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, 1999 |_| 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, 1999 AND DECEMBER 31, 1998 (Unaudited) ASSETS 1999 1998 ---- ---- Cash and cash equivalents $ 447,985 $ 744,132 Accounts receivable 6,857,675 9,786,041 Investments in leases 116,891,773 129,566,007 ------------------ ----------------- Total assets $124,197,433 $140,096,180 ================== ================= LIABILITIES AND PARTNERS' CAPITAL Non-recourse debt $52,404,057 $65,164,309 Line of credit 6,350,000 5,100,000 Accounts payable: General Partner 1,027,570 171,050 Other 692,358 604,768 Equipment purchases 130,852 255,252 Accrued interest payable 808,723 2,275,444 Unearned operating lease income 273,333 202,920 ------------------ ----------------- Total liabilities 61,686,893 73,773,743 Partners' capital: General Partner (492,985) (409,182) Limited Partners 63,003,525 66,731,619 ------------------ ----------------- Total partners' capital 62,510,540 66,322,437 ------------------ ----------------- Total liabilities and partners' capital $124,197,433 $140,096,180 ================== ================= See accompanying notes. ATEL CASH DISTRIBUTION FUND VI, L.P. STATEMENTS OF OPERATIONS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 (Unaudited) Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- Revenues: Leasing activities: Operating lease revenues $ 18,054,921 $ 18,243,619 $ 8,546,289 $ 9,220,961 Direct financing leases 56,606 68,501 28,386 32,486 Gain on sales of assets 157,439 795,189 86,474 117,792 Interest income 3,447 16,980 1,709 5,861 Other 12,519 9,721 6,461 4,130 ----------------- ------------------ ------------------ ----------------- 18,284,932 19,134,010 8,669,319 9,381,230 Expenses: Depreciation and amortization 11,856,615 13,512,038 5,798,360 6,710,334 Interest 2,517,878 3,452,060 1,291,530 1,722,230 Equipment and incentive management fees 576,016 631,370 190,821 260,732 Other 350,286 366,666 135,259 168,297 Administrative cost reimbursements 150,308 185,529 106,629 63,756 Professional fees 38,661 21,752 27,629 11,562 Provision for losses - 97,528 - - ----------------- ------------------ ------------------ ----------------- 15,489,764 18,266,943 7,550,228 8,936,911 ----------------- ------------------ ------------------ ----------------- Net income $ 2,795,168 $ 867,067 $ 1,119,091 $ 444,319 ================= ================== ================== ================= Net income: General partner $ 27,952 $ 8,671 $ 11,191 $ 4,443 Limited partners 2,767,216 858,396 1,107,900 439,876 ----------------- ------------------ ------------------ ----------------- $ 2,795,168 $ 867,067 $ 1,119,091 $ 444,319 ================= ================== ================== ================= Weighted average number of units outstanding 12,500,050 12,500,050 12,500,050 12,500,050 Net loss per limited partnership unit $0.22 $0.07 $0.09 $0.04 See accompanying notes. ATEL CASH DISTRIBUTION FUND VI, L.P. STATEMENT OF CHANGES IN PARTNERS' CAPITAL SIX MONTH PERIOD ENDED JUNE 30, 1999 (Unaudited) Limited Partners General Units Amount Partner Total Balance December 31, 1998 12,500,050 $ 66,731,619 $ (409,182) $66,322,437 Distributions to partners (6,495,310) (111,755) (6,607,065) Net income 2,767,216 27,952 2,795,168 ----------------- ------------------ ------------------ ----------------- Balance June 30, 1999 12,500,050 $ 63,003,525 $ (492,985) $62,510,540 ================= ================== ================== ================= See accompanying notes. STATEMENT OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 (Unaudited) Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- Operating activities: Net income $ 2,795,168 $ 867,067 $ 1,119,091 $ 444,319 Adjustments to reconcile net income to net cash provided by operations Depreciation and amortization 11,856,615 13,512,038 5,798,360 6,710,334 Gain on sales of assets (157,439) (795,189) (86,474) (117,792) Provision for losses - 97,528 - - Changes in operating assets and liabilities: Accounts receivable 2,928,366 3,790,999 2,548,924 (2,482,797) Accounts payable, general partner 856,520 (253,626) 859,450 (162,184) Accounts payable, other 87,590 1,151,352 (1,155,697) 152,063 Accrued interest expense (1,466,721) (2,837,356) (1,516,338) 877,775 Unearned lease income 70,413 242,507 (803,863) (715,000) ----------------- ------------------ ------------------ ----------------- Net cash provided by operating activities 16,970,512 15,775,320 6,763,453 4,706,718 ----------------- ------------------ ------------------ ----------------- Investing activities: Proceeds from sales of assets 871,191 2,308,466 414,402 424,912 Reduction in net investment in direct financing leases 103,867 258,270 55,639 108,733 Purchase of equipment on operating leases (124,400) - 5,452 - ----------------- ------------------ ------------------ ----------------- Net cash provided by investing activities 850,658 2,566,736 475,493 533,645 ----------------- ------------------ ------------------ ----------------- ATEL CASH DISTRIBUTION FUND VI, L.P. STATEMENTS OF CASH FLOWS (Continued) SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 (Unaudited) Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- Financing activities: Repayment of long-term non-recourse debt (12,760,252) (10,280,075) (4,972,863) (2,430,478) Distributions to partners (6,607,065) (6,281,757) (3,282,381) (3,125,059) Borrowings on line of credit 1,250,000 1,250,000 Repayment of line of credit - (5,850,000) - - Proceeds of long-term non-recourse debt - 4,199,995 - - ----------------- ------------------ ------------------ ----------------- Net cash provided by financing activities (18,117,317) (18,211,837) (7,005,244) (5,555,537) ----------------- ------------------ ------------------ ----------------- Net (decrease) increase in cash and cash equivalents (296,147) 130,219 233,702 (315,174) Cash at beginning of period 744,132 739,701 214,283 1,185,094 ----------------- ------------------ ------------------ ----------------- Cash at end of period $ 447,985 $ 869,920 $ 447,985 $ 869,920 ================= ================== ================== ================= Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 1,880,563 $ 2,424,973 $ 703,832 $ 844,455 ================= ================== ================== ================= Supplemental disclosure of non-cash transactions: Offset of accounts receivable and debt service per lease and debt agreement: Accrued interest payable $(2,104,036) $(3,864,443) $ 0 $ 0 Non-recourse debt (2,695,964) (935,557) - - ----------------- ------------------ ------------------ ----------------- Accounts receivable $(4,800,000) $(4,800,000) $ 0 $ 0 ================= ================== ================== ================= See accompanying notes. ATEL CASH DISTRIBUTION FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) 1. Summary of significant accounting policies: Interim financial statements: The unaudited interim financial statements reflect all adjustments which are, in the opinion of the general partners, necessary to a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim financial statements should be read in conjunction with the most recent report on Form 10K. 2. Organization and partnership matters: ATEL Cash Distribution Fund VI, L.P. (the Fund), was formed under the laws of the State of California on June 29 , 1994, for the purpose of acquiring equipment to engage in equipment leasing and sales activities. The Partnership does not make a provision for income taxes since all income and losses will be allocated to the Partners for inclusion in their individual tax returns. 3. Investment in leases: The Partnership's investment in leases consists of the following: Depreciation Expense or Reclass- December 31, Amortization ifications & June 30, 1998 of Leases Dispositions 1999 ---- --------- - ------------- ---- Net investment in operating leases $126,447,049 $(11,475,914) $ (962,070) $114,009,065 Net investment in direct financing leases 1,222,716 (103,867) (6,742) 1,112,107 Assets held for sale or lease 99,038 - 255,060 354,098 Residual interests 379,551 - - 379,551 Reserve for losses (785,086) - - (785,086) Initial direct costs, net of accumulated amortization 2,202,739 (380,701) - 1,822,038 ----------------- ------------------ ------------------ ----------------- $129,566,007 $(11,960,482) $ (713,752) $116,891,773 ================= ================== ================== ================= ATEL CASH DISTRIBUTION FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) 3. Investment in leases (continued): Property on operating leases consists of the following: Acquisitions & Balance December 31, Dispositions June 30, 1998 1st Quarter 2nd Quarter 1999 ---- ----------- ----------- ---- Transportation $ 99,965,294 $ (46,242) $ (181,510) $99,737,542 Construction 32,178,737 - - 32,178,737 Manufacturing 30,086,474 - (302,940) 29,783,534 Materials handling 18,442,909 (516,356) (1,009,500) 16,917,053 Office automation 10,485,156 (1,206,953) (282,900) 8,995,303 Miscellaneous 3,453,751 - - 3,453,751 Communications 658,185 - - 658,185 Medical 343,409 - - 343,409 Food processing 317,520 - - 317,520 ----------------- ------------------ ------------------ ----------------- 195,931,435 (1,769,551) (1,776,850) 192,385,034 Less accumulated depreciation (69,484,386) (4,429,697) (4,461,886) (78,375,969) ----------------- ------------------ ------------------ ----------------- $126,447,049 $(6,199,248) $(6,238,736) $114,009,065 ================= ================== ================== ================= All of the property on leases was acquired in 1995, 1996 and 1997. At June 30, 1999, the aggregate amounts of future minimum lease payments are as follows: Direct Year ending Operating Financing December 31, Leases Leases Total 1999 $ 13,998,355 $ 185,919 $ 14,184,274 2000 20,285,928 260,274 20,546,202 2001 10,777,239 158,238 10,935,477 2002 4,847,069 112,480 4,959,549 2003 3,050,287 98,760 3,149,047 Thereafter 12,975,397 395,040 13,370,437 ------------------ ------------------ ----------------- $ 65,934,275 $ 1,210,711 $ 67,144,986 ================= ================== ================== ATEL CASH DISTRIBUTION FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) 4. Non-recourse debt: Notes payable to financial institutions are due in varying monthly and semi-annual installments of principal and interest. The notes are secured by assignments of lease payments and pledges of the assets which were purchased with the proceeds of the particular notes. Interest rates on the notes vary from 6.5% to 12.229%. Future minimum principal payments of non-recourse debt are as follows: Year ending December 31, Principal Interest Total 1999 $ 5,875,578 $ 1,349,708 $ 7,225,286 2000 15,889,562 3,714,499 19,604,061 2001 8,834,242 2,531,010 11,365,252 2002 5,755,960 1,831,550 7,587,510 2003 5,488,995 1,241,942 6,730,937 Thereafter 10,559,720 4,302,772 14,862,492 ------------------ ------------------ ----------------- $ 52,404,057 $ 14,971,481 $ 67,375,538 ================= ================== ================== 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: 1999 1998 ---- ---- 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). $ 576,016 $ 631,370 Reimbursement of administrative costs 150,308 185,529 ------------------ ----------------- $ 726,324 $ 816,899 ================== ================= ATEL CASH DISTRIBUTION FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (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 $95,000,000 revolving credit agreement with a group of financial institutions which expires on January 31, 2000. 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, 1999, the Partnership had $6,350,000 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, 1999. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity During the first half of 1999, 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 $95,000,000 revolving line of credit with a financial institution. The line of credit expires on January 31, 2000. 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, 1999, the Partnership had borrowed $100,521,405 with a remaining unpaid balance of $52,404,057. 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, 1999. 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, 1999 vs. 1998: Six months: In 1999 and 1998, the Partnership's primary source of cash was rents from operating leases. Cash provided by operations increased by $1,326,044 (from $15,775,320 in 1998 to $17,101,364 in 1999). 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. In 1999, the only source of cash from financing activities was borrowings on the line of credit. Payments of non-recourse debt have increased as a result of borrowings in the first quarter of 1998. The Partnership's only significant source of cash from financing activities in 1998 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 1999 and 1998. 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 1999 and 1998 and were not as significant as cash flows from operations. There were no sources of cash from financing activities in 1999 or in 1998. Debt payments have increased for the same reasons note above for the six month period. Results of operations In 1999, operations resulted in net income of $2,795,168 (six months) and $1,119,091 (three months). In 1998, operations resulted in net income of $867,067 (six months) and $444,319 (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 decreased compared to 1998 due to sales of lease assets over the last year. As Interest expense is related to the borrowings under the line of credit and non-recourse debt and has decreased because of decreased debt balances compared to 1998. 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, 1999 and December 31, 1998. Statements of operations for the six and three month periods ended June 30, 1999 and 1998. Statement of changes in partners' capital for the six month period ended June 30, 1999. Statements of cash flows for the six and three month periods ended June 30, 1999 and 1998. 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 13, 1999 ATEL CASH DISTRIBUTION FUND VI, L.P. (Registrant) By: ATEL Financial Corporation General Partner of Registrant By: /s/ A. J. BATT ------------------------------------ A. J. Batt President and Chief Executive Officer of General Partner By: /s/ DEAN L. CASH ------------------------------------ Dean L. Cash Executive Vice President of General Partner By: /s/ PARITOSH K. CHOKSI ------------------------------------ Paritosh K. Choksi Principal financial officer of registrant By: /s/ DONALD E. CARPENTER ------------------------------------ Donald E. Carpenter Principal accounting officer of registrant