Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1996
|_| 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 0-16843
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
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
1
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
2
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 1996 and DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
---- ----
Cash and cash equivalents $100,248 $91,084
Accounts receivable, net of allowance for
doubtful accounts of $22,097 in 1996 and 1995 3,410 6,098
Investment in leases and equipment 473,429 552,050
--------------- ---------------
$577,087 $649,232
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $173,087 $190,568
Accounts payable and accruals 10,184 10,179
Deposits due to lessees 12,914 12,914
Accrued interest 1,336 1,471
Unearned operating lease income 1,254 915
--------------- ---------------
Total liabilities 198,775 216,047
Partners' capital:
General partners 20,606 19,914
Limited partners 357,706 413,271
--------------- ---------------
Total partners' capital 378,312 433,185
--------------- ---------------
$577,087 $649,232
=============== ===============
See notes to financial statements
3
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Lease income:
Operating $57,074 $49,926 $27,878 $28,249
Direct financing 24,691 34,150 11,663 16,566
Gain (loss) on sale of equipment 5,196 9,837 - (2)
Other 25,955 103,308 25,946 103,296
Gain on sale of marketable securities - 68,158 - -
Interest income 361 566 215 246
-------------- -------------- --------------- ---------------
113,277 265,945 65,702 148,355
-------------- -------------- --------------- ---------------
Expenses:
Professional fees 5,035 12,213 3,797 3,808
Depreciation 21,572 8,760 10,562 6,990
Other 4,647 6,422 3,045 3,907
Taxes 3,326 4,920 3,326 4,920
Interest 8,358 3,281 4,078 3,281
Provision for losses 1,133 2,797 1,133 1,389
-------------- -------------- --------------- ---------------
44,071 38,393 25,941 24,295
-------------- -------------- --------------- ---------------
Net income $69,206 $227,552 $39,761 $124,060
============== ============== =============== ===============
Net income:
General partners $692 $2,276 $398 $1,241
Limited partners 68,514 225,276 39,363 122,819
-------------- -------------- --------------- ---------------
$69,206 $227,552 $39,761 $124,060
============== ============== =============== ===============
Net income per limited partnership unit $3.43 $11.29 $1.97 $6.15
Weighted average number of units outstanding 19,962 19,962 19,962 19,962
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
<S> <C> <C> <C> <C>
Balance December 31, 1995 19,962 $413,271 $19,914 $433,185
Net income 68,514 692 69,206
Distributions (124,079) - (124,079)
-------------- -------------- --------------- ---------------
Balance June 30, 1996 19,962 $357,706 $20,606 $378,312
============== ============== =============== ===============
</TABLE>
See notes to financial statements
4
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating activities:
Net income $69,206 $227,552 $39,761 $124,060
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization expense 21,572 8,760 10,562 6,990
(Gain) loss on sales of assets (5,196) (9,837) - 2
Provision for losses 1,133 2,797 1,133 1,389
Changes in operating assets and liabilities:
Accounts receivable 2,688 (691) 8,076 (4,297)
Accrued interest (135) - (68) -
Unearned operating lease income 339 (863) 1,254 125
Accounts payable, other 5 (32,263) 3,386 (21,544)
-------------- -------------- --------------- ---------------
Net cash from operations 89,612 195,455 64,104 106,725
-------------- -------------- --------------- ---------------
Investing activities:
Purchase of assets on operating leases - (208,789) - (208,789)
Proceeds from sales of lease assets 14,000 30,000 1 -
Reductions in net investment in direct
financing leases 47,112 37,654 24,237 19,336
-------------- -------------- --------------- ---------------
Net cash provided by (used in) investing
activities 61,112 (141,135) 24,238 (189,453)
-------------- -------------- --------------- ---------------
Financing activities:
Distributions to limited partners (124,079) (294,936) (55,891) (76,735)
Proceeds from non-recourse debt - 205,517 - 205,517
Repayments of non-recourse debt (17,481) - (8,842) -
-------------- -------------- --------------- ---------------
Net cash (used in) provided by financing
activities (141,560) (89,419) (64,733) 128,782
-------------- -------------- --------------- ---------------
Net increase (decrease) in cash and cash
equivalents 9,164 (35,099) 23,609 46,054
Cash and cash equivalents at beginning
of period 91,084 203,776 76,639 122,623
-------------- -------------- --------------- ---------------
Cash and cash equivalents at end of period $100,248 $168,677 $100,248 $168,677
============== ============== =============== ===============
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $8,358 $3,281 $4,078 $3,281
============== ============== =============== ===============
</TABLE>
See notes to financial statements
5
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(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:
<TABLE>
<CAPTION>
Depreciation
Expense or
December 31, Amortization June 30,
1995 Additions of Leases Dispositions 1996
---- --------- --------- -------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating leases $301,079 ($21,119) ($8,803) $271,157
Net investment in direct
financing leases 252,989 (47,112) - 205,877
Initial direct costs 2,344 (453) (1) 1,890
Reserve for losses (4,362) ($1,133) - - (5,495)
-------------- -------------- -------------- --------------- ---------------
$552,050 ($1,133) ($68,684) ($8,804) $473,429
============== ============== ============== =============== ===============
</TABLE>
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, 1995,
acquisitions and dispositions during the quarters ended March 31, and June 30,
1996 and as of June 30, 1996.
<TABLE>
<CAPTION>
December 31, Dispositions June 30,
1995 1st Quarter 2nd Quarter 1996
---- ----------- ----------- ----
<S> <C> <C> <C> <C>
Materials handling $271,352 ($25,755) $245,597
Food processing 208,787 - 208,787
Manufacturing equipment 120,663 (16,052) 104,611
Motor vehicles 35,653 - 35,653
-------------- -------------- --------------- ---------------
636,455 (41,807) 594,648
Less accumulated depreciation (335,376) 22,221 ($10,336) (323,491)
-------------- -------------- --------------- ---------------
$301,079 ($19,586) ($10,336) $271,157
============== ============== =============== ===============
</TABLE>
Equipment on operating leases was acquired in 1987, 1988, 1989, 1990, 1992 ,
1993 and 1995.
6
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
2. Investment in leases: (continued)
Operating leases: (continued)
At June 30, 1996, the aggregate amounts of future minimum lease payments from
direct financing leases and operating leases are as follows:
Year ending Direct
December 31, Financing Operating Total
------------ --------- --------- -----
1996 $71,803 $36,615 $108,418
1997 143,606 52,837 196,443
1998 51,091 51,948 103,039
1999 - 51,948 51,948
2000 - 25,974 25,974
-------------- -------------- ---------------
$266,500 $219,322 $485,822
============== ============== ===============
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
June 30, 1996 is due in monthly payments through 2000.
Future minimum principal and interest payments of debt as of June 30, 1996 are
as follows:
Year ending
December 31, Principal Interest Total
1996 $18,307 $7,667 $25,974
1997 39,248 12,700 51,948
1998 43,042 8,906 51,948
1999 47,203 4,745 51,948
2000 25,287 688 25,975
-------------- -------------- ---------------
$173,087 $34,706 $207,793
============== ============== ===============
7
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
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.
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
1996 and 1995, $28,402 and $32,427 were waived.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
At June 30, 1996, the Partnership had cash balances of $100,248. Of this amount,
$55,892 was cash held for the distribution made to the Limited Partners in July
of 1996.
During the first and second quarters, the Partnership's primary sources of
liquidity were cash flows from lease rentals. In the second quarter, the
Partnership received $25,938 relating to the bankruptcy settlement of Financial
News Network (FNN), a former lessee of the Partnership. 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 and
proceeds form asset sales.
The Partnership currently has available adequate reserves to meet contingencies.
As of June 30, 1996, the Partnership had borrowed approximately $2,817,500 with
a remaining unpaid balance of $173,087. The borrowings are non-recourse to the
Partnership, that is the only recourse of the lender is to the equipment or
corresponding lease acquired or secured with the loan proceeds. The Agreement of
Limited Partnership limits such borrowings to 80% of the total cost of
equipment, in aggregate.
The Partnership made distributions of cash from operations to the Limited
Partners in April and July 1996. These distributions were based on the results
of operations in the first and second quarters of 1996. The amount of each of
the distributions was $2.50 per Unit. The distributions represent 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.
If interest rates increase or decrease significantly, the lease rates that the
Partnership can obtain on future leases will be expected to increase or decrease
in parallel as the cost of capital is a significant factor in the pricing of
lease financing. Leases already in place, for the most part, would not be
affected by changes in interest rates.
Cash Flows
Six months, 1996 vs. 1995
During the first six months of 1996, the Partnership's primary source of cash
was from rents from operating and direct financing leases. The amounts of such
rents, in total, was almost unchanged from 1995. During the second quarter of
1996, the Partnership received $25,938 relating to the FNN bankruptcy
settlement. The Partnership does not expect to receive additional amount in
future periods.
Sources of cash from investing activities decreased from $67,654 in 1995 to
$61,112 in 1996. The decrease was primarily due to a decrease in sales of lease
assets compared to 1995.
In 1996, there were no sources of cash flows from financing activities.
9
<PAGE>
Three months, 1996 vs. 1995
Cash flows from operations decreased due to the same causes noted above for the
six month period.
Cash flows from investing activities increased due to the method of income
recognition and lease amortization for direct financing leases. The total cash
flows provided by such leases was unchanged from 1995 for both the three and six
month periods.
In 1996, there were no financing sources of cash flows.
Results of Operations
The results of operations in future periods may vary significantly from those of
the first six months of 1996 as the Partnership's lease portfolio of capital
equipment matures. Revenues from leases are expected to decline over the long
term 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.
Six and three months, 1996 vs. 1995
Operating lease revenues have increases due to a lease acquisition at the end of
the second quarter of 1995. Depreciation has also increased due to the asset
acquisition. Interest expense has increased as the average balances of
outstanding debt have increased due to the borrowings at the end of the second
quarter of 1995. This has been partially offset as debt balances have been
reduced as a result of scheduled debt payments. The gains on sales of marketable
securities and cash received related to FNN are not expected to occur again in
future periods.
Revenues from leases and sales of lease assets decreased slightly compared to
1995. These decreases resulted primarily from decreased asset sales compared to
the prior year.
In the second quarter of 1995, the Partnership received $103,286 relating to the
bankruptcy of FNN. In 1996, $25,938 was received from the settlement. No further
payments are anticipated. In the first quarter of 1995, the Partnership sold
common stock it had received from the FNN bankruptcy settlement and realized a
gain of $68,158 on the sale of the stock. Upon completion of the sale, the
Partnership no longer held any equity securities. Combined, these factors caused
a decline in revenues of $145,511 from 1995 to 1996.
The Partnership's expenses increased by $5,678 for the six month period compared
to 1995. The increase was primarily related to increases in depreciation and
interest expenses. These increases were the result of assets acquired at the end
of the second quarter of 1995 using the proceeds of non-recourse debt.
10
<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, 1996 and December 31, 1995
Statements of operations for the six and three month periods ended
June 30, 1996 and 1995
Statements of changes in partners' capital for the six months
ended June 30, 1996
Statements of cash flows for the six and three month periods ended
June 30, 1996 and 1995
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.
11
<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, 1996
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
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 100248
<SECURITIES> 0
<RECEIVABLES> 25507
<ALLOWANCES> 22097
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 577087
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 378312
<TOTAL-LIABILITY-AND-EQUITY> 577087
<SALES> 0
<TOTAL-REVENUES> 113277
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 34580
<LOSS-PROVISION> 1133
<INTEREST-EXPENSE> 8358
<INCOME-PRETAX> 69206
<INCOME-TAX> 0
<INCOME-CONTINUING> 69206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69206
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
