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 0-24175
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.)
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
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(Unaudited)
ASSETS
1999 1998
---- ----
Cash and cash equivalents $ 1,071,226 $ 1,576,029
Accounts receivable 4,807,711 6,380,886
Other assets 140,006 170,003
Investments in leases 188,793,710 204,329,984
------------------ ------------------
Total assets $194,812,653 $212,456,902
================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Long-term debt $ 57,077,000 $ 61,553,000
Non-recourse debt 22,602,274 16,599,347
Line of credit 2,000,000 11,781,707
Accounts payable:
General Partner 371,072 377,955
Other 569,553 684,475
Accrued interest payable 435,897 805,753
Unearned operating lease income 1,077,744 943,419
------------------ ------------------
Total liabilities 84,133,540 92,745,656
Partners' capital:
General Partner (1,415,428) (717,165)
Limited Partners 112,094,541 120,428,411
------------------ ------------------
Total partners' capital 110,679,113 119,711,246
------------------ ------------------
Total liabilities and partners' capital $194,812,653 $212,456,902
================== ==================
See accompanying notes.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
Revenues:
<S> <C> <C> <C> <C>
Leasing activities:
Operating leases $ 27,434,445 $20,536,470 $ 9,384,429 $ 7,423,969
Direct financing 1,426,625 1,226,303 450,491 417,267
Leveraged leases 107,616 98,636 35,872 32,879
Gain on sales of assets 778,259 1,485,935 31,065 642,142
Interest 42,405 34,690 8,501 12,294
Other 15,743 11,254 2,938 7,791
----------------- ------------------ ------------------ ------------------
29,805,093 23,393,288 9,913,296 8,536,342
Expenses:
Depreciation 18,352,622 13,928,035 6,188,566 5,234,029
Interest expense 4,594,693 3,127,366 1,491,892 1,165,166
Administrative cost reimbursements to General
Partner 418,021 763,032 167,943 317,641
Other 1,086,341 474,886 390,943 192,284
Equipment and incentive management fees to
General Partner 1,329,633 1,026,501 445,045 380,780
Professional fees 146,774 101,790 27,358 64,580
Provision for losses 750,000 56,954 750,000 -
----------------- ------------------ ------------------ ------------------
26,678,084 19,478,564 9,461,747 7,354,480
----------------- ------------------ ------------------ ------------------
Net income $ 3,127,009 $ 3,914,724 $ 451,549 $ 1,181,862
================= ================== ================== ==================
Net income:
General Partner $ 234,526 $ 293,604 $ 33,866 $ 88,640
Limited Partners 2,892,483 3,621,120 417,683 1,093,222
----------------- ------------------ ------------------ ------------------
$ 3,127,009 $ 3,914,724 $ 451,549 $ 1,181,862
================= ================== ================== ==================
Net income per Limited Partnership Unit $ 0.19 $ 0.38 $ 0.03 $ 0.09
Weighted average number of Units outstanding 14,996,050 9,554,273 14,996,050 11,635,928
</TABLE>
See accompanying notes.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
<S> <C> <C> <C> <C>
Balance December 31, 1998 6,716,896 $120,428,411 $ (717,165) $119,711,246
Distributions to partners (11,226,353) (932,789) (12,159,142)
Net income 2,892,483 234,526 3,127,009
----------------- ------------------ ------------------ ------------------
Balance September 30, 1999 6,716,896 $112,094,541 $(1,415,428) $110,679,113
================= ================== ================== ==================
</TABLE>
See accompanying notes.
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
Operating activities: 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 3,127,009 $ 3,914,724 $ 451,549 $ 1,181,862
Adjustments to reconcile net income (loss)
to cash provided by operating
activities:
Leveraged lease income (107,616) (98,636) (35,872) (32,879)
Depreciation 18,352,622 13,928,035 6,188,566 5,234,029
Gain on sales of assets (778,259) (1,485,935) (31,065) (642,142)
Provision for losses 750,000 56,954 750,000 -
Changes in operating assets and liabilities:
Accounts receivable 1,573,175 (2,188,297) (834,103) 528,597
Other assets 29,997 19,998 9,999 19,998
Accounts payable, General Partner (6,883) (59,937) 32,235 104,144
Accounts payable, other (114,922) 82,466 136,062 (21,024)
Accrued interest expense (369,856) 411,905 (126,604) 234,440
Unearned lease income 134,325 242,305 (108,903) 36,581
----------------- ------------------ ------------------ ------------------
Net cash provided by operations 22,589,592 14,823,582 6,431,864 6,643,606
----------------- ------------------ ------------------ ------------------
Investing activities:
Purchases of equipment on operating leases (6,617,689) (77,120,556) (1,924,811) (47,227,759)
Purchases of equipment on direct financing leases (812,462) (5,618,148) (34,520) (207,553)
Proceeds from sales of assets 2,162,469 5,213,023 888,599 2,882,830
Reduction in net investment in direct financing leases 2,587,209 924,120 844,906 52,855
Purchases of equipment held for sale or lease - (441,187) - -
Payment of initial direct costs - (33,992) - (33,988)
----------------- ------------------ ------------------ ------------------
Net cash used in investing activities (2,680,473) (77,076,740) (225,826) (44,533,615)
----------------- ------------------ ------------------ ------------------
</TABLE>
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
Six Months Three Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
Financing activities:
<S> <C> <C> <C> <C>
Borrowings under line of credit 6,672,824 37,365,043 2,000,000 19,230,336
Repayments of borrowings under line of credit (16,454,531) (66,977,843) - (23,200,436)
Proceeds of long-term debt 9,000,000 46,770,000 - 25,000,000
Repayments of long-term debt (13,476,000) (2,753,000) (4,206,000) (2,012,000)
Proceeds of non-recourse debt 9,520,748 6,087,415 - 4,630,831
Repayments of non-recourse debt (3,517,821) (2,160,402) (1,287,603) (650,553)
Distributions to partners (12,159,142) (7,114,959) (4,054,389) (3,088,703)
Capital contributions received - 59,303,920 - 20,852,300
Payment of selling commissions to affiliate of
General Partner - (5,633,872) - (1,980,968)
Payment of syndication costs to General Partner - (2,512,374) - (917,841)
----------------- ------------------ ------------------ ------------------
Net cash (used in) provided by financing
activities (20,413,922) 62,373,928 (7,547,992) 37,862,966
--------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents (504,803) 120,770 (1,341,954) (27,043)
Cash and cash equivalents at beginning of
period 1,576,029 2,014,706 2,413,180 2,162,519
----------------- ------------------ ------------------ ------------------
Cash and cash equivalents at end of period $ 1,071,226 $ 2,135,476 $ 1,071,226 $ 2,135,476
================= ================== ================== ==================
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $ 4,964,549 $ 2,715,461 $ 1,618,496 $ 930,726
================= ================== ================== ==================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, 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 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 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 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.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
<TABLE>
<CAPTION>
Depreciation
Balance Expense or Reclassi- Balance
December 31, Amortization fications or September 30,
1998 Additions of Leases Dispositions 1999
---- --------- --------- ------------ ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $ 177,401,763 $ 6,617,689 $ (18,344,439) $(1,536,904) $164,138,109
Net investment in direct
financing leases 25,063,961 812,462 (2,587,209) - 23,289,214
Net investment in leveraged
leases 1,580,583 - 107,616 - 1,688,199
Assets held for sale or lease 355,633 - - 152,694 508,327
Reserve for losses (131,232) (750,000) - - (881,232)
Initial direct costs, net of
accumulated amortization 59,276 - (8,183) - 51,093
------------------- ----------------- ------------------ ------------------ ------------------
$ 204,329,984 $ 6,680,151 $ (20,832,215) $ (1,384,210) $188,793,710
=================== ================= ================== ================== ==================
</TABLE>
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
<TABLE>
<CAPTION>
Balance Balance
December 31, Acquisitions & Dispositions September 30,
1998 1st Quarter 2nd Quarter 3rd Quarter 1999
---- ----------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
Transportation $ 102,138,178 $ (417,559) $ (5,044,946) $ 4,815,377 $101,491,050
Manufacturing 24,391,341 3,149,912 (1,209,350) (219,287) 26,112,616
Mining 26,099,674 - (19,310) - 26,080,364
Marine vessels 22,335,250 - - - 22,335,250
Motor vehicles 5,454,671 - - - 5,454,671
Other 4,602,749 (1,235,019) 1,183,442 996,016 5,547,188
Materials handling 5,574,150 440,829 (23,648) - 5,991,331
Aircraft 4,991,972 - - - 4,991,972
Office automation 6,307,481 1,322,416 28,892 - 7,658,789
Furniture and fixtures 2,461,533 - - - 2,461,533
------------------- ----------------- ------------------ ------------------ ------------------
204,356,999 3,260,579 (5,084,920) 5,592,106 208,124,764
Less accumulated depreciation (26,955,236) (5,279,419) (2,789,512) (8,962,488) (43,986,655)
------------------- ----------------- ------------------ ------------------ ------------------
$ 177,401,763 $ (2,018,840) $ (7,874,432) $ (3,370,382) $164,138,109
=================== ================= ================== ================== ==================
</TABLE>
All of the property on leases was acquired in 1997, 1998 and 1999.
At September 30, 1999, the aggregate amounts of future minimum lease payments
are as follows:
<TABLE>
<CAPTION>
Direct
Year ending Operating Financing
December 31, Leases Leases Total
------------ ------ ------ -----
<S> <C> <C> <C>
Three months ending December 31, 1999 $ 8,137,074 $ 1,278,940 $ 9,416,014
Year ending December 31, 2000 34,965,167 4,660,094 39,625,261
2001 27,584,674 4,502,824 32,087,498
2002 19,438,372 3,555,471 22,993,843
2003 10,761,017 2,252,958 13,013,975
Thereafter 12,723,335 5,404,634 18,127,969
------------------ ------------------ ------------------
$113,609,639 $ 21,654,921 $135,264,560
================== ================== ==================
</TABLE>
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, 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
7.4% to 8.828%.
Future minimum principal payments of non-recourse debt are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Principal Interest Total
------------ --------- -------- -----
<S> <C> <C> <C>
Three months ending December 31, 1999 $ 939,459 $ 375,935 $ 1,315,394
Year ending December 31, 2000 5,654,438 1,862,541 7,516,979
2001 6,359,170 1,323,954 7,683,124
2002 6,180,266 728,117 6,908,383
2003 2,830,982 222,305 3,053,287
Thereafter 637,959 78,582 716,541
------------------ ------------------ ------------------
$ 22,602,274 $ 4,591,434 $ 27,193,708
================== ================== ==================
</TABLE>
5. Long-term debt:
The Partnership has established a $65 million dollar receivables funding program
with a receivables financing company that issues commercial paper rated A1 from
Standard and Poors and P1 from Moody's Investor Services. In this receivables
funding program, the lenders will receive a general lien against all of the
otherwise unencumbered assets of the Partnership. The program provides for
borrowing at a variable interest rate and requires the General Partner to enter
into hedge agreements with certain hedge counterparties (also rated A1/P1) to
mitigate the interest rate risk associated with a variable rate note. The
General Partner anticipates that this program will allow the Partnership to
avail itself of lower cost debt than that available for individual non-recourse
debt transactions. It is the intention of the Partnership to use the receivables
funding program to finance assets leased to those credits which, in the opinion
of the General Partner, have a relatively lower potential risk of lease default
then those lessees with equipment financed with non-recourse debt. The
Partnership will continue to use its traditional sources of non-recourse secured
debt financing on a transaction basis as a means of mitigating credit risk.
Through hedge agreements, the interest rates have been effectively fixed.
Borrowings under this facility are as follows:
<TABLE>
<CAPTION>
Variable Interest
Original Balance Rate on Rate at
Date Amount September 30, Interest Swap September 30,
Borrowed Borrowed 1999 Agreement 1999
-------- -------- ---- --------- ----
<S> <C> <C> <C> <C>
4/1/98 $ 21,770,000 $ 14,952,000 6.22000% 5.71342%
7/1/98 25,000,000 17,704,000 6.15500% 5.71342%
10/1/98 20,000,000 16,197,000 5.55000% 5.71342%
4/16/99 9,000,000 8,224,000 5.89000% 5.81342%
------------------- -----------------
$ 75,770,000 $ 57,077,000
=================== =================
</TABLE>
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Long-term debt (continued):
Future minimum principal payments of long-term debt are as follows:
<TABLE>
<CAPTION>
Principal Interest Total
--------- -------- -----
<S> <C> <C> <C>
Three months ending December 31, 1999 $ 3,896,000 $ 828,314 $ 4,724,314
Year ending December 31, 2000 16,760,000 2,664,354 19,424,354
2001 12,868,000 1,752,333 14,620,333
2002 10,269,000 1,069,178 11,338,178
2003 5,365,000 619,417 5,984,417
Thereafter 7,919,000 630,383 8,549,383
------------------ ------------------ ------------------
$ 57,077,000 $ 7,563,979 $ 64,640,979
================== ================== ==================
</TABLE>
6. 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 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.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Incentive management fees (computed as 4% of distributions of cash from
operations, as defined in the Limited Partnership Agreement) and equipment
management fees (computed as 3.5% of gross revenues from operating leases, as
defined in the Limited Partnership Agreement plus 2% of gross revenues from full
payout leases, as defined in the Limited Partnership Agreement). $ 1,329,633 $ 1,026,501
Administrative costs reimbursed to General Partner 418,021 763,032
Selling commissions (equal to 9.5% of the selling price of the Limited Partnership
units, deducted from Limited Partners' capital) - 5,633,872
Reimbursement of other syndication costs - 2,512,374
------------------ ------------------
$ 1,747,654 $ 9,935,779
================== ==================
</TABLE>
7. Partner's capital:
As of September 30, 1999, 14,996,050 Units ($149,960,050) were issued and
outstanding. The Fund's registration statement with the Securities and Exchange
Commission became effective November 29, 1996. 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.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
8. 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 $2,000,000 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.
9. Commitments:
As of September 30, 1999, the Partnership had outstanding commitments to
purchase lease equipment totaling approximately $1,171,000.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first three quarters of 1999, the Partnership's primary activity was
engaging in equipment leasing activities.
During the funding period, the Partnership's primary source of liquidity is
subscription proceeds from the public offering of Units. The liquidity of the
Partnership will vary in the future, increasing to the extent cash flows from
leases exceed expenses, and decreasing as lease assets are acquired, as
distributions are made to the limited partners and to the extent expenses exceed
cash flows from leases.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $95,000,000 revolving line of credit with a financial
institution. The line of credit expires on January 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 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.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. Such commitments totaled approximately
$1,171,000 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.
During 1999, the Partnership's primary source of liquidity was rents from
operating leases.
Cash from operating activities was almost entirely from operating lease rents in
both 1999 and in 1998 for both the three and nine month periods.
Sources of cash from investing activities consisted of proceeds from sales of
assets and direct financing lease rents. Rents from direct financing leases
increased significantly compared to 1998 as a result of asset acquisitions over
the last year. Proceeds from sales of assets are not expected to be consistent
from one period to another. Cash was used in investing activities to purchase
assets on operating and direct financing leases.
In 1999, sources of cash from financing activities consisted of borrowings (from
the line of credit or in the form of either non-recourse or long-term debt).
In 1998, cash from financing sources consisted primarily of cash received for
subscriptions for Units, borrowings under the line of credit and proceeds of
non-recourse and other long-term debt. The purchase of lease assets was
primarily funded with borrowings on this line of credit, proceeds of the
Partnership's public offering of Units and proceeds of non-recourse and other
long-term debt.
<PAGE>
Results of operations
Operations in 1999 resulted in a net income of $3,877,009 (nine months) and
$1,201,549 (three months). Operations in 1998 resulted in a net income of
$3,914,724 (nine months) and $1,181,862 (three months). The Partnership's
primary source of revenues is from operating leases. Lease revenues and
depreciation expenses have increased compared to 1998 for both the three and
nine month periods as a result of asset acquisitions over the last year.
Equipment management fees are based on the Partnership's rental revenues and
have increased due to increases in the Partnership's revenues from leases.
Incentive management fees are based on the levels of distributions to limited
partners. The number of units outstanding increased (as a result of the
continuing offering of such units through November 1998), and as a result, the
incentive management fees increased. Interest expense has increased due to the
higher average debt balances in 1999 than in 1998.
<PAGE>
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
months ended September 30, 1999.
Statements of operations for the nine and three month
periods ended September 30, 1999 and 1998.
Statement 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
<PAGE>
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 CAPITAL EQUIPMENT FUND VII, 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
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<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
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