Form10-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, 1995
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 000-16843
ATEL Cash Distribution Fund, a California Limited Partnership
(Exact name of registrant as specified in its charter)
California 94-2985201
(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
Former name, former address and former fiscal year, if changed since last
report
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
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(Unaudited)
ASSETS
1995 1994
---- ----
Cash and cash equivalents $88,949 $203,776
Accounts receivable, net of allowance for doubtful
accounts of $22,097 in 1995 and 1994 679 3,606
Investment in leases and equipment 591,393 484,971
-------- --------
$681,021 $692,353
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $199,073
Accounts payable and accruals 33,100 $68,459
Accrued interest 1,534 -
Deposits due to lessees 12,914 12,914
Unearned operating lease income 915 1,903
-------- --------
Total liabilities 247,536 83,276
Partners' capital:
General Partners 19,358 16,807
Limited Partners 414,127 592,270
-------- --------
Total partners' capital 433,485 609,077
-------- --------
$681,021 $692,353
======== ========
See accompanying notes.
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Lease income:
Operating $81,503 $142,563 $31,577 $34,900
Direct financing 49,620 47,272 15,470 17,401
Gain on sale of equipment 11,731 40,573 1,894 1,335
Other 103,197 10,388 (111) 4,631
Gain on sale of marketable
securities 68,158 - - -
Interest income 931 11,865 365 3,788
--------- --------- --------- ---------
315,140 252,661 49,195 62,055
Expenses:
Depreciation and amortization 18,824 87,831 10,064 13,013
Professional fees 14,337 20,357 2,124 188
Other 10,590 16,788 4,168 7,418
Interest 8,077 6,012 4,796 203
Taxes 4,920 - - -
Provision for losses 3,288 - 491 -
Administrative cost reimbursements - 34,380 - -
Management fees - 20,359 - -
--------- --------- --------- ---------
60,036 185,727 21,643 20,822
--------- --------- --------- ---------
Net income $255,104 $66,934 $27,552 $41,233
========= ========= ========= =========
Net income per Limited
Partnership unit $12.65 $3.32 $1.37 $2.04
Weighted average number of
units outstanding 19,962 19,965 19,962 19,962
Net income:
General Partners $2,551 $669 $276 $412
Limited Partners 252,553 66,265 27,276 40,821
--------- --------- --------- ---------
$255,104 $66,934 $27,552 $41,233
========= ========= ========= =========
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
NINE MONTHS ENDED SEPTEMBER 30, 1995
Limited Partners
---------------- General
Units Amount Partners Total
----- ------ -------- -----
Balance December 31, 1994 19,962 $592,270 $16,807 $609,077
Net income 252,553 2,551 255,104
Distributions (430,696) (430,696)
------ --------- ------- ---------
Balance September 30, 1995 19,962 $414,127 $19,358 $433,485
====== ========= ======= =========
See accompanying notes.
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
Operating activities:
Net income $255,104 $66,934 $27,552 $41,233
Adjustments to reconcile net
income to net cash provided by
operations:
Depreciation and amortization
expense 18,824 87,831 10,064 13,013
Gain on sales of assets (11,731) (40,573) (1,894) (1,335)
Gain on sale of marketable
securities (68,158) - - -
Provision for losse 3,288 - 491 -
Changes in operating assets
and liabilities:
Accounts receivable 2,927 16,584 3,618 (3,822)
Accounts payable and accruals (35,359) (31,711) (3,096) (2,885)
Deposits due to lessees - 12,914 - -
Accrued interest 1,534 - 1,534 -
Unearned operating lease income (988) 2,561 (125) (12)
--------- --------- --------- ---------
Net cash provided by operations 165,441 114,540 38,144 46,192
--------- --------- --------- ---------
Investing activities:
Investment in operating lease
assets (208,787) - - -
Proceeds from sale of
marketable securities 68,158 - - -
Proceeds from sales of equipment 33,901 314,116 3,901 (3,108)
Reductions in net investment in
direct financing leases 58,085 88,102 20,433 37,152
Investment in direct financing
leases - (247,000) - -
Payment of initial direct costs - (3,705) - -
--------- --------- --------- ---------
Net cash (used in) provided by
investing activities (48,643) 151,513 24,334 34,044
--------- --------- --------- ---------
Financing activities:
Proceeds of non-recourse debt 205,517 - - -
Repayments of non-recourse debt (6,444) (102,214) (6,444) (7,200)
Repurchase of limited partnership
units - (1,894) - -
Distributions to Limited Partners (430,696)(1,006,050) (135,760) (335,349)
--------- ---------- --------- ---------
Net cash used in financing
activities (231,623)(1,110,158) (142,204) (342,549)
--------- ---------- --------- ---------
Net decrease in cash and
cash equivalents (114,825) (844,105) (79,726) (262,313)
Cash and cash equivalents at
beginning of period 203,776 987,546 168,677 405,754
--------- ---------- --------- ---------
Cash and cash equivalents at
end of period $88,951 $143,441 $88,951 $143,441
========= ========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $8,077 $6,012 $4,796 $203
========= ========= ========= =========
See accompanying notes.
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
1. 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. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Expense or
December 31, Amortization September 30,
1994 Additions of Leases Dispositions 1995
---- --------- --------- ------------ ----
Net investment in
operating leases $149,632 $208,787 ($18,143) ($22,168) $318,108
Net investment in
direct financing
leases 332,682 - (58,085) (1) 274,596
Reserve for losses (594) (3,288) - - (3,882)
Initial direct costs 3,251 - (680) - 2,571
--------- --------- ---------- --------- ---------
$484,971 $205,499 ($76,908) ($22,169) $591,393
========= ========= ========== ========= =========
Operating leases:
The following schedule provides an analysis of the Partnership's investment
in property on operating leases by major classifications as of December 31,
1994, acquisitions and dispositions during the quarters ended March 31,
June 30 and September 30, 1995 and as of September 30, 1995.
Acquisitions &
December 31, ----- Dispositions ----- September 30,
1994 1st Quarter 2nd Quarter 3rd Quarter 1995
---- ----------- ----------- ----------- ----
Materials handling $392,901 $392,901
Manufacturing equipment 35,653 $208,787 244,440
Motor vehicles 148,672 ($114,972) - ($13,981) 19,719
--------- --------- --------- --------- ---------
577,226 (114,972) 208,787 (13,981) 657,060
Less accumulated
depreciation (427,594) 93,268 (6,764) 2,138 (338,952)
--------- --------- --------- --------- ---------
$149,632 ($21,704) $202,023 ($11,843) $318,108
========= ========= ========= ========= =========
Equipment on operating leases was acquired in 1987, 1988, 1989, 1990, 1992,
1993 and 1995.
At September 30, 1995, the aggregate amounts of future minimum lease payments
from direct financing leases and operating leases are as follows:
Direct
Financing Operating Total
------- ------- -------
Three months ending December 31, 1995 $35,901 $30,120 $66,021
Year ending December 31, 1996 143,606 81,437 225,043
1997 143,606 52,837 196,443
1998 51,091 51,948 103,039
1999 - 51,948 51,948
2000 - 25,974 25,974
------- ------- --------
$374,204 $294,264 $668,468
======== ======== ========
3. Non-recourse debt:
Note payable to financial institution is due in monthly installments of
principal and interest. The note is secured by an assignment of lease
payments and a pledge of the assets which were purchased with the proceeds
of the note. Interest on the note is at an annual rate of 9.25%. The
balance remaining at September 30, 1995 is due in monthly payments through
2000.
Future minimum principal and interest payments of debt as of September 30, 1995
are as follows:
Principal Interest Total
------ ------ -------
Three months ending December 31, 1995 $8,448 $4,539 $12,987
Year ending December 31, 1996 35,808 16,140 51,948
1997 39,265 12,683 51,948
1998 43,055 8,893 51,948
1999 47,210 4,738 51,948
2000 25,287 687 25,974
-------- ------- -------
$199,073 $47,680 $246,753
======== ======= ========
4. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General
Partners and/or their Affiliates are entitled to receive certain fees for
equipment acquisition, management and resale and for management of the
Partnership.
The General Partners earned partnership management fees equal to 5% of cash
distributed from operations and equipment management fees equal to 2% of full
payout lease rentals and 5% of operating lease rentals pursuant to the
Limited Partnership Agreement. Effective April 1, 1994, the General Partners
elected to waive all management fees. The amount of management fees earned
in 1994 was $20,359.
The Limited Partnership Agreement allows for the reimbursement of costs
incurred by ATEL in providing administrative services to the Partnership.
Administrative services provided include partnership accounting, investor
relations, legal counsel and lease and equipment documentation. ATEL is not
reimbursed for services where it is entitled to receive a separate fee as
compensation for such services, such as acquisition and disposition of
equipment. Reimbursable costs incurred by ATEL 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. Effective May 1, 1994, the General Partners have
elected to waive all reimbursements of administrative costs. In 1995,
$39,824 was waived. Costs charged and reimbursed in 1994 totaled $34,380.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital Resources and Liquidity
At September 30, 1995, the Partnership had cash balances of $88,949.
During the nine months and the quarter ended September 30, 1995, the
Partnership's primary sources of liquidity were cash flows from leasing
operations. The liquidity of the Partnership will vary in the future,
increasing to the extent cash flows from operations exceed expenses, and
decreasing as distributions are made to the Limited Partners and to the
extent expenses exceed cash flows from leases.
The Partnership currently has available adequate reserves to meet
contingencies.
As of September 30, 1995, the Partnership had borrowed approximately
$2,817,500 with a remaining unpaid balance of approximately $199,000. There
were $205,517 of borrowings between December 31, 1994 and September 30, 1995.
The borrowings are non-recourse to the Partnership, that is the only recourse
of the lender for a lessee default is to the equipment or corresponding lease
acquired with the loan proceeds. The Partnership Agreement limits such
borrowings to 80% of the total cost of equipment, in aggregate.
No commitments of capital have been made or are expected to be made in
connection with the acquisition of additional equipment. The General PArtners
have determined that the Partnership's investment objectives will be best
served by making limited additional investments by means of non-recourse debt.
The Partnership may acquire an asset for lease without use of any cash or
exposure of any of its other assets by using 100% financing on a non-recourse
basis. The Partnership may sell the asset when its lease terminates or sell it
subject to the lease and debt. In either case, the potential residual proceeds
may provide additional liquidation distributions to the Limited Partners. The
Partnership will have the ability to dispose of the asset at any time
consistent with the final liquidation of its portfolio and termination of the
Partnership.
The General Partners have in certain cases determined that waiver of fees or
reimbursement of expenses to which they are entitled under the terms of the
Agreement of Limited Partnership would be in the best interest of the
Partnership and appropriate given the circumstances under which the Partneship
was operating. Although the General Partners may be entitled to certain
payments, they are fiduciaries and must analyze each payment authorized by the
Partnership under all of the facts and circumstances prevailing. Any fees or
reimbursements disclosed as waived will not be deferred or recovered in the
future. However, unless a fee or reimbursement right is altered by an
amendment to the Agreement of Limited Partnership, it is not permanently waived
for any future period or transaction.
The Partnership made a distribution of cash from operations to the Limited
Partners in April 1995. The amount of the distribution was $3.43 per Unit.
The distribution represents an annualized distribution rate of 2.74%.
The Partnership made a distribution of cash from operations to the Limited
Partners in July 1995. The amount of the distribution was $6.07 per Unit.
The distribution represents an annualized distribution rate of 4.86%.
The Partnership made a distribution of cash from operations to the Limited
Partners in October 1995. The amount of the distribution was $2.50 per Unit.
The distribution represents an annualized distribution rate of 2.00%.
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.
Leases already in place, for the most part, would not be affected by changes
in interest rates.
Cash flows 1994 vs. 1993
Nine months:
Cash flows from operations increased for the nine month period compared to
the same period in 1994. In 1995, there were two important sources of
operating cash flows. As in 1994, cash flows from operating and direct
financing leases were the primary sources of operating cash flows, however,
these rents decreased by about $58,000. This was offset by the increase in
other income of about $92,800. In 1995, the other income represented the
Partnership's sharing in certain cash flows generated by the successor
company to a former lessee. The rights to participate in these cash flows
were a part of the bankruptcy settlement regarding that lessee. No such
amounts will be received in the future. These amounts were received in
June 1995.
Sources of cash from investing activities consisted of proceeds from the sales
of marketable securities (in the first quarter), rents received on direct
financing leases and the proceeds from sales of lease assets. The securities
were received as a part of the bankruptcy settlement discussed above. The
Partnership does not own any other marketable securities and no further
income of this nature is expected. Cash flows from direct financing leases
has decreased from the prior year as the Partnership's investment in such
assets has declined due to sales of such assets over the last year.
Proceeds from sales of lease assets declined from about $314,000 in 1994 to
about $34,000 in 1995. The amounts of such sales are expected to vary
considerably from one period to another but are expected to generally decline
over the long-term as the Partnership's underlying portfolio of assets
diminishes.
In 1995, the only financing source of cash was the $205,517 of non-recourse
debt proceeds. The debt proceeds were used to finance the acquisition of
lease assets in the second quarter.
Three months:
In both 1994 and 1995, lease rents were the primary source of operating cash
flows. Lease rents decreased from about $52,300 in 1994 to about $47,000 in
1995.
In both years, the only significant investing source of cash was rents from
direct financing leases. The amount decreased from about $37,200 in 1994 to
about $20,400 in 1995. The decrease resulted from terminations of direct
financing leases and sales of the related assets over the last year.
There were no financing sources of cash in either year. The primary financing
use of cash continues to be distributions to the limited partners for both the
three and nine month periods.
Results of Operations
As of December 29, 1986, the Partnership commenced operations in its primary
business (leasing activities). Operations in the first nine months of 1995
resulted in net income of $255,104 compared to $66,964 in the previous year.
1995 vs. 1994:
Nine months:
Operating lease revenues declined from $142,563 in 1994 to $81,503 in 1995.
This decline resulted from asset sales over the last year. The assets are
typically sold at the expiration of the underlying lease contract. As the
underlying pool of assets decreases, the rents generated also declines. The
amounts of equipment on direct financing leases did not change as dramatically
in the period and revenues actually increased slightly as a result of assets
placed in service in June 1994. Gains realized on sales of assets decreased
from the year before. Gains or losses on such sales are expected to
fluctuate from one period to another.
In 1995, the Partnership sold certain securities at a gain of $68,158. The
stock had been received as a part of the settlement of the bankruptcy of
Financial News Network (FNN) (a former lessee of the Partnership). The stock
was sold in the first quarter of 1995. In the second quarter, the Partnership
received a cash payment from the successor to FNN. This was a sharing of
certain cash flows generated by that successor and which the Partnership had
received a right to participate in as a result of that bankruptcy settlement.
The Partnership owns no more stock and if there will not be any further cash
flows received from the successor company.
Depreciation expense has declined dramatically as operating lease assets have
been sold over the last year.
Three months:
Lease revenues have declined from 1994 to 1995 as a result of asset sales over
the last year as noted above. Depreciation has declined for the three month
period for the same reasons as noted above for the nine month period. Interest
expense increased for the three month period due to the amounts borrowed at the
end of the second quarter of 1995.
The results of operations in future periods may vary significantly from those
of the first nine months of 1995 as the Partnership's lease portfolio of
capital equipment matures. Revenues from leases are expected to decline as
leased assets come off lease and are sold or re-leased at lower lease rates.
The effect on net income is not determinable as it will depend to a large
degree on the amounts received from the sales of assets or from re-leases to
either the same or new lessees once the initial lease terms expire.
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, 1995 and December 31, 1994
Statements of operations for the nine and three month periods ended
September 30, 1995 and 1994
Statement of changes in partners' capital for the nine months ended
September 30, 1995
Statements of cash flows for the nine and three month periods ended
September 30, 1995 and 1994
Notes to the financial statements
2. Financial Statement Schedules
All 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
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 10, 1995
ATEL Cash Distribution Fund,
a California Limited Partnership
(Registrant)
By: /s/ A. J. BATT
A. J. Batt,
General Partner of registrant
By: /s/ DEAN L. CASH
Dean Cash,
General Partner of registrant
By: /s/ F. RANDALL BIGONY
F. RANDALL BIGONY
Principal financial officer
of registrant
By: /s/ DONALD E. CARPENTER
Donald E. Carpenter,
Principal accounting
officer of registrant
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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0
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<OTHER-SE> 433485
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