Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended June 30, 1999
|_| Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number 0-24175
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
JUNE 30, 1999 AND DECEMBER 31, 1998
(Unaudited)
ASSETS
1999 1998
---- ----
Cash and cash equivalents $ 2,413,180 $ 1,576,029
Accounts receivable 3,973,608 6,380,886
Other assets 150,005 170,003
Investments in leases 195,439,513 204,329,984
------------------ ------------------
Total assets $201,976,306 $ 212,456,902
================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Long-term debt $61,283,000 $ 61,553,000
Non-recourse debt 23,889,877 16,599,347
Lines of credit - 11,781,707
Accounts payable:
General Partner 338,837 377,955
Other 433,491 684,475
Accrued interest payable 562,501 805,753
Unearned operating lease income 1,186,647 943,419
------------------ ------------------
Total liabilities 87,694,353 92,745,656
Partners' capital:
General Partner (1,145,215) $ (717,165)
Limited Partners 115,427,168 120,428,411
------------------ ------------------
Total partners' capital 114,281,953 119,711,246
------------------ ------------------
Total liabilities and partners' capital $201,976,306 $ 212,456,902
================== ==================
See accompanying notes.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENT OF OPERATIONS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Leasing activities:
Operating leases $18,050,016 $13,112,501 $ 9,034,907 $ 7,720,265
Direct financing 976,134 809,036 481,711 546,863
Leveraged leases 71,744 65,757 35,872 32,878
Gain on sales of assets 747,194 843,793 29,597 842,915
Interest 33,904 22,396 21,249 15,829
Other 12,805 3,463 8,933 2,740
----------------- ----------------- ------------------ ------------------
19,891,797 14,856,946 9,612,269 9,161,490
Expenses:
Depreciation 12,164,056 8,694,006 6,177,819 5,780,645
Interest expense 3,102,801 1,962,200 1,591,989 1,115,963
Equipment and incentive management fees to
General Partner 884,588 645,721 391,434 350,175
Other 695,398 282,602 339,094 137,306
Administrative cost reimbursements to General
Partner 250,078 445,391 171,865 197,700
Professional fees 119,416 37,210 81,035 28,459
Provision for losses - 56,954 - -
----------------- ----------------- ------------------ ------------------
17,216,337 12,124,084 8,753,236 7,610,248
----------------- ----------------- ------------------ ------------------
Net income $ 2,675,460 $ 2,732,862 $ 859,033 $ 1,551,242
================= ================= ================== ==================
Net income:
General Partner $ 200,660 $ 204,965 $ 64,427 $ 116,343
Limited Partners 2,474,800 2,527,897 794,606 1,434,899
================= ================= ================== ==================
$ 2,675,460 $ 2,732,862 $ 859,033 $ 1,551,242
================= ================= ================== ==================
Net income per Limited Partnership Unit $0.17 $0.30 $0.05 $0.15
Weighted average number of Units outstanding 14,996,050 8,499,596 14,996,050 9,483,808
</TABLE>
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD ENDED
JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
<S> <C> <C> <C> <C>
Balance December 31, 1998 14,996,050 120,428,411 $ (717,165) $ 119,711,246
Distributions to partners (7,476,043) (628,710) (8,104,753)
Net income 2,474,800 200,660 2,675,460
----------------- ----------------- ------------------ ------------------
Balance June 30, 1999 14,996,050 $115,427,168 $(1,145,215) $ 114,281,953
================= ================= ================== ==================
</TABLE>
See accompanying notes.
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
Operating activities: 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $2,675,460 $2,732,862 $859,033 $ 1,551,242
Adjustments to reconcile net income to cash provided
by operating activities:
Leveraged lease income (71,744) (65,757) (35,872) (32,878)
Depreciation 12,164,056 8,694,006 6,177,819 5,780,645
Gain on sales of assets (747,194) (843,793) (29,597) (842,915)
Provision for losses - 56,954 - -
Changes in operating assets and liabilities:
Accounts receivable 2,407,278 (2,716,894) 874,239 (1,549,382)
Other assets 19,998 - 9,999 -
Accounts payable, General Partner (39,118) (164,081) 98,786 (75,529)
Accounts payable, other (250,984) 103,490 (385,145) 371,085
Accrued interest expense (243,252) 177,465 (428,027) 118,439
Unearned lease income 243,228 205,724 (373,351) 110,991
----------------- ----------------- ------------------ ------------------
Net cash provided by operations 16,157,728 8,179,976 6,767,884 5,431,698
----------------- ----------------- ------------------ ------------------
Investing activities:
Purchases of equipment on operating leases (4,692,878) (29,892,797) (120,145) (18,332,769)
Reduction in net investment in direct financing
leases 1,742,303 871,265 1,328,152 765,189
Proceeds from sales of assets 1,273,870 2,330,193 (768,273) 2,319,585
Purchases of equipment on direct financing
leases (777,942) (5,410,595) (222,754) (5,410,595)
Purchases of equipment held for sale or lease - (441,187) - -
Payment of initial direct costs - (4) - (4)
----------------- ----------------- ------------------ ------------------
Net cash (used in) provided by investing
activities (2,454,647) (32,543,125) 216,980 (20,658,594)
================= ================= ================== ==================
</TABLE>
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Financing activities:
Repayments of borrowings under line of credit (16,454,531) (43,777,407) (16,172,824) (40,641,908)
Borrowings under line of credit 4,672,824 18,134,707 1,500,000 18,134,707
Proceeds of long-term debt 9,000,000 21,770,000 9,000,000 21,770,000
Repayments of long-term debt (9,270,000) (741,000) (3,700,000) (741,000)
Proceeds of non-recourse debt 9,520,748 1,456,584 9,520,748 1,456,584
Repayments of non-recourse debt (2,230,218) (1,509,849) (1,309,155) (1,327,616)
Distributions to partners (8,104,753) (4,026,256) (4,065,391) (2,140,790)
Capital contributions received - 38,451,620 - 21,960,980
Payment of syndication costs to General Partner - (5,247,437) - (3,084,876)
----------------- ----------------- ------------------ ------------------
Net cash (used in) provided by financing
activities (12,865,930) 24,510,962 (5,226,622) 15,386,081
----------------- ----------------- ------------------ ------------------
Net increase in cash and cash equivalents 837,151 147,813 1,758,242 159,185
Cash and cash equivalents at beginning of
period 1,576,029 2,014,706 654,938 2,003,334
----------------- ----------------- ------------------ ------------------
Cash and cash equivalents at end of period $ 2,413,180 $ 2,162,519 $ 2,413,180 $ 2,162,519
================= ================= ================== ==================
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $ 3,346,053 $ 1,784,735 $ 2,020,016 $ 1,784,735
================= ================= ================== ==================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
1. Summary of significant accounting policies:
Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the most recent report on Form
10K.
2. Organization and partnership matters:
ATEL 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.
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 June 30,
1998 Additions of Leases Dispositions 1999
---- --------- --------- - ------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $177,401,763 4,692,878 (12,158,600) (2,427,550) $ 167,508,491
Net investment in direct
financing leases 25,063,961 777,942 (1,742,303) - 24,099,600
Net investment in leveraged
leases 1,580,583 - 71,744 - 1,652,327
Assets held for sale or lease 355,633 - - 1,900,874 2,256,507
Reserve for losses (131,232) - - - (131,232)
Initial direct costs, net of
accumulated amortization 59,276 - (5,456) - 53,820
------------------- ----------------- ----------------- ------------------ ------------------
$204,329,984 $ 5,470,820 $ (13,834,615) $ (526,676) $ 195,439,513
=================== ================= ================= ================== ==================
</TABLE>
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
<TABLE>
<CAPTION>
Balance Acquisitions, Dispositions & Balance
December 31, Reclassifications June 30,
1998 1st Quarter 2nd Quarter 1999
---- ----------- ----------- ----
<S> <C> <C> <C> <C>
Transportation $102,138,178 $ (417,559) $(5,044,946) $ 96,675,673
Manufacturing 24,391,341 3,149,912 (1,209,350) 26,331,903
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 4,551,172
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) 202,532,658
Less accumulated depreciation (26,955,236) (5,279,419) (2,789,512) (35,024,167)
----------------- ----------------- ------------------ ------------------
$177,401,763 $ (2,018,840) $(7,874,432) $ 167,508,491
================= ================= ================== ==================
</TABLE>
All of the property on leases was acquired in 1997, 1998 and 1999.
At June 30, 1999, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
1999 $17,654,302 $ 2,492,608 $20,146,910
2000 34,679,385 4,660,094 39,339,479
2001 27,431,220 4,502,824 31,934,044
2002 19,280,546 3,555,471 22,836,017
2003 10,611,080 2,252,958 12,864,038
Thereafter 12,385,232 5,404,635 17,789,867
----------------- ----------------- ------------------
$122,041,765 $22,868,590 $144,910,355
================= ================= ==================
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly and quarterly
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 7.40% to 8.828%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1999 $ 2,227,062 $ 1,035,757 $ 3,262,819
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
----------------- ----------------- ------------------
$23,889,877 $ 5,251,256 $29,141,133
================= ================= ==================
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. The General Partner anticipates that
the Program will allow the Partnership to avail itself to lower cost debt than
that available for individual non-recourse debt transactions. It is the
intention of the Partnership to use the 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 than 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 selected transaction basis
as a means of mitigating credit risk.
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 June 30,
1999, the Partnership receives or pays interest on a notional principal of
$61,283,000, based on the difference between nominal rates ranging from 5.55% to
6.22% and the variable rate under the Program. No actual borrowing or lending is
involved. The last of the swaps terminates in 2008. 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.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
5. Long-term debt (continued):
Borrowings under the Program are as follows:
Variable
Interest
Original Balance Rate on Rate at
Date Amount June 30, Interest Swap June 30,
Borrowed Borrowed 1999 Agreement 1999
- -------- -------- ---- --------- ----
4/1/98 $ 21,770,000 $16,065,000 6.220% 5.20984%
7/1/98 25,000,000 19,458,000 6.155% 5.20984%
10/1/98 20,000,000 17,106,000 5.550% 5.20984%
4/16/99 9,000,000 8,654,000 5.890% 5.30984%
------------------- -----------------
$ 75,770,000 $61,283,000
=================== =================
The long-term debt borrowings mature from 2004 through 2008. Future minimum
principal payments of long-term debt are as follows:
Year ending
December 31, Principal Interest Total
1999 $ 8,102,000 $ 1,716,095 $ 9,818,095
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
----------------- ----------------- ------------------
$61,283,000 $ 8,451,760 $69,734,760
================= ================= ==================
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 (i) actual costs incurred on behalf of the Partnership or (ii)
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
JUNE 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). $ 884,588 $ 645,721
Administrative costs reimbursed to General Partner 250,078 445,391
Selling commissions (equal to 9.5% of the selling price of the Limited
Partnership units, deducted from Limited Partners' capital) - 3,652,904
Reimbursement of other syndication costs - 1,594,533
-------------- ---------------
$ 1,134,666 $ 6,338,549
============== ===============
</TABLE>
7. Partner's capital:
As of June 30, 1999, 14,996,050 Units ($149,960,500) were issued and
outstanding.
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
JUNE 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 31, 2000. The agreement includes an
acquisition facility and a warehouse facility which are used to provide bridge
financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases. Borrowings on the warehouse facility are recourse
jointly to certain of the Affiliates, the Partnership and the General Partner.
At June 30, 1999, the Partnership had no borrowings under the line of credit.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of June 30,
1999.
9. Commitments:
As of June 30, 1999, the Partnership had outstanding commitments to purchase
lease equipment totaling approximately $4,768,000.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first and second quarters of 1999, the Partnership's primary activity
was engaging in equipment leasing activities.
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases exceed expenses, and decreasing as lease assets
are acquired, as distributions are made to the limited partners and to the
extent expenses exceed cash flows from leases.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $95,000,000 revolving line of credit with a financial
institution. The line of credit expires on January 31, 2000.
The Partnership anticipates reinvesting a portion of lease payments from assets
owned in new leasing transactions. Such reinvestment will occur only after the
payment of all obligations, including debt service (both principal and
interest), the payment of management 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
$4,768,000 as of June 30, 1999.
If inflation in the general economy becomes significant, it may affect the
Partnership inasmuch as the residual (resale) values and rates on re-leases of
the Partnership's leased assets may increase as the costs of similar assets
increase. However, the Partnership's revenues from existing leases would not
increase, as such rates are generally fixed for the terms of the leases without
adjustment for inflation.
If interest rates increase significantly, the lease rates that the Partnership
can obtain on future leases will be expected to increase as the cost of capital
is a significant factor in the pricing of lease financing. Leases already in
place, for the most part, would not be affected by changes in interest rates.
<PAGE>
Cash Flows, 1999 vs. 1998:
During the first half of 1999, the Partnership's primary sources of liquidity
was rents from assets on operating leases.
Cash from operating activities was almost entirely from operating lease rents in
both 1999 and in 1998 for both the three and six month periods.
Sources of cash from investing activities consisted of proceeds from sales of
assets and direct financing lease rents. Proceeds from sales of lease assets
increased significantly compared to 1998. Cash was used in investing activities
to purchase assets on operating and direct financing leases.
Cash from financing sources consisted of borrowings under the line of credit and
proceeds of non-recourse and other long-term debt. Repayments of debt have
increased as a result of borrowings over the last year. Distributions to
partners have increases due to the larger number of outstanding Units in 1999
compared to 1998.
Results of operations
Operations in 1999 resulted in a net income of $2,675,337 (six months) and
$859,033 (three months). Operations in 1998 resulted in a net income of
$2,732,862 (six months) and $1,551,242 (three months). The Partnership's primary
source of revenues is from operating leases. This is expected to remain true in
future periods. These revenues in fact increased from $$13,112,501 (six months)
and $7,720,265 (three months) in 1998 to $18,050,016 and $9,034,907,
respectively, in 1999. Depreciation expense is the single largest expense of the
Partnership and is expected to remain so in future periods. Equipment management
fees are based on the Partnership's rental revenues and have increased in
relation to increases in the Partnership's revenues from leases. Incentive
management fees are based on the levels of distributions to limited partners.
Incentive management fees have increased as a result of the increase in the
number of outstanding Units in 1999 compared to 1998. These expenses have
increased from 1998 to 1999 for both the three and six month periods as a result
of these factors. Interest expense has increased due to the higher debt balances
in 1999 than in 1998.
As of June 30, 1998, the Partnership's public offering was continuing and was
completed I November 1998. As a result, operations in 1998 are not comparable to
those in 1999.
<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, June 30, 1999 and December 31, 1998.
Statement of changes in partners' capital for the six
months ended June 30, 1999.
Statements of operations for the six and three month
periods ended June 30, 1999 and 1998.
Statement of cash flows for the six and three month
periods ended June 30, 1999 and 1998.
Notes to the Financial Statements.
2. Financial Statement Schedules
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
(b) Report on Form 8-K
None
<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:
August 13, 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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