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 March 31, 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 000-19160
ATEL Cash Distribution Fund III, L.P.
(Exact name of registrant as specified in its charter)
California 94-3100855
(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 III, L.P.
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
---- ----
Cash and cash equivalents $1,316,100 $1,874,774
Accounts receivable 696,665 873,451
Notes receivable 33,646 44,861
Investments in leases 36,396,275 39,107,792
--------------- ----------------
Total assets $38,442,686 $41,900,878
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $10,051,247 $11,451,641
Accrued interest 118,846 125,026
Accounts payable:
General Partners 46,503 109,779
Other 128,989 290,428
Deposit due to lessees 75,340 75,340
Unearned operating lease income 634,488 396,749
--------------- ----------------
Total liabilities 11,055,413 12,448,963
Partners' capital:
General Partners 102,896 97,750
Limited partners 27,284,377 29,354,165
--------------- ----------------
Total partners' capital 27,387,273 29,451,915
--------------- ----------------
Total liabilities and partners' capital $38,442,686 $41,900,878
=============== ================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
INCOME STATEMENTS
THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
Revenues:
Lease revenues:
Operating leases $2,673,655 $3,473,688
Direct financing leases 121,508 130,900
Leveraged leases 21,258 14,888
Gain on sales of assets 144,368 47,337
Interest income 15,894 6,295
Other - 1,278
--------------- ----------------
2,976,683 3,674,386
--------------- ----------------
Expenses:
Depreciation and amortization 1,953,478 2,283,236
Interest 230,907 294,344
Equipment and partnership management fees to
General Partners 197,315 211,072
Administrative cost reimbursements to General
Partners 39,556 54,702
Provision for losses 29,713 36,711
Professional fees 6,434 30,563
Other 4,688 25,046
--------------- ----------------
2,462,091 2,935,674
--------------- ----------------
Net income $514,592 $738,712
=============== ================
Net income:
General Partners $5,146 $7,387
Limited Partners 509,446 731,325
--------------- ----------------
$514,592 $738,712
=============== ================
Net income per Limited Partnership unit $0.07 $0.10
Weighted average number of units outstanding 7,378,884 7,378,884
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
<S> <C> <C> <C> <C>
Balance December 31, 1995 7,378,884 $29,354,165 $97,750 $29,451,915
Net income 509,446 5,146 514,592
Distributions (2,579,234) (2,579,234)
================ ================ =============== ================
Balance March 31, 1996 7,378,884 $27,284,377 $102,896 $27,387,273
================ ================ =============== ================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
Operating activities:
Net income $514,592 $738,712
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 1,953,478 2,283,236
Gain on sale of assets (144,368) (47,337)
Leveraged lease income (16,446) (10,142)
Provision for losses 29,713 36,711
Changes in operating assets and liabilities:
Accounts receivable 176,786 (60,483)
Notes receivable 11,215 11,215
Accounts payable, general partner (63,276) 209,817
Accounts payable, other (161,439) (220,888)
Accrued interest (6,180) (47,655)
Unearned operating lease income 237,739 243,454
--------------- ----------------
Net cash provided by operations 2,531,814 3,136,640
--------------- ----------------
Investing activities:
Proceeds from sales of lease assets 540,249 130,843
Reductions of net investment in direct
financing leases 468,891 392,044
Purchase of assets on direct financing leases (120,000) -
--------------- ----------------
Net cash provided by investing activities 889,140 522,887
--------------- ----------------
Financing activities:
Distributions to limited partners (2,579,234) (2,586,459)
Repayments of non-recourse debt (1,400,394) (1,676,137)
--------------- ----------------
Net cash used in financing activities (3,979,628) (4,262,596)
--------------- ----------------
Net decrease in cash and cash equivalents (558,674) (603,069)
Cash and cash equivalents at beginning of
period 1,874,774 1,566,318
--------------- ----------------
Cash and cash equivalents at end of period $1,316,100 $963,249
=============== ================
Supplemental disclosures of cash flow information:
Cash paid during period for interest $237,087 $341,999
=============== ================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(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 III, L.P. (the Partnership), was formed under the
laws of the State of California in September 1989, 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 7, 1989, $100 of which
represented the General Partners' continuing interest, and $500 of which
represented the Initial Limited Partners' capital investment.
Upon the sale of the minimum amount of Units of Limited Partnership interest
(Units) of $1,200,000 and receipt of the proceeds thereof on March 1, 1990, the
Partnership commenced operations.
The Partnership's business consists of leasing various types of equipment. As of
March 31, 1996, the terms of the Partnership's leases were for two to eight and
one half years.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
<TABLE>
<CAPTION>
Depreciation
Expense or Reclas-
December 31, Lease sifications and March 31,
1995 Additions Amortization Dispositions 1996
---- --------- ------------ -------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $32,622,297 ($1,953,478) ($394,942) $30,273,877
Net investment in direct
financing leases 5,254,109 $120,000 (468,891) - 4,905,218
Net investment in leveraged
leases 1,623,406 - 16,446 - 1,639,852
Assets held for sale 432,348 - - (939) 431,409
Reserve for losses and
impairments (824,368) (29,713) - - (854,081)
================ ================ ================ =============== ================
$39,107,792 $90,287 ($2,405,923) ($395,881) $36,396,275
================ ================ ================ =============== ================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
3. Investment in leases (continued):
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 quarter ended March 31, 1996 and as of
March 31, 1996.
<TABLE>
<CAPTION>
December 31, 1st Quarter March 31,
1995 Acquisitions Dispositions 1996
<S> <C> <C> <C> <C>
Mining $18,592,029 $18,592,029
Manufacturing 12,773,604 12,773,604
Transportation 7,777,179 7,777,179
Aircraft 5,275,000 5,275,000
Materials handling 3,946,886 3,946,886
Utilities 3,987,085 ($347,028) 3,640,057
Printing 3,454,353 - 3,454,353
Food processing 2,438,524 - 2,438,524
Medical 2,041,222 - 2,041,222
Furniture, fixtures and equipment 345,815 - 345,815
Other 290,175 - 290,175
Communications 2,155,489 - (1,887,374) 268,115
---------------- ---------------- --------------- ----------------
63,077,361 (2,234,402) 60,842,959
Less accumulated depreciation (30,455,064) ($1,953,478) 1,839,460 (30,569,082)
---------------- ---------------- --------------- ----------------
$32,622,297 ($1,953,478) ($394,942) $30,273,877
================ ================ =============== ================
</TABLE>
Equipment on operating leases was acquired in 1990, 1991, 1992, 1993 and 1995.
At March 31, 1996, the aggregate amounts of future minimum lease payments are as
follows:
Year ending Direct
December 31, Operating Financing Total
1996 $7,326,460 $1,634,106 $8,960,566
1997 7,396,751 1,286,463 8,683,214
1998 4,645,575 1,053,142 5,698,717
1999 816,880 542,146 1,359,026
2000 - 140,876 140,876
Thereafter - 45,255 45,255
---------------- ---------------- ---------------
$20,185,666 $4,701,988 $24,887,654
================ ================ ===============
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(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
6.81% to 11.2%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1996 $3,295,055 $691,109 $3,986,164
1997 3,812,234 413,772 4,226,006
1998 2,530,248 147,354 2,677,602
1999 356,419 22,119 378,538
2000 57,291 2,374 59,665
================ ================ ===============
$10,051,247 $1,276,728 $11,327,975
================ ================ ===============
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
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.
The General Partner and/or Affiliates earned the following fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
1996 1995
---- ----
Incentive management fees (computed as 5% of
distributions of cash from operations, as
defined in the Limited Partnership Agreement)
and equipment management fees (computed as 5% of
gross revenues from operating leases, as defined
in the Limited Partnership Agreement plus 2% of
gross revenues from full payout leases, as defined
in the Limited Partnership Agreement). $197,315 $211,072
Administrative costs reimbursed to General
Partner 39,556 54,702
--------------- ----------------
$236,871 $265,774
=============== ================
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
6. Line of credit:
The Partnership participates with ATEL and certain of its Affiliates in a
$70,000,000 revolving line of credit with a financial institution that includes
certain financial covenants. The line of credit expires on January 31, 1997.
The current line of credit, when used, is collateralized by (i) specific lease
assets assigned or (ii) all lease receivables and other lease related proceeds
owned by the Partnership, all equipment subject to leases and related insurance
policies and maintenance contracts owned by the Partnership and all deposit
accounts with the lender and all cash on deposit.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Capital Resources and Liquidity
Funds which have been received, but which have not yet been invested in leased
equipment, are invested in interest-bearing accounts or high-quality/short-term
commercial paper. During the first quarter of 1996 and 1995, the Partnership's
primary source of cash was rents from operating leases. The liquidity of the
Partnership will vary in the future, increasing to the extent cash flows from
leases and proceeds from the sales of lease assets 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 and
the proceeds from the sales of lease assets.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $70,000,000 revolving line of credit with a financial
institution. The line of credit expires on January 31, 1997.
The current line of credit, when used, is collateralized by (i) specific lease
assets assigned or (ii) all lease receivables and other lease related proceeds
owned by the Partnership, all equipment subject to leases and related insurance
policies and maintenance contracts owned by the Partnership and all deposit
accounts with the lender and all cash on deposit.
The Partnership's objective is to reinvest a portion of lease payments from
assets owned in new leasing transactions. Such reinvestment will occur only
after the payment of all obligations, including debt service (both principal and
interest), the payment of management fees to the General Partner and providing
for cash distributions to the Limited Partners.
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 March 31, 1996, the Partnership had borrowed approximately $32,425,000.
The remaining unpaid balance of such borrowings at March 31, 1996 was
approximately $10,050,000. The borrowings are generally non-recourse to the
Partnership, that is, the only recourse of the lender upon default by the lessee
on the underlying lease will be to the equipment or corresponding lease acquired
with the loan proceeds. The General Partners expect that aggregate borrowings in
the future will not exceed 40% of aggregate 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. At March 31, 1996, there were no
commitments to purchase additional lease assets.
The Partnership made distributions of cash from 1996 first quarter operations in
February, March and April 1996. The distributions were paid either monthly in
the amounts of $.11667 in February and March 1996 and $.08333 in April 1996 or
quarterly in the amount of $.31667 in April 1996.
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 significantly, the lease rates that the Partnership
can obtain on future leases will be expected to increase 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 from operations decreased by $604,826 compared to 1995. The decrease
resulted from a decrease in operating lease revenues. In both years, the primary
operating source of cash was operating lease revenues.
Cash flows provided by investing activities increased by $366,253 compared to
1995. Proceeds from the sales of assets increased from $130,842 in 1995 to
$540,249 in 1996, an increase of $409,406. Asset sales are not currently
expected to be consistent from one period to another as they do not occur at
regular intervals nor do assets come off lease in steady amounts from one period
to another. Overall cash flows from direct financing leases increased by
$67,455, including both the portion recognized as revenues and the portion
applied to reduce the net investment in direct financing leases. The increase is
due to the effects of assets added in 1995 and in the first quarter of 1996.
There were no financing sources of cash in 1993 or 1995. Payments of
non-recourse debt have decreased as a result of certain of the non-recourse
notes being fully paid off since the first quarter of 1995. All of the debt
payments were made as scheduled.
Results of Operations
Operations in the first quarter of 1996 resulted in net income of $514,592
compared to $738,712 in 1995.
Operating lease revenues declined from $3,473,688 in 1995 to $2,673,655 in 1996.
The decrease is the result of scheduled lease terminations and subsequent sales
of the related lease assets. The $800,033 decrease was partially offset by an
increase in the gains recognized on sales of lease assets. The gains realized
increased by $97,031 compared to 1995. Other types of revenues did not change
significantly from 1995.
Depreciation and amortization expense decreased by $329,758 compared to 1995.
The decrease resulted from sales of assets which were previously on operating
leases. Interest expense has decreased as the Partnership has made scheduled
debt payments and has reduced the overall amounts of its non-recourse debt since
1995.
In January 1996, Barney's, Inc. (Barney's), one of the Partnership's lessees,
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The
Partnership's lease transaction has been financed primarily with non-recourse
debt. In addition, the Partnership holds certain deposits which may accrue to it
in the event of a default. As of December 31, 1995, the Partnership had
established certain reserves with regard to this transaction. The bankruptcy
proceedings are still in the preliminary stages and no additional information
has become available that would require any changes to those reserves through
the end of the first quarter of 1996.
<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, March 31, 1996 and December 31, 1995
Income statements for the three month periods ended
March 31, 1996 and 1995
Statements of changes in partners' equity for the
three months ended March 31, 1996
Statements of cash flows for the three month periods
ended March 31, 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>
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:
May 10, 1996
ATEL CASH DISTRIBUTION FUND III, L.P.
(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 and of
registrant
By: /s/ Donald E. Carpenter
Donald E. Carpenter
Principal accounting officer of registrant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1316100
<SECURITIES> 0
<RECEIVABLES> 696665
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3842686
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27387273
<TOTAL-LIABILITY-AND-EQUITY> 38442686
<SALES> 0
<TOTAL-REVENUES> 2976683
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2201471
<LOSS-PROVISION> 29713
<INTEREST-EXPENSE> 230907
<INCOME-PRETAX> 514592
<INCOME-TAX> 0
<INCOME-CONTINUING> 514592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 514592
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
