain on sales of assets (559,525) 4,039,545 262,067
Interest income 50,520 196,627 10,231
Other 11,333 30,430 28,736
---------------- ---------------- ----------------
16,549,229 27,796,597 34,400,228
Expenses:
Depreciation and amortization 8,641,204 16,127,857 22,710,097
Interest 2,217,411 3,151,691 4,783,105
Cost reimbursements to General Partner 866,915 508,653 397,125
Other 816,703 750,309 776,273
Equipment and incentive management fees to affiliates 771,498 963,332 1,178,105
Provision for doubtful accounts 276,067 - 282,991
Professional fees 121,068 81,813 65,918
Provision for losses and impairments - - 5,113,290
---------------- ---------------- ----------------
13,710,866 21,583,655 35,306,904
---------------- ---------------- ----------------
Income (loss) before extraordinary item 2,838,363 6,212,942 (906,676)
Extraordinary gain on early extinguishment of debt - 3,320,774 -
---------------- ---------------- ----------------
Net income (loss) $ 2,838,363 $ 9,533,716 $ (906,676)
================ ================ ================
Net income (loss):
General Partner $ 715,247 $ 95,337 $ (9,067)
Limited Partners 2,123,116 9,438,379 (897,609)
---------------- ---------------- ----------------
$ 2,838,363 $ 9,533,716 $ (906,676)
================ ================ ================
Income (loss) before extraordinary item per Limited Partnership unit $ 0.17 $ 0.50 $ (0.07)
Extraordinary gain on early extinguishment of debt
per Limited Partnership unit - 0.26 -
---------------- ---------------- ----------------
Net income (loss) per Limited Partnership unit $ 0.17 $ 0.76 $ (0.07)
================ ================ ================
Weighted average number of units outstanding 12,500,050 12,500,050 12,500,050
See accompanying notes.
15
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Limited Partners General
Units Amount Partner Total
Balance December 31, 1998 12,500,050 $66,731,619 $ (409,182) $66,322,437
Distributions to limited partners ($1.04 per Unit) (13,058,314) - (13,058,314)
Distributions to General Partner - (149,695) (149,695)
Net income (897,609) (9,067) (906,676)
---------------- ---------------- ---------------- ----------------
Balance December 31, 1999 12,500,050 52,775,696 (567,944) 52,207,752
Distributions to limited partners ($1.06 per Unit) (13,204,070) - (13,204,070)
Net loss 9,438,379 95,337 9,533,716
---------------- ---------------- ---------------- ----------------
Balance December 31, 2000 12,500,050 49,010,005 (472,607) 48,537,398
Distributions to limited partners ($1.05 per Unit) (13,124,441) - (13,124,441)
Distributions to General Partner - (242,640) (242,640)
Net income 2,123,116 715,247 2,838,363
---------------- ---------------- ---------------- ----------------
Balance December 31, 2001 12,500,050 $38,008,680 $ - $38,008,680
================ ================ ================ ================
See accompanying notes.
16
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
---- ---- ----
Operating activities:
Net income (loss) $ 2,838,363 $ 9,533,716 $ (906,676)
Adjustment to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 8,641,204 16,127,857 22,710,097
Provision for doubtful accounts 276,067 - 282,991
Provision for losses and impairments - - 5,113,290
Loss (gain) on sales of assets 559,525 (4,039,545) (262,067)
Extraordinary gain on early extinguishment of debt - (3,320,774) -
Changes in operating assets and liabilities:
Accounts receivable (4,785,126) (2,329,866) (5,665,104)
Accounts payable, General Partner (55,708) (812,362) 905,707
Accounts payable, other 254,608 (262,477) (10,906)
Accrued interest payable 1,064,450 1,325,602 1,379,696
Unearned lease income (74,183) (292,290) 226,566
---------------- ---------------- ----------------
Net cash provided by operating activities 8,719,200 15,929,861 23,773,594
---------------- ---------------- ----------------
Investing activities:
Proceeds from sales of assets 2,511,046 18,083,829 1,802,696
Reduction of net investment in direct financing leases 259,277 269,437 255,610
Purchases of equipment on operating leases (5,452) - (249,800)
---------------- ---------------- ----------------
Net cash provided by investing activities 2,764,871 18,353,266 1,808,506
---------------- ---------------- ----------------
Financing activities:
Repayments of non-recourse debt (3,863,254) (11,172,244) (15,977,760)
Distributions to Limited Partners (13,124,441) (13,204,070) (13,058,314)
Repayments of borrowings under line of credit (1,000,000) (8,350,000) -
Borrowings under line of credit 5,500,000 - 3,250,000
Distributions to General Partner (242,640) - (149,695)
---------------- ---------------- ----------------
Net cash used in financing activities (12,730,335) (32,726,314) (25,935,769)
---------------- ---------------- ----------------
Net (decrease) increase in cash and cash equivalents (1,246,264) 1,556,813 (353,669)
Cash and cash equivalents at beginning of year 1,947,276 390,463 744,132
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 701,012 $ 1,947,276 $ 390,463
================ ================ ================
17
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
---- ---- ----
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 1,152,961 $ 1,826,089 $ 3,403,409
================ ================ ================
Schedule of non-cash transactions:
Offset of accounts receivable and debt service per lease and debt agreement:
Accrued interest payable $ (1,404,335) $ (1,774,345) $ (2,104,036)
Non-recourse debt (3,395,665) (3,025,655) (2,695,964)
---------------- ---------------- ----------------
Accounts receivable $ (4,800,000) $ (4,800,000) $ (4,800,000)
================ ================ ================
Extraordinary gain on early extinguishment of debt $ - $ 3,320,774 $ -
================ ================ ================
See accompanying notes.
18
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. Organization and Partnership matters:
ATEL Cash Distribution Fund VI, L.P. (the Partnership) 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.
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 General Partner of the Partnership is ATEL Financial Services LLC (ATEL).
Prior to converting to a limited liability company structure, the General
Partner was formerly known as ATEL Financial Corporation.
The Partnership's business consists of leasing various types of equipment. As of
December 31, 2001, the original terms of the leases ranged from one month to
twenty years.
Pursuant to the Limited Partnership Agreement, ATEL receives compensation and
reimbursements for services rendered on behalf of the Partnership (Note 5). ATEL
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:
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
estimated residual values of the equipment at the end of the leases.
Revenues from operating leases are recognized evenly over the lives of the
related leases.
Direct financing leases:
Income from direct financing lease transactions is reported using the financing
method of accounting, in which the Partnership's investment in the leased
property is reported as a receivable from the lessee to be recovered through
future rentals. The income portion of each rental payment is calculated so as to
generate a constant rate of return on the net receivable outstanding.
Statements of cash flows:
For purposes of the Statements of Cash Flows, cash and cash equivalents include
cash in banks and cash equivalent investments with original maturities of ninety
days or less.
19
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
2. Summary of significant accounting policies (continued):
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 (unaudited):
2001 2000
---- ----
Financial statement basis of net assets $38,008,680 $48,537,398
Tax basis of net assets 6,482,117 15,493,667
---------------- ----------------
Difference $31,526,563 $33,043,731
================ ================
The primary differences between the tax basis of net assets and the amounts
recorded in the financial statements are the result of differences in accounting
for syndication costs and differences between the depreciation methods used in
the financial statements and the Partnership's tax returns.
The following reconciles the net income (loss) reported in these financial
statements to the loss reported on the Partnership's federal tax return
(unaudited):
2001 2000 1999
---- ---- ----
Net income (loss) per financial statements $ 2,838,363 $ 9,533,716 $ (906,676)
Adjustment to depreciation expense 429,207 (701,135) (1,309,581)
Other adjustments to revenues and expenses 811,895 6,359,698 371,417
Provision for losses and impairments - - 5,113,290
Provision for doubtful accounts 276,067 - 282,991
---------------- ---------------- ----------------
Net income (loss) per federal tax return $ 4,355,532 $15,192,279 $ 3,551,441
================ ================ ================
Per unit data:
Net income and distributions per unit are based upon the weighted average number
of units outstanding during the period.
Credit risk:
Financial instruments which potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents and accounts
receivable. 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. Accounts receivable represent
amounts due from lessees in various industries, related to equipment on
operating and direct financing leases. See Note 7 for a description of lessees
by industry as of December 31, 2001, 2000 and 1999.
20
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
2. Summary of significant accounting policies (continued):
Basis of presentation:
The accompanying financial statements as of December 31, 2001 and 2000 and for
the three years ended December 31, 2001 have been prepared in accordance with
accounting principles generally accepted in the United States. Certain prior
year amounts have been reclassified to conform to the current year presentation.
Use of estimates:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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. Such
estimates primarily relate to the determination of residual values at the end of
the lease term.
Reserve for losses and impairments:
The Partnership maintains a reserve on its investments in equipment and leases
for losses and impairments which are inherent in the portfolio as of the balance
sheet dates. The General Partner's evaluation of the adequacy of the allowance
is a judgmental estimate that is based on a review of individual leases, past
loss experience and other factors. While the General Partner believes the
allowance is adequate to cover known losses, it is reasonably possible that the
allowance may change in the near term. However, such change is not expected to
have a material effect on the financial position or future operating results of
the Partnership. It is the Partnership's policy to charge off amounts which, in
the opinion of the General Partner, are not recoverable from lessees or the
disposition of the collateral. See Note 10.
Recent accounting pronouncement:
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a
segment of a business. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, with earlier application encouraged. The Partnership expects
to adopt SFAS 144 as of January 1, 2002 and it does not expect that the adoption
of the Statement will have a significant impact on the Partnership's financial
position and results of operations.
21
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
3. Investments in equipment and leases:
The Partnership's investments in equipment and leases consist of the following:
Depreciation
Expense or Reclass-
December 31, Amortization ifications or December 31,
2000 of Leases Dispositions 2001
---- --------- ------------ ----
Net investment in operating leases $66,838,736 $ (8,401,319) $ (2,989,907) $55,447,510
Net investment in direct financing leases 1,019,935 (259,277) 160,885 921,543
Assets held for sale or lease 953,554 - 180,934 1,134,488
Residual value interests 379,551 - (345,390) 34,161
Reserve for losses and impairments (291,905) - 103,896 (188,009)
Initial direct costs, net of accumulated amortization
of $1,535,327 in 2001 and $2,046,198 in 2000 907,127 (239,885) (77,093) 590,149
---------------- ---------------- ---------------- ----------------
$69,806,998 $ (8,900,481) $ (2,966,675) $57,939,842
================ ================ ================ ================
Operating leases:
Property on operating leases consists of the following:
Reclass-
December 31, ifications or December 31,
2000 Additions Dispositions 2001
---- --------- ------------ ----
Transportation $85,622,871 $ - $ (2,698,778) $82,924,093
Construction 21,133,558 - (1,178,462) 19,955,096
Materials handling 16,923,148 - (6,860,784) 10,062,364
Office automation 2,658,730 - (1,155,005) 1,503,725
Miscellaneous 1,088,706 - (46,503) 1,042,203
Manufacturing 409,385 - (120,617) 288,768
---------------- ---------------- ---------------- ----------------
127,836,398 - (12,060,149) 115,776,249
Less accumulated depreciation (60,997,662) (8,401,319) 9,070,242 (60,328,739)
---------------- ---------------- ---------------- ----------------
$66,838,736 $ (8,401,319) $ (2,989,907) $55,447,510
================ ================ ================ ================
22
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
3. Investments in equipment and leases (continued):
Direct financing leases:
As of December 31, 2001 and 2000, investment in direct financing leases consists
of railroad tank cars and various office automation equipment. The following
lists the components of the Partnership's investment in direct financing leases
as of December 31, 2001 and 2000:
2001 2000
---- ----
Total minimum lease payments receivable $ 1,015,735 $ 1,157,825
Estimated residual values of leased equipment (unguaranteed) 200,683 187,832
---------------- ----------------
Investment in direct financing leases 1,216,418 1,345,657
Less unearned income (294,875) (325,722)
---------------- ----------------
Net investment in direct financing leases $ 921,543 $ 1,019,935
================ ================
All of the property on leases was acquired in 1997, 1996 and 1995.
At December 31, 2001, 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
------------ ------ ------ -----
2002 $ 8,557,470 $ 426,745 $8,984,215
2003 3,616,340 182,355 3,798,695
2004 2,905,622 110,355 3,015,977
2005 2,702,747 98,760 2,801,507
2006 1,624,797 98,760 1,723,557
Thereafter 10,520,601 98,760 10,619,361
----------------- --------------- ----------------
$29,927,577 $1,015,735 $30,943,312
================= =============== ================
Reserves for losses and impairments and allowance for doubtful accounts:
Activity in the reserve for losses and impairments and allowances for doubtful
accounts consists of the following:
Allowance for Allowance for
reserves and doubtful
impairments accounts
Balance December 31,1998 $ 785,086 $ -
Provision 5,113,290 282,991
---------------- ----------------
Balance December 31,1999 5,898,376 282,991
Reclassifications (302,195) 302,195
Charge offs (5,304,276) -
---------------- ----------------
Balance December 31,2000 291,905 585,186
Provision - 276,067
Charge offs (103,896) -
---------------- ----------------
Balance December 31,2001 $ 188,009 $ 861,253
================ ================
23
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
4. Non-recourse debt:
At December 31, 2001, non-recourse debt 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 fixed rates from 6.37% to 12.22%. The
notes are secured by assignments of lease payments and pledges of assets. At
December 31, 2001, the carrying value of the pledged assets is $26,931,167. The
notes mature from 2002 through 2016.
Future minimum payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
2002 $ 5,743,147 $ 1,826,594 $ 7,569,741
2003 5,486,383 1,237,053 6,723,436
2004 821,505 633,381 1,454,886
2005 476,034 591,844 1,067,878
2006 679,762 548,359 1,228,121
Thereafter 8,506,162 2,493,684 10,999,846
----------------- --------------- ----------------
$21,712,993 $ 7,330,915 $29,043,908
================= =============== ================
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that ATEL 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 ATEL in providing administrative services to the Partnership. Administrative
services provided include Partnership accounting, investor relations, legal
counsel and lease and equipment documentation. ATEL 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 ATEL 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 ATEL record time incurred in performing
administrative services on behalf of all of the Partnerships serviced by ATEL.
ATEL 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 VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
5. Related party transactions (continued):
ATEL and/or affiliates earned fees, commissions and reimbursements, pursuant to
the Limited Partnership Agreement as follows during 2001, 2000 and 1999:
2001 2000 1999
---- ---- ----
Cost reimbursements to ATEL $ 866,915 $ 508,653 $ 397,125
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) 771,498 963,332 1,178,105
---------------- ---------------- ----------------
$ 1,638,413 $ 1,471,985 $ 1,575,230
================ ================ ================
6. Partners' capital:
As of December 31, 2001 and 2000, 12,500,050 Units were issued and outstanding,
including the 50 Units issued to the Initial Limited Partners. The Partnership's
registration statement with the Securities and Exchange Commission became
effective November 23, 1994. The Partnership is authorized to issue up to
12,500,000 Units, in addition to those issued to the Initial Limited Partners.
The Partnership's Net Profits, Net Losses, and Tax Credits are to be allocated
99% to the Limited Partners and 1% to the General Partner. In accordance with
the terms of the of Limited Partnership Agreement, an additional allocation of
income was made to the General Partner in 2001. The amount allocated was
determined so as to bring the General Partner's ending capital account balance
to zero.
Available Cash from Operations and Cash from Sales and Refinancing, as defined
in the Limited Partnership Agreement, are to 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 ATEL and 3.25% to an affiliate of
ATEL as an Incentive Management Fee, 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 ATEL will receive as an Incentive Management Fee, 4% of
remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
24
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
7. Concentration of credit risk and major customers:
The Partnership leases equipment to lessees in diversified industries. Leases
are subject to ATEL's credit committee review. The leases provide for the return
of the equipment upon default.
As of December 31, 2001, 2000 and 1999 there were concentrations (greater than
10%) of equipment leased to lessees in certain industries (as a percentage of
total equipment cost) as follows:
2001 2000 1999
---- ---- ----
Other manufacturing 30% 33% *
Rail transportation 33% 31% 30%
Municipalities 13% * *
Other transportation services * * 14%
* Less than 10%.
During 2001, four customer comprised 13%, 12%, 11% and 10% of the Partnership's
revenues from leases. During 2000, one customer comprised 18% of the
Partnership's revenues from leases. During 1999, two customers comprised 13% and
11% of the Partnership's revenues from leases.
8. Lines of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $62,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on April 12, 2002. The General Partner is currently negotiating a new
line of credit and anticipates that the current line of credit will either be
replaced upon its expiration or that the current line of credit will be extended
until the new one is finalized. As of December 31, 2001, borrowings under the
facility were as follows:
Amount borrowed by the Partnership under the acquisition facility $ 4,500,000
Amounts borrowed by affiliated partnerships and limited liability companies under the
acquisition facility 13,100,000
----------------
Total borrowings under the acquisition facility 17,600,000
Amounts borrowed by the General Partner and its sister corporation under the warehouse facility * 10,999,501
----------------
Total outstanding balance $ 28,599,501
================
Total available under the line of credit $ 62,000,000
Total outstanding balance (28,599,501)
----------------
Remaining availability $ 33,400,499
================
* (Unaudited) The carrying value of the assets pledged as collateral and
financed at December 31, 2001 was $17,955,014.
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Partnership and the General
Partner.
25
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
8. Lines of credit (continued):
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of December
31, 2001. The effective interest rate on borrowings at December 31, 2001 ranged
from 3.92% to 3.93%.
9. Fair value of financial instruments:
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-term 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, 2001 is
$22,032,785.
Line of credit:
The carrying amounts of the Partnership's variable rate lines of credit
approximate fair value.
10. Extraordinary gain on extinguishment:
In January 2000, one of the Partnership's lessees filed for reorganization under
Chapter 11 of the United States Bankruptcy Code. The Partnership determined that
the assets under operating lease with a net book value of $5,113,290 at December
31, 1999 leased to this particular lessee were impaired as of December 31, 1999.
The Partnership estimated that the proceeds from the sales of the assets would
not be sufficient to satisfy the non-recourse lender. The debt balance was
$3,320,774 at December 31, 1999. As a result, the Partnership fully reserved for
these assets as of December 31, 1999.
Upon foreclosure by the lender and upon sale of the financed assets in 2000, the
Partnership recognized an extraordinary gain on the extinguishment of the debt
of $3,320,774 during the year ended December 31, 2000.
26
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None
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 Services LLC (the General
Partner) is held by ATEL Capital Group ("ACG"), a holding company formed to
control ATEL and affiliated companies. The outstanding voting capital stock of
ATEL Capital Group is owned 5% by A. J. Batt and 95% by Dean Cash.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"),
ATEL Investor Services ("AIS") and ATEL Financial Services LLC ("AFS") is a
wholly-owned subsidiary of ATEL Capital Group and performs services for the
Partnership. Acquisition services are performed for the Partnership by ALC,
equipment management, lease administration and asset disposition services are
performed by AEC, investor relations and communications services are performed
by AIS and general administrative services for the Partnership are performed by
AFS. ATEL Securities Corporation ("ASC") is a wholly-owned subsidiary of ATEL
Financial Services LLC.
The officers and directors of ATEL Capital Group and its affiliates are as
follows:
Dean L. Cash Chairman of the Board of Directors of ACG, AFS, ALC,
AEC, AIS and ASC; President and Chief Executive
Officer of ACG, AFS and AEC
Paritosh K. Choksi Director, Executive Vice President, Chief Operating
Officer and Chief Financial Officer of ACG, AFS,
ALC, AEC and AIS
Donald E. Carpenter Vice President and Controller of ACG, AFS, ALC, AEC
and AIS; Chief Financial Officer of ASC
Vasco H. Morais Senior Vice President, Secretary and General Counsel
for ACG, AFS, ALC, AIS and AEC
Dean L. Cash, age 51, 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. He has been President and CEO since April 2001. 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.
27
Paritosh K. Choksi, age 48, joined ATEL in 1999 as a director, senior vice
president and its chief financial officer. He became its executive vice
president and COO in April 2001. Prior to joining ATEL, Mr. Choksi was chief
financial officer at Wink Communications, Inc. from 1997 to 1999. From 1977 to
1997, Mr. Choksi was with Phoenix American Incorporated, a financial services
and management company, where he held various positions during his tenure, and
was senior vice president, chief financial officer and director when he left the
company. Mr. Choksi was involved in all corporate matters at Phoenix and was
responsible for Phoenix's capital market needs. He also served on the credit
committee overseeing all corporate investments, including its venture lease
portfolio. Mr. Choksi was a part of the executive management team which caused
Phoenix's portfolio to increase from $50 million in assets to over $2 billion.
Mr. Choksi received a bachelor of technology degree in mechanical engineering
from the Indian Institute of Technology, Bombay; and an M.B.A. degree from the
University of California, Berkeley.
Donald E. Carpenter, age 53, 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 43, 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, a J.D. degree in 1986 from Golden Gate University Law
School and an M.B.A. (Finance) in 1997 from Golden Gate University. Mr. Morais
has been an active member of the State Bar of California since 1986.
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 ATEL and its Affiliates. The amount of such remuneration paid for the
years ended December 31, 2001, 2000 and 1999 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 will pay selling commissions in the amount of 9.5% of Gross
Proceeds, as defined, to ATEL Securities Corporation, an affiliate of ATEL. Of
this amount, the majority is expected to be reallowed to other broker/dealers.
Through December 31, 1996, $11,875,000 of such commissions (the maximum
allowable) had been paid to ATEL or its affiliates. Of that amount, $10,163,554
was reallowed to other broker/dealers. None have been paid since 1996, nor will
any additional amounts be paid in future periods.
28
Acquisition Fees
Acquisition fees were paid to ATEL 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 paid to ATEL or their affiliates was not to exceed 3% of the
aggregate purchase price of equipment acquired with the net proceeds of the
offering and was not to exceed 4.5% of the Gross Proceeds of the Offering.
Through December 31, 1996, $5,625,000 of such fees (the maximum allowable
amount) had been paid to ATEL or its affiliates. No such fees have been paid
subsequent to that date.
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, ATEL 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) 3.5% of the gross lease revenues from "operating" leases, as
defined, and (ii) 2% of gross lease revenues from "full payout" leases, as
defined, which contain net lease provisions.
See Notes 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, ATEL is entitled to receive the Incentive
management fee which shall be payable for each fiscal quarter and shall be an
amount equal to 1% of cash distributions from operations, sales or refinancing
and 3.25% (4% prior to July 1, 1995) of cash distributions from operations to an
affiliate of ATEL 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 paid to the affiliate of ATEL shall be 4% of all
distributions of cash from operations, sales or refinancing.
See Notes 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,
ATEL is 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.
29
Equipment Re-lease Fee
As compensation for providing re-leasing services, ATEL is entitled to 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) ATEL 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) ATEL or its affiliates have rendered substantial
re-leasing services in connection with such re-lease and (iv) ATEL or its
affiliates are compensated for rendering equipment management services. To date,
none have been accrued or paid.
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 ATEL. In accordance with the terms of the of Limited
Partnership Agreement, an additional allocation of income was made to the
General Partner in 2001. The amount allocated was determined so as to bring the
General Partner's ending capital account balance to zero. See financial
statements included in Item 8, Part I of this report for amounts allocated to
ATEL in 2001, 2000 and 1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
At December 31, 2001 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 ATEL 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.
ATEL 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 therefore of Limited Partners holding 10% or more
of the total outstanding Limited Partnership units.
30
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 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, 2001 and 2000
Statements of Operations for the years ended December
31, 2001, 2000 and 1999
Statements of Changes in Partners' Capital for the
years ended December 31, 2001, 2000 and 1999
Statements of Cash Flows for the years ended December
31, 2001, 2000 and 1999
Notes to Financial Statements
2. Financial Statement Schedules
Allschedules 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 2001
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
Form 10K for the period ended December 31, 1994
(File No. 33-81952).
31
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: 3/25/2002
ATEL Cash Distribution Fund VI, L.P.
(Registrant)
By: ATEL Financial Services, LLC,
General Partner of Registrant
By: /s/ Dean Cash
----------------------------------------
Dean Cash,
President and Chief Executive Officer of
ATEL Financial Services, LLC (General
Partner)
By: /s/ Paritosh K. Choksi
----------------------------------------
Paritosh K. Choksi,
Executive Vice President of ATEL
Financial Services, LLC (General
Partner)
32
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/ Dean Cash President, Chairman and Chief 3/25/2002
- -------------------------Executive Officer of ATEL Financial
Dean Cash Services, LLC
/s/ Paritosh K. Choksi Executive Vice President and director 3/25/2002
- -------------------------of ATEL Financial Services LLC,
Paritosh K. Choksi Principal financial officer of
registrant; principal financial officer
and director of ATEL Financial Services,
LLC
/s/ Donald E. Carpenter Principal accounting officer of 3/25/2002
- -------------------------registrant; principal accounting officer
Donald E. Carpenter of ATEL Financial Services, LLC
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 supplementary to the
Commission when forwarded to the security holders.
33