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 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 SHEET
JUNE 30, 1997
(Unaudited)
ASSETS
Cash and cash equivalents $3,532,837
Accounts receivable 229,367
Investments in leases 21,094,123
---------------
$24,856,327
===============
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $3,618,166
Accrued interest 18,732
Accounts payable:
General partners 49,097
Other 227,847
Unearned operating lease income 341,135
---------------
Total liabilities 4,254,977
Partners' capital:
General partners 140,757
Limited partners 20,460,593
---------------
Total partners' capital 20,601,350
---------------
$24,856,327
===============
See notes to financial statements
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
INCOME STATEMENTS
THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
Revenues: 1997 1996 1997 1996
---- ---- ---- ----
Lease revenues:
<S> <C> <C> <C> <C>
Operating leases $3,986,005 $5,108,126 $1,951,721 $2,434,471
Direct financing leases 166,177 235,054 79,765 113,546
Leveraged leases 22,096 42,515 11,048 21,257
Gain on sales of assets 608,324 181,879 375,485 37,511
Interest income 53,776 25,814 29,135 9,920
Other 750 (192) 216 (192)
---------------- ---------------- ---------------- ---------------
4,837,128 5,593,196 2,447,370 2,616,513
---------------- ---------------- ---------------- ---------------
Expenses:
Depreciation 2,583,530 3,801,365 1,253,735 1,847,887
Equipment and partnership management fees 294,161 373,497 145,419 176,182
Interest expense 200,192 389,779 96,338 158,872
Administrative cost reimbursements 124,978 108,924 53,827 69,368
Taxes 73,732 47,978 73,732 47,978
Other 64,501 38,701 25,924 34,013
Provision for losses 34,095 55,882 10,197 26,169
Professional fees 12,698 21,604 9,267 15,170
---------------- ---------------- ---------------- ---------------
3,387,887 4,837,730 1,668,439 2,375,639
---------------- ---------------- ---------------- ---------------
Net Income $1,449,241 $755,466 $778,931 $240,874
================ ================ ================ ===============
Net income:
General partners $14,492 $7,555 $7,789 $2,409
Limited partners 1,434,749 747,911 771,142 238,465
---------------- ---------------- ---------------- ---------------
$1,449,241 $755,466 $778,931 $240,874
================ ================ ================ ===============
Net income per limited partnership unit $0.19 $0.10 $0.10 $0.03
Weighted average number of units
outstanding 7,376,284 7,377,584 7,376,284 7,376,284
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD ENDED
JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
<S> <C> <C> <C> <C>
Balance December 31, 1996 7,376,284 $22,955,215 $126,265 $23,081,480
Distributions to limited partners (3,929,371) (3,929,371)
Net income 1,434,749 14,492 1,449,241
---------------- ---------------- ---------------- ---------------
Balance June 30, 1997 7,376,284 $20,460,593 $140,757 $20,601,350
================ ================ ================ ===============
</TABLE>
See notes to financial statements
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
STATEMENTS OF CASH FLOWS
THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating activities:
Net income $1,449,241 $755,466 $778,931 $240,874
Adjustment to reconcile net income to net cash
provided by operations:
Depreciation 2,583,530 3,801,365 1,253,735 1,847,887
Leveraged lease income 148,692 (32,892) 155,697 (16,446)
Gain on sales of assets (608,324) (181,879) (375,485) (37,511)
Provision for losses 34,095 55,882 10,197 26,169
Changes in operating assets and liabilities:
Accounts receivable 592,113 269,222 237,727 92,436
Notes receivable - 22,431 - 11,216
Accounts payable, general partner (58,492) 11,216 6,790 74,492
Accounts payable, other (31,595) (92,914) (40,545) 68,525
Accrued interest (41,430) (38,433) (22,804) (32,253)
Unearned operating lease income 127,093 95,498 (135,086) (142,241)
---------------- ---------------- ---------------- ---------------
Net cash provided by operating activities 4,194,923 4,664,962 1,869,157 2,133,148
---------------- ---------------- ---------------- ---------------
Investing activities:
Proceeds from sales of lease assets 2,343,433 1,025,749 1,294,059 485,500
Reduction in net investment in direct
financing leases 607,460 867,605 291,501 398,714
Purchase of equipment on direct financing
leases - (120,000) - -
---------------- ---------------- ---------------- ---------------
Net cash provided by investing activities 2,950,893 1,773,354 1,585,560 884,214
---------------- ---------------- ---------------- ---------------
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
STATEMENTS OF CASH FLOWS
(CONTINUED)
THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Financing activities:
Distributions to limited partners (3,929,371) (4,787,797) (1,843,989) (2,208,563)
Repayments of long-term non-recourse debt (2,450,160) (2,394,274) (1,184,233) (993,880)
Repurchases of units - (8,608) - (8,608)
---------------- ---------------- ---------------- ---------------
Net cash used in financing activities (6,379,531) (7,190,679) (3,028,222) (3,211,051)
---------------- ---------------- ---------------- ---------------
Net increase (decrease) in cash and
cash equivalents 766,285 (752,363) 426,495 (193,689)
Cash and cash equivalents at
beginning of period 2,766,552 1,874,774 3,106,342 1,316,100
---------------- ---------------- ---------------- ---------------
Cash and cash equivalents at end of
period $3,532,837 $1,122,411 $3,532,837 $1,122,411
================ ================ ================ ===============
Supplemental disclosures of cash flow information:
Cash paid during period for interest $200,192 $389,779 $96,338 $158,872
================ ================ ================ ===============
</TABLE>
See notes to financial statements
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
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 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 the 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
June 30, 1997, the Partnership's leases were for terms of two and one half to
eight and one half years.
Pursuant to the Agreement of Limited Partnership, the General Partners receive
compensation and reimbursements for services rendered on behalf of the
Partnership (Note 5.)
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>
Net investment in operating
leases $21,853,800 ($2,558,621) ($1,432,787) $17,862,392
Net investment in direct
financing leases 3,680,949 (607,460) (79,160) 2,994,329
Net investment in leveraged
leases 757,654 (148,692) - 608,962
Equipment held for sale or
lease 419,898 (24,909) (223,162) 171,827
Reserve for losses (509,292) ($34,095) - - (543,387)
------------------ ---------------- ---------------- ---------------- ---------------
$26,203,009 ($34,095) ($3,339,682) ($1,735,109) $21,094,123
================== ================ ================ ================ ===============
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(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, 1996,
acquisitions and dispositions during the quarters ended March 31, 1997 and June
30, 1997 and as of June 30, 1997.
<TABLE>
<CAPTION>
Reclassifications &
December 31, Dispositions June 30,
1996 1st Quarter 2nd Quarter 1997
---- ----------- ----------- ----
<S> <C> <C> <C> <C>
Mining $17,497,908 ($949,110) ($1,649,183) $14,899,615
Manufacturing 10,144,506 (86,943) (1,113,778) 8,943,785
Aircraft 5,275,000 - - 5,275,000
Utilities 3,946,886 - - 3,946,886
Transportation 3,923,808 - - 3,923,808
Printing 3,454,353 - - 3,454,353
Food processing 2,438,524 - - 2,438,524
Materials handling 1,958,393 (264,343) (203,545) 1,490,505
Medical 2,155,489 (1,405,674) - 749,815
Communications 290,175 - - 290,175
Other 65,695 (28,452) - 37,243
---------------- ---------------- ---------------- ---------------
51,150,737 (2,734,522) (2,966,506) 45,449,709
Less accumulated depreciation (29,296,937) 824,792 884,828 (27,587,317)
---------------- ---------------- ---------------- ---------------
$21,853,800 ($1,909,730) ($2,081,678) $17,862,392
================ ================ ================ ===============
</TABLE>
Equipment on operating leases was acquired in 1990, 1991, 1992, 1993 and 1995.
At June 30, 1997, the aggregate amounts of future minimum lease payments are as
follows:
Year ending Direct
December 31, Financing Operating Total
------------ --------- --------- -----
1997 $559,543 $3,155,515 $3,715,058
1998 1,099,859 4,386,947 5,486,806
1999 546,039 821,284 1,367,323
2000 144,416 - 144,416
2001 23,836 - 23,836
Thereafter 17,877 - 17,877
---------------- ---------------- ----------------
$2,391,570 $8,363,746 $10,755,316
================ ================ ================
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
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
6.81% to 11.3%.
Future minimum principal and interest payments of long-term non-recourse debt as
of June 30, 1997 are as follows:
Year ending
December 31, Principal Interest Total
1997 $1,120,774 $124,113 $1,244,887
1998 2,083,685 132,689 2,216,374
1999 356,416 22,119 378,535
2000 57,291 2,374 59,665
---------------- ---------------- ----------------
$3,618,166 $281,295 $3,899,461
================ ================ ================
5. Related party transactions:
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 $124,978 $108,924
Incentive and equipment management fees 294,161 373,497
---------------- ---------------
$419,139 $482,421
================ ===============
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
6. Partners' capital:
The Partnership Net Profits, Net Losses, and Tax Credits are to be allocated 99%
to the Limited Partners and 1% to the General Partners.
As more fully described in the Partnership Agreement, available Cash from
Operations and Cash from Sales or Refinancing shall be distributed as follows:
First, 5% of Distributions of Cash from Operations to the General Partners
as Incentive Management Compensation.
Second, the balance to the Limited Partners until the Limited Partners have
received aggregate Distributions, as defined, in an amount equal to their
Original Invested Capital, as defined, plus an 8% per annum cumulative
(compounded daily) return on their Adjusted Invested Capital, as defined.
Third, the General Partners will receive as Incentive Management
Compensation, the following:
(A) 10% of remaining Cash from Operations, as defined,
(B) 15% of remaining Cash from Sales or Refinancing, as defined.
Fourth, the balance to the Limited Partners.
7. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $90,000,000 revolving credit agreement with a group of financial
institutions which expires on October 28, 1997. The agreement includes an
acquisition facility to be used by the Partnership and Affiliates to provide
bridge financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases.
The Partnership had no borrowings under the agreement during 1997.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of June 30,
1997.
<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.
The Partnership's primary source of liquidity during the first six months of
1997 was lease rents. 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.
As of June 30, 1997, the Partnership had borrowed approximately $32,425,000. The
remaining unpaid balance of such borrowings at June 30, 1997 was $3,618,166. 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 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. As of June 30, 1997, there were no such
commitments.
The Partnership made distributions of cash from 1997 first quarter operations in
February, March and April 1997. The Partnership made distributions of cash from
1997 second quarter operations in May, June and July 1997. The amounts of the
monthly distributions were each $0.0833 per Unit. The amounts of the quarterly
distributions were each $0.25 per Unit. These distributions represent an
annualized distribution rate of 10.0%.
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, 1997 vs. 1996:
Six months:
Cash flows from operations decreased due to decreases in lease rents compared to
1996. The decreases were due to lease asset sales since the second quarter of
1996.
Cash flows from the sales of assets increased by $1,317,684 compared to 1996.
The increase was due to larger amounts of lease maturities and resulting sales.
The original cost of such assets sold increased to approximately $5,700,000 in
1997 from approximately $3,600,000 in 1996. Cash flows from the reduction of the
Partnership's net investment in direct financing leases decreased compared to
1996 as a result of equipment sales over the last twelve months.
There were no financing sources of cash flows in 1997 or 1996. Distributions to
limited partners decreased compared to 1996 due to the decrease in the
annualized distribution rates compared to 1996. Debt payments for the six month
period increased due to scheduled debt payments.
<PAGE>
Three months:
Cash flows from operations decreased in the three month period for the same
reasons noted above for the six month period.
Cash flows from investing activities in both 1996 and 1997 consisted of proceeds
from sales of assets and from reductions in the Partnership's net investment in
direct financing leases. Proceeds from the sales of assets increased due to
larger amounts of sales activities. Direct financing lease rents decreased for
the same reasons as noted above for the six month period.
There were no financing sources of cash in 1996 or 1997. Debt payments increased
for the same reasons as noted above for the six month period.
Results of Operations
Operations in the second quarter of 1996 resulted in net income of $778,931
compared to $240,874 in 1996. Net income for the first six months of 1997 was
$1,449,241 compared to $755,466 in 1996.
1997 vs. 1996:
Lease revenues decreased in both the three and six month periods compared to the
prior year. This is the result of asset sales since June 30, 1996. Interest
income has increased from 1996 to 1997 for both the three and six month periods.
This a direct consequence of having maintained higher average cash balances
during the 1997 periods than in the 1996 periods.
Operating lease revenues have shown a net decrease for both the three and six
month periods. The original cost of the underlying assets has decreased from
$60,503,401 at June 30, 1996 to $45,449,709 at June 30, 1997. The decreased
amounts of equipment owned by the Partnership also gave rise to the decrease in
depreciation expense.
As scheduled debt payments have been made, debt balances have been reduced and
this has caused interest expense to decline from 1996 to 1997.
Management fees are based on distributions to the limited partners and on lease
rents. The decreases in both these revenues and distributions caused the
decrease in management fees.
<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 statement 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 III, L.P.
(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> 3,532,837
<SECURITIES> 0
<RECEIVABLES> 229,367
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,856,327
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,601,350
<TOTAL-LIABILITY-AND-EQUITY> 24,856,327
<SALES> 0
<TOTAL-REVENUES> 4,837,128
<CGS> 0
<TOTAL-COSTS> 3,089,099
<OTHER-EXPENSES> 64,501
<LOSS-PROVISION> 34,095
<INTEREST-EXPENSE> 200,192
<INCOME-PRETAX> 1,449,241
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,449,241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,449,241
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
