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, 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
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
ASSETS
1998 1997
---- ----
Cash and cash equivalents $234,003 $739,701
Accounts receivable 7,596,083 10,694,629
Investments in leases 136,667,878 158,856,251
----------------- -----------------
Total assets $144,497,964 $170,290,581
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $67,718,110 $77,647,591
Line of credit 4,100,000 8,750,000
Accounts payable:
General Partner 248,198 314,358
Equipment purchases 255,252 255,252
Other 545,638 415,660
Accrued interest payable 1,422,623 4,108,922
Unearned operating lease income 690,284 524,363
----------------- -----------------
Total liabilities 74,980,105 92,016,146
Partners' capital:
General Partner (377,227) (254,015)
Limited Partners 69,895,086 78,528,450
----------------- -----------------
Total partners' capital 69,517,859 78,274,435
----------------- -----------------
Total liabilities and partners' capital $144,497,964 $170,290,581
================= =================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1998
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Leasing activities:
Operating leases $26,712,867 $26,544,273 $8,469,248 $8,885,718
Direct financing leases 108,287 187,966 39,786 62,366
Gain (loss) on sales of assets 851,569 27,454 56,380 (32,659)
Interest 20,507 16,956 3,527 3,276
Other 13,571 6,847 3,850 5,380
------------------ ---------------- -----------------------------------
27,706,801 26,783,496 8,572,791 8,924,081
Expenses:
Depreciation and amortization 19,971,865 20,562,503 6,459,827 6,786,438
Interest expense 4,932,006 5,941,242 1,479,946 1,648,873
Administrative cost reimbursements to General
Partner 308,672 330,520 123,143 139,548
Equipment and incentive management fees to
General Partner 1,038,051 1,129,257 406,681 430,829
Other 554,496 616,231 187,830 186,656
Professional fees 55,276 78,417 33,524 30,573
Provision for losses 97,528 178,594 - -
------------------ ---------------- -----------------------------------
26,957,894 28,836,764 8,690,951 9,222,917
------------------ ---------------- -----------------------------------
Net income (loss) $748,907 ($2,053,268) ($118,160) ($298,836)
================== ================ ===================================
Net income (loss):
General Partner 7,489 (20,533) (1,182) (2,988)
Limited Partners 741,418 (2,032,735) (116,978) (295,848)
------------------ ---------------- -----------------------------------
$748,907 ($2,053,268) ($118,160) ($298,836)
================== ================ ================= =================
Net income (loss) per Limited Partnership Unit $0.06 ($0.16) ($0.01) ($0.02)
Weighted average number of Units outstanding 12,500,050 12,500,050 12,500,050 12,500,050
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
NINE MONTH PERIOD ENDED
SEPTEMBER 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
Distributions to partners (9,374,782) (130,701) (9,505,483)
Net income 741,418 7,489 748,907
------------------ ---------------- -----------------------------------
Balance September 30, 1998 12,500,050 $69,895,086 ($377,227) $69,517,859
================== ================ ================= =================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1998
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Operating activities:
Net income (loss) $748,907 ($2,053,268) ($118,160) ($298,836)
Adjustment to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 19,971,865 20,562,503 6,459,827 6,786,438
Loss (gain) on sales of assets (851,569) (27,454) (56,380) 32,659
Provision for losses 97,528 178,594 - -
Changes in operating assets and liabilities:
Accounts receivable 3,098,546 (1,291,640) (692,453) 1,676,732
Accounts payable, General Partner (66,160) 278,906 187,466 138,448
Accounts payable, other 129,978 239 (1,021,374) 87,917
Accrued interest payable (2,686,299) 1,316,551 151,057 (165,069)
Unearned lease income 165,921 130,966 (76,586) (115,296)
------------------ ---------------- ----------------- -----------------
Net cash provided by operations 20,608,717 19,095,397 4,833,397 8,142,993
------------------ ---------------- ----------------- -----------------
Investing activities:
Purchases of equipment on operating leases - (1,338,943) - -
Purchases of equipment on direct financing leases - (94,469) - (60,654)
Reduction in net investment in direct financing
leases 320,815 452,614 62,545 153,413
Proceeds from sales of assets 2,649,734 153,956 341,268 (48,704)
------------------ ---------------- ----------------- -----------------
Net cash used in investing activities 2,970,549 (826,842) 403,813 44,055
------------------ ---------------- ----------------- -----------------
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CASH FLOWS
(CONTINUED)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1998
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Financing activities:
Borrowings under line of credit 1,200,000 1,210,974 1,200,000 750,000
Repayments of borrowings under line of credit (5,850,000) (10,059,231) - -
Proceeds of non-recourse debt 4,199,995 10,686,017 - -
Repayments of non-recourse debt (14,129,476) (11,442,747) (3,849,401) (6,139,112)
Payment of syndication costs to General Partner - (41,174) - -
Distributions to Partners (9,505,483) (9,413,075) (3,223,726) (3,126,924)
------------------ ---------------- ----------------- -----------------
Net cash (used in) provided by financing
activities (24,084,964) (19,059,236) (5,873,127) (8,516,036)
------------------ ---------------- ----------------- -----------------
Net (decrease) increase in cash and cash
equivalents (505,698) (790,681) (635,917) (328,988)
Cash and cash equivalents at beginning of
period 739,701 1,123,336 869,920 661,643
------------------ ---------------- ----------------- -----------------
Cash and cash equivalents at end of period $234,003 $332,655 $234,003 $332,655
================== ================ ================= =================
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $7,618,305 $5,941,242 $1,328,889 $1,648,873
================== ================ ================= =================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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.
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 Fund or the General Partner on
behalf of the Fund, will incur costs in connection with the organization,
registration and issuance of the Units. The amount of such costs to be born by
the Fund is limited by certain provisions in the Agreement of Limited
Partnership.
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,
1997 Additions of Leases Dispositions 1998
---- --------- --------- ------------ ----
Net investment in operating
leases $152,814,493 ($19,308,182) ($582,731) $132,923,580
Net investment in direct financing
leases 2,850,933 (320,815) (1,240,075) 1,290,043
Equipment held for sale or lease 428,609 - 24,641 453,250
Residual interests 379,551 - - 379,551
Initial direct costs, net of
accumulated amortization of
$933,369 in 1996 and
$2,094,732 in 1997 3,070,223 (663,683) - 2,406,540
Reserve for losses (687,558) ($97,528) - - (785,086)
------------------- ------------------ ---------------- ----------------- -----------------
$158,856,251 ($97,528) ($20,292,680) ($1,798,165) $136,667,878
=================== ================== ================ ================= =================
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
Balance Balance
December 31, Acquisitions, Dispositions & Reclassifications September 30,
1997 1st Quarter 2nd Quarter 3rd Quarter 1998
---- ----------- ----------- ----------- ----
Transportation $100,087,024 ($17,306) ($198,171) $99,871,547
Construction 32,643,774 - - 32,643,774
Manufacturing 30,738,706 - (662,265) 30,076,441
Materials handling 18,710,808 - (17,929) 18,692,879
Office automation 13,068,112 - ($720,666) (381,850) 11,965,596
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) (1,260,215) 198,253,014
Less accumulated depreciation (47,436,708) (6,569,949) (5,846,307) (5,476,470) (65,329,434)
------------------- ------------------ ---------------- ----------------- -----------------
$152,814,493 ($6,587,255) ($6,566,973) ($6,736,685) $132,923,580
=================== ================== ================ ================= =================
All of the property on leases was acquired in 1995, 1996 and 1997.
At September 30, 1998, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Operating Financing
Leases Leases Total
Three months ending December 31, 1998 $5,721,526 $97,734 $5,819,260
Year ending December 31, 1999 26,886,972 305,788 27,192,760
2000 20,556,629 245,719 20,802,348
2001 11,051,910 149,766 11,201,676
2002 4,396,635 112,480 4,509,115
Thereafter 19,299,184 493,800 19,792,984
------------------ ---------------- -----------------
$87,912,856 $1,405,287 $89,318,143
================== ================ =================
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
6.33% to 12.23%.
Future minimum principal payments of non-recourse debt as of September 30, 1998
are as follows:
Principal Interest Total
Three months ending December 31, 1998 $2,595,657 $703,839 $3,299,496
Year ending December 31, 1999 18,593,974 5,176,561 23,770,535
2000 15,889,562 3,714,499 19,604,061
2001 8,834,243 2,531,010 11,365,253
2002 5,755,960 1,831,550 7,587,510
Thereafter 16,048,714 5,544,714 21,593,428
------------------ ---------------- -----------------
$67,718,110 $19,502,173 $87,220,283
================== ================ =================
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). $1,038,051 $1,129,257
Administrative cost reimbursements to General Partner 308,672 330,520
Reimbursement of other syndication costs - 41,174
----------------- -----------------
$1,346,723 $1,500,951
================= =================
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.
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
5. Related party transactions (continued):
Substantially all employees of the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. The General Partner believes that the costs reimbursed
are the lower of (i) actual costs incurred on behalf of the Partnership or (ii)
the amount the Partnership would be required to pay independent parties for
comparable administrative services in the same geographic location and are
reimbursable in accordance with the Limited Partnership Agreement.
6. Partner's capital:
As of September 30, 1997, 112,500,050 Units ($125,000,500) 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% (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 10% per annum cumulative (compounded
daily) return on their Adjusted Invested Capital.
Third, an affiliate of the General Partner will receive as Incentive
Management Compensation, 4% (3.25% after June 30, 1995) of remaining Cash
from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
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 November 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 September 30, 1998, the Partnership had $4,100,000 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 September
30, 1998. At September 30, 1998, $32,612,740 was available under this agreement.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
In 1998, the Partnership's primary activity was equipment leasing and sales
activities.
The Partnership's primary source of liquidity during the first nine months of
1998 was lease rents. 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 which consist primarily of 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 November 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 September 30, 1998, the Partnership had borrowed $100,521,405 with a
remaining unpaid balance of $67,718,110. 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
September 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.
1998 vs. 1997:
In 1998 and 1997, lease rents were the Partnership's primary source of cash. In
both years, cash from operating activities was almost entirely from operating
lease rents.
Proceeds from the sales of assets and direct financing lease rents were the only
investing sources of cash. Proceeds from sales of such assets increased by
$2,495,778 compared to 1997. The primary investing use of cash in 1997 was the
purchase of assets on operating and direct financing leases.
In 1998 and 1997, financing sources of cash consisted of borrowings on the line
of credit and proceeds of non-recourse debt. Non-recourse debt proceeds were
used to repay outstanding balances on the line of credit.
Results of operations
Operations resulted in net income of $748,907 for the nine months ended
September 30, 1998 compared to a net loss of $2,053,268 in 1997. Operations
resulted in a net loss of $118,160 in 1998 compared to $298,836 in 1997 for the
three month periods. The Partnership's primary source of revenues is from
operating leases.
Operating lease revenues increased by less than one percent for the nine month
period compared to 1997.
Depreciation expense has declined by $590,638 compared to 1997 as a result of
asset sales over the last year.
Non-recourse debt and line of credit balances have been reduced in 1998 compared
to 1997. In the nine month period in 1997, these two types of debt had an
average combined balance of about $92,000,000. In 1998, the average balance was
about $79,000,000. This has led to the reduction of interest expense of
$1,009,236 in 1998 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, September 30, 1998 and December 31,
1997.
Statement of changes in partners' capital for the nine
month period ended September 30, 1998.
Statements of operations for the nine and three month
periods ended September 30, 1998 and 1997.
Statements of cash flows for the nine and three month
periods ended September 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:
November 10, 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