Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended September 30, 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 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
Page 1 of 13
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Page 2
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
---- ----
Cash and cash equivalents $101,363 $91,084
Accounts receivable, net of allowance for
doubtful accounts of $22,097 in 1996 and 1995 2,312 6,098
Investment in leases and equipment 410,746 552,050
--------------- ---------------
$514,421 $649,232
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $164,039 $190,568
Accounts payable and accruals 11,928 10,179
Accrued interest 1,266 1,471
Deposits due to lessees 12,914 12,914
Unearned operating lease income - 915
--------------- ---------------
Total liabilities 190,147 216,047
Partners' capital:
General Partners 20,625 19,914
Limited Partners 303,649 413,271
--------------- ---------------
Total partners' capital 324,274 433,185
--------------- ---------------
$514,421 $649,232
=============== ===============
See accompanying notes.
Page 3
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Lease income:
Operating $81,607 $81,503 $24,533 $31,577
Direct financing 33,493 49,620 8,802 15,470
Gain on sale of equipment 12,719 11,731 7,523 1,894
Other 26,037 103,197 82 (111)
Gain on sale of marketable securities - 68,158 - -
Interest income 697 931 336 365
--------------- ---------------- --------------- ---------------
154,553 315,140 41,276 49,195
--------------- ---------------- --------------- ---------------
Expenses:
Depreciation and amortization 51,356 18,824 29,784 10,064
Professional fees 9,512 14,337 4,477 2,124
Other 5,526 10,590 879 4,168
Interest 12,227 8,077 3,869 4,796
Taxes 3,326 4,920 - -
Provision for losses 1,546 3,288 413 491
--------------- ---------------- --------------- ---------------
83,493 60,036 39,422 21,643
--------------- ---------------- --------------- ---------------
Net income $71,060 $255,104 $1,854 $27,552
=============== ================ =============== ===============
Net income:
General Partners $711 $2,551 $19 $276
Limited Partners 70,349 252,553 1,835 27,276
--------------- ---------------- --------------- ---------------
$71,060 $255,104 $1,854 $27,552
=============== ================ =============== ===============
Net income per Limited Partnership unit $3.52 $12.65 $0.09 $1.37
=============== ================ =============== ===============
Weighted average number of units
outstanding 19,962 19,962 19,962 19,962
=============== ================ =============== ===============
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
NINE MONTHS ENDED SEPTEMBER 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 70,349 711 71,060
Distributions (179,971) (179,971)
--------------- ---------------- --------------- ---------------
Balance September 30, 1996 19,962 $303,649 $20,625 $324,274
=============== ================ =============== ===============
</TABLE>
See accompanying notes.
Page 4
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Operating activities:
Net income $71,060 $255,104 $1,854 $27,552
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization
expense 51,356 18,824 29,784 10,064
Gain on sales of assets (12,719) (11,731) (7,523) (1,894)
Gain on sale of marketable
securities - (68,158) - -
Provision for losses 1,546 3,288 413 491
Changes in operating assets and liabilities:
Accounts receivable 3,786 2,927 1,098 3,618
Accounts payable and accruals 1,749 (35,359) 1,744 (3,096)
Accrued interest (205) 1,534 (70) 1,534
Unearned operating lease income (915) (988) (1,254) (125)
--------------- ---------------- --------------- ---------------
Net cash provided by operations 115,658 165,441 26,046 38,144
--------------- ---------------- --------------- ---------------
Investing activities:
Investment in operating lease assets - (208,787) - -
Proceeds from sale of marketable
securities - 68,158 - -
Proceeds from sales of equipment 33,365 33,901 19,365 3,901
Reductions in net investment in direct
financing leases 67,755 58,085 20,643 20,433
--------------- ---------------- --------------- ---------------
Net cash provided by (used in)
investing activities 101,120 (48,643) 40,008 24,334
--------------- ---------------- --------------- ---------------
Financing activities:
Proceeds of non-recourse debt - 205,517 - -
Repayments of non-recourse debt (26,528) (6,444) (9,047) (6,444)
Distributions to Limited Partners (179,971) (430,696) (55,892) (135,760)
--------------- ---------------- --------------- ---------------
Net cash used in financing activities (206,499) (231,623) (64,939) (142,204)
--------------- ---------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents 10,279 (114,825) 1,115 (79,726)
Cash and cash equivalents at beginning
of period 91,084 203,776 100,248 168,677
--------------- ---------------- --------------- ---------------
Cash and cash equivalents at end of
period $101,363 $143,441 $101,363 $143,441
=============== ================ =============== ===============
Supplemental disclosure of cash flow information:
Cash paid for interest $12,227 $8,077 $3,869 $4,796
=============== ================ =============== ===============
</TABLE>
See accompanying notes.
Page 5
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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 Reclass-
December 31, Amortization ifications & September 30,
1995 Additions of Leases Dispositions 1996
---- --------- --------- ------------ ----
<S> <C> <C> <C> <C> <C>
Net investment in operating leases $301,079 ($50,676) ($20,647) $229,756
Net investment in direct
financing leases 252,989 (67,755) (133,002) 52,232
Assets held for sale or lease - - 133,003 133,003
Initial direct costs 2,344 (681) - 1,663
Reserve for losses (4,362) ($1,546) - - (5,908)
------------------- --------------- ---------------- --------------- ---------------
$552,050 ($1,546) ($119,112) ($20,646) $410,746
=================== =============== ================ =============== ===============
</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, June 30 and
September 30, 1996 and as of September 30, 1996.
<TABLE>
<CAPTION>
December 31, ----- Dispositions ----- September 30,
1995 1st Quarter 2nd Quarter 3rd Quarter 1996
---- ----------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
Materials handling $271,352 ($25,755) ($12,127) $233,470
Food processing 208,787 - - 208,787
Manufacturing equipment 120,663 (16,052) - 104,611
Motor vehicles 35,653 - (30,764) 4,889
------------------- --------------- ---------------- --------------- ---------------
636,455 (41,807) (42,891) 551,757
Less accumulated depreciation (335,376) 22,221 ($10,336) 1,490 (322,001)
------------------- --------------- ---------------- --------------- ---------------
$301,079 ($19,586) ($10,336) ($41,401) $229,756
=================== =============== ================ =============== ===============
</TABLE>
Equipment on operating leases was acquired in 1987, 1988, 1989, 1990, 1992, 1993
and 1995.
Page 6
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
2. Investment in leases: (continued)
At September 30, 1996, the aggregate amounts of future minimum lease payments
from direct financing leases and operating leases are as follows:
<TABLE>
<CAPTION>
Direct
Financing Operating Total
--------- --------- -----
<S> <C> <C> <C>
Three months ending December 31, 1996 $16,531 $16,572 $33,103
Year ending December 31, 1997 66,125 52,837 118,962
1998 - 51,948 51,948
1999 - 51,948 51,948
2000 - 25,974 25,974
--------------- ---------------- ---------------
$82,656 $199,279 $281,935
=============== ================ ===============
</TABLE>
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, 1996 is due in monthly payments through 2000.
Future minimum principal and interest payments of debt as of September 30, 1996
are as follows:
<TABLE>
<CAPTION>
Principal Interest Total
--------- -------- -----
<S> <C> <C> <C>
Three months ending December 31, 1996 $9,259 $3,728 $12,987
Year ending December 31, 1997 39,248 12,700 51,948
1998 43,042 8,906 51,948
1999 47,204 4,745 51,949
2000 25,286 688 25,974
--------------- ---------------- ---------------
$164,039 $30,767 $194,806
=============== ================ ===============
</TABLE>
Page 7
<PAGE>
ATEL CASH DISTRIBUTION FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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. Effective April 1, 1994, the General Partners elected to
waive all management fees.
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, $39,919 was waived. In 1995, $39,824 was waived.
Page 8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
At September 30, 1996, the Partnership had cash balances of $101,363.
During the nine months and the quarter ended September 30, 1996, 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, 1996, the Partnership had borrowed approximately $2,817,500
with a remaining unpaid balance of approximately $164,000. There were no
borrowings between December 31, 1995 and September 30, 1996. 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 were 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 Partnership
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 distributions of cash from operations and sales proceeds to
the Limited Partners in April, July and October 1996. 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.
Page 9
<PAGE>
Cash flows 1996 vs. 1995
Nine months:
Cash flows from operations decreased for the nine month period compared to the
same period in 1995. In 1996, cash flows from operating and direct financing
leases were the primary sources of operating cash flows. Other income decreased
by $77,160 compared to 1995. 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, Financial News Network (FNN).
These amounts were received in June 1995. In 1996 $25,938 was received compared
to $103,286 in 1995. No such amounts are expected to be received in the future.
Sources of cash from investing activities consisted of rents received on direct
financing leases and the proceeds from sales of lease assets. The amounts of
proceeds from the sales of assets 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.
There were no financing sources of cash in 1996. 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 1996 and 1995, lease rents were the primary source of operating cash
flows. Lease rents decreased to about $33,300 in 1996 from about $47,000 in
1995.
In both years, the most significant investing source of cash was rents from
direct financing leases.
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 1996
resulted in net income of $71,060 compared to $255,104 in the previous year.
1996 vs. 1995:
Nine months:
Lease revenues were almost unchanged from the prior year. Other income in 1996
consisted of the $25,938 received in the second quarter as a part of the FNN
bankruptcy settlement. In the second quarter of 1995, $103,286 was received from
the same source. No further amounts are expected.
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 FNN. 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 there will not be any further cash flows
received from the successor company.
Page 10
<PAGE>
Depreciation expense and interest expense have increased as a result of the
second quarter 1995 asset acquisitions.
Three months:
Lease revenues have declined from 1995 to 1996 as a result of asset sales over
the last year. Depreciation has increased 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 1996 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.
Page 11
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Inapplicable.
Item 2. CHANGES IN SECURITIES.
Inapplicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
Inapplicable.
Item 5. OTHER INFORMATION.
Inapplicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Documents filed as a part of this report
1 Financial Statements.
Included in Part I of this report:
Balance sheets, September 30, 1996 and December 31,
1995 Statements of operations for the nine and three
month periods ended
September 30, 1996 and 1995
Statement of changes in partners' capital for the
nine months ended September 30, 1996
Statements of cash flows for the nine and three
month periods ended September 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.
(b) Report on Form 8-K
None
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
November 11, 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
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 101363
<SECURITIES> 0
<RECEIVABLES> 24409
<ALLOWANCES> 22097
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 514421
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 324274
<TOTAL-LIABILITY-AND-EQUITY> 514421
<SALES> 0
<TOTAL-REVENUES> 154553
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 69720
<LOSS-PROVISION> 1546
<INTEREST-EXPENSE> 12227
<INCOME-PRETAX> 71060
<INCOME-TAX> 0
<INCOME-CONTINUING> 71060
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71060
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
