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, 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
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(Unaudited)
ASSETS
1999 1998
---- ----
Cash and cash equivalents $ 1,018,402 $ 744,132
Accounts receivable 7,729,032 9,786,041
Investments in leases 110,335,642 129,566,007
----------------- -----------------
Total assets $119,083,076 $140,096,180
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 48,645,505 $ 65,164,309
Line of credit 7,350,000 5,100,000
Accounts payable:
General Partner 1,121,294 171,050
Equipment purchases 139,224 255,252
Other 731,213 604,768
Accrued interest payable 1,075,507 2,275,444
Unearned operating lease income 319,785 202,920
----------------- -----------------
Total liabilities 59,382,528 73,773,743
Partners' capital:
General Partner (488,259) (409,182)
Limited Partners 60,188,807 66,731,619
----------------- -----------------
Total partners' capital 59,700,548 66,322,437
----------------- -----------------
Total liabilities and partners' capital $119,083,076 $140,096,180
================= =================
See accompanying notes.
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1999
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
Leasing activities:
Operating leases $26,218,702 $ 26,712,867 $ 8,163,781 $ 8,469,248
Direct financing leases 82,736 108,287 26,130 39,786
Gain on sales of assets 222,217 851,569 64,778 56,380
Interest 5,879 20,507 2,432 3,527
Other 17,367 13,571 4,848 3,850
------------------------------------ -----------------------------------
26,546,901 27,706,801 8,261,969 8,572,791
Expenses:
Depreciation and amortization 17,327,722 19,971,865 5,471,107 6,459,827
Interest expense 3,710,959 4,932,006 1,193,081 1,479,946
Equipment and incentive management fees to
General Partner 886,812 1,038,051 310,796 406,681
Other 521,470 554,496 171,184 187,830
Administrative cost reimbursements to General
Partner 278,463 308,672 128,155 123,143
Professional fees 53,660 55,276 14,999 33,524
Provision for losses 500,000 97,528 500,000 -
------------------------------------ -----------------------------------
23,279,086 26,957,894 7,789,322 8,690,951
------------------------------------ -----------------------------------
Net income (loss) $ 3,267,815 $ 748,907 $ 472,647 $ (118,160)
==================================== ===================================
Net income (loss):
General Partner $ 32,678 $ 7,489 $ 4,726 $ (1,182)
Limited Partners 3,235,137 741,418 467,921 (116,978)
------------------------------------ -----------------------------------
$ 3,267,815 $ 748,907 $ 472,647 $ (118,160)
================= ================== ================= =================
Net income (loss) per Limited Partnership Unit $ 0.26 $ 0.06 $ 0.04 $ (0.01)
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, 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 (9,777,949) (111,755) (9,889,704)
Net income 3,235,137 32,678 3,267,815
------------------------------------ ----------------- -----------------
Balance September 30, 1999 12,500,050 $ 60,188,807 $ (488,259) $ 59,700,548
================= ================== ================= =================
See accompanying notes.
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1999
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Operating activities:
Net income (loss) $ 3,267,815 $ 748,907 $ 472,647 $ (118,160)
Adjustment to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 17,327,722 19,971,865 5,471,107 6,459,827
Gain on sales of assets (222,217) (851,569) (64,778) (56,380)
Provision for losses 500,000 97,528 500,000 -
Changes in operating assets and liabilities:
Accounts receivable (2,742,991) (1,701,454) (5,671,357) (692,453)
Accounts payable, General Partner 950,244 (66,160) 93,724 187,466
Accounts payable, other 126,445 129,978 38,855 (1,021,374)
Accrued interest payable 904,099 1,178,144 2,370,820 151,057
Unearned lease income 116,865 165,921 46,452 (76,586)
----------------- ------------------ ----------------- -----------------
Net cash provided by operations 20,227,982 19,673,160 3,257,470 4,833,397
----------------- ------------------ ----------------- -----------------
Investing activities:
Purchases of equipment on operating leases (116,028) - 8,372 -
Reduction in net investment in direct financing
leases 186,910 320,815 83,043 62,545
Proceeds from sales of assets 1,437,950 2,649,734 566,759 341,268
----------------- ------------------ ----------------- -----------------
Net cash provided by investing activities 1,508,832 2,970,549 658,174 403,813
----------------- ------------------ ----------------- -----------------
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CASH FLOWS
(CONTINUED)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1999
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Financing activities:
Repayments of non-recourse debt (13,822,840) (13,193,919) (1,062,588) (3,849,401)
Distributions to Partners (9,889,704) (9,505,483) (3,282,639) (3,223,726)
Borrowings under line of credit 2,250,000 1,200,000 1,000,000 1,200,000
Repayments of borrowings under line of credit - (5,850,000) - -
Proceeds of non-recourse debt - 4,199,995 - -
----------------- ------------------ ----------------- -----------------
Net cash used in financing activities (21,462,544) (23,149,407) (3,345,227) (5,873,127)
----------------- ------------------ ----------------- -----------------
Net increase (decrease) in cash and cash
equivalents 274,270 (505,698) 570,417 (635,917)
Cash and cash equivalents at beginning of
period 744,132 739,701 447,985 869,920
----------------- ------------------ ----------------- -----------------
Cash and cash equivalents at end of period $ 1,018,402 $ 234,003 $ 1,018,402 $ 234,003
================= ================== ================= =================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 4,910,896 $ 7,618,305 $ 3,030,333 $ 1,328,889
================= ================== ================= =================
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
SEPTEMBER 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. 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,
1998 of Leases Dispositions 1999
---- --------- ------------ ----
Net investment in operating leases $126,447,049 ($16,780,438) ($1,523,841) $108,142,770
Net investment in direct financing leases 1,222,716 (186,910) (6,743) 1,029,063
Equipment held for sale or lease 99,038 - 314,851 413,889
Residual interests 379,551 - - 379,551
Initial direct costs, net of accumulated
amortization of $2,094,732 in 1998 and
$2,568,966 in 1999 2,202,739 (547,284) - 1,655,455
Reserve for losses (785,086) (500,000) - (1,285,086)
----------------- ------------------ ----------------- -----------------
$129,566,007 $(18,014,632) $(1,215,733) $110,335,642
================= ================== ================= =================
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
Balance Balance
December 31, Acquisitions, Dispositions & Reclassifications September 30,
1998 1st Quarter 2nd Quarter 3rd Quarter 1999
---- ----------- ----------- ----------- ----
Transportation $ 99,965,294 $ (46,242) $ (181,510) $ (196,339) $ 99,541,203
Construction 32,178,737 - - (492,220) 31,686,517
Manufacturing 30,086,474 - (302,940) (145,693) 29,637,841
Materials handling 18,442,909 (516,356) (1,009,500) (816,986) 16,100,067
Office automation 10,485,156 (1,206,953) $ (282,900) (1,200,794) 7,794,509
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) (2,852,032) 189,533,002
Less accumulated depreciation (69,484,386) (4,429,697) (4,461,886) (3,014,263) (81,390,232)
------------------ ----------------- ------------------ ----------------- -----------------
$ 126,447,049 $ (6,199,248) $(6,238,736) $(5,866,295) $108,142,770
================== ================= ================== ================= =================
All of the property on leases was acquired in 1995, 1996 and 1997.
At September 30, 1999, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Operating Financing
Leases Leases Total
Three months ending December 31, 1999 $ 6,177,897 $ 76,747 $ 6,254,644
Year ending December 31, 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
----------------- ------------------ -----------------
$ 58,113,817 $ 1,101,539 $ 59,215,356
================== ================= =================
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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, 1999
are as follows:
Principal Interest Total
Three months ending December 31, 1999 $ 2,117,026 $ 526,088 $ 2,643,114
Year ending December 31, 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
----------------- ------------------ -----------------
$ 48,645,505 $ 14,147,861 $ 62,793,366
================== ================= =================
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). $ 886,812 $ 1,038,051
Administrative cost reimbursements to General Partner 278,463 308,672
------------- --------------
$ 1,165,275 $ 1,346,723
============= ==============
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, 1999
(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 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, 1999, 12,500,050 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, 95.75% 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.
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
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 28, 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 September 30, 1999, the Partnership had $7,350,000 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 September
30, 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
In 1999, the Partnership's primary activity was equipment leasing and sales
activities.
The Partnership's primary source of liquidity during the first nine months of
1999 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 $95,000,000 revolving line of credit with a financial
institution. The line of credit expires on January 28, 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 September 30, 1999, the Partnership had borrowed $100,521,405 with a
remaining unpaid balance of $48,645,505. 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, 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.
1999 vs. 1998:
In 1999 and 1998, 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 decreased by
$1,211,784 compared to 1998. The only investing use of cash in 1999 was payments
on the purchase of assets on operating leases.
Financing sources of cash consisted of borrowings on the line of credit (1999
and 1998) and proceeds of non-recourse debt (1998).
Results of operations
For the nine month periods, operations resulted in net income of $3,767,815 in
1999 and $748,907 in 1998. For the three month periods, operations resulted in
net income of $972,642 in 1999 and a net loss of $118,160 in 1998. The
Partnership's primary source of revenues is from operating leases.
Operating lease revenues decreased slightly for both the nine and three month
periods compared to 1998.
Depreciation expense has declined by $2,644,143 (nine months) and $988,720
(three months) compared to 1998. The decreases were the result of asset sales
over the last year.
Non-recourse debt balances have been reduced in 1999 compared to 1998 as a
result of scheduled debt payments. This has led to the reduction of interest
expense of $1,221,047 in 1999 compared to 1998 for the nine month period and
$286,865 for the three month period.
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, 1999 and December 31,
1998.
Statement of changes in partners' capital for the nine
month period ended September 30, 1999.
Statements of operations for the nine and three month
periods ended September 30, 1999 and 1998.
Statements of cash flows for the nine and three month
periods ended September 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:
November 12, 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