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, 2003
|_| 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 0-24175
ATEL Capital Equipment Fund VII, L.P.
(Exact name of registrant as specified in its charter)
California 94-3248318
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
600 California Street, 6th Floor, San Francisco, California 94108-2733
(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 |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|
The number of Limited Partnership Units outstanding as of September 30, 2003 was
14,995,550.
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
2
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(Unaudited)
ASSETS
September 30, December 31,
2003 2002
(Unaudited)
Cash and cash equivalents $ 870,679 $ 2,194,169
Accounts receivable, net of allowance for
doubtful accounts of $378,880 in 2003
and $403,067 in 2002 2,169,582 4,848,736
Due from General Partner 24,851 253,543
Other assets - 10,019
Investments in leases 78,442,637 108,917,281
----------------- ------------------
Total assets $ 81,507,749 $116,223,748
================= ==================
LIABILITIES AND PARTNERS' CAPITAL
Long-term debt $ 17,536,000 $ 33,546,000
Line of credit 13,000,000 13,300,000
Non-recourse debt 2,176,571 4,577,308
Accounts payable 497,781 752,459
Accrued interest payable 41,121 192,403
Interest rate swap contracts 884,582 1,624,360
Unearned operating lease income 624,177 1,012,984
----------------- ------------------
Total liabilities 34,760,232 55,005,514
Partners' capital 46,747,517 61,218,234
----------------- ------------------
Total liabilities and partners' capital $ 81,507,749 $116,223,748
================= ==================
See accompanying notes.
3
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF OPERATIONS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND 2002
(Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
Revenues:
Leasing activities:
Operating leases $ 14,674,318 $19,066,158 $ 4,736,287 $ 6,522,507
Direct financing 475,179 1,115,790 46,421 347,458
Gain (loss) on sales of assets 2,285,677 (1,283,977) 96,552 (225,989)
Interest 3,713 11,284 1,272 2,742
Other 177,615 156,438 128,914 66,379
------------------ ------------------ ----------------- ------------------
17,616,502 19,065,693 5,009,446 6,713,097
Expenses:
Depreciation and amortization 11,350,471 13,967,963 3,478,857 4,872,131
Impairment losses 4,559,020 300,000 4,041,094 300,000
Interest expense 1,527,850 2,486,353 439,508 748,945
Cost reimbursements to General Partner 828,448 755,205 24,714 82,796
Equipment and incentive management fees to
General Partner 751,255 730,798 279,773 239,336
Railcar maintenance 616,746 560,297 191,676 212,835
Franchise fees and income taxes 128,178 23,124 - -
Professional fees 117,929 153,614 22,611 5,134
(Recovery of) provision for doubtful accounts (3,000) 500,000 (139,000) 130,000
Other 770,874 507,960 446,979 213,176
------------------ ------------------ ----------------- ------------------
20,647,771 19,985,314 8,786,212 6,804,353
------------------ ------------------ ----------------- ------------------
Net loss $(3,031,269) $ (919,621) $(3,776,766) $ (91,256)
===================================== ====================================
Net loss:
General Partner $ 929,996 $ 899,824 $ 302,788 $ 303,240
Limited Partners (3,961,265) (1,819,445) (4,079,554) (394,496)
------------------ ------------------ ----------------- ------------------
$(3,031,269) $ (919,621) $(3,776,766) $ (91,256)
================== ================== ================= ==================
Net loss per limited partnership unit $ (0.26) $ (0.12) $ (0.27) $ (0.03)
Weighted average number of Units outstanding 14,995,883 14,996,050 14,995,550 14,996,050
See accompanying notes.
4
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2002
AND FOR THE
NINE MONTH PERIOD ENDED
SEPTEMBER 30, 2003
(Unaudited)
Accumulated
Other
Limited Partners General Comprehensive
Units Amount Partner Income (Loss) Total
Balance December 31, 2001 14,996,050 $ 80,818,857 $ - $(1,326,006) $ 79,492,851
Distributions to Limited Partners (14,999,876) - - (14,999,876)
Distributions to General Partner - (1,203,884) - (1,203,884)
Unrealized decrease in value of
interest rate swap contracts - - (298,354) (298,354)
Net income (loss) (2,976,387) 1,203,884 - (1,772,503)
------------------ ------------------ ------------------ ----------------- ------------------
Balance December 31, 2002 14,996,050 62,842,594 - (1,624,360) 61,218,234
Unrealized change in value of
interest rate swap contracts - - 739,778 739,778
Limited partnership units
repurchased (500) (1,844) - - (1,844)
Distributions to Limited Partners (11,247,386) - (11,247,386)
Distributions to General Partner - (929,996) - (929,996)
Net income (loss) (3,961,265) 929,996 - (3,031,269)
------------------ ------------------ ------------------ ----------------- ------------------
Balance September 30, 2003 14,995,550 $ 47,632,099 $ - $ (884,582) $ 46,747,517
================== ================== ================== ================= ==================
See accompanying notes.
5
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND 2002
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
Operating activities:
Net loss $ (3,031,269) $ (919,621) $ (3,776,766) $ (91,256)
Adjustments to reconcile net loss to
cash provided by operating activities:
(Gain) loss on sales of assets (2,285,677) 1,283,977 (96,552) 225,989
Depreciation and amortization 11,350,471 13,967,963 3,478,857 4,872,131
Impairment losses 4,559,020 300,000 4,041,094 300,000
(Recovery of) provision for doubtful accounts (3,000) 500,000 (139,000) 130,000
Changes in operating assets and liabilities:
Accounts receivable 2,682,154 2,308,256 667,956 389,813
Due from General Partner 228,692 - 9,000 -
Other assets 10,019 87,997 - 9,999
Accounts payable, General Partner - (580,916) - -
Accounts payable, other (254,678) 149,504 (145,017) (411,171)
Accrued interest payable (151,282) (225,521) (2,444) (48,971)
Unearned operating lease income (388,807) 108,834 (357,001) 268,964
----------------- ------------------ ----------------- ------------------
Net cash provided by operations 12,715,643 16,980,473 3,680,127 5,645,498
----------------- ------------------ ----------------- ------------------
Investing activities:
Proceeds from sales of assets 15,665,275 2,703,781 722,478 1,778,351
Reduction in net investment in direct financing leases 1,185,555 859,894 214,878 (737,462)
Purchases of equipment on operating leases - (3,959,522) - -
Purchases of equipment on direct financing leases - (3,052,572) - -
Payment of initial direct costs to General Partner - (107,961) - -
----------------- ------------------ ----------------- ------------------
Net cash provided by (used in) investing
activities 16,850,830 (3,556,380) 937,356 1,040,889
----------------- ------------------ ----------------- ------------------
6
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
SEPTEMBER 30, 2003 AND 2002
(Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
Financing activities:
Distributions to partners (12,177,382) (12,149,626) (4,052,736) (4,053,188)
Borrowings under line of credit 17,500,000 16,500,000 3,000,000 3,300,000
Repayments of borrowings under line of credit (17,800,000) (10,300,000) (4,000,000) -
Proceeds of long-term debt - 10,100,000 - -
Repayments of long-term debt (16,010,000) (11,803,000) (1,408,000) (3,692,000)
Proceeds of non-recourse debt 1,489,905 - 1,489,905 -
Repayments of non-recourse debt (3,890,642) (4,787,973) (406,616) (1,844,670)
Repurchase of limited partnership units (1,844) - - -
----------------- ------------------ ----------------- ------------------
Net cash used in financing activities (30,889,963) (12,440,599) (5,377,447) (6,289,858)
-------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents (1,323,490) 983,494 (759,964) 396,529
Cash and cash equivalents at beginning of
period 2,194,169 936,189 1,630,643 1,523,154
----------------- ------------------ ----------------- ------------------
Cash and cash equivalents at end of period $ 870,679 $ 1,919,683 $ 870,679 $ 1,919,683
================= ================== ================= ==================
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $ 1,679,132 $ 2,711,874 $ 441,952 $ 797,916
================= ================== ================= ==================
Schedule of non-cash transactions:
Change in fair value of interest rate swap contracts $ 739,778 $ 585,914 $ 236,698 $ (38,914)
================= ================== ================= ==================
See accompanying notes.
7
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
1. Summary of significant accounting policies:
Interim financial statements:
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (GAAP) for
interim financial information and with instructions to Form 10-Q and Article 10
of Regulation S-X. The unaudited interim financial statements reflect all
adjustments which are, in the opinion of the General Partner, 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. The
preparation of financial statements in accordance with GAAP requires management
to make estimates and assumptions that effect reported amounts in the financial
statements and accompanying notes. Therefore, actual results could differ from
those estimates. Operating results for the three and nine months ended September
30, 2003 are not necessarily indicative of the results for the year ending
December 31, 2003.
These unaudited interim financial statements should be read in conjunction with
the financial statements and notes thereto contained in the report on Form 10-K
for the year ended December 31, 2002, filed with the Securities and Exchange
Commission.
2. Organization and partnership matters:
ATEL Capital Equipment Fund VII, L.P. (the Fund), was formed under the laws of
the State of California on July 17, 1996, 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 17, 1996, $100 of which represented the General
Partner's (ATEL Financial Services, LLC'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 7,
1997, the Partnership commenced operations.
The Partnership does not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their individual tax
returns.
Certain prior year balances have been reclassified to conform to the current
year presentation.
8
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation /
Amortization
Expense or
Balance Amortization of Reclassi- Balance
December 31, Impairment Direct Financing fications or September 30,
2002 Losses Leases Dispositions 2003
Net investment in operating
leases $ 82,215,309 $(1,039,925) $ (11,253,710) $(14,590,487) $ 55,331,187
Net investment in direct
financing leases 16,227,117 - (1,185,555) (6,223,986) 8,817,576
Assets held for sale or lease 10,263,086 (3,519,095) - 7,434,875 14,178,866
Initial direct costs, net of
accumulated amortization 211,769 - (96,761) - 115,008
-------------------- ------------------ ------------------ ----------------- ------------------
$ 108,917,281 $ (4,559,020) $ (12,536,026) $(13,379,598) $ 78,442,637
==================== ================== ================== ================= ==================
Operating leases:
Property on operating leases consists of the following:
Depreciation
Balance Expense and Reclassi- Balance
December 31, Impairment fications or September 30,
2002 Losses Dispositions 2003
Transportation $ 74,889,008 $ - $ 6,725 $ 74,895,733
Construction 22,414,263 - (2,339,711) 20,074,552
Marine vessels/barges 27,030,136 - (16,875,136) 10,155,000
Mining 9,012,965 - (369,793) 8,643,172
Materials handling 9,009,095 - (4,390,694) 4,618,401
Manufacturing 9,367,388 - (4,813,948) 4,553,440
Communications 4,309,885 - (561,827) 3,748,058
Office automation 3,604,688 - (83,642) 3,521,046
Other 6,034,386 - (2,726,406) 3,307,980
------------------ ------------------ ----------------- ------------------
165,671,814 - (32,154,432) 133,517,382
Less accumulated depreciation, including
impairment losses (83,456,505) (12,293,635) 17,563,945 (78,186,195)
------------------ ------------------ ----------------- ------------------
$ 82,215,309 $ (12,293,635) $(14,590,487) $ 55,331,187
================== ================== ================= ==================
All of the property on leases was acquired in 1997, 1998, 1999, 2001 and 2002.
9
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
3. Investment in leases (continued):
Impairment losses on operating lease assets are recorded as an addition to
accumulated depreciation of the impaired assets. Depreciation expense and
impairment losses consist of the following:
Depreciation expense $ 11,253,710
Impairment losses 1,039,925
------------------
$ 12,293,635
==================
Direct financing leases:
The following lists the components of the Partnership's investment in direct
financing leases:
September 30, December 31,
2003 2002
Total minimum lease payments receivable $ 6,579,576 $ 14,018,775
Estimated residual values of leased equipment (unguaranteed) 4,800,103 6,286,069
----------------- ------------------
Investment in direct financing leases 11,379,679 20,304,844
Less unearned income (2,562,103) (4,077,727)
----------------- ------------------
Net investment in direct financing leases $ 8,817,576 $ 16,227,117
================= ==================
At September 30, 2003, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Operating Financing
Leases Leases Total
Three months ending December 31, 2003 $ 3,555,663 $ 623,316 $ 4,178,979
Year ending December 31, 2004 12,403,361 2,135,616 14,538,977
2005 7,920,453 2,135,616 10,056,069
2006 4,526,939 945,719 5,472,658
2007 3,660,007 535,056 4,195,063
2008 3,303,607 204,253 3,507,860
Thereafter 2,927,407 - 2,927,407
------------------ ----------------- ------------------
$ 38,297,437 $ 6,579,576 $ 44,877,013
================== ================= ==================
Impairments of investments in leases and assets held for sale or lease:
Due to continued declines in the markets for certain types of assets, during the
first nine months of 2003, management determined that the value of various
locomotives, an off shore supply vessel, covered grain hopper cars, barges and
petroleum rail cars were impaired. The Company recorded a provision for
impairments relating to those assets in the amount of $4,559,020.
10
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
3. Investment in leases (continued):
Impairments of investments in leases and assets held for sale or lease
(continued):
During the first nine months of 2003, the Company recognized impairment losses
on various types of equipment as set forth below. The impairments resulted from
continued declines in the markets for the equipment.
Locomotives $ 2,475,000
Off shore supply vessels 1,022,000
Covered grain hopper cars 517,925
Petroleum rail tank cars 325,462
Barges 218,633
------------------
$ 4,559,020
==================
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
5.5% to 7.0%. During the third quarter of 2003, an additional $1,489,905 was
borrowed.
Future minimum principal payments of non-recourse debt are as follows:
Principal Interest Total
Three months ending December 31, 2003 $ 590,169 $ 24,321 $ 614,490
Year ending December 31, 2004 1,118,694 53,992 1,172,686
2005 251,586 24,182 275,768
2006 101,568 11,462 113,030
2007 90,838 5,141 95,979
2008 23,716 279 23,995
------------------ ----------------- ------------------
$ 2,176,571 $ 119,377 $ 2,295,948
================== ================= ==================
11
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
5. Long-term debt:
In 1998, the Partnership entered into a $65 million receivables funding program
(the Program) with a receivables financing company that issues commercial paper
rated A1 by Standard and Poors and P1 by Moody's Investor Services. Under the
Program, the receivables financing company receives a general lien against all
of the otherwise unencumbered assets of the Partnership. The Program provides
for borrowing at a variable interest rate (1.1071% at September 30, 2003).
The Program requires the General Partner to enter into various interest rate
swaps with a financial institution (also rated A1/P1) to manage interest rate
exposure associated with variable rate obligations under the Program by
effectively converting the variable rate debt to fixed rates. As of September
30, 2003, the Partnership receives or pays interest on a notional principal of
$17,536,000, based on the difference between nominal rates ranging from 4.36% to
7.58% and the variable rate under the Program. No actual borrowing or lending is
involved. The last of the swaps terminates in 2009. The differential to be paid
or received is accrued as interest rates change and is recognized currently as
an adjustment to interest expense related to the debt.
Through hedge agreements, the interest rates have been effectively fixed.
Borrowings under this facility are as follows:
Original Balance Rate on
Date Amount September 30, Interest Swap
Borrowed Borrowed 2003 Agreement
4/1/1998 $ 21,770,000 $ 424,000 6.22000%
7/1/1998 25,000,000 2,676,000 6.15500%
10/1/1998 20,000,000 3,615,000 5.55000%
4/16/1999 9,000,000 1,947,000 5.89000%
1/26/2000 11,700,000 4,702,000 7.58000%
5/25/2001 2,000,000 994,000 5.79000%
9/28/2001 6,000,000 2,961,000 4.36000%
1/31/2002 4,400,000 217,000 *
2/19/2002 5,700,000 - *
------------------ ------------------
$105,570,000 $17,536,000
================== ==================
* Under the terms of the Program, no interest rate swap agreements were required
for these borrowings.
12
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
5. Long-term debt (continued):
Future minimum principal payments of long-term debt are as follows:
Swap Notional / Debt Rates on
Debt Principal Interest Swap
Principal Not Swapped Interest Total Agreements*
Three months ending
December 31, 2003 $ 1,729,000 $ 48,000 $ 258,765 $ 2,035,765 6.060%-6.074%
Year ending December 31, 2004 6,648,000 114,000 777,674 7,539,674 6.074%-6.135%
2005 5,405,000 12,000 404,456 5,821,456 6.146%-6.450%
2006 2,033,000 43,000 167,037 2,243,037 6.593%-6.897%
2007 901,000 - 75,818 976,818 6.872%-7.028%
2008 603,000 - 18,843 621,843 7.066%-7.580%
-------------------- ------------------ ------------------ -----------------
$ 17,319,000 $ 217,000 $ 1,702,593 $ 19,238,593
==================== ================== ================== =================
* Represents the range of monthly weighted average fixed interest rates paid for
amounts maturing in the particular year. The receive-variable rate portion of
the swap represents commercial paper rates (1.1071% at September 30, 2003).
6. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or its affiliates (Affiliates) are entitled to receive certain fees for
equipment management and resale and for management of the Partnership.
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 management of equipment.
Reimbursable costs incurred by the General Partner are allocated to the
Partnership based upon actual time incurred by employees working on Partnership
business and an allocation of rent and other costs based on utilization studies.
Substantially all employees of the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. The General Partner believes that the costs reimbursed
are the lower of actual costs incurred on behalf of the Partnership or the
amount the Partnership would be required to pay independent parties for
comparable administrative services in the same geographic location and are
reimbursable in accordance with the Limited Partnership Agreement.
13
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
6. Related party transactions (continued):
The General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
Incentive management fees and equipment
management fees $ 751,255 $ 730,798 $ 279,773 $ 239,336
Administrative costs reimbursed to General
Partner 828,448 755,205 24,714 82,796
------------------ ------------------ ----------------- ------------------
$ 1,579,703 $ 1,486,003 $ 304,487 $ 322,132
================== ================== ================= ==================
7. Partner's capital:
As of September 30, 2003, 14,995,550 Units ($149,955,050) were issued and
outstanding. The Fund is authorized to issue up to 15,000,050 Units, including
the 50 Units issued to the initial limited partners.
Available Cash from Operations, as defined in the Limited Partnership Agreement,
shall be distributed as follows:
First, Distributions of Cash from Operations shall be 88.5% to the Limited
Partners, 7.5% to the General Partner and 4% to the General Partner or its
affiliate designated as the recipient of the Incentive Management Fee, 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, as defined in the
Limited Partnership Agreement.
Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the
General Partner or its affiliate designated as the recipient of the Incentive
Management Fee.
Available Cash from Sales or Refinancing, as defined in the Limited Partnership
Agreement, shall be distributed as follows:
First, Distributions of Sales or Refinancings shall be 92.5% to the Limited
Partners and 7.5% to the General Partner, 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.
Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the
General Partner or its affiliate designated as the recipient of the Incentive
Management Fee.
14
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
7. Partner's capital (continued):
Distributions to the Limited Partners were as follows in 2003 and 2002:
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
Distributions $ 11,247,386 $ 11,249,802 $ 3,749,948 $ 3,749,948
Weighted average number of Units outstanding 14,995,883 14,996,050 14,995,550 14,996,050
Weighted average distributions per Unit $0.75 $0.75 $0.25 $0.25
8. Line of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $56,282,201 revolving line of credit (comprised of an
acquisition facility and a warehouse facility) with a financial institution that
includes certain financial covenants. The line of credit expires on June 28,
2004. As of September 30, 2003, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ 13,000,000
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition
facility 11,300,000
----------------
Total borrowings under the acquisition facility 24,300,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
----------------
Total outstanding balance $ 24,300,000
================
Total available under the line of credit $ 57,282,201
Total outstanding balance (24,300,000)
----------------
Remaining availability $ 32,982,201
================
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Partnership and the General
Partner.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of September
30, 2003.
9. Commitments:
As of September 30, 2003, the Company had no outstanding commitments to purchase
lease equipment.
15
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
10. Other comprehensive income (loss):
In 2003 and 2002, other comprehensive income (loss) consisted of the following:
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
Net loss $(3,031,269) $ (919,621) $(3,776,766) $ (91,256)
Other comprehensive income (loss):
Change in fair value of interest rate swap contracts 739,778 585,914 236,698 (38,914)
--------------- ------------------ ----------------- ------------------
Comprehensive net income (loss) $(2,291,491) $ (333,707) $(3,540,068) $ (130,170)
=============== ================== ================= ==================
There were no other sources of comprehensive net income (loss).
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements contained in this Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Form 10-Q,
which are not historical facts, may be forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Investors are cautioned not
to attribute undue certainty to these forward-looking statements, which speak
only as of the date of this Form 10-Q. We undertake no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this Form 10-Q or to reflect the occurrence of
unanticipated events, other than as required by law.
Capital Resources and Liquidity
During the first three quarters of 2003 and 2002, our primary activity was
engaging in equipment leasing activities.
Our liquidity will vary in the future, increasing to the extent cash flows from
leases exceed expenses, and decreasing as lease assets are acquired, as
distributions are made to the limited partners and to the extent expenses exceed
cash flows from leases.
As another source of liquidity, we have contractual obligations with a
diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire we will re-lease or sell the equipment. The
future liquidity beyond the contractual minimum rentals will depend on our
success in re-leasing or selling the equipment as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $56,282,201 revolving line of credit (comprised of an
acquisition facility and a warehouse facility) with a financial institution that
includes certain financial covenants. The line of credit expires on June 28,
2004. As of September 30, 2003, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ 13,000,000
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition
facility 11,300,000
----------------
Total borrowings under the acquisition facility 24,300,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
----------------
Total outstanding balance $ 24,300,000
================
Total available under the line of credit $ 57,282,201
Total outstanding balance (24,300,000)
----------------
Remaining availability $ 32,982,201
================
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Partnership and the General
Partner.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of September
30, 2003.
We anticipate reinvesting a portion of lease payments from assets owned in new
leasing transactions. These reinvestments will occur only after the payment of
all obligations, including debt service (both principal and interest), the
payment of management fees to the General Partner and providing for cash
distributions to the Limited Partners.
We currently have available adequate reserves to meet contingencies, but in the
event those reserves were found to be inadequate, we would likely be in a
position to borrow against its current portfolio to meet such requirements. We
envision no such requirements for operating purposes.
We do not expect to make commitments of capital other than for the acquisition
of additional equipment. As of September 30, 2003, we had made none of these
commitments.
If inflation in the general economy becomes significant, it may affect us in
that the residual (resale) values and rates on re-leases of our leased assets
may increase as the costs of similar assets increase. However, our revenues from
existing leases would not increase, as such rates are generally fixed for the
terms of the leases without adjustment for inflation.
17
If interest rates increase significantly, the lease rates that we can obtain on
future leases will be expected to increase as the cost of capital is a
significant factor in the pricing of lease financing. Our leases already in
place, for the most part, would not be affected by changes in interest rates.
During 2003, our primary sources of liquidity were rents from operating leases
and proceeds from the sales of lease assets. In 2002, our primary source of
liquidity was rents from operating leases. The sales proceeds in 2003 were,
however, used primarily to repay long-term debt and did not provide a large
amount of cash, net of those repayments.
In both 2003 and in 2002, our cash flows from operating activities came almost
entirely from operating lease rents for both the three and nine month periods.
Our sources of cash from investing activities consisted of proceeds from sales
of assets and direct financing lease rents. Rents from direct financing leases
increased compared to 2002. This occurred as a result of lease asset
reclassifications over the last year from assets off lease and from operating
leases to direct financing leases. We do not expect that the amounts of proceeds
from sales of assets will be consistent from one period to another. The majority
of the sales proceeds were used to repay long-term debt, as noted above.
In 2002, borrowings on the line of credit and proceeds of long-term debt were
our only sources of cash from financing sources. In 2003, we also borrowed
$1,489,905 on a new non-recourse note payable.
The amounts we distributed to our partners have not changed significantly
compared to 2002. The amounts of cash we used to repay non-recourse debt
increased significantly for the nine month period and decreased for the three
month period. The increase for the nine month period was the result of the early
debt payments from proceeds generated from asset sales, as noted above. The
decrease in the third quarter resulted from a decrease in the average
outstanding balances compared to prior periods. This was partially a result of
the additional debt repayments earlier in the year as noted above.
Results of operations
In 2003, our operations resulted in a net loss of $3,031,269 (nine months) and
$3,776,766 (three months). Our operations in 2002 resulted in a net loss of
$919,621 (nine months) and $91,256 (three months). Our primary source of
revenues is from operating leases. These lease revenues and the related
depreciation expenses have decreased compared to 2002 as a result of asset sales
over the last year. Equipment management fees are based on our rental revenues
and have decreased due to decreases in our revenues from leases. Incentive
management fees are based on the levels of distributions of cash from operations
to limited partners. Our distributions of operating cash flows increased
compared to 2002, and as a result, incentive management fees also increased.
Interest expense has decreased as a result of the scheduled debt payments we
have made over the last year.
Due to continued declines in the markets for certain types of assets, during the
first nine months of 2003, we determined that the value of various locomotives,
an off shore supply vessel, covered grain hopper cars, barges and petroleum rail
cars were impaired. We recorded an a provision for impairments relating to those
assets in the amount of $4,559,020 for the nine months ended, of which
$4,041,094 was recorded during the three months ended September 30, 2003.
Item 3. Quantitative and Qualitative Disclosures of Market Risk.
The Fund, like most other companies, is exposed to certain market risks,
including primarily changes in interest rates. The Fund believes its exposure to
other market risks, including foreign currency exchange rate risk, commodity
risk and equity price risk, are insignificant to both its financial position and
results of operations.
In general, the Fund's strategy is to manage its exposure to interest rate risk
by obtaining fixed rate debt. Current fixed rate debt is structured so as to
match the cash flows required to service the debt to the payment streams under
fixed rate lease receivables. The payments under the leases are assigned to the
lenders in satisfaction of the debt. Furthermore, the Fund has historically been
able to maintain a stable spread between its cost of funds and lease yields in
both periods of rising and falling interest rates. Nevertheless, the Fund
frequently funds leases with its floating rate line of credit and is, therefore,
exposed to interest rate risk until fixed interest rate financing is arranged,
or the floating interest rate line of credit is repaid. As of September 30,
2003, the outstanding balance on the floating rate line of credit was
$13,000,000.
Also, the Fund entered into a receivables funding facility in 1998. Since
interest on the outstanding balances under the facility varies, the Fund is
exposed to market risks associated with changing interest rates. To hedge its
interest rate risk, the Fund enters into interest rate swaps, which effectively
convert the underlying interest characteristic on the facility from floating to
fixed.
18
Under the swap agreements, the Fund makes or receives variable interest payments
to or from the counterparty based on a notional principal amount. The net
differential paid or received by the Fund is recognized as an adjustment to
interest expense related to the facility balances. The amount paid or received
represents the difference between the payments required under the variable
interest rate facility and the amounts due under the facility at the fixed
(hedged) interest rate. As of September 30, 2003, borrowings on the facility
were $17,536,000 and the associated variable interest rate was 1.1071% and the
average fixed interest rate achieved with the swap agreements was 6.074% at
September 30, 2003. As of September 30, 2003, the estimated fair value of the
interest rate swaps was $884,582.
Item 4. Controls and procedures.
Internal Controls
As of September 30, 2003, an evaluation was performed under the supervision and
with the participation of the Fund's management, including the CEO and CFO of
the General Partner, of the effectiveness of the design and operation of the
Fund's disclosure controls and procedures. Based on that evaluation, the Fund's
management, including the CEO and CFO of the General Partner, concluded that the
Fund's disclosure controls and procedures were effective as of September 30,
2003. There have been no significant changes in the Fund's internal controls or
in other factors that could significantly affect internal controls subsequent to
September 30, 2003.
Changes in internal controls
There have been no significant changes in our internal controls or in other
factors that could significantly affect our disclosure controls and procedures
subsequent to the evaluation date, nor were there any significant deficiencies
or material weaknesses in our internal controls.
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including
the CEO and CFO, an evaluation of the effectiveness of the design and operation
of the Fund's disclosure controls and procedures, as defined in Rules
240.13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 was
performed as of a date within ninety days before the filing date of this
quarterly report. Based upon this evaluation, the CEO and CFO of the General
Partner concluded that, as of the evaluation date, our disclosure controls and
procedures were effective for the purposes of recording, processing, summarizing
and timely reporting information required to be disclosed by us in the reports
that we file under the Securities Exchange Act of 1934 and that such information
is accumulated and communicated to our management in order to allow timely
decisions regarding required disclosure.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No material legal proceedings are currently pending against the Partnership or
against any of its assets. The following is a discussion of legal matters
involving the Partnership but which do not represent claims against the
Partnership or its assets.
Applied Magnetics Corporation:
In January 2000, Applied Magnetics Corporation (the "Debtor") filed for
protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. The
Partnership had assets with a total net book value of $8,048,095 leased to
Applied Magnetics Corporation at the bankruptcy filing date. On January 31,
2000, the General Partner was appointed to the Official Committee of Unsecured
Creditors and currently serves as the Chairperson of the Committee. Procedures
were quickly undertaken for the liquidation of the Partnership's leased
equipment, which proceeds resulted in recoveries of $1,773,798 or 21.7% of
original equipment cost. As of November 1, 2000, liquidation of the assets was
completed.
The debtor filed a Plan of Reorganization (the "Plan"), which was approved by a
vote of the creditors of the Debtor in October 2001. The Plan provided that the
Debtor change its name to Integrated Micro-Technology (IMT), and enter into a
new line of business, the manufacture and production of "micro-machines." As
part of the Plan, the Partnership, along with the other unsecured creditors,
receives a proportionate share of its unsecured claims in the form of ownership
shares and warrants in the newly formed business. The success of this new
business plan is highly uncertain.
On February 13, 2002, the reorganized Debtor filed a notice of objection to the
Partnership's claim due to duplication and an improper liquidated damages
provision. The Partnership disputed this and, as of July 26, 2002, agreement has
been reached between the Partnership and Debtor as to the amount of the
Partnership's claim, and the Debtor's objection to the Partnership's claim was
withdrawn.
19
On April 28, 2003, the Partnership received 139,133 shares of IMT stock, which
is carried at zero value. The Partnership anticipates additional amounts may be
recoverable through its equity interests in the reorganized lessee's business,
however, any recoveries above the amounts received upon liquidation of the
Partnership's equipment are highly uncertain and speculative.
Railcar, Ltd., et al.:
This matter relates to the breach by Railcar, Ltd., as lessee, of its
obligations under a lease, where in lessee had the option of making minimum
monthly payments. The lessee made the payments and then later rescinded the
previously made payments arguing that they were made in error. The Partnership
has attempted to resolve these issues amicably to no avail, and elected to file
a complaint for the recovery of $187,835.85 in damages, while the Partnership
makes continuing efforts to seek a non-judicial remedy or settlement. The
Partnership anticipates that it has a high likelihood of a successful resolution
of its complaint in this matter.
Martin Marietta Magnesia Specialties Inc.:
This is an action for breach of contract by Martin Marietta Magnesia
Specialties, as lessee, for the failure by lessee to maintain the leased
equipment in accordance with the conditions required by the lease. The
Partnership has attempted to resolve these issues amicably to no avail, and
elected to file a complaint for the recovery $179,678.83 in damages, while the
Partnership makes continuing efforts to seek a non-judicial remedy or
settlement. The Partnership anticipates that it has a high likelihood of a
successful resolution of its complaint in this matter.
Pioneer Companies, Inc.:
On July 31, 2001, petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code were filed by the Pioneer Companies, Inc., et al (the "Debtor").
The Partnership's Proof of Claim was timely filed on October 14, 2001, with the
Bankruptcy Clerk in Houston. The Partnership is the successor in interest to
First Union Rail Corporation (FURC) under four (4) tank car lease schedules for
36 tank cars with Pioneer Chlor-Alkali Company, Inc. n/k/a Pioneer Americas,
Inc. (together, the "Lease"). FURC manages the Lease for the Partnership. The
Order Confirming Debtor's Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code ("Plan") was entered on November 28, 2001. The Effective Date,
as defined in the Plan, was December 31, 2001. Pursuant to Schedules 6.1(a)(x)
and 6.1(a)(y) of the Plan, the Lease was rejected by the Debtor.
Although the equipment was to be returned to FURC by December 31, 2001, the
Debtor continued to use and pay for the equipment under the lease on a
month-to-month basis. A letter agreement has been executed by the Debtor to
formalize an understanding for debtor's continued use of the equipment under the
terms of the Lease on a month-to-month basis until the cars were returned. The
Debtor has also objected to the Partnership's claim, which objection was
disputed by the Partnership and has been resolved with the Debtor allowing the
Partnership an allowed secured claim in the amount of $193,765 via a stipulation
that was filed with the court in April 2003.
At this point, all equipment has been returned to the Partnership, and is in the
process of being re-leased and/or sold. The full extent of any recovery is not
known at this time as the unsecured claim amount is being paid out in the form
of stock, which, while publicly traded, has a low valuation. The Partnership
intends to hold onto the stock received until such time as the market price
improves.
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.
20
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, 2003 and December 31, 2002.
Statements of operations for the nine and three month periods
ended September 30, 2003 and 2002.
Statements of changes in partners' capital for the year ended
December 31, 2002 and for the nine months ended September 30,
2003.
Statements of cash flows for the nine and three month periods
ended September 30, 2003 and 2002.
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.
3. Other Exhibits
99.1 Certification of Paritosh K. Choksi
99.2 Certification of Dean L. Cash
99.3 Certification Pursuant to 18 U.S.C. section 1350 of Dean L.
Cash
99.4 Certification Pursuant to 18 U.S.C. section 1350 of Paritosh
K. Choksi
(b) Report on Form 8-K
None
21
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, 2003
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
(Registrant)
By: ATEL Financial Corporation
General Partner of Registrant
By: /s/ DEAN L. CASH
-------------------------------------
Dean L. Cash
President and Chief Executive Officer
of General Partner
By: /s/ PARITOSH K. CHOKSI
-------------------------------------
Paritosh K. Choksi
Executive Vice President of
Managing Member and Principal
financial officer of registrant
By: /s/ DONALD E. CARPENTER
---------------------------------------
Donald E. Carpenter
Principal accounting
officer of registrant
22
Exhibit 99.1
CERTIFICATIONS
I, Paritosh K. Choksi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Cash Distribution
Fund VII, LP;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 12, 2003
/s/ PARITOSH K. CHOKSI
- --------------------------------------
Paritosh K. Choksi
Principal financial officer of registrant, Executive
Vice President of General Partner
23
Exhibit 99.2
CERTIFICATIONS
I, Dean L. Cash, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Cash Distribution
Fund VII, LP;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 12, 2003
/s/ DEAN L. CASH
- --------------------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
24
Exhibit 99.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10Q of ATEL Cash Distribution
Fund VII, LP, (the "Partnership") for the period ended September 30, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of
the Sarbanes-Oxley Act of 2002, I, Dean L. Cash, Chief Executive Officer of ATEL
Financial Services, LLC, general partner of the Partnership, hereby certify
that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: November 12, 2003
/s/ DEAN L. CASH
- --------------------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
25
Exhibit 99.4
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10Q of ATEL Cash Distribution
Fund VII, LP, (the "Partnership") for the period ended September 30, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of
the Sarbanes-Oxley Act of 2002, I, Paritosh K. Choksi, Chief Financial Officer
of ATEL Financial Services, LLC, general partner of the Partnership, hereby
certify that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: November 12, 2003
/s/ PARITOSH K. CHOKSI
- --------------------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal financial officer of registrant
26