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 September 30, 2002
|_| 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
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
(Unaudited)
ASSETS
2002 2001
---- ----
Cash and cash equivalents $ 909,095 $ 701,012
Accounts receivable, net of allowance for
doubtful accounts of $881,254 in 2002
and $861,254 in 2001 4,314,609 7,200,988
Investments in leases 35,492,874 57,939,842
----------------- ------------------
Total assets $ 40,716,578 $ 65,841,842
================= ==================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 4,935,180 $ 21,712,993
Line of credit 4,500,000 4,500,000
Accounts payable:
General Partner 81,591 208,687
Other 629,059 585,993
Accrued interest payable 264,963 762,476
Unearned operating lease income 73,604 63,013
----------------- ------------------
Total liabilities 10,484,397 27,833,162
Partners' capital 30,232,181 38,008,680
----------------- ------------------
Total liabilities and partners' capital $ 40,716,578 $ 65,841,842
================= ==================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2002 AND 2001
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Leasing activities:
Operating leases $ 9,167,662 $ 13,073,075 $ 2,358,251 $ 4,169,938
Direct financing leases 108,728 137,175 19,095 44,512
Gain (loss) on sales of assets 1,627,349 (199,824) 1,985,088 5,076
Interest 5,238 45,814 2,246 6,693
Other 55,477 9,929 23,300 972
------------------ ------------------ ----------------- ------------------
10,964,454 13,066,169 4,387,980 4,227,191
Expenses:
Depreciation and amortization 5,659,155 6,778,965 2,082,102 1,988,925
Interest expense 1,165,528 1,697,518 239,831 521,831
Cost reimbursements to General Partner 609,801 733,052 212,115 328,132
Equipment and incentive management fees to
General Partner 606,950 643,301 192,360 188,608
Other 394,122 383,795 126,161 91,110
Railcar maintenance 245,688 236,381 34,605 98,098
Professional fees 98,681 100,700 6,214 23,610
Provision for doubtful accounts 20,000 - - -
------------------ ------------------ ----------------- ------------------
8,799,925 10,573,712 2,893,388 3,240,314
------------------ ------------------ ----------------- ------------------
Net income $ 2,164,529 $ 2,492,457 $ 1,494,592 $ 986,877
================== ================== ================= ==================
Net income:
General Partner $ 98,626 $ 24,925 $ 32,785 $ 9,869
Limited Partners 2,065,903 2,467,532 1,461,807 977,008
------------------ ------------------ ----------------- ------------------
$ 2,164,529 $ 2,492,457 $ 1,494,592 $ 986,877
================== ================== ================= ==================
Net income per limited partnership unit $ 0.17 $ 0.20 $ 0.12 $ 0.08
Weighted average number of Units outstanding 12,493,401 12,500,050 12,490,076 12,500,050
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
NINE MONTH PERIOD ENDED
SEPTEMBER 30, 2002
(Unaudited)
Limited Partners General
Units Amount Partner Total
Balance December 31, 2001 12,500,050 $ 38,008,680 $ - $ 38,008,680
Repurchase of limited partnership units (9,974) (3,907) (3,907)
Distributions to partners (9,838,495) (98,626) (9,937,121)
Net income 2,065,903 98,626 2,164,529
------------------ ------------------ ----------------- ------------------
Balance September 30, 2002 12,490,076 $ 30,232,181 $ - $ 30,232,181
================== ================== ================= ==================
See accompanying notes.
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2002 AND 2001
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
Operating activities:
Net income $ 2,164,529 $ 2,492,457 $ 1,494,592 $ 986,877
Adjustment to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 5,659,155 6,778,965 2,082,102 1,988,925
(Gain) loss on sales of assets (1,627,349) 199,824 (1,985,088) (5,076)
Provision for doubtful accounts 20,000 - - -
Changes in operating assets and liabilities:
Accounts receivable (1,933,621) (4,204,342) (378,125) (1,935,448)
Accounts payable, General Partner (127,096) (128,431) (315,561) 36,327
Accounts payable, other 43,066 18,650 177,505 (212,384)
Accrued interest payable 491,562 824,009 116,398 240,506
Unearned lease income 10,591 (58,778) 24,810 (14,416)
------------------ ------------------ ----------------- ------------------
Net cash provided by operations 4,700,837 5,922,354 1,216,633 1,085,311
------------------ ------------------ ----------------- ------------------
5
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CASH FLOWS
(CONTINUED)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2002 AND 2001
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
Investing activities:
Proceeds from sales of assets 18,180,818 2,183,842 17,710,782 240,759
Reduction in net investment in direct financing
leases 234,344 225,273 60,813 72,225
Purchases of equipment on operating leases - (5,452) - -
------------------ ------------------ ----------------- ------------------
Net cash provided by investing activities 18,415,162 2,403,663 17,771,595 312,984
------------------ ------------------ ----------------- ------------------
Financing activities:
Repayments of non-recourse debt (12,966,888) (3,207,705) (11,773,451) (667,139)
Distributions to Partners (9,937,121) (9,961,135) (3,311,384) (3,281,066)
Borrowings under line of credit 6,000,000 4,000,000 1,500,000 2,000,000
Repayments of borrowings under line of credit (6,000,000) (1,000,000) (5,000,000) -
Repurchase of limited partnership units (3,907) - - -
------------------ ------------------ ----------------- ------------------
Net cash used in financing activities (22,907,916) (10,168,840) (18,584,835) (1,948,205)
------------------ ------------------ ----------------- ------------------
Net increase (decrease) in cash and cash
equivalents 208,083 (1,842,823) 403,393 (549,910)
Cash and cash equivalents at beginning of
period 701,012 1,947,276 505,702 654,363
------------------ ------------------ ----------------- ------------------
Cash and cash equivalents at end of period $ 909,095 $ 104,453 $ 909,095 $ 104,453
================== ================== ================= ==================
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $ 1,663,041 $ 2,277,844 $ 1,112,508 $ 1,685,660
================== ================== ================= ==================
Supplemental disclosure of non-cash
transactions:
Offset of accounts receivable and debt service
per lease and debt agreement:
Accrued interest payable $ (989,075) $(1,404,335) $ - $ -
Non-recourse debt (3,810,925) (3,395,665) - -
------------------ ------------------ ----------------- ------------------
Accounts receivable $ (4,800,000) $(4,800,000) $ - $ -
================== ================== ================= ==================
See accompanying notes.
6
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
1. Summary of significant accounting policies:
Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the most recent report on Form
10K.
2. Organization and partnership matters:
ATEL Cash Distribution Fund VI, L.P. (the Fund), was formed under the laws of
the State of California on June 29 , 1994, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. Contributions in
the amount of $600 were received as of July 21, 1994, $100 of which represented
the General Partner's (ATEL Financial Corporation's) continuing interest, and
$500 of which represented the Initial Limited Partners' capital investment.
Upon the sale of the minimum amount of Units of Limited Partnership interest
(Units) of $1,200,000 and the receipt of the proceeds thereof on January 3,
1995, the Partnership commenced operations.
The Partnership does not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their individual tax
returns.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Balance Expense or Reclass- Balance
December 31, Amortization ifications & September 30,
2001 of Leases Dispositions 2002
---- --------- ------------ ----
Net investment in operating leases $55,447,510 $(5,182,187) $(18,592,894) $ 31,672,429
Equipment held for sale or lease 1,134,488 - 2,054,925 3,189,413
Net investment in direct financing leases 921,543 (234,344) (15,500) 671,699
Initial direct costs, net of accumulated
amortization 590,149 (476,968) - 113,181
Residual interests 34,161 - - 34,161
Reserve for losses (188,009) - - (188,009)
------------------ ------------------ ----------------- ------------------
$57,939,842 $(5,893,499) $(16,553,469) $ 35,492,874
================== ================== ================= ==================
7
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
Balance Balance
December 31, Acquisitions, Dispositions & Reclassifications September 30,
----------------------------------------------
2001 1st Quarter 2nd Quarter 3rd Quarter 2002
---- ----------- ----------- ----------- ----
Transportation $ 82,924,093 $ (1,174,264) $(2,942,406) $(17,435,545) $ 61,371,878
Construction 19,955,096 - - (8,228,090) 11,727,006
Materials handling 10,062,364 (586,841) (501,012) (218,564) 8,755,947
Office automation 1,503,725 - - - 1,503,725
Other 1,330,971 (489,233) (5,500) 5,500 841,738
------------------- ------------------ ------------------ ----------------- ------------------
115,776,249 (2,250,338) (3,448,918) (25,876,699) 84,200,294
Less accumulated depreciation (60,328,739) (184,861) (590,641) 8,576,376 (52,527,865)
------------------- ------------------ ------------------ ----------------- ------------------
$ 55,447,510 $ (2,435,199) $(4,039,559) $(17,300,323) $ 31,672,429
=================== ================== ================== ================= ==================
All of the property on leases was acquired in 1995, 1996 and 1997.
At September 30, 2002, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Operating Financing
Leases Leases Total
Three months ending December 31, 2002 $ 1,142,121 $ 76,617 $ 1,218,738
Year ending December 31, 2003 7,351,951 184,227 7,536,178
2004 1,700,544 110,823 1,811,367
2005 1,434,165 98,760 1,532,925
2006 357,193 98,760 455,953
Thereafter - 98,760 98,760
------------------ ------------------ -----------------
$11,985,974 $ 667,947 $ 12,653,921
================== ================== =================
8
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
6.37% to 15.54%.
Future minimum principal payments of non-recourse debt as of September 30, 2002
are as follows:
Principal Interest Total
Three months ending December 31, 2002 $ 125,803 $ 12,771 $ 138,574
Year ending December 31, 2003 4,439,115 560,641 4,999,756
2004 109,054 26,870 135,924
2005 79,916 18,844 98,760
2006 86,868 11,892 98,760
Thereafter 94,424 4,336 98,760
------------------ ------------------ -----------------
$ 4,935,180 $ 635,354 $ 5,570,534
================== ================== =================
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 as follows:
2002 2001
---- ----
Cost reimbursements to General Partner $ 609,801 $ 733,052
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). 606,950 643,301
----------------- ------------------
$ 1,216,751 $ 1,376,353
================= ==================
9
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
5. Related party transactions (continued):
The Limited Partnership Agreement allows for the reimbursement of costs incurred
by the General Partner in providing administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. The General
Partner is not reimbursed for services where it is entitled to receive a
separate fee as compensation for such services, such as acquisition and
management of equipment. Reimbursable costs incurred by the General Partner are
allocated to the Partnership based upon actual time incurred by employees
working on Partnership business and an allocation of rent and other costs based
on utilization studies.
Substantially all employees of the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. The General Partner believes that the costs reimbursed
are the lower of actual costs incurred on behalf of the Partnership or 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.
6. Partner's capital:
As of September 30, 2000, 12,490,076 Units ($124,900,760) were issued and
outstanding. 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, 95.75% of Distributions of Cash from Operations to the Limited Partners,
1% of Distributions of Cash from Operations to the General Partner and 3.25% to
an affiliate of the General Partner as Incentive Management Compensation, 99% of
Distributions of Cash from Sales or Refinancing to the Limited Partners and 1%
of Cash from Sales or Refinancing to the General Partner.
Second, the balance to the Limited Partners until the Limited Partners have
received Aggregate Distributions in an amount equal to their Original Invested
Capital, as defined, plus a 10% per annum cumulative (compounded daily) return
on their Adjusted Invested Capital.
Third, an affiliate of the General Partner will receive as Incentive Management
Compensation, 3.25% of remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
10
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
7. Line of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $43,654,928 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on June 28, 2004. As of September 30, 2002, 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 17,400,000
------------------
Total borrowings under the acquisition facility 21,900,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
------------------
Total outstanding balance $ 21,900,000
==================
Total available under the line of credit $ 43,654,928
Total outstanding balance (21,900,000)
------------------
Remaining availability $ 21,754,928
==================
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 credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of September
30, 2002.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
In 2002 and 2001, our primary activity was equipment leasing and sales
activities.
Our primary source of liquidity during the first nine months of 2001 was lease
rents. Our primary source of liquidity during the first nine months of 2002 was
lease rents and proceeds from the sales of lease assets. Our liquidity 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, we have contractual obligations with a
diversified group of lessees which consist primarily of fixed lease terms at
fixed rental amounts. As the initial lease terms expire, we will re-lease or
sell the equipment. Our future liquidity beyond the contractual minimum rentals
will depend on our 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 $43,654,928 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on June 28, 2004. As of September 30, 2002, 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 17,400,000
------------------
Total borrowings under the acquisition facility 21,900,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
------------------
Total outstanding balance $ 21,900,000
==================
Total available under the line of credit $ 43,654,928
Total outstanding balance (21,900,000)
------------------
Remaining availability $ 21,754,928
==================
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.
We anticipate reinvesting a portion of lease payments from assets owned in new
leasing transactions. This reinvestment will occur only after the payment of all
obligations, including debt service (both principal and interest), the payment
of management fees to the General Partner and providing for cash distributions
to the Limited Partners.
We currently have available adequate reserves to meet contingencies, but in the
event those reserves were found to be inadequate, we would likely be in a
position to borrow against our current portfolio to meet such requirements. We
envision no such requirements for operating purposes.
As of September 30, 2002, we had borrowed $100,521,405 with a remaining unpaid
balance of $4,935,180. We expect 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.
We do not expect to make commitments of capital other than for the acquisition
of additional equipment. As of September 30, 2002, we had made no commitments of
this type .
If inflation in the general economy becomes significant, it may affect the us in
that the residual (resale) values and rates on re-leases of our leased assets
may increase as the costs of similar assets increase. However, our 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 we 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. Our leases already in
place, for the most part, would not be affected by changes in interest rates.
2002 vs. 2001:
In 2002 and 2001, lease rents were our primary source of cash from operating
activities. Our lease rents have declined as a result of lease terminations and
asset sales over the last year.
12
Our only sources of cash from investing sources was proceeds from the sales of
assets and direct financing lease rents. Proceeds from sales of such assets
increased by $15,996,976 compared to 2001. Most of the proceeds from sales in
2002 resulted from the sales of assets on lease to Mobil Corporation and Tarmac
America. Our only investing use of cash in 2001 was payments on the purchase of
assets on operating leases. There were none in 2002.
In 2001, our only financing source of cash was borrowings on the line of credit.
Proceeds from sales of assets of approximately $11,680,000 were used to repay
non-recourse debt. The debt had been used to finance the original acquisition of
a portion of the assets sold in the third quarter. Other repayments of
non-recourse debt have decreased as a result of scheduled debt payments.
Results of operations
For the nine month periods, our operations resulted in net income of $2,164,529
in 2002 and $2,492,457 in 2001. For the three month periods, operations resulted
in net income of $1,494,592 in 2002 and $986,877 in 2001. Our primary source of
revenues is from operating leases.
Over the last year, we have sold some of our operating lease assets. Some other
leases have been terminated. These lease terminations and asset sales have
caused operating lease revenues to decrease for both the nine and three month
periods when compared to 2001.
Our depreciation expense has declined by $1,402,954 compared to 2001. The
decreases were the result of asset sales over the last year.
Non-recourse debt balances were reduced in 2002 compared to 2001 as a result of
scheduled and unscheduled (see above) debt payments. This led to the reduction
of interest expense of $531,990 in 2002 compared to 2001 for the nine month
period and $282,000 for the three month period.
Internal Controls
As of September 30, 2002, an evaluation was performed under the supervision and
with the participation of the Partnership's management, including the CEO and
CFO of the General Partner, of the effectiveness of the design and operation of
the Partnership's disclosure controls and procedures. Based on that evaluation,
the Partnership's management, including the CEO and CFO of the General Partner,
concluded that the Partnership's disclosure controls and procedures were
effective as of September 30, 2002. There have been no significant changes in
the Partnership's internal controls or in other factors that could significantly
affect internal controls subsequent to September 30, 2002.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No material legal proceedings are currently pending against the Partnership or
against any of its assets.
Quaker Coal Company:
On December 31, 1997, Quaker Coal Company (the Debtor), 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 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 I,
Item 1 of this report.
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 upon securing the return of its equipment, which has
been liquidated. The Court issued a ruling on March 4, 2001, denying the
Partnership's claim for damages. The Debtor 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 Debtor filed a plan of reorganization, which was objected to by several
large creditors, including the General Partner. These creditors were also
seeking a formal role on the creditors committee or formation of their own
committee.
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, another of the creditor's,
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.
13
In January 2002, ATEL attended an appellate settlement conference seeking to
resolve the outstanding disputed claim. A reserve has been set aside by the
Debtor's liquidating trustee in the amount of $1.2 million in partial
satisfaction of the Partnership's claim, 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
(the Guarantor) , 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 decision from the Court was adverse to
the Partnership as to the very narrow issue whether an Event of Default existed
as declared by the Partnership (for the failure of the lessee to notify the
Partnership of the material defect of in the equipment.) Notwithstanding the
adverse ruling, the Partnership has two additional bases for default: (i) the
failure by the lessee to satisfy the maintenance and return conditions of the
lease, and (ii) the relocation by the lessee of the equipment without the
lessor's consent..
The General Partner has filed a suit and 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 claims.
Applied Magnetics Corporation:
In January 2000, Applied Magnetics Corporation (the Debtor) 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, receives 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.
On February 13, 2002, the reorganized Debtor filed a notice of objection to the
Funds claim due to duplication and an improper liquidated damages provision. The
Fund disputed this and, as of July 26, 2002, agreement has been reached between
the Fund and Debtor as to the amount of the Fund's claim, and the Debtor's
objection to the Fund's claim was withdrawn.
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 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.
14
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, September 30, 2002 and December 31, 2001.
Statement of changes in partners' capital for the nine month period
ended September 30, 2002.
Statements of operations for the nine and three month periods ended
September 30, 2002 and 2001.
Statements of cash flows for the nine and three month periods ended
September 30, 2002 and 2001.
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
15
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:
November 7, 2002
ATEL CASH DISTRIBUTION FUND VI, L.P.
(Registrant)
By: ATEL Financial Corporation
General Partner of Registrant
By: /s/ DEAN L. CASH
---------------------
Dean L. Cash
President and Chief Executive Officer of
General Partner
By: /s/ PARITOSH K. CHOKSI
--------------------------
Paritosh K. Choksi
Executive Vice President of
Managing Member and Principal
financial officer of registrant
By: /s/ DONALD E. CARPENTER
--------------------------
Donald E. Carpenter
Principal accounting officer of registrant
16
CERTIFICATIONS
I, Paritosh K. Choksi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Cash Distribution
Fund VI, LP;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 7, 2002
/s/ PARITOSH K. CHOKSI
- --------------------------------------
Paritosh K. Choksi
Principal financial officer of registrant, Executive
Vice President of General Partner
17
CERTIFICATIONS
I, Dean L. Cash, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Cash Distribution
Fund VI, LP;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 7, 2002
/s/ DEAN L. CASH
- --------------------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
18
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10Q of ATEL Cash Distribution
Fund VI, LP, (the "Partnership") for the period ended June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, I, Dean L. Cash, Chief Executive Officer of ATEL
Financial Services, LLC, general partner of the Partnership, hereby certify
that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934 ; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: November 7, 2002
/s/ DEAN L. CASH
- --------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10Q of ATEL Cash Distribution
Fund VI, LP, (the "Partnership") for the period ended June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, I, Paritosh K. Choksi, Chief Financial Officer of
ATEL Financial Services, LLC, general partner of the Partnership, hereby certify
that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934 ; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: November 7, 2002
/s/ PARITOSH K. CHOKSI
- --------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal financial officer of registrant
19