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, 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 000-17631
ATEL Cash Distribution Fund II, a California Limited Partnership
(Exact name of registrant as specified in its charter)
California 94-3051991
(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 II
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(Unaudited)
ASSETS
1995 1994
---- ----
Cash and cash equivalents $1,253,445 $924,041
Accounts receivable, net of allowance for doubtful
accounts of $15,552 in 1995 and 1994 - 675,980
Investment in equipment and leases 8,192,403 1,523,077
---------- -----------
$9,445,848 $13,123,098
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $3,279,507 $4,255,444
Accrued interest 59,197 75,141
Accounts payable:
General Partners 49,120 50,505
Other 68,816 55,219
Deposits due to lessees 77,409 77,409
Unearned lease income 42,292 57,644
---------- ----------
Total liabilities 3,576,341 4,571,362
Partners' capital:
General Partners 71,833 60,467
Limited Partners 5,797,674 8,491,269
---------- ----------
Total partners' capital 5,869,507 8,551,736
---------- ----------
$9,445,848 $13,123,098
========== ===========
See accompanying notes.
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
INCOME STATEMENTS
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 $1,856,003 $3,907,883 $547,341 $1,279,726
Direct financing 339,916 572,792 103,711 105,959
Leveraged 11,496 9,135 3,832 3,045
Gain (loss) on
disposition of assets 396,058 (258,988) 20,601 (39,937)
Interest income 27,858 48,967 9,678 27,738
Gain on sale of marketable
securities 124,879 - - -
Other 228,600 161,215 155,452 (1,046)
----------- ----------- ----------- ----------
2,984,810 4,441,004 840,615 1,375,485
Expenses:
Depreciation 1,159,568 2,374,368 310,969 661,970
Interest expense 286,058 385,435 88,398 114,635
Management fees 171,722 357,406 49,121 118,408
Administrative cost
reimbursements 107,480 166,465 34,352 45,960
Professional fees 42,853 34,857 3,622 1,668
Other expense 35,342 53,718 11,483 22,337
Taxes 25,841 - 63 -
Provision for losses 19,371 - 8,406 -
----------- ----------- ----------- ----------
1,848,235 3,372,249 506,414 964,978
----------- ----------- ----------- ----------
Net income $1,136,575 $1,068,755 $334,201 $410,507
=========== =========== =========== ==========
Net income:
General Partners $11,366 $10,688 $3,342 $4,105
Limited Partners 1,125,209 1,058,067 330,859 406,402
----------- ----------- ----------- ----------
$1,136,575 $1,068,755 $334,201 $410,507
=========== =========== =========== ==========
Net income per Limited
Partnership unit $16.08 $15.12 $4.73 $5.81
Weighted average number
of units outstanding 69,979 69,994 69,979 69,990
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
NINE MONTHS ENDED SEPTEMBER 30, 1995
Limited Partners
---------------- General
Units Amount Partners Total
----- ------ -------- -----
Balance December 31, 1994 69,979 $8,491,269 $60,467 $8,551,736
Net income 1,125,209 11,366 1,136,575
Distributions to limited
partners (3,818,804) - (3,818,804)
------ ----------- ------- -----------
Balance September 30, 1995 69,979 $5,797,674 $71,833 $5,869,507
====== =========== ======= ===========
See accompanying notes.
ATEL CASH DISTRIBUTION FUND II
(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 $1,136,575 $1,068,755 $334,201 $410,507
Adjustments to reconcile
net income to net cash
provided by operations:
Depreciation 1,159,568 2,374,368 310,969 661,970
Revenues from leveraged
leases (11,496) (9,135) (3,832) (3,045)
(Gain) loss on
dispositions of assets (396,058) 258,988 (20,601) 39,937
Gain on sale of marketable
securities (124,879) - - -
Provision for losses 19,371 - 8,406 -
Changes in operating
assets and liabilities:
Accounts receivable 675,980 152,599 104,933 (65,261)
Accounts payable, General
Partner (1,385) 7,603 (14,137) 3,788
Accounts payable, other 13,597 38,490 (9,816) 30,199
Accrued interest (15,944) (76,977) (4,457) (22,588)
Customer deposit - 77,410 - (9,097)
Unearned operating lease
income (15,352) (89,066) (20,117) (119,800)
----------- ---------- ---------- ----------
Net cash provided by
operations 2,439,977 3,803,035 685,549 926,610
----------- ---------- ---------- ----------
Investing activities:
Proceeds from sales of
equipment 1,901,361 2,108,670 38,546 1,261,316
Proceeds from sales of
marketable securities 124,879 - - -
Reductions of net
investment in direct
financing leases 657,928 726,913 212,824 104,254
Purchase of equipment on
operating leases - (1,368,301) - -
Purchase of equipment on
direct financing leases - (820,607) - -
Payment of initial direct
costs - (7,605) - -
----------- ------------ ---------- -----------
Net cash provided by
investing activities 2,684,168 639,070 251,370 1,365,570
----------- ----------- ----------- -----------
Financing activities:
Repayment of non-recourse
debt (975,937) (1,984,923) (306,255) (671,676)
Distributions to limited
partners (3,818,804) (4,547,104) (909,238) (1,545,707)
----------- ----------- ----------- -----------
Net cash used in financing
activities (4,794,741) (6,532,027) (1,215,493) (2,217,383)
----------- ----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents 329,404 (2,089,922) (278,574) 74,797
Cash and cash equivalents
at beginning of period 924,041 3,700,348 1,532,019 1,535,629
----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period $1,253,445 $1,610,426 $1,253,445 $1,610,426
=========== =========== =========== ==========
Supplemental disclosures of cash flow information:
Cash paid for interest $286,058 $385,435 $88,398 $114,635
Non-cash transactions:
Operating lease assets
reclassified to direct
financing lease assets $166,612 $166,612
Less accumulated depreciation (127,649) (127,649)
--------- ---------
$38,963 $38,963
========= =========
Operating lease assets
reclassified to equipment
held for lease $324,310 $324,310
Less accumulated depreciation (259,448) (259,448)
--------- ---------
$64,862 $64,862
========= =========
See accompanying notes.
ATEL CASH DISTRIBUTION FUND II
(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 Reclass-
December 31, Amortization ifications & September 30,
1994 Additions of Leases Dispositions 1995
---- --------- --------- ------------ ----
Net investment in
operating
leases $7,691,388 ($1,158,171) ($1,609,128) $4,924,089
Net investment in
direct financing
leases 3,777,324 (657,928) 38,963 3,158,359
Net investment
in leveraged
leases 59,307 11,496 - 70,803
Equipment held
for lease - - 64,862 64,862
Reserve for
losses (11,616) ($19,371) - - (30,987)
Initial direct
costs 6,674 - (1,397) - 5,277
----------- --------- ------------ ------------ -----------
$11,516,403 ($19,371) ($1,804,603) ($1,505,303) $8,192,403
=========== ========= ============ ============ ===========
The following schedule provides an analysis of the Partnership's investment in
equipment on operating leases by major classifications as of December 31, 1994,
dispositions during the three month periods ended March 31, June 30 and
September 30, 1995 and as of September 30, 1995:
December 31, -------- Dispositions -------- September 30,
Equipment type 1994 1st Quarter 2nd Quarter 3rd Quarter 1995
---- ----------- ----------- ----------- ----
Aircraft $3,164,533 $3,164,533
Materials
handling 3,398,792 ($51,407) ($784,122) ($109,811) 2,453,452
Transportation 2,474,788 - (339,457) (19,641) 2,115,690
Mining 6,435,092 (4,330,449) - - 2,104,643
Manufacturing 835,681 - - - 835,681
Data processing 527,739 - - - 527,739
Communications 481,738 - - - 481,738
Food processing 344,799 - - - 344,799
Furniture,
fixtures and
equipment 347,277 - - (324,310) 22,967
Motor vehicles 176,962 (175,515) - - 1,447
Medical 36,676 - (36,676) - -
------------ ------------ ----------- ---------- ----------
18,224,077 (4,557,371) (1,160,255) (453,762) 12,052,689
Less accumulated
depreciation (10,532,689) 2,821,141 532,463 50,485 (7,128,600)
------------ ------------ ---------- ---------- -----------
$7,691,388 ($1,736,230) ($627,792) ($403,277) $4,924,089
============ ============ ========== ========== ===========
At September 30, 1995, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Financing Operating Total
--------- --------- -----
Three months ending December 31, 1995 $310,794 $501,056 $811,850
Year ending December 31, 1996 1,200,961 1,209,916 2,410,877
1997 1,126,523 543,627 1,670,150
1998 220,075 271,610 491,685
1999 4,248 269,732 273,980
Thereafter - 202,299 202,299
---------- ---------- ----------
$2,862,601 $2,998,240 $5,860,841
========== ========== ==========
3. Non-recourse debt:
Notes payable to financial institutions are due in varying
monthly, quarterly and semi-annual 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 9.43% to 12.86%. $3,279,507
==========
Future minimum principal payments of debt as of September 30, 1995 are as
follows:
Principal Interest Total
--------- -------- -----
Three months ending December 31, 1995 $313,562 $70,685 $384,247
Year ending December 31, 1996 1,272,080 261,180 1,533,260
1997 1,037,153 137,795 1,174,948
1998 230,049 61,609 291,658
1999 233,530 36,202 269,732
Thereafter 193,133 9,166 202,299
---------- -------- ----------
$3,279,507 $576,637 $3,856,144
========== ======== ==========
4. Commitments, management and report of fees:
The terms of the Agreement of Limited Partnership provide that the General
Partners and/or Affiliates are entitled to receive certain fees.
The General Partners and/or Affiliates earned partnership and equipment
management fees of $171,722 in 1995 and $357,406 in 1994, as permitted in
the Agreement of Limited Partnership .
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Partnership cash which has been received, but which has not yet been invested
in leased equipment or distributed to partners, is invested in interest-bearing
accounts or high-quality/short-term commercial paper.
The Partnership's primary source of liquidity is cash received from lease
rentals. 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.
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 Partners envision no such
requirements for operating purposes, nor have they explored with lenders the
possibility of obtaining loans. There can be no assurance as to the terms of
any such financing or that the Partnership will be able to obtain such loans.
As of September 30, 1995, the Partnership had borrowed approximately
$21,700,000. The remaining unpaid balance on those borrowings was approximately
$3,280,000. The borrowings are non-recourse to the Partnership, that is, the
only recourse of the lender will be to the equipment or corresponding lease
acquired with the loan proceeds. The Agreement of Limited Partnership limits
such borrowings to 40% of the total cost of equipment, in aggregate.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. At September 30, 1994, there were no
such commitments.
The Partnership made a distributions of cash from 1995 first quarter operations
in April 1995, from second quarter operations in July 1995 and from third
quarter operations in October 1995. The amount of the distributions were
$18.75, $12.50 and $12.50 per Unit, respectively. These distributions
represent annualized distribution rates of 15%, 10% and 10%, respectively.
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, nine months, 1995 vs. 1994
Lease revenues, the Partnership's primary source of cash, decreased by
$2,282,395 compared to 1994.
Cash flows provided by investing activities decreased by $151,415 as a result
of decreased asset sales and direct finance lease rents. This was partially
offset by sales of marketable securities. The decrease in rents was the result
of sales of such equipment over the last year.
There were no financing sources of cash in 1995. Debt principal payments have
decreased due to scheduled debt payments.
Cash flows, three months, 1995 vs. 1994
For the third quarter, lease rents were the primary source of cash for the
Partnership. Lease rents decreased by $733,846 compared to 1994. As noted
above, the decrease is the result of assets coming off lease and being
subsequently sold.
Cash flows provided by investing activities decreased materially due to
reduced asset sales. This was the result of a decreased amount of equipment
coming off lease in 1995 compared to 1994 and subsequent sales of that
equipment. This was partially offset by increases in direct financing lease
rents accounted for as reductions of the net investment in such leases.
There were no financing sources of cash in 1995. Debt principal payments
decreased due to the causes noted above for the nine month period.
Results of Operations
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 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.
1995 vs. 1994
Operating lease revenues decreased by $2,051,880 for the nine month period and
$732,385 for the three month period due to lease terminations and subsequent
asset sales. Direct financing lease revenues decreased by $232,876 for the
nine month period and decreased by $2,248 for the three month period compared
to 1994. The decreases resulted from lease terminations and asset sales. In
1995, sales of assets resulted in gains of $396,058 (nine months) and $20,601
(three months). In 1994, sales of assets resulted in losses of $258,988 (for
nine months) and $39,937 (for three months). Such gains and losses are not
expected to be comparable from one period to another. Depreciation expense
declined by $1,214,800 (nine months) and $351,001 (three months) as a result
of asset sales since October 1, 1994. Interest expense continues to decline
in both the three and nine month periods in relation to the declining balances
of debt. There have been no new borrowings in the current year.
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
Income statements 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 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
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 II,
a California Limited Partnership
(Registrant)
By: /s/ A. J. BATT
A. J. Batt
General Partner of registrant
By: /s/ DEAN L. CASH
Dean L. 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
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