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, 1999
|_| 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
SEPTEMBER 30, 1999
(Unaudited)
ASSETS
Cash and cash equivalents $4,639,664
Accounts receivable 64,033
Investment in leases 4,284,990
----------------
$8,988,687
================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 84,792
Accounts payable:
General Partners 12,664
Other 105,592
Unearned operating lease income 30,381
----------------
Total liabilities 233,429
Partners' capital:
General Partners 246,831
Limited Partners 8,508,427
----------------
Total partners' capital 8,755,258
----------------
$8,988,687
================
See accompanying notes
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Lease income:
<S> <C> <C> <C> <C>
Operating $ 1,125,221 $3,134,750 $ 271,883 $ 841,181
Direct financing 60,793 211,082 18,659 70,570
Leveraged 15,842 13,930 5,280 4,643
Gain (loss) on sales of assets 38,505 (37,875) 81,854 36,709
Interest income 253,645 302,393 72,578 104,066
Other 3,991 24,272 1,706 20,315
---------------- ----------------- ---------------- ----------------
1,497,997 3,648,552 451,960 1,077,484
---------------- ----------------- ---------------- ----------------
Expenses:
Depreciation 637,679 1,953,426 205,924 567,924
Administrative cost reimbursements 155,774 168,747 68,332 59,200
Management fees 114,822 257,236 33,632 80,796
Other 71,198 57,652 8,030 21,572
Taxes 49,014 28,746 11,670 (13,824)
Professional fees 22,251 20,546 6,885 12,779
Interest expense 18,425 98,487 3,243 21,109
Provision for losses - 17,173 - -
---------------- ----------------- ---------------- ----------------
1,069,163 2,602,013 337,716 749,556
---------------- ----------------- ---------------- ----------------
Net income $ 428,834 $1,046,539 $ 114,244 $ 327,928
================ ================= ================ ================
Net income:
General Partners $ 4,288 $ 10,465 $ 1,142 $ 3,279
Limited Partners 424,546 1,036,074 113,102 324,649
---------------- ----------------- ---------------- ----------------
$ 428,834 $1,046,539 $ 114,244 $ 327,928
================ ================= ================ ================
Net income per limited partnership unit $ 0.06 $ 0.14 $ 0.02 $ 0.04
Weighted average number of units
outstanding 7,376,284 7,376,284 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, 1999
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partners Total
<S> <C> <C> <C> <C>
Balance December 31, 1998 7,376,284 $16,388,235 $ 242,543 $16,630,778
Distributions to limited partners (8,304,354) - (8,304,354)
Net income 424,546 4,288 428,834
---------------- ----------------- ---------------- ----------------
Balance September 30, 1999 7,376,284 $8,508,427 $ 246,831 $8,755,258
================ ================= ================ ================
</TABLE>
See accompanying notes
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
Operating activities:
<S> <C> <C> <C> <C>
Net income $ 428,834 $1,046,539 $ 114,244 $ 327,928
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 637,679 1,953,426 205,924 567,924
Leveraged lease income (15,842) (13,930) (5,280) (4,643)
(Gain) loss on sales of assets (38,505) 37,875 (81,854) (36,709)
Provision for losses - 17,173 - -
Changes in operating assets and liabilities:
Accounts receivable 1,996 33,746 27,838 (9,248)
Accounts payable, General Partner (326,710) (41,540) 12,664 30,999
Accounts payable, other (38,573) 1,177,023 (16,384) 1,033,544
Accrued interest (1,363) (3,646) (349) 2,654
Unearned operating lease income (22,746) (35,904) (91,738) (94,139)
---------------- ----------------- ---------------- ----------------
Net cash provided by operations 624,770 4,170,762 165,065 1,818,310
---------------- ----------------- ---------------- ----------------
Investing activities:
Proceeds from sales of equipment 999,366 3,203,765 262,498 403,951
Reduction in net investment in direct financing
leases 353,855 566,951 116,878 118,550
---------------- ----------------- ---------------- ----------------
Net cash provided by investing activities 1,353,221 3,770,716 379,376 522,501
---------------- ----------------- ---------------- ----------------
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
STATEMENTS OF CASH FLOWS
(CONTINUED)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
Financing activities:
<S> <C> <C> <C> <C>
Distributions to limited partners (8,304,354) (7,691,142) (2,767,565) (2,766,711)
Repayments of non-recourse debt (328,915) (1,621,698) (70,840) (217,672)
---------------- ----------------- ---------------- ----------------
Net cash used in financing activities (8,633,269) (9,312,840) (2,838,405) (2,984,383)
---------------- ----------------- ---------------- ----------------
Net decrease in cash and cash equivalents (6,655,278) (1,371,362) (2,293,964) (643,572)
Cash and cash equivalents at beginning
of period 11,294,942 9,342,727 6,933,628 8,614,937
---------------- ----------------- ---------------- ----------------
Cash and cash equivalents at end of period $ 4,639,664 $7,971,365 $ 4,639,664 $7,971,365
================ ================= ================ ================
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 18,425 $ 98,487 $ 3,243 $ 21,109
================ ================= ================ ================
</TABLE>
See accompanying notes
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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,
1998 of Leases Dispositions 1999
---- --------- -------------- ----
<S> <C> <C> <C> <C>
Net investment in operating leases $ 4,961,101 $ (637,679) $(1,928,373) $2,395,049
Net investment in direct financing leases 1,114,623 (353,855) (60,813) 699,955
Net investment in leveraged leases 144,944 15,842 - 160,786
Equipment held for sale or lease 363,048 - 791,943 1,154,991
Reserve for losses (362,173) 236,382 (125,791)
---------------- ----------------- ---------------- ----------------
$ 6,221,543 $ (975,692) $ (960,861) $4,284,990
================ ================= ================ ================
</TABLE>
The following schedule provides an analysis of the Partnership's investment in
property on operating leases by major classifications as of December 31, 1998,
acquisitions and dispositions during the nine months ended September 30, 1999
and as of September 30, 1999.
<TABLE>
<CAPTION>
Reclass-
December 31, ifications & September 30,
1998 Dispositions 1999
---- -------------- ----
<S> <C> <C> <C>
Mining $2,171,980 $1,792,055 $3,964,035
Printing 3,044,659 90,715 3,135,374
Medical 2,155,489 - 2,155,489
Transportation 2,214,215 (1,508,021) 706,194
Materials handling 529,071 (224,545) 304,526
Manufacturing 3,618,000 (3,618,000) -
Utilities 2,839,101 (2,839,101) -
Food processing 2,438,524 (2,438,524) -
Other 65,695 (65,695) -
------------------ ---------------- -----------------
19,076,734 (8,811,116) 10,265,618
Less accumulated depreciation (14,115,633) 6,245,064 (7,870,569)
------------------ ---------------- -----------------
$ 4,961,101 $(2,566,052) $2,395,049
================== ================ =================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
2. Investment in leases (continued):
At September 30, 1999, the aggregate amounts of future minimum lease payments
are as follows:
<TABLE>
<CAPTION>
Direct
Operating Financing Total
<S> <C> <C> <C>
Three months ending December 31, 1999 $ 209,395 $ 135,538 $ 344,933
Year ending December 31, 2000 238,486 140,876 379,362
2001 59,415 23,836 83,251
2002 - 17,877 17,877
----------------- ---------------- ----------------
$ 507,296 $ 318,127 $ 825,423
================= ================ ================
</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 or
financed with the proceeds of the particular notes. Interest rates on the notes
vary from 9.5% to 11%.
Future minimum principal payments of non-recourse debt as of September 30, 1999
are as follows:
<TABLE>
<CAPTION>
Principal Interest Total
<S> <C> <C> <C>
Three months ending December 31, 1999 $ 27,501 $ 2,332 $ 29,833
Year ending December 31, 2000 57,291 2,374 59,665
----------------- ---------------- ----------------
$ 84,792 $ 4,706 $ 89,498
================= ================ ================
</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 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:
1999 1998
---- ----
Reimbursement of administrative costs $ 155,774 $ 168,747
Incentive and equipment management fees 114,822 257,236
---------------- ----------------
$270,596 $425,983
================ ================
<PAGE>
ATEL CASH DISTRIBUTION FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
5. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $95,000,000 revolving credit agreement with a group of financial
institutions which expires on January 28, 2000. 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 1999.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of September
30, 1999.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Capital Resources and Liquidity
During the third quarter of 1999, the Partnership's primary sources of liquidity
were proceeds from sales of assets and from 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, 1999, the Partnership had borrowed approximately
$32,425,000. The remaining unpaid balance of such borrowings at September 30,
1999 was approximately $85,000. 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 do not expect that there will be additional borrowings in the
future.
The Partnership participates with the General Partner and certain of its
affiliates in a $95,000,000 revolving line of credit with a financial
institution. The line of credit expires on January 28, 2000.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. As of September 30, 1999, there were no
such commitments.
The Partnership made distributions of cash from 1999 first quarter operations in
February, March and April 1999. The Partnership made distributions of cash from
1999 second quarter operations in May, June and July 1999. The Partnership made
distributions of cash from 1999 third quarter operations in August, September
and October 1999. The amounts of the monthly distributions were each $0.125 per
Unit. The amounts of the quarterly distributions were each $0.375 per Unit.
These distributions represent an annualized distribution rate of 15.0%.
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.
1999 vs. 1998 - nine months
During the nine month period ended September 30, 1999, 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 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 compared to 1998. Asset sales have decreased. As more leases
matured and the related assets were subsequently sold, the total portfolio of
leases and leased assets has decreased. 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.
<PAGE>
In 1999 and 1998, there were no financing sources of cash. Repayments of
non-recourse debt have decreased due to scheduled debt payments. Distributions
to limited partners have increased due to an increase in the per Unit
distribution rates. Distributions form 1999 and 1998 operations were based on a
higher per Unit rate than the distributions made in January of 1998 (from 1997
operations).
1999 vs. 1998 - 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 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 1998 for the reasons noted
above for the nine month period.
In 1999 and 1998, there were no financing sources of cash. Repayments of
non-recourse debt have decreased compared to 1998 for the reasons noted above
for the nine month period.
Results of Operations
Operations in the third quarter of 1999 resulted in net income of $114,244
compared to $327,928 in 1998. Net income for the first nine months of 1999 was
$428,834 compared to $1,046,539 in 1998.
1999 vs. 1998
Nine months:
Operating lease revenues decreased by $2,009,529 compared to 1998 and
depreciation expense decreased by $1,315,747. Both of these decreases are due to
scheduled terminations of operating leases over the last year and the subsequent
sales of the related assets.
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. Lease revenues decreased compared to 1998. This decrease
resulted in a decrease in management fees of approximately $142,000.
Three months:
Operating lease revenues decreased by $569,298 compared to 1998. Direct
financing lease revenues decreased $51,911 compared to 1998. The decreases in
operating and direct financing lease revenues are related to the maturing of the
underlying leases and subsequent sales of the assets. Gains or losses on
equipment sales have fluctuated significantly for the reasons noted above. Such
gains and losses are not expected to be consistent for one period to another.
Depreciation expense decreased by $362,000 from 1998 to 1999 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 $9,132 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, 1999.
Income statements for the nine and three month
periods ended September 30, 1999 and 1998.
Statement of changes in partners' capital for
the nine month period ended September 30, 1999.
Statements of cash flows for the nine and three
month periods ended September 30, 1999 and
1998.
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, 1999
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/ PARITOSH K. CHOKSI
-------------------------------------
Paritosh K. Choksi
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-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 4639664
<SECURITIES> 0
<RECEIVABLES> 64033
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8988687
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8755258
<TOTAL-LIABILITY-AND-EQUITY> 8988687
<SALES> 0
<TOTAL-REVENUES> 1497997
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1050738
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18425
<INCOME-PRETAX> 428834
<INCOME-TAX> 0
<INCOME-CONTINUING> 428834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428834
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
