Form 10-QSB
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, 1997
|_| 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 0-17631
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
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>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEET
JUNE 30, 1997
(Unaudited)
ASSETS
Cash and cash equivalents $930,138
Accounts receivables, net of allowance for
doubtful accounts of $15,552 93,320
Investment in equipment and leases 3,518,451
----------------
$4,541,909
================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $1,108,591
Accrued interest 17,270
Accounts payable:
General partners 1,541
Other 72,081
Customer deposit 9,000
Unearned operating lease income 10,681
----------------
Total liabilities 1,219,164
Partners' capital:
General partners 83,688
Limited partners 3,239,057
----------------
Total partners' capital 3,322,745
----------------
$4,541,909
================
See notes to financial statements
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
INCOME STATEMENTS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
Revenues: 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Lease income:
Operating $517,582 $806,088 $243,145 $374,416
Direct financing 87,003 178,607 40,381 85,603
Leveraged leases 12,138 9,645 6,069 4,822
Gain on sales of assets 150,117 63,650 68,045 61,723
Other income 63,752 97,828 62,933 18,362
Interest income 12,965 6,145 6,738 3,148
---------------- ----------------- ---------------- ----------------
843,557 1,161,963 427,311 548,074
---------------- ----------------- ---------------- ----------------
Expenses:
Depreciation and amortization 217,793 527,880 104,619 204,415
Interest expense 71,318 134,967 31,942 63,782
Administrative cost reimbursements 64,868 60,902 27,619 37,361
Equipment and partnership management
fees 49,915 74,040 23,947 33,820
Other 26,071 18,969 18,676 11,868
Taxes 20,641 32,050 20,641 32,050
Professional fees 8,450 13,211 6,959 11,009
Provision for losses 4,162 11,344 - 5,470
---------------- ----------------- ---------------- ----------------
463,218 873,363 234,403 399,775
---------------- ----------------- ---------------- ----------------
Net Income $380,339 $288,600 $192,908 $148,299
================ ================= ================ ================
Net income:
General partners $3,803 $2,886 $1,929 $1,483
Limited partners 376,536 285,714 190,979 146,816
---------------- ----------------- ---------------- ----------------
$380,339 $288,600 $192,908 $148,299
================ ================= ================ ================
Net income per limited partnership unit $5.38 $4.08 $2.73 $2.10
Weighted average number of units
outstanding 69,979 69,979 69,979 69,979
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
<S> <C> <C> <C> <C>
Balance December 31, 1996 69,979 $3,608,097 $79,885 $3,687,982
Net income 376,536 3,803 380,339
Distributions (745,576) - (745,576)
---------------- ----------------- ---------------- ----------------
Balance June 30, 1997 69,979 $3,239,057 $83,688 $3,322,745
================ ================= ================ ================
</TABLE>
See notes to financial statements
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Operating activities:
<S> <C> <C> <C> <C>
Net income $380,339 $288,600 $192,908 $148,299
Adjustment to reconcile net income to net cash provided by operations:
Depreciation and amortization 217,793 527,880 104,619 204,415
Revenues from leveraged leases (12,138) (9,645) (6,069) (4,822)
Gain on sales of assets (150,117) (63,650) (68,045) (61,723)
Provision for losses 4,162 11,344 - 5,470
Changes in operating assets and liabilities:
Decrease (increase) in accounts
Accounts receivable (63,077) 24,674 (46,737) 45,366
Accounts payable, general partner (19,741) (27,372) (16,371) (6,400)
Accounts payable, other 5,297 20,801 (2,442) (5,350)
Accrued interest (11,822) (11,747) (5,912) (5,570)
Customer deposits (60,000) - - -
Unearned operating lease income (5,818) (12,790) (12,023) 7,034
---------------- ----------------- ---------------- ----------------
Net cash from operations 284,878 748,095 139,928 326,719
---------------- ----------------- ---------------- ----------------
Investing activities:
Proceeds from sales of assets 563,964 431,159 100,553 329,390
Reductions of net investment in direct
financing leases 422,809 449,828 213,279 229,633
---------------- ----------------- ---------------- ----------------
Net cash provided by investing
activities 986,773 880,987 313,832 559,023
---------------- ----------------- ---------------- ----------------
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Financing activities:
Repayment of non-recourse debt (585,274) (649,365) (296,354) (328,688)
Distributions to limited partners (745,576) (1,131,094) (272,771) (472,805)
---------------- ----------------- ---------------- ----------------
Net cash used in financing activities (1,330,850) (1,780,459) (569,125) (801,493)
---------------- ----------------- ---------------- ----------------
Net (decrease) increase in cash and
cash equivalents (59,199) (151,377) (115,365) 84,249
Cash and cash equivalents at
beginning of period 989,337 874,714 1,045,503 639,088
---------------- ----------------- ---------------- ----------------
Cash and cash equivalents at end of
period $930,138 $723,337 $930,138 $723,337
================ ================= ================ ================
Supplemental disclosures of cash flow information:
Cash paid for interest during the period $71,318 $134,967 $31,942 $63,782
================ ================= ================ ================
Operating lease assets reclassified to assets
held or sale or lease $1,046,154 $1,046,154
Less accumulated depreciation (802,625) (802,625)
---------------- ----------------
$243,529 $243,529
================ ================
</TABLE>
See notes to financial statements
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
1. Summary of significant accounting policies:
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. Organization and partnership matters:
ATEL Cash Distribution Fund II, a California Limited Partnership (the
Partnership), was formed under the laws of the State of California on September
30, 1987, for the purpose of acquiring equipment to engage in equipment leasing
and sales activities. Contributions in the amount of $600 were received as of
September 30, 1987, $100 of which represented the General Partners' continuing
interest, and $500 of which represented the Initial Limited Partner's capital
investment.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
<TABLE>
<CAPTION>
Depreciation
Expense or Reclass-
December 31, Amortization ifications & June 30,
1996 Additions of Leases Dispositions 1997
---- --------- --------- -------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $2,756,220 ($217,793) ($651,880) $1,886,547
Net investment in direct
financing leases 1,774,588 (422,809) (6,396) 1,345,383
Net investment in leveraged
leases 93,925 12,138 - 106,063
Equipment held for sale - - 243,529 243,529
Reserve for losses (59,809) ($4,162) - 900 (63,071)
------------------ ---------------- ----------------- ---------------- ----------------
$4,564,924 ($4,162) ($628,464) ($413,847) $3,518,451
================== ================ ================= ================ ================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
3. Investment in leases (continued):
Operating leases:
The following schedule provides an analysis of the Partnership's investment in
equipment on operating leases by major classifications as of December 31, 1996,
additions and dispositions during the three month periods ended March 31, 1997
and June 30, 1997 and as of June 30, 1997:
<TABLE>
<CAPTION>
Reclassifications &
December 31, Dispositions June 30,
Equipment type 1996 1st Quarter 2nd Quarter 1997
-------------- ---- ----------- ----------- ----
<S> <C> <C> <C> <C>
Aircraft $3,164,533 ($810,000) $2,354,533
Materials handling 835,681 - ($105,498) 730,183
Manufacturing 717,059 - - 717,059
Data processing 481,738 - (139,658) 342,080
Communications 331,071 - - 331,071
Mining 1,316,547 - (1,045,766) 270,781
Food processing 80,832 - - 80,832
Motor vehicles 22,967 - (11,875) 11,092
Transportation 45,525 (3,696) (41,080) 749
Furniture, fixtures and equipment 73,217 (73,217) - -
---------------- ----------------- ---------------- ----------------
7,069,170 (886,913) (1,343,877) 4,838,380
Less accumulated depreciation (4,312,950) 391,502 969,615 (2,951,833)
---------------- ----------------- ---------------- ----------------
$2,756,220 ($495,411) ($374,262) $1,886,547
================ ================= ================ ================
</TABLE>
Equipment on operating leases was acquired in 1988, 1989, 1990, 1991 and 1994.
At June 30, 1997, the aggregate amounts of future minimum lease payments are as
follows:
Year ending Direct
December 31, Financing Operating Total
1997 $459,342 $226,283 $685,625
1998 115,204 273,495 388,699
1999 4,248 269,732 273,980
2000 - 202,299 202,299
---------------- ----------------- ----------------
$578,794 $971,809 $1,550,603
================ ================= ================
<PAGE>
ATEL CASH DISTRIBUTION FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
4. 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
7.69% to 12.86%.
Future minimum principal and interest payments of debt as of June 30, 1997 are
as follows:
Year ending
December 31, Principal Interest Total
1997 $451,878 $54,656 $506,534
1998 230,050 61,609 291,659
1999 233,530 36,202 269,732
2000 193,133 9,166 202,299
---------------- ----------------- ----------------
$1,108,591 $161,633 $1,270,224
================ ================= ================
5. 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 for equipment
acquisition, management and resale and for management of the Partnership.
The General Partners and/or Affiliates earned the following fees, commissions
and reimbursements, pursuant to the Limited Partnership Agreement as follows:
1997 1996
---- ----
Reimbursement of administrative costs $64,868 $60,902
Incentive and equipment management fees 49,915 74,040
---------------- ----------------
$114,783 $134,942
================ ================
<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.
All of the Partnership's non-recourse debt is paid by lease payments assigned to
the lenders. The assigned lease payments match the required payments on the debt
and such payments fully amortize the debt.
As of June 30, 1997, the partnership had borrowed approximately $21,700,000. The
remaining unpaid balance on those borrowings was $1,108,591. 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
general partners expect that aggregate borrowings in the future will decrease as
a percentage of equipment cost. In any event, 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. There were no such commitments at June
30, 1997.
The Partnership made distributions of cash from 1997 first and second quarter
operations in April and July 1997, respectively. The amounts of these
distributions were each $3.75 per Unit. These distributions represent an
annualized distribution rate of 3.0%.
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, 1997 vs. 1996
In the first six months of 1997, the Partnership's primary source of cash flows
from operations was lease rents, particularly operating lease rents. Cash flows
from operations decreased by $463,217. The Partnership's operating lease
revenues declined by $288,506 compared to 1996 and direct financing lease
revenues declined by $91,604. These decreases are a result of scheduled lease
terminations and subsequent sales of the underlying lease assets since the
second quarter of 1996.
<PAGE>
Cash flows from investing activities increased by $105,786 compared to 1996.
Most of the increase was due to increased sales of lease assets in 1997 compared
to 1996. The original cost of assets sold in 1997 was approximately $2,231,000
compared to $1,520,000 in 1996. The proceeds from the sales of such assets
increased from $431,159 in 1996 to $657,568 in 1997.
There were no financing sources of cash in the 1997 or 1996 periods. Debt
principal payments have decreased as a result of scheduled debt payments.
Distributions decreased due to the lower per Unit rate of distributions in 1997
compared to 1996.
Cash flows, three months, 1997 vs. 1996
Lease revenues decreased by $175,246. Lease rentals and the $100,553 received
from asset sales were the largest sources of cash in the second quarter of 1997.
The decrease in lease rents for the three month period was due to asset sales as
noted above for the six month period.
Sources of cash flows from investing activities decreased compared to 1996.
Proceeds from the sales of assets decreased by $228,837 compared to 1996.
There were no financing sources of cash in the 1997 or 1996 periods. Cash flows
used in financing activities changed in the three month period due to the same
causes as noted above for the six month period.
Results of Operations
The results of operations in future periods may vary significantly from those of
the first six months of 1997 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.
1997 vs. 1996
Operating lease revenues declined by $288,506 (six months) and $131,271 (three
months). Direct financing lease revenues decreased by $91,604 (six months) and
$45,222 (three months) compared to 1996. Depreciation expense decreased by
$310,087 (six months) and $99,796 (three months) compare to 1996. Operating
lease revenues, direct financing lease revenues and depreciation have all
declined as leases have reached their scheduled terminations and the underlying
assets have been sold. Management fees are related to lease revenues and to
distributions. Both of these factors declined in 1997 compared to 1996,
resulting in lower management fees. Interest expense decreased for both the six
and three month periods due to lower average debt balances than in 1996
resulting from scheduled debt payments.
<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 sheet, June 30, 1997.
Income statements for the six and three month periods
ended June 30, 1997 and 1996.
Statement of changes in partners' equity for the six
month period ended June 30, 1997.
Statements of cash flows for the six and three month
periods ended June 30, 1997 and 1996.
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>
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 14, 1997
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 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-START> jan-01-1997
<PERIOD-END> jun-30-1997
<CASH> 930,138
<SECURITIES> 0
<RECEIVABLES> 108,872
<ALLOWANCES> 15,552
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,541,909
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,322,745
<TOTAL-LIABILITY-AND-EQUITY> 4,541,909
<SALES> 0
<TOTAL-REVENUES> 843,557
<CGS> 0
<TOTAL-COSTS> 361,667
<OTHER-EXPENSES> 26,071
<LOSS-PROVISION> 4,162
<INTEREST-EXPENSE> 71,318
<INCOME-PRETAX> 380,339
<INCOME-TAX> 0
<INCOME-CONTINUING> 380,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 380,339
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
