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 March 31, 2002
|_| 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 333-47196
ATEL Capital Equipment Fund IX, LLC
(Exact name of registrant as specified in its charter)
California 94-3375584
- ---------- ----------
(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 |_|
No |X|
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
2
ATEL CAPITAL EQUIPMENT FUND IX, LLC
BALANCE SHEETS
MARCH 31, 2002 AND DECEMBER 31, 2001
(Unaudited)
ASSETS
2002 2001
---- ----
Cash and cash equivalents $17,753,199 $13,568,058
Accounts receivable 742,323 1,186,719
Notes receivable 1,811,376 982,262
Investments in leases 28,331,406 21,091,372
------------------ ------------------
Total assets $48,638,304 $36,828,411
================== ==================
LIABILITIES AND MEMBERS' CAPITAL
Accounts payable:
Managing Member $ 315,014 $ 157,719
Other 10,818 24,471
Unearned operating lease income 230,416 95,618
------------------ ------------------
Total liabilities 556,248 277,808
Members' capital:
Managing member - -
Other members 48,082,056 36,550,603
------------------ ------------------
Total members' capital 48,082,056 36,550,603
------------------ ------------------
Total liabilities and members' capital $48,638,304 $36,828,411
================== ==================
See accompanying notes.
3
ATEL CAPITAL EQUIPMENT FUND IX, LLC
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED
MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
---- ----
Revenues:
Leasing activities:
Operating leases $ 951,867 $ 69,815
Direct financing leases 21,152 5,568
Interest 106,591 13,900
Other 136 5,000
------------------ ------------------
1,079,746 94,283
Expenses:
Depreciation and amortization 784,536 41,288
Other 81,354 2,591
Asset management fees to Managing Member 58,256 1,798
Cost reimbursements to Managing Member 52,854 66,460
Professional fees 24,025 -
Interest expense - 19,327
------------------ ------------------
1,001,025 131,464
------------------ ------------------
Net income (loss) $ 78,721 $ (37,181)
================== ==================
Net income (loss):
Managing member $ 86,510 $ (100)
Other members (7,789) (37,081)
------------------ ------------------
$ 78,721 $ (37,181)
================== ==================
Net income (loss) per Limited
Liability Company Unit $ (0.00) $ (0.17)
Weighted average number of Units
outstanding 5,055,796 221,235
STATEMENT OF CHANGES IN MEMBERS' CAPITAL
THREE MONTH PERIOD ENDED
MARCH 31, 2002
(Unaudited)
Other Members Managing
-------------
Units Amount Member Total
Balance December 31, 2001 4,363,409 $36,550,603 $ - $36,550,603
Capital contributions 1,446,708 14,467,080 14,467,080
Less selling commissions to affiliates (1,374,373) (1,374,373)
Other syndication costs to affiliates (497,888) (497,888)
Distributions to members (1,055,577) (86,510) (1,142,087)
Net income (loss) (7,789) 86,510 78,721
------------------ ------------------ ------------------ ------------------
Balance March 31, 2002 5,810,117 $48,082,056 $ - $48,082,056
================== ================== ================== ==================
See accompanying notes.
4
ATEL CAPITAL EQUIPMENT FUND IX, LLC
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
---- ----
Operating activities:
Net income (loss) $ 78,721 $ (37,181)
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 784,536 41,288
Changes in operating assets and liabilities:
Accounts receivable 444,396 (86,551)
Accounts payable, Managing Member 157,295 10,717
Accounts payable, other (13,653) 2,101
Unearned operating lease income 134,798 -
------------------ ------------------
Net cash provided by (used in) operations 1,586,093 (69,626)
------------------ ------------------
Investing activities:
Purchases of equipment on operating leases (6,859,596) (2,285,186)
Note receivable advances (1,177,028) (1,000,000)
Purchases of equipment on direct financing leases (980,570) (819,124)
Payments received on notes receivable 347,914 152,042
Payments of initial direct costs to managing member (126,727) (40,376)
Investment in residuals (91,809) (100,000)
Reduction of net investment in direct financing leases 34,132 6,615
------------------ ------------------
Net cash used in investing activities (8,853,684) (4,086,029)
------------------ ------------------
Financing activities:
Capital contributions received 14,467,080 7,123,500
Payment of syndication costs to managing member (1,872,261) (886,225)
Distributions to members (1,142,087) -
------------------ ------------------
Net cash provided by financing activities 11,452,732 6,237,275
------------------ ------------------
Net increase in cash and cash equivalents 4,185,141 2,081,620
Cash and cash equivalents at beginning of period 13,568,058 600
------------------ ------------------
Cash and cash equivalents at end of period $17,753,199 $ 2,082,220
================== ==================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ - $ 19,327
================== ==================
See accompanying notes.
5
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(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 managing member, 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 Company matters:
ATEL Capital Equipment Fund IX, LLC (the Fund) was formed under the laws of the
state of California on September 27, 2000 for the purpose of acquiring equipment
to engage in equipment leasing and sales activities. The Fund may continue until
December 31, 2019.
Upon the sale of the minimum amount of Units of Limited Liability Company
interest (Units) of $1,200,000 and the receipt of the proceeds thereof on
February 21, 2001, the Company commenced operations.
The Company 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 Company's investment in leases consists of the following:
Depreciation
Balance Expense and Reclass- Balance
December 31, Amortization ifications and March 31,
2001 Additions of Leases Dispositions 2002
---- --------- --------- ------------ ----
Net investment in operating leases $19,971,408 $ 6,859,596 $ (765,391) $ - $26,065,613
Net investment in direct financing
leases 750,894 980,570 (34,132) - 1,697,332
Residual values, other 75,983 91,809 167,792
Initial direct costs 293,087 126,727 (19,145) - 400,669
----------------- ------------------ ------------------ ------------------ -----------------
$21,091,372 $ 8,058,702 $ (818,668) $ - $28,331,406
================= ================== ================== ================== =================
6
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
3. Investment in leases (continued):
Operating leases:
Property on operating leases consists of the following:
Balance Reclass- Balance
December 31, Additions and ifications and March 31,
2001 Depreciation Dispositions 2002
---- ------------ ------------ ----
Mining $ 13,421,219 $ - $ - $ 13,421,219
Marine vessels 5,712,000 - - 5,712,000
Manufacturing 989,709 4,052,809 - 5,042,518
Materials handling 207,486 2,211,915 - 2,419,401
Office furniture 998,540 325,719 - 1,324,259
Natural gas compressors 696,451 - - 696,451
Communications - 269,153 - 269,153
----------------- ------------------ ------------------ ------------------
22,025,405 6,859,596 - 28,885,001
Less accumulated depreciation (2,053,997) (765,391) - (2,819,388)
----------------- ------------------ ------------------ ------------------
$ 19,971,408 $ 6,094,205 $ - $ 26,065,613
================= ================== ================== ==================
The average assumed residual values for assets on operating leases were 32% at
December 31, 2001 and 26% at March 31, 2002.
Direct financing leases:
As of March 31, 2002, investment in direct financing leases consists office
furniture and materials handling equipment. The following lists the components
of the Company's investment in direct financing leases as of March 31, 2002:
Total minimum lease payments receivable $ 1,886,069
Estimated residual values of leased equipment (unguaranteed) 209,873
------------------
Investment in direct financing leases 2,095,942
Less unearned income (398,610)
------------------
Net investment in direct financing leases $ 1,697,332
==================
All of the property on leases was acquired in 2001 and 2002.
7
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
3. Investment in leases (continued):
At March 31, 2002, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Operating Financing
Leases Leases Total
Nine months ending December 31, 2002 $ 2,814,074 $ 278,277 $ 3,092,351
Year ending December 31, 2003 4,316,937 371,036 4,687,973
2004 4,191,708 371,036 4,562,744
2005 3,938,837 371,036 4,309,873
2006 3,484,311 361,172 3,845,483
Thereafter 539,209 133,512 672,721
------------------ ------------------ ------------------
$19,285,076 $ 1,886,069 $21,171,145
================== ================== ==================
4. Related party transactions:
The terms of the Limited Company Operating Agreement provide that the Managing
Member and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Company.
The Limited Liability Company Operating Agreement allows for the reimbursement
of costs incurred by the Managing Member in providing services to the Company.
Services provided include Company accounting, investor relations, legal counsel
and lease and equipment documentation. The Managing Member 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 Managing Member are allocated to the Company based upon actual
time incurred by employees working on Company business and an allocation of rent
and other costs based on utilization studies.
Substantially all employees of the Managing Member record time incurred in
performing services on behalf of all of the Companies serviced by the Managing
Member. The Managing Member believes that the costs reimbursed are the lower of
(i) actual costs incurred on behalf of the Company or (ii) the amount the
Company would be required to pay independent parties for comparable
administrative services in the same geographic location and are reimbursable in
accordance with the Limited Liability Company Operating Agreement.
The Managing Member and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Liability Company Agreement as follows:
2002 2001
---- ----
Selling commissions (equal to 9.5% of the selling price of the Limited Liability
Company units, deducted from Other Members' capital) $ 1,374,373 $ 676,733
Reimbursement of other syndication costs to Managing Member 497,888 209,493
Asset management fees to Managing Member 58,256 1,798
Costs reimbursed to Managing Member 52,854 66,460
------------------ ------------------
$ 1,983,371 $ 954,484
================== ==================
8
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
5. Member's capital:
As of March 31, 2002, 5,810,117 Units ($58,101,170) were issued and outstanding.
The Company is authorized to issue up to 15,000,050 Units, including the 50
Units issued to the initial members.
The Company's Net Income, Net Losses, and Distributions are to be allocated
92.5% to the Members and 7.5% to the Managing Member.
6. Line of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $62,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expired on April 12, 2002 and has been extended through June 30, 2002. The
General Partner is currently negotiating a new line of credit and anticipates
that the current line of credit will be replaced before its extended expiration
date. The terms and conditions on the new line of credit are expected to be
substantially the same as on the expiring line of credit. As of March 31, 2002,
borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ -
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 19,300,000
---------------
Total borrowings under the acquisition facility 19,300,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility 5,235,045
---------------
Total outstanding balance $ 24,535,045
===============
Total available under the line of credit $ 62,000,000
Total outstanding balance (24,535,045)
---------------
Remaining availability $ 37,464,955
===============
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 March 31,
2002.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first quarters of 2002 and 2001, the Company's primary activities
were raising funds through its offering of Limited Liability Company Units
(Units) and engaging in equipment leasing activities. Through March 31, 2002,
the Company had received subscriptions for 5,810,117 Units ($58,101,170) all of
which were issued and outstanding.
During the funding period, the Company's primary source of liquidity is
subscription proceeds from the public offering of Units. The liquidity of the
Company 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 members and to the extent expenses exceed cash flows from
leases.
As another source of liquidity, the Company has contractual obligations with a
diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire the Company will re-lease or sell the equipment.
The future liquidity beyond the contractual minimum rentals will depend on the
Managing Member'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 $62,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expired on April 12, 2002 and has been extended through June 30, 2002. The
General Partner is currently negotiating a new line of credit and anticipates
that the current line of credit will be replaced before its extended expiration
date. The terms and conditions on the new line of credit are expected to be
substantially the same as on the expiring line of credit. As of March 31, 2002,
borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ -
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 19,300,000
---------------
Total borrowings under the acquisition facility 19,300,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility 5,235,045
---------------
Total outstanding balance $ 24,535,045
===============
Total available under the line of credit $ 62,000,000
Total outstanding balance (24,535,045)
---------------
Remaining availability $ 37,464,955
===============
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 Company 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 Managing Member
and providing for cash distributions to the Limited Partners.
10
The Company currently has available adequate reserves to meet contingencies, but
in the event those reserves were found to be inadequate, the Company would
likely be in a position to borrow against its current portfolio to meet such
requirements. The Managing Member envisions no such requirements for operating
purposes.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. There were a total of approximately
$700,000 of such commitments as of March 31, 2002.
If inflation in the general economy becomes significant, it may affect the
Company inasmuch as the residual (resale) values and rates on re-leases of the
Company's leased assets may increase as the costs of similar assets increase.
However, the Company'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 Company 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
During the first quarters of 2002 and 2001, the Company's primary source of
liquidity was the proceeds of its offering of Units.
In 2002 and 2001, the primary source of cash from operations was rents from
operating leases.
Rents from direct financing leases and payments received on notes receivable
were the primary sources of cash from investing activities. Uses of cash for
investing activities consisted of cash used to purchase operating and direct
financing lease assets, payments of initial direct costs associated with the
lease asset purchases and advances on notes receivable.
In 2002 and 2001, the primary source of cash from financing activities was the
proceeds of the Company's public offering of Units of Limited Liability Company
interest. Financing uses of cash consisted of payments of syndication costs
associated with the offering.
Results of operations
On February 21, 2001, the Company commenced operations. Operations resulted in
net income of $78,721 in 2002 compared to a net loss of $37,181 in 2001. The
Company's primary source of revenues is from operating leases. Depreciation is
related to operating lease assets and thus, to operating lease revenues. They
are expected to increase in future periods as acquisitions continue.
Asset management fees are based on the gross lease rents of the Company plus
proceeds from the sales of lease assets. They are limited to certain percentages
of lease rents, distributions to members and certain other items. As assets are
acquired, lease rents are collected and distributions are made to the members,
these fees are expected to increase.
Interest expense for the first quarter of 2001 related to the borrowings under
the line of credit incurred by an affiliate of the Managing Member. It included
all amounts related to those borrowings related transactions transferred to the
Company. All of the revenues and related carrying costs for these transactions
were attributed to the Company in the first quarter of 2001. There was no
interest expense or debt in the first quarter of 2002.
Results of operations in future periods are expected to vary considerably from
those of the first quarter of 2002 as the Company continues to acquire
significant amounts of lease assets.
11
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.
Information provided pursuant to ss. 228.701 (Item 701(f))(formerly
included in Form SR):
(1) Effective date of the offering: December 7, 1998; File Number:
333-47196
(2) Offering commenced: January 16, 2001
(3) The offering did not terminate before any securities were sold.
(4) The offering has not been terminated prior to the sale of all of the
securities.
(5) The managing underwriter is ATEL Securities Corporation.
(6) The title of the registered class of securities is "Units of Limited
Liability Company interest"
(7) Aggregate amount and offering price of securities registered and sold
as of April 30, 2002
Aggregate Aggregate
price of price of
offering offering
Amount amount Amount amount
Title of Security Registered registered sold sold
----------------- ---------- ---------- ---- ----
Limited Company units 15,000,000 $150,000,000 5,809,517 $58,095,170
12
(8) Costs incurred for the issuers account in connection with the issuance
and distribution of the securities registered for each category listed
below:
Direct or indirect payments to
directors, officers, general
partners of the issuer or their
associates; to persons owning
ten percent or more of any Direct or
class of equity securities of indirect
the issuer; and to affiliates of payments to
the issuer others Total
---------- ------ -----
Underwriting discounts and
commissions $ - $ 5,519,041 $ 5,519,041
Other expenses 2,864,283 2,864,283
------------------ ------------------ ------------------
Total expenses $ - $ 8,383,324 $ 8,383,324
================== ================== ==================
(9) Net offering proceeds to the issuer after the total expenses in item 8: $49,711,846
(10) The amount of net offering proceeds to the issuer used for each of the
purposes listed below:
Direct or indirect payments to
directors, officers, general
partners of the issuer or their
associates; to persons owning
ten percent or more of any Direct or
class of equity securities of indirect
the issuer; and to affiliates of payments to
the issuer others Total
---------- ------ -----
Purchase and installation of
machinery and equipment $ 444,711 $30,892,639 $31,337,351
Working capital 18,374,496 18,374,496
------------------ ------------------ ------------------
$ - $49,267,135 $49,711,846
================== ================== ==================
(11) The use of the proceeds in Item 10 does not represent a material
change in the uses of proceeds described in the prospectus.
13
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, March 31, 2002 and December 31, 2001.
Statements of operations for the three month periods ended March
31, 2002 and 2001.
Statement of changes in partners' capital for the three month
period ended March 31, 2002.
Statements of cash flows for the three month periods ended March
31, 2002 and 2001.
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
14
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:
May 13, 2002
ATEL CAPITAL EQUIPMENT FUND IX, LLC
(Registrant)
By: ATEL Financial Corporation
Managing Member of Registrant
By: /s/ Dean L. Cash
-------------------------------------
Dean L. Cash
President and Chief Executive Officer
of Managing Member
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
15