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 000-17631
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
Page 1 OF 12
<PAGE>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements.
Page 2
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
---- ----
Cash and cash equivalents $740,014 $874,714
Accounts receivable, net of allowance for
doubtful accounts of $15,552 in 1996
and 1995 43,209 69,558
Investment in equipment and leases 5,446,372 7,459,980
---------------- ----------------
$6,229,595 $8,404,252
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $2,009,137 $2,965,946
Accrued interest 35,270 53,047
Accounts payable:
General Partners 45,940 61,192
Other 98,567 79,398
Deposits due to lessees 77,409 77,409
Unearned lease income 12,567 36,385
---------------- ----------------
Total liabilities 2,278,890 3,273,377
Partners' capital:
General Partners 77,776 73,539
Limited Partners 3,872,929 5,057,336
---------------- ----------------
Total partners' capital 3,950,705 5,130,875
---------------- ----------------
$6,229,595 $8,404,252
================ ================
See accompanying notes.
Page 3
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
Revenues: 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Lease income:
Operating $1,144,100 $1,856,003 $338,012 $547,341
Direct financing 250,018 339,916 71,411 103,711
Leveraged 12,860 11,496 3,215 3,832
Gain (loss) on disposition of assets 51,757 396,058 (11,893) 20,601
Interest income 10,869 27,858 4,724 9,678
Gain on sale of marketable securities - 124,879 - -
Other 177,151 228,600 79,323 155,452
--------------- ---------------- ---------------- ----------------
1,646,755 2,984,810 484,792 840,615
--------------- ---------------- ---------------- ----------------
Expenses:
Depreciation 712,396 1,159,568 184,516 310,969
Interest expense 190,085 286,058 55,118 88,398
Management fees 119,981 171,722 45,941 49,121
Administrative cost reimbursements 101,298 107,480 40,396 34,352
Taxes 32,048 25,841 - 63
Other expense 31,345 35,342 12,376 11,483
Professional fees 19,682 42,853 6,471 3,622
Provision for losses 16,192 19,371 4,846 8,406
--------------- ---------------- ---------------- ----------------
1,223,027 1,848,235 349,664 506,414
--------------- ---------------- ---------------- ----------------
Net income $423,728 $1,136,575 $135,128 $334,201
=============== ================ ================ ================
Net income:
General Partners $4,237 $11,366 $1,351 $3,342
Limited Partners 419,491 1,125,209 133,777 330,859
--------------- ---------------- ---------------- ----------------
$423,728 $1,136,575 $135,128 $334,201
=============== ================ ================ ================
Net income per Limited Partnership unit $5.99 $16.08 $1.91 $4.73
=============== ================ ================ ================
Weighted average number of units
outstanding 69,979 69,979 69,979 69,979
=============== ================ ================ ================
</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> <C> <C>
Balance December 31, 1995 69,979 $5,057,336 $73,539 $5,130,875
Net income 419,491 4,237 423,728
Distributions to limited partners (1,603,898) (1,603,898)
--------------- ---------------- ---------------- ----------------
Balance September 30, 1996 69,979 $3,872,929 $77,776 $3,950,705
=============== ================ ================ ================
</TABLE>
See accompanying notes.
Page 4
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(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
---- ---- ---- ----
Operating activities:
<S> <C> <C> <C> <C>
Net income $423,728 $1,136,575 $135,128 $334,201
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 712,396 1,159,568 184,516 310,969
Revenues from leveraged leases (12,860) (11,496) (3,215) (3,832)
(Gain) loss on dispositions of assets (51,757) (396,058) 11,893 (20,601)
Gain on sale of marketable securities - (124,879) - -
Provision for losses 16,192 19,371 4,846 8,406
Changes in operating assets and liabilities:
Accounts receivable 26,349 675,980 1,675 104,933
Accounts payable, General Partner (15,252) (1,385) 12,120 (14,137)
Accounts payable, other 19,169 13,597 (1,632) (9,816)
Accrued interest (17,777) (15,944) (6,030) (4,457)
Customer deposit - - - -
Unearned operating lease income (23,818) (15,352) (11,028) (20,117)
--------------- ---------------- ---------------- ----------------
Net cash provided by operations 1,076,370 2,439,977 328,273 685,549
--------------- ---------------- ---------------- ----------------
Investing activities:
Proceeds from sales of equipment 679,310 1,901,361 248,151 38,546
Proceeds from sales of marketable securities - 124,879 - -
Reductions of net investment in direct
financing leases 670,327 657,928 220,499 212,824
--------------- ---------------- ---------------- ----------------
Net cash provided by investing activities 1,349,637 2,684,168 468,650 251,370
--------------- ---------------- ---------------- ----------------
</TABLE>
Page 5
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Financing activities:
Repayment of non-recourse debt (956,809) (975,937) (307,442) (306,255)
Distributions to limited partners (1,603,898) (3,818,804) (472,804) (909,238)
--------------- ---------------- ---------------- ----------------
Net cash used in financing activities (2,560,707) (4,794,741) (780,246) (1,215,493)
--------------- ---------------- ---------------- ----------------
Net increase (decrease) in cash and cash
equivalents (134,700) 329,404 16,677 (278,574)
Cash and cash equivalents at beginning of
period 874,714 924,041 723,337 1,532,019
--------------- ---------------- ---------------- ----------------
Cash and cash equivalents at end of
period $740,014 $1,253,445 $740,014 $1,253,445
=============== ================ ================ ================
Supplemental disclosures of cash flow
information:
Cash paid for interest $190,085 $286,058 $55,118 $88,398
=============== ================ ================ ================
Supplemental schedule of 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 $146,252 $324,310 $146,252 $324,310
Less accumulated depreciation (118,612) (259,448) (118,612) (259,448)
--------------- ---------------- ---------------- ----------------
$27,640 $64,862 $27,640 $64,862
=============== ================ ================ ================
</TABLE>
See accompanying notes.
Page 6
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(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 $4,278,094 (640,319) ($559,940) $3,077,835
Net investment in direct
financing leases 2,940,554 (670,327) (276,456) 1,993,771
Net investment in leveraged
leases 74,635 12,860 - 87,495
Assets held for sale or lease 199,474 (70,680) 208,843 337,637
Initial direct costs 4,811 (1,397) - 3,414
Reserve for losses (37,588) ($16,192) - - (53,780)
---------------- --------------- ---------------- ---------------- ----------------
$7,459,980 ($16,192) ($1,369,863) ($627,553) $5,446,372
================ =============== ================ ================ ================
</TABLE>
The following schedule provides an analysis of the Partnership's investment in
equipment on operating leases by major classifications as of December 31, 1995,
dispositions during the three month periods ended March 31, June 30 and
September 30, 1996 and as of September 30, 1996:
<TABLE>
<CAPTION>
December 31, -------- Dispositions -------- September 30,
Equipment type 1995 1st Quarter 2nd Quarter 3rd Quarter 1996
-------------- ---- ----------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
Aircraft $3,164,533 $3,164,533
Mining 2,104,643 2,104,643
Manufacturing 835,681 835,681
Materials handling 1,918,334 ($187,555) ($579,632) ($509,889) 641,258
Communications 481,738 - - - 481,738
Data processing 527,739 - (195,522) - 332,217
Food processing 344,799 - (13,728) - 331,071
Transportation 697,722 (511,041) (33,029) - 153,652
Motor vehicles 95,277 - - (34,061) 61,216
Furniture, fixtures and equipment 22,967 - - - 22,967
---------------- --------------- ---------------- ---------------- ----------------
10,193,433 (698,596) (821,911) (543,950) 8,128,976
Less accumulated depreciation (5,915,339) 303,412 380,940 179,846 (5,051,141)
---------------- --------------- ---------------- ---------------- ----------------
$4,278,094 ($395,184) ($440,971) ($364,104) $3,077,835
================ =============== ================ ================ ================
</TABLE>
Page 7
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(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
are as follows:
<TABLE>
<CAPTION>
Direct
Financing Operating Total
--------- --------- -----
<S> <C> <C> <C>
Three months ending December 31, 1996 $260,003 $304,081 $564,084
Year ending December 31, 1997 967,483 578,044 1,545,527
1998 115,204 272,090 387,294
1999 4,248 269,732 273,980
2000 - 202,299 202,299
--------------- ---------------- ----------------
$1,346,938 $1,626,246 $2,973,184
=============== ================ ================
</TABLE>
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%.
Future minimum principal 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 $315,272 $53,319 $368,591
Year ending December 31, 1997 1,037,153 137,795 1,174,948
1998 230,049 61,609 291,658
1999 233,530 36,202 269,732
2000 193,133 9,166 202,299
--------------- ---------------- ----------------
$2,009,137 $298,091 $2,307,228
=============== ================ ================
</TABLE>
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 $119,181 in 1996, as permitted in the
Agreement of Limited Partnership .
Page 8
<PAGE>
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, 1996, the Partnership had borrowed approximately
$21,700,000. The remaining unpaid balance on those borrowings was approximately
$2,009,000. 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, 1996, there were no
such commitments.
The Partnership made distributions of cash from 1996 first quarter operations in
April 1996, from second quarter operations in July 1996 and from third quarter
operations in October 1996. The amounts of each of the distributions were $6.50
per Unit. These distributions represent an annualized distribution rate of 5.2%.
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, 1996 vs. 1995
Lease revenues, the Partnership's primary source of cash, decreased by $800,437
compared to 1995. Lease revenues have declined as leases have matured and the
underlying assets have been sold.
Cash flows provided by investing activities decreased by $1,334,531 primarily as
a result of decreased asset sales.
There were no financing sources of cash in 1996. Debt principal payments have
decreased due to scheduled debt payments.
Page 9
<PAGE>
Cash flows, three months, 1996 vs. 1995
For the third quarter, lease rents were the primary source of cash for the
Partnership. Lease rents decreased by $242,246 compared to 1995. As noted above,
the decrease is the result of assets coming off lease and being subsequently
sold.
Cash flows provided by investing activities increased by $217,280 due largely to
increased asset sales. This was the result of a increased amount of equipment
coming off lease in the third quarter of 1996 compared to 1995 and subsequent
sales of that equipment.
There were no financing sources of cash in 1996 or 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 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.
1996 vs. 1995
Operating lease revenues decreased by $711,903 for the nine month period and
$209,329 for the three month period due to lease terminations and subsequent
asset sales. Direct financing lease revenues decreased by $89,898 for the nine
month period and decreased by $32,300 for the three month period compared to
1995. 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 1996, sales of assets resulted in gains of $51,757 for the nine
month period and losses of $11,893 for the three month period. Such gains and
losses are not expected to be comparable from one period to another.
Depreciation expense declined by $447,172 (nine months) and $126,453 (three
months) as a result of asset sales since October 1, 1995. 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.
Page 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, September 30, 1996 and December
31, 1995
Income statements 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 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 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:
November 11, 1996
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
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 740014
<SECURITIES> 0
<RECEIVABLES> 58761
<ALLOWANCES> 15552
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6229595
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3950705
<TOTAL-LIABILITY-AND-EQUITY> 6229595
<SALES> 0
<TOTAL-REVENUES> 1646755
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1016750
<LOSS-PROVISION> 16192
<INTEREST-EXPENSE> 190085
<INCOME-PRETAX> 423728
<INCOME-TAX> 0
<INCOME-CONTINUING> 423728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 423728
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
