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, 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 333-62477
ATEL Capital Equipment Fund VIII, LLC
(Exact name of registrant as specified in its charter)
California 94-3307404
(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 VIII, LLC
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(Unaudited)
ASSETS
1999 1998
---- ----
Cash and cash equivalents $1,522,336 $ 600
Accounts receivable 359,974 -
Investments in leases 12,744,807 -
---------------- ----------------
Total assets $14,627,117 $ 600
================ ================
LIABILITIES AND MEMBERS' CAPITAL
Accounts payable:
Managing Member $ 16,864
Other 32,929
Unearned operating lease income 35,118
----------------
Total liabilities 84,911
Members' capital:
Managing member (16,636) $ 100
Other members 14,558,842 500
---------------- ----------------
Total members' capital 14,542,206 600
---------------- ----------------
Total liabilities and members' capital $14,627,117 $ 600
================ ================
See accompanying notes.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
STATEMENT OF OPERATIONS
THREE MONTH PERIOD ENDED
MARCH 31, 1999
(Unaudited)
Revenues:
Leasing activities:
Operating leases $ 18,751
Direct financing leases 65,995
Interest 145
Other 251
----------------
85,142
Expenses:
Depreciation 134,842
Interest expense 105,548
Administrative cost reimbursements to Managing Member 40,113
Asset management fees to Managing Member 16,864
Other 5,621
Professional fees 5,294
----------------
308,282
----------------
Net loss $ (223,140)
================
Net loss:
Managing member $ (16,736)
Other members (206,404)
----------------
$ (223,140)
================
Net loss per Limited Liability Company Unit $ (0.24)
Weighted average number of Units outstanding 860,029
STATEMENT OF CHANGES IN MEMBERS' CAPITAL
THREE MONTH PERIOD ENDED
MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Other Members Managing
Units Amount Member Total
<S> <C> <C> <C> <C>
Balance December 31, 1998 50 $ 500 $ 100 $ 600
Capital contributions 1,735,142 17,351,420 - 17,351,420
Less selling commissions to affiliates (1,648,385) - (1,648,385)
Other syndication costs to affiliates (890,623) - (890,623)
Distributions to members (47,666) - (47,666)
Net loss (206,404) (16,736) (223,140)
---------------- ------------------ ---------------- ----------------
Balance March 31, 1999 1,735,192 $14,558,842 $ (16,636) $ 14,542,206
================ ================== ================ ================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
STATEMENT OF CASH FLOWS
THREE MONTH PERIOD ENDED
MARCH 31, 1999
Operating activities:
Net loss $ (223,140)
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 134,842
Changes in operating assets and liabilities:
Accounts receivable (359,974)
Accounts payable, Managing Member 16,864
Accounts payable, other 32,929
Unearned lease income 35,118
----------------
Net cash used in operations (363,361)
----------------
Investing activities:
Purchases of equipment on operating leases (8,773,491)
Purchases of equipment on direct financing leases (4,184,704)
Reduction of net investment in direct financing leases 78,546
----------------
Net cash used in investing activities (12,879,649)
----------------
Financing activities:
Capital contributions received 17,351,420
Payment of syndication costs to managing member (2,539,008)
Distributions to other members (47,666)
----------------
Net cash provided by financing activities 14,764,746
----------------
Net increase in cash and cash equivalents 1,521,736
Cash and cash equivalents at beginning of period 600
----------------
Cash and cash equivalents at end of period $1,522,336
================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 105,548
================
See accompanying notes.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 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 VIII, LLC. (the Company), was formed under the laws
of the State of California on July 31 , 1998, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. Contributions in
the amount of $600 were received as of October 7, 1998, $100 of which
represented the Managing Member's (ATEL Financial Corporation's) continuing
interest, and $500 of which represented the Initial Members' capital investment.
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
January 13, 1999, 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:
<TABLE>
<CAPTION>
Depreciation
Expense or Balance
Amortization March 31,
Additions of Leases 1999
<S> <C> <C> <C>
Net investment in operating leases 8,773,491 $ (134,842) $8,638,649
Net investment in direct financing leases 4,184,704 (78,546) 4,106,158
---------------- ------------------ ----------------
$12,958,195 $ (213,388) $12,744,807
================ ================== ================
</TABLE>
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
3. Investment in leases (continued):
Operating leases:
Property on operating leases consists of the following as of March 31, 1999:
Transportation $ 7,404,130
Manufacturing 494,113
Materials handling 594,748
Other 280,500
------------------
8,773,491
Less accumulated depreciation (134,842)
------------------
$ 8,638,649
==================
Direct financing leases:
As of March 31, 1999, investment in direct financing leases consists office
automation equipment. The following lists the components of the Company's
investment in direct financing leases as of March 31, 1999:
Total minimum lease payments receivable $4,142,441
Estimated residual values of leased equipment (unguaranteed) 448,103
----------------
Investment in direct financing leases 4,590,544
Less unearned income (484,386)
----------------
Net investment in direct financing leases $4,106,158
================
All of the property on leases was acquired in 1999. There were no dispositions
of such property.
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
3. Investment in leases (continued):
At March 31, 1999, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
1999 $1,537,672 $ 856,505 $2,394,177
2000 2,052,365 1,141,734 3,194,099
2001 2,052,365 1,001,391 3,053,756
2002 2,052,365 579,542 2,631,907
2003 1,394,111 563,269 1,957,380
Thereafter 4,779,513 - 4,779,513
---------------- ------------------ ----------------
$13,868,391 $ 4,142,441 $18,010,832
================ ================== ================
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 administrative services to
the Company. Administrative 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 administrative 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:
Selling commissions (equal to 9.5% of the selling price of
the Limited Liability Company units, deducted from Other
Members' capital) $1,648,385
Reimbursement of other syndication costs to Managing Member 890,623
Administrative costs reimbursed to Managing Member 40,113
Asset management fees to Managing Member 16,864
-----------------
$2,595,985
=================
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
5. Member's capital:
As of March 31, 1999, 1,735,192 Units ($17,351,920) were issued and outstanding.
The Company's registration statement with the Securities and Exchange Commission
became effective December 7, 1998. 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 Company participates with the Managing Member and certain of its Affiliates
in a $90,000,000 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 Company and the Managing Member.
At March 31, 1999, the Company had no borrowings under the line of credit.
The credit agreement includes certain financial covenants applicable to each
borrower. The Company was in compliance with its covenants as of March 31, 1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first quarter of 1999, 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, 1999, the Company
had received subscriptions for 1,767,141 Units ($17,671,410) 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 Company participates with the Managing Member and certain of its affiliates
in a $90,000,000 revolving line of credit with a financial institution. The line
of credit expires on January 31, 2000.
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.
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. Such commitments totaled approximately
$4,700,000 as of March 31, 1999.
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.
<PAGE>
Cash Flows
During the first quarters of 1999, the Company's primary source of liquidity was
the proceeds of its offering of Units.
Sources of cash flows from operating activities consisted primarily of direct
financing lease revenues. In future periods, operating leases are expected to
provide the majority of cash flows generated by operating activities.
Rents from direct financing leases were the only source of cash from investing
activities. Uses of cash for investing activities consisted of cash used to
purchase operating and direct financing lease assets.
The only 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 included payments of syndication costs associated with
the offering and distributions to the members.
Results of operations
On January 13, 1999, the Company commenced operations. Operations resulted in a
net loss of $223,140. The Company's primary source of revenues is from direct
financing leases. In future periods, operating leases are expected to be the
most significant source of revenues. Depreciation is related to operating lease
assets and thus, to operating lease revenues. It is 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 1999 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, going back as far as November 1998 when
the Managing Member started to fund the related transactions on behalf of the
Company. All of the revenues and related carrying costs for these transactions
were attributed to the Company in the first quarter of 1999.
Results of operations in future periods are expected to vary considerably from
those of the first quarter of 1999 as the Company continues to acquire
significant amounts of lease assets.
<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.
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: 333-62477 (2) Offering commenced:
December 7, 1998 (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, 1999
<TABLE>
<CAPTION>
Aggregate Aggregate
price of price of
offering offering
Amount amount Amount amount
Title of Security Registered registered sold sold
<S> <C> <C> <C> <C>
Limited Company units 15,000,000 $150,000,000 2,533,533 $ 25,335,330
(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 $ - $2,406,856 $2,406,856
Other expenses 1,390,090 1,390,090
---------------- ---------------- ----------------
Total expenses $ - $3,796,946 $3,796,946
================ ================ ================
(9) Net offering proceeds to the issuer after the total expenses in item 8: $ 21,538,384
(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 $ - $21,411,707 $ 21,411,707
Working capital 126,677 126,677
---------------- ---------------- ----------------
$ - $21,538,384 $ 21,538,384
================ ================ ================
(11) The use of the proceeds in Item 10 does not
represent a material change in the uses of
proceeds described in the prospectus.
</TABLE>
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, 1999 and December 31, 1998.
Statement of operations for the three month period
ended March 31, 1999.
Statement of changes in partners' capital for the
three month period ended March 31, 1999.
Statements of cash flows for the three month period
ended March 31, 1999.
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:
May 14, 1999
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
(Registrant)
By: ATEL Financial Corporation
Managing Member of Registrant
By: /s/ A. J. Batt
-----------------------------------
A. J. Batt
President and Chief Executive Officer
of Managing Member
By: /s/ Dean L. Cash
-----------------------------------
Dean L. Cash
Executive Vice President
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1522336
<SECURITIES> 0
<RECEIVABLES> 359974
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14627117
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14542206
<TOTAL-LIABILITY-AND-EQUITY> 14627117
<SALES> 0
<TOTAL-REVENUES> 85142
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 202734
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105548
<INCOME-PRETAX> (223140)
<INCOME-TAX> 0
<INCOME-CONTINUING> (223140)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (223140)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
