Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended June 30, 1998
|_| 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
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
ASSETS
1998 1997
---- ----
Cash and cash equivalents $869,920 $739,701
Accounts receivable 6,903,630 10,694,629
Investments in leases 143,475,138 158,856,251
------------------ -----------------
Total assets $151,248,688 $170,290,581
================== =================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $71,567,511 $77,647,591
Line of credit 2,900,000 8,750,000
Accounts payable:
General Partner 60,732 314,358
Other 1,567,012 415,660
Equipment purchases 255,252 255,252
Accrued interest payable 1,271,566 4,108,922
Unearned operating lease income 766,870 524,363
------------------ -----------------
Total liabilities 78,388,943 92,016,146
Partners' capital:
General Partner (276,911) (254,015)
Limited Partners 73,136,656 78,528,450
------------------ -----------------
Total partners' capital 72,859,745 78,274,435
------------------ -----------------
Total liabilities and partners' capital $151,248,688 $170,290,581
================== =================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1998 AND 1997
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Leasing activities:
Operating lease revenues $18,243,619 $17,658,555 $9,220,961 $8,857,827
Direct financing leases 68,501 125,600 32,486 60,359
Gain on sales of assets 795,189 60,113 117,792 49,308
Interest income 16,980 13,680 5,861 7,808
Other 9,721 1,467 4,130 (498)
----------------- ---------------- ------------------ -----------------
19,134,010 17,859,415 9,381,230 8,974,804
Expenses:
Depreciation and amortization 13,512,038 13,776,065 6,710,334 6,816,305
Interest 3,452,060 4,292,369 1,722,230 2,157,074
Equipment and incentive management fees 631,370 698,428 260,732 335,242
Other 366,666 429,575 168,297 240,208
Administrative cost reimbursements 185,529 190,972 63,756 92,446
Provision for losses 97,528 178,594 - 89,748
Professional fees 21,752 47,844 11,562 29,808
----------------- ---------------- ------------------ -----------------
18,266,943 19,613,847 8,936,911 9,760,831
----------------- ---------------- ------------------ -----------------
Net income (loss) $867,067 ($1,754,432) $444,319 ($786,027)
================= ================ ================== =================
Net income (loss:)
General partner $8,671 ($17,544) $4,443 ($7,860)
Limited partners 858,396 (1,736,888) 439,876 (778,167)
----------------- ---------------- ------------------ -----------------
$867,067 ($1,754,432) $444,319 ($786,027)
================= ================ ================== =================
Weighted average number of units
outstanding 12,500,050 12,500,050 12,500,050 12,500,050
Net loss per limited partnership unit $0.07 ($0.14) $0.04 ($0.06)
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD ENDED
JUNE 30, 1998
(Unaudited)
Limited Partners General
Units Amount Partner Total
Balance December 31, 1997 12,500,050 $78,528,450 ($254,015) $78,274,435
Other syndication costs to affiliates - -
Distributions to partners (6,250,190) (31,567) (6,281,757)
Net income 858,396 8,671 867,067
----------------- ---------------- ------------------ -----------------
Balance June 30, 1998 12,500,050 $73,136,656 ($276,911) $72,859,745
================= ================ ================== =================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1998 AND 1997
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Operating activities:
Net income (loss) $867,067 ($1,754,432) $444,319 ($786,027)
Adjustments to reconcile net income (loss) to net
cash provided by operations
Depreciation and amortization 13,512,038 13,776,065 6,710,334 6,816,305
Gain on sales of assets (795,189) (60,113) (117,792) (49,308)
Provision for losses 97,528 178,594 - 89,748
Changes in operating assets and liabilities:
Accounts receivable 3,790,999 (2,968,372) (2,482,797) (3,025,544)
Accounts payable, general partner (253,626) 140,458 (162,184) 25,500
Accounts payable, other 1,151,352 (87,678) 152,063 8,757
Accrued interest expense (2,837,356) 1,481,620 877,775 1,208,244
Unearned lease income 242,507 246,262 (715,000) 52,987
----------------- ---------------- ------------------ -----------------
Net cash provided by operating activities 15,775,320 10,952,404 4,706,718 4,340,662
----------------- ---------------- ------------------ -----------------
Investing activities:
Proceeds from sales of assets 2,308,466 202,660 424,912 92,805
Reduction in net investment in direct
financing leases 258,270 299,201 108,733 150,736
Purchase of equipment on operating leases - (1,338,943) - (603,733)
Purchase of equipment on direct financing
leases - (33,815) - -
----------------- ---------------- ------------------ -----------------
Net cash provided by (used in) investing
activities 2,566,736 (870,897) 533,645 (360,192)
----------------- ---------------- ------------------ -----------------
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1998 AND 1997
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Financing activities:
Repayment of long-term non-recourse debt (10,280,075) (5,303,635) (2,430,478) (2,208,478)
Distributions to partners (6,281,757) (6,286,151) (3,125,059) (3,188,313)
Repayment of line of credit (5,850,000) (10,059,231) - (8,960,974)
Proceeds of long-term non-recourse debt 4,199,995 10,686,017 - 9,774,981
Borrowings on line of credit - 460,974 - 460,974
Payment of syndication costs to General
Partner - (41,174) - (9,627)
----------------- ---------------- ------------------ -----------------
Net cash provided by (used in) financing
activities (18,211,837) (10,543,200) (5,555,537) (4,131,437)
----------------- ---------------- ------------------ -----------------
Net (decrease) increase in cash and
cash equivalents 130,219 (461,693) (315,174) (150,967)
Cash at beginning of period 739,701 1,123,336 1,185,094 812,610
----------------- ---------------- ------------------ -----------------
Cash at end of period $869,920 $661,643 $869,920 $661,643
================= ================ ================== =================
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest $6,289,416 $2,810,749 $844,455 $948,830
================= ================ ================== =================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(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.
The Fund, or the General Partner on behalf of the Fund, will incur costs in
connection with the organization, registration and issuance of the Limited
Partnership Units (Units). The amount of such costs to be borne by the Fund is
limited by certain provisions of the Partnership Agreement. Operations commenced
January 3, 1995.
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.
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Expense or Reclass-
December 31, Amortization ifications & June 30,
1997 Additions of Leases Dispositions 1998
---- --------- --------- - ------------- ----
Net investment in operating
leases $152,814,493 ($13,060,266) ($93,962) $139,660,265
Net investment in direct
financing leases 2,850,933 (258,270) (1,130,738) 1,461,925
Assets held for sale or lease 428,609 - (288,577) 140,032
Residual interests 379,551 - - 379,551
Reserve for losses (687,558) ($97,528) - - (785,086)
Initial direct costs, net of
accumulated amortization 3,070,223 - (451,772) - 2,618,451
-------------------- ------------------ ---------------- ------------------ -----------------
$158,856,251 ($97,528) ($13,770,308) ($1,513,277) $143,475,138
=================== =================== ================ ================== =================
Property on operating leases consists of the following:
Acquisitions & Balance
December 31, Dispositions June 30,
1997 1st Quarter 2nd Quarter 1998
---- ----------- ----------- ----
Transportation $100,087,024 ($17,306) $100,069,718
Construction 32,643,774 - 32,643,774
Manufacturing 30,738,706 - 30,738,706
Materials handling 18,710,808 - 18,710,808
Office automation 13,068,112 - ($720,666) 12,347,446
Miscellaneous 3,683,663 - - 3,683,663
Communications 658,185 - - 658,185
Medical 343,409 - - 343,409
Food processing 317,520 - - 317,520
----------------- ---------------- ------------------ -----------------
200,251,201 (17,306) (720,666) 199,513,229
Less accumulated depreciation (47,436,708) (6,569,949) (5,846,307) (59,852,964)
------------------ ---------------- ------------------ -----------------
$152,814,493 ($6,587,255) ($6,566,973) $139,660,265
================= ================ ================== =================
All of the property on leases was acquired in 1995, 1996 and 1997.
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
3. Investment in leases (continued):
At June 30, 1998, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
1998 $13,243,644 $201,804 $13,445,448
1999 26,616,951 305,789 26,922,740
2000 20,553,145 245,719 20,798,864
2001 11,052,698 149,766 11,202,464
2002 4,396,876 112,480 4,509,356
Thereafter 21,189,085 493,800 21,682,885
---------------- ------------------ -----------------
$97,052,399 $1,509,358 $98,561,757
================= ================ ==================
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly and
semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
6.5% to 11.186%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1998 $10,042,904 $1,619,857 $11,662,761
1999 18,004,634 4,912,259 22,916,893
2000 15,297,422 3,494,887 18,792,309
2001 8,154,489 2,368,107 10,522,596
2002 5,012,964 1,720,382 6,733,346
Thereafter 15,055,098 5,505,192 20,560,290
---------------- ------------------ -----------------
$71,567,511 $19,620,684 $91,188,195
================= ================ ==================
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
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:
1998 1997
---- ----
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). $631,370 $698,428
Reimbursement of administrative costs 185,529 190,972
Reimbursement of other syndication costs - 41,174
------------------ -----------------
$816,899 $930,574
================== =================
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
6. Partner's capital:
As of June 30, 1997, 12,500,050 Units ($125,000,500) were issued and
outstanding. The Fund's registration statement with the Securities and Exchange
Commission became effective November 23, 1994 and its offering was concluded on
November 23, 1996. The Fund is authorized to issue up to 12,500,050 Units,
including the 50 Units issued to the initial limited partners.
The Partnership Net Profits, Net Losses, and Tax Credits are to be allocated 99%
to the Limited Partners and 1% to the General Partner.
Available Cash from Operations and Cash from Sales and Refinancing, as defined
in the Limited Partnership Agreement, shall be distributed as follows:
First, 95% (95.75% after June 30, 1995) of Distributions of Cash from
Operations to the Limited Partners, 1% of Distributions of Cash from
Operations to the General Partner and 4% (3.25% after June 30, 1995) ( to
an affiliate of the General Partner as Incentive Management Compensation,
99% of Distributions of Cash from Sales or Refinancing to the Limited
Partners and 1% of Cash from Sales or Refinancing to the General Partner.
Second, the balance to the Limited Partners until the Limited Partners have
received Aggregate Distributions in an amount equal to their Original
Invested Capital, as defined, plus a 8% per annum cumulative (compounded
daily) return on their Adjusted Invested Capital.
Third, an affiliate of the General Partner will receive as Incentive
Management Compensation, 4% (3.25% after June 30, 1995) of remaining Cash
from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
7. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $90,000,000 revolving credit agreement with a group of financial
institutions which expires on October 28, 1998. The agreement includes an
acquisition facility and a warehouse facility which are used to provide bridge
financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases. Borrowings on the warehouse facility are recourse
jointly to certain of the Affiliates, the Partnership and the General Partner.
At June 30, 1998, the Partnership had $2,900,000 of borrowings under the line of
credit.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of June 30,
1998.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first half of 1998, the Partnership's primary activity was engaging
in equipment leasing activities.
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases exceed expenses, and decreasing as lease assets
are acquired, as distributions are made to the limited partners and to the
extent expenses exceed cash flows from leases.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire, the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $90,000,000 revolving line of credit with a financial
institution. The line of credit expires on October 28, 1998.
The Partnership anticipates reinvesting a portion of lease payments from assets
owned in new leasing transactions. Such reinvestment will occur only after the
payment of all obligations, including debt service (both principal and
interest), the payment of management and acquisition fees to the General Partner
and providing for cash distributions to the Limited Partners.
The Partnership currently has available adequate reserves to meet contingencies,
but in the event those reserves were found to be inadequate, the Partnership
would likely be in a position to borrow against its current portfolio to meet
such requirements. The General Partner envisions no such requirements for
operating purposes.
As of June 30, 1998, the Partnership had borrowed $100,521,405 with a remaining
unpaid balance of $71,567,511. The General Partner expects that aggregate
borrowings in the future will not exceed 50% of aggregate equipment cost. In any
event, the Agreement of Limited Partnership limits such borrowings to 50% of the
total cost of equipment, in aggregate.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. There were no such commitments as of
June 30, 1998.
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, 1998 vs. 1997:
Six months:
In 1998 and 1997, the Partnership's primary source of cash was rents from
operating leases. Cash provided by operations increased by $4,822,916 (from
$10,952,404 in 199 to $15,775,320 in 1998).
The only sources of cash from investing activities were direct financing lease
rents and proceeds from sales of lease assets. Neither of these was as
significant as operating sources of cash.
The Partnership's most significant source of cash from financing activities in
1998 and 1997 was proceeds of non-recourse debt. The proceeds of this debt were
used to make payments on the Partnership's line of credit.
Three months:
Operating lease rents were the primary source of cash from operating activities
in 1998 and 1997.
As noted above for the six month period, proceeds from asset sales and direct
financing lease rents were the only sources of cash from investing activities in
1998 and were not as significant as cash flows from operations.
There were no sources of cash from financing activities in 1998. The primary
source of cash from financing activities in 1997 was proceeds from non-recourse
debt. In 1997, the proceeds of this debt were used to pay down the line of
credit.
Results of operations
In 1998, operations resulted in net income of $867,067 (six months) and $444,319
(three months). In 1997, operations resulted in a net loss of $1,754,432 (six
months) and $786,027 (three months). The Partnership's primary source of
revenues is from operating leases. This is expected to remain true in future
periods. Depreciation expense is the single largest expense of the Partnership
and is expected to remain so in future periods. Operating lease rents increased
compared to 1997 due to purchases of lease assets over the last year. As
Interest expense is related to the borrowings under the line of credit and
non-recourse debt and has decreased because of decreased debt balances compared
to 1997.
Other
Year 2000 Issues
The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any computer programs
that have time sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruptions of operations, including, among other things,
a temporary inability to process transactions or engage in similar normal
business activities.
The Partnership uses primarily third party software and is communicating with
key vendors to ensure that the Partnership's systems are year 2000 compliant.
Based on these discussions, the Partnership does not expect that the costs
related to the year 2000 issue will be significant. Ultimately, the potential
impact of the year 2000 issue will depend on the way in which the year 2000
issue is addressed by businesses and other entities whose financial condition or
operational capability is important to the Partnership.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Inapplicable.
Item 2. Changes In Securities.
Inapplicable.
Item 3. Defaults Upon Senior Securities.
Inapplicable.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Inapplicable.
Item 5. Other Information.
Inapplicable.
Item 6. Exhibits And Reports On Form 8-K.
(a) Documents filed as a part of this report
1. Financial Statements
Included in Part I of this report:
Balance Sheets, June 30, 1998 and December 31, 1997.
Statements of operations for the six and three month
periods ended June 30, 1998 and 1997.
Statement of changes in partners' capital for the six
month period ended June 30, 1998.
Statements of cash flows for the six and three month
periods ended June 30, 1998 and 1997.
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
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
August 12, 1998
ATEL CASH DISTRIBUTION FUND VI, L.P.
(Registrant)
By: ATEL Financial Corporation
General Partner of Registrant
By: /s/ A. J. BATT
----------------------------------
A. J. Batt
President and Chief Executive Officer
of General Partner
By: /s/ DEAN L. CASH
----------------------------------
Dean L. Cash
Executive Vice President
of General Partner
By: /s/ F. RANDALL BIGONY
--------------------------------------
F. Randall Bigony
Principal financial officer
of registrant
By: /s/ DONALD E. CARPENTER
--------------------------------------
Donald E. Carpenter
Principal accounting
officer of registrant