Form 10-QSB
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, 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 SHEETS
SEPTEMBER 30, 1997
(Unaudited)
ASSETS
Cash and cash equivalents $3,315,738
Accounts receivable 508,715
Investment in leases 19,096,379
----------------
$22,920,832
================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $3,165,311
Accrued interest 29,135
Accounts payable:
General Partners 124,985
Other 124,197
Unearned operating lease income 259,038
----------------
Total liabilities 3,702,666
Partners' capital:
General Partners 145,367
Limited Partners 19,072,799
----------------
Total partners' capital 19,218,166
----------------
$22,920,832
================
See accompanying notes
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Lease income:
Operating $5,647,733 $7,580,444 $1,661,728 $2,472,318
Direct financing 228,725 339,307 62,548 104,253
Leveraged 29,461 63,773 7,365 21,258
Gain on sales of assets 608,992 902,477 668 720,598
Other 1,701 993 951 1,185
Interest income 92,500 41,678 38,724 15,864
--------------- ---------------- ---------------- ----------------
6,609,112 8,928,672 1,771,984 3,335,476
--------------- ---------------- ---------------- ----------------
Expenses:
Depreciation 3,609,021 5,507,064 1,025,491 1,705,699
Interest expense 259,436 516,778 59,244 126,999
Management fees 415,165 537,724 121,004 164,227
Administrative cost reimbursements 192,612 181,917 67,634 72,993
Professional fees 26,538 35,266 13,840 13,662
Provision for losses 43,337 90,212 9,242 34,330
Taxes 75,738 47,579 2,006 (399)
Other 77,090 61,163 12,589 22,462
--------------- ---------------- ---------------- ----------------
4,698,937 6,977,703 1,311,050 2,139,973
--------------- ---------------- ---------------- ----------------
Income before extraordinary item 1,910,175 1,950,969 460,934 1,195,503
Extraordinary gain on early extinguishment of debt - 97,608 - 97,608
--------------- ---------------- ---------------- ----------------
Net income $1,910,175 $2,048,577 $460,934 $1,293,111
=============== ================ ================ ================
Net income:
General Partners $19,102 $20,486 $4,609 $12,931
Limited Partners 1,891,073 2,028,091 456,325 1,280,180
--------------- ---------------- ---------------- ----------------
$1,910,175 $2,048,577 $460,934 $1,293,111
=============== ================ ================ ================
Income before extraordinary item per limited
partnership unit $0.26 $0.26 $0.06 $0.16
Extraordinary gain on early extinguishment of
debt per limited partnership unit - 0.01 - 0.01
--------------- ---------------- ---------------- ----------------
Net income per limited partnership unit $0.26 $0.27 $0.06 $0.17
=============== ================ ================ ================
Weighted average number of units
outstanding 7,376,284 7,377,151 7,376,284 7,376,284
</TABLE>
See accompanying notes
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
NINE MONTH PERIOD ENDED
SEPTEMBER 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 (5,773,489) - (5,773,489)
Net income 1,891,073 19,102 1,910,175
--------------- ---------------- ---------------- ----------------
Balance September 30, 1997 7,376,284 $19,072,799 $145,367 $19,218,166
=============== ================ ================ ================
</TABLE>
See accompanying notes
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
Operating activities:
<S> <C> <C> <C> <C>
Net income $1,910,175 $2,048,577 $460,934 $1,293,111
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation 3,609,021 5,507,064 1,025,491 1,705,699
Leveraged lease income 141,883 (50,106) (6,809) (17,214)
Gain on sales of assets (608,992) (902,477) (668) (720,598)
Provision for losses 43,337 90,212 9,242 34,330
Extraordinary gain on early extinguishment of
non-recourse debt - (97,608) - (97,608)
Changes in operating assets and liabilities:
Accounts receivable 312,765 148,964 (279,348) (120,258)
Accounts payable, General Partner 17,396 6,737 75,888 (4,479)
Accounts payable, other (135,245) (68,431) (103,650) 24,483
Accrued interest (31,027) (30,621) 10,403 7,812
Deposits due to lessees - (75,340) - (75,340)
Unearned operating lease income 44,996 (81,854) (82,097) (177,352)
--------------- ---------------- ---------------- ----------------
Net cash provided by operations 5,304,309 6,495,117 1,109,386 1,852,586
--------------- ---------------- ---------------- ----------------
Investing activities:
Proceeds from sales of equipment 3,012,880 3,670,704 669,447 2,644,955
Reduction in net investment in direct financing
leases 908,501 1,193,581 301,041 325,976
Purchases of equipment on direct finance
leases - (120,000) - -
Principal payments received on notes
receivable - 33,646 - 11,215
--------------- ---------------- ---------------- ----------------
Net cash provided by investing activities 3,921,381 4,777,931 970,488 2,982,146
--------------- ---------------- ---------------- ----------------
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
STATEMENTS OF CASH FLOWS
(CONTINUED)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Financing activities:
Repayments of non-recourse debt (2,903,015) (4,234,972) (452,855) (1,840,698)
Repurchases of units - (8,608) - -
Distributions to limited partners (5,773,489) (6,999,903) (1,844,118) (2,212,106)
--------------- ---------------- ---------------- ----------------
Net cash used in financing activities (8,676,504) (11,243,483) (2,296,973) (4,052,804)
--------------- ---------------- ---------------- ----------------
Net increase (decrease) in cash and cash
equivalents 549,186 29,565 (217,099) 781,928
Cash and cash equivalents at beginning
of period 2,766,552 1,874,774 3,532,837 1,122,411
--------------- ---------------- ---------------- ----------------
Cash and cash equivalents at end of period $3,315,738 $1,904,339 $3,315,738 $1,904,339
=============== ================ ================ ================
Supplemental disclosures of cash flow information:
Cash paid for interest $259,436 $516,778 $59,244 $126,999
=============== ================ ================ ================
Supplemental schedule of non-cash transactions:
Gain on extinguishment of non-recourse debt $97,608 $97,608
================ ================
</TABLE>
See accompanying notes
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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,
1996 Additions of Leases Dispositions 1997
---- --------- --------- ------------ ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $21,853,800 ($3,583,577) ($1,938,942) $16,331,281
Net investment in direct
financing leases 3,680,949 (908,501) (174,962) 2,597,486
Net investment in leveraged
leases 757,654 (141,883) - 615,771
Equipment held for sale or lease 419,898 (25,444) (289,984) 104,470
Reserve for losses (509,292) ($43,337) - - (552,629)
------------------ --------------- ---------------- ---------------- ----------------
$26,203,009 ($43,337) ($4,659,405) ($2,403,888) $19,096,379
================== =============== ================ ================ ================
</TABLE>
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, June 30 and
September 30, 1997 and as of September 30, 1997.
<TABLE>
<CAPTION>
December 31, --------------- Dispositions --------------- September 30,
1996 1st Quarter 2nd Quarter 3rd Quarter 1997
---- ----------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
Mining $17,497,908 ($949,110) ($1,649,183) ($2,209,023) $12,690,592
Manufacturing 10,144,506 (86,943) (1,113,778) (468,782) 8,475,003
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) (293,282) 1,197,223
Medical 2,155,489 (1,405,674) - - 749,815
Communications 355,870 (28,452) - - 327,418
------------------ --------------- ---------------- ---------------- ----------------
51,150,737 (2,734,522) (2,966,506) (2,971,087) 42,478,622
Less accumulated
depreciation (29,296,937) 824,792 884,828 1,439,976 (26,147,341)
------------------ --------------- ---------------- ---------------- ----------------
$21,853,800 ($1,909,730) ($2,081,678) ($1,531,111) $16,331,281
================== =============== ================ ================ ================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
2. Investment in leases (continued):
At September 30, 1997, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Operating Financing Total
--------- --------- -----
Three months ending December 31, 1997 $1,658,364 $277,086 $1,935,450
Year ending December 31, 1998 4,407,420 1,099,859 5,507,279
1999 824,070 546,039 1,370,109
2000 - 144,416 144,416
2001 - 23,836 23,836
Thereafter - 17,877 17,877
------------ ------------ ------------
$6,889,854 $2,109,113 $8,998,967
============ ============ ============
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 or
financed with the proceeds of the particular notes. Interest rates on the notes
vary from 8% to 13.3%.
Future minimum principal payments of non-recourse debt as of September 30, 1997
are as follows:
Principal Interest Total
--------- -------- -----
Three months ending December 31, 1997 $667,919 $75,271 $743,190
Year ending December 31, 1998 12,083,685 132,689 2,216,374
1999 356,416 22,119 378,535
2000 57,291 2,374 59,665
------------ ---------- ------------
$3,165,311 $232,453 $3,397,764
============ ========== ============
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 for equipment
acquisition, management and resale and management of the Partnership.
The General Partners and/or Affiliates earned partnership and equipment
management fees of $415,165 in 1997 and $537,724 in 1996, pursuant to the
Agreement of Limited Partnership.
The amounts above are gross amounts incurred by the General Partners and/or
Affiliates, including commissions to broker dealers for the sales of Partnership
Units.
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
5. 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, 1998. 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
<PAGE>
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 September
30, 1997.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Capital Resources and Liquidity
During the third quarter of 1997, the Partnership's primary source of liquidity
was operating 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.
In the event the Partnership's 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 September 30, 1997, the Partnership had borrowed approximately
$32,425,000. The remaining unpaid balance of such borrowings at September 30,
1997 was approximately $3,165,000. The borrowings are non-recourse to the
Partnership, that is, the only recourse of the lender for a lessee default will
be to the equipment or corresponding lease acquired with the loan proceeds. The
General Partners expect that aggregate borrowings in the future will be
approximately 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.
The Partnership participates with the General Partner and certain of its
affiliates in a $90,000,000 revolving line of credit with a financial
institution. The line of credit expires on October 28, 1998.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. As of September 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 Partnership made
distributions of cash from 1997 third quarter operations in August, September
and October 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.
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.
<PAGE>
1997 vs. 1996 - nine months
During the nine month period ended September 30, 1997, the Partnership's primary
source of cash from operating activities was lease rents. Lease rents have
decreased compared to the prior year as a result of scheduled lease terminations
and asset sales in the last year.
Sources of cash from investing activities consisted primarily of direct
financing lease rents accounted for as reductions of the net investment in
direct financing leases and the proceeds from sales of lease assets. Proceeds
from sales of assets decreased by $549,323 compared to 1996. Asset sales have
decreased as fewer leases matured and the related assets were subsequently sold.
Asset sales are not expected to be consistent from one period to another. Cash
flows from direct financing leases have also decreased as a result of lease
terminations and asset sales.
In 1997 and 1996, there were no financing sources of cash. Repayments of
non-recourse debt have decreased due to scheduled debt payments. Distributions
to limited partners have decreased due to reductions in the per Unit
distribution rates compared to 1996.
1997 vs. 1996 - three months
During the third quarter, the Partnership's primary source of cash from
operations was operating lease rents.
Sources of cash from investing activities consisted primarily of direct
financing lease rents accounted for as reductions of the net investment in
direct financing leases and the proceeds from sales of lease assets as noted
above for the nine month period. These cash flows decreased compared to 1996 for
the reasons noted above for the nine month period.
In 1997 and 1996, there were no financing sources of cash. Repayments of
non-recourse debt and distributions to limited partners decreased compared to
1996 for the reasons noted above for the nine month period.
Results of Operations
Operations in the third quarter of 1997 resulted in net income of $460,934
compared to $1,293,111 in 1996. Net income for the first nine months of 1997 was
$1,910,175 compared to $2,048,577 in 1996.
1997 vs. 1996
Nine months:
Operating lease revenues decreased by $1,932,711 compared to 1996 and
depreciation expense decreased by $1,898,043. Both of these decreases are due to
scheduled terminations of operating leases over the last year and the subsequent
sales of the related assets.
<PAGE>
Effective January 1, 1996, the Partnership suspended the recognition of income
under its lease with Barney's, Inc. The non-recourse debt related to this
transaction was also put in a non-accrual status, that is, interest expense was
no longer accrued. In July 1996, the underlying assets were sold to an unrelated
third party and the related debt was extinguished as a part of the transaction.
The Partnership recorded a gain on the sale of the assets of $417,925. The sale
resulted in the debt being extinguished for less than its carrying amount,
resulting in an extraordinary gain of $97,608. There were no similar
transactions in 1997.
Interest expense has decreased due to scheduled reductions of debt balances in
the nine month period.
Management fees are based on the Partnership's revenues and its distributions to
its Limited Partners. Both lease revenues and distributions to Limited Partners
decreased compared to 1996. These decreases resulted in a decrease in management
fees of approximately $123,000.
Three months:
Operating lease revenues decreased by $810,590 compared to 1996. Direct
financing lease revenues decreased $41,705 compared to 1996. These decreases
resulted from the same factors discussed above relating to the nine month
period. Gains or losses on equipment sales have fluctuated significantly for the
reasons noted above.
Depreciation expense decreased by $680,208 from 1996 to 1997 for the three month
periods. This decrease resulted from the factors discussed above as they related
to the nine month period. Management fees also decreased by $43,223 due to the
factors noted above relating to the nine month period.
<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, September 30, 1997.
Income statements for the nine and three month
periods ended September 30, 1997 and 1996.
Statement of changes in partners' capital for the
nine month period ended September 30, 1997.
Statements of cash flows for the nine and three
month periods ended September 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:
November 12, 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 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-END> sep-30-1997
<CASH> 3,315,738
<SECURITIES> 0
<RECEIVABLES> 508,715
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,920,832
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,218,166
<TOTAL-LIABILITY-AND-EQUITY> 22,920,832
<SALES> 0
<TOTAL-REVENUES> 6,609,112
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,396,164
<LOSS-PROVISION> 43,337
<INTEREST-EXPENSE> 259,436
<INCOME-PRETAX> 1,910,175
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,910,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,910,175
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
