Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Annual report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934 (fee required)
For the Year Ended December 31, 1996
OR
|_| Transition report pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934 (no fee
required) For the transition period from ____ to
----
Commission File number 0-21552
ATEL Cash Distribution Fund IV, L.P.
California 94-3145429
(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
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Limited Partnership
Units
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 |_|
State the aggregate market value of voting stock held by non-affiliates of the
registrant.
Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |X| <PAGE>
PART I
Item 1: BUSINESS
General Development of Business
ATEL Cash Distribution Fund IV, L.P. (the Partnership), was formed under the
laws of the State of California in September 1991. The Partnership was formed
for the purpose of acquiring equipment to engage in equipment leasing and sales
activities.
The Partnership conducted a public offering of 7,500,000 units of Limited
Partnership Interest (Units), at a price of $10 per Unit which terminated on
February 3, 1993. As of that date, the Partnership had sold an aggregate of
7,500,000 Units for a total capitalization of $75,000,000.
The Partnership's principal objectives are to invest in a diversified portfolio
of equipment which will (i) preserve, protect and return the Partnership's
invested capital; (ii) generate substantial distributions to the partners of
cash from operations and cash from sales or refinancing, with any balance
remaining after certain minimum distributions to be used to purchase additional
equipment during the reinvestment period, ending December 31, 1999 and (iii)
provide significant distributions following the reinvestment period and until
all equipment has been sold. The Partnership is governed by its Limited
Partnership Agreement.
Narrative Description of Business
The Partnership has acquired and intends to acquire various types of equipment
and to lease such equipment pursuant to "Operating" leases and "Full Payout"
leases, where "Operating" leases are defined as being leases in which the
minimum lease payments during the initial lease term do not recover the full
cost of the equipment and "Full Payout" leases recover such cost. It is the
intention of the General Partner that no more than 25% of the aggregate purchase
price of equipment will be subject to "Operating" leases upon final investment
of the Net Proceeds of the Offering and that no more than 20% of the aggregate
purchase price of equipment will be invested in equipment acquired from a single
manufacturer.
The Partnership only purchases equipment for which a lease exists or for which a
lease will be entered into at the time of the purchase. The Partnership has
completed its initial acquisition stage with the investment of the net proceeds
from the public offering of Units. As noted above, however, it intends to
continue to invest any cash flow in excess of certain amounts required to be
distributed to the Limited Partners in additional items of leased equipment
through December 31, 1999.
The Partnership's objective is to lease a minimum of 75% of the equipment
acquired with the net proceeds of the offering to lessees which (i) have an
aggregate credit rating by Moody's Investor Service, Inc. of Baa or better, or
the credit equivalent as determined by the General Partners, with the aggregate
rating weighted to account for the original equipment cost for each item leased;
or (ii) are established hospitals with histories of profitability or
municipalities. The balance of the original equipment portfolio may include
equipment leased to lessees which, although deemed creditworthy by the General
Partners, would not satisfy the general credit rating criteria for the
portfolio. At December 31, 1996, in excess of 75% of the equipment acquired had
been leased to lessees with an aggregate credit rating of Baa or better or to
such hospitals or municipalities.
<PAGE>
In 1995, no single lessee generated more than 10% of the Partnership's total
lease revenues. During 1996 and 1994, certain lessees generated significant
portions of the Partnership's total lease revenues as follows:
Lessee Type of Equipment 1996 1995 1994
------ ----------------- ---- ---- ----
ARR, Inc. Corporate aircraft 11% * *
Burlington Northern
Railroad Company Locomotives * * 17%
Union Tank Car Company Railroad box cars * * 10%
* Less than 10%.
The equipment leasing industry is highly competitive. Equipment manufacturers,
corporations, partnerships and others offer users an alternative to the purchase
of most types of equipment with payment terms which vary widely depending on the
lease term and type of equipment. The ability of the Partnership to keep the
equipment leased and/or operating and the terms of the acquisitions, leases and
dispositions of equipment depends on various factors (many of which are not in
the control of the General Partner or the Partnership), such as general economic
conditions, including the effects of inflation or recession, and fluctuations in
supply and demand for various types of equipment resulting from, among other
things, technological and economic obsolescence.
The General Partner will seek to limit the amount invested in equipment to any
single lessee to not more than 25% of the aggregate purchase price of equipment
owned at any time during the reinvestment period.
The business of the Partnership is not seasonal.
The Partnership has no full time employees.
Equipment Dispositions:
Through December 31, 1996, the Partnership has disposed of certain leased assets
as set forth below:
Original
Equipment Cost, Excess of
Type of Excluding Rents Over
Equipment Acquisition Fees Sale Price Expenses *
--------- ---------------- ---------- ----------
Transportation $14,978,848 $11,027,920 $9,480,962
Furniture & fixtures 2,899,608 1,516,387 1,482,548
Mining 641,854 44,235 679,436
Data processing 226,505 204,675 22,017
-------------- ---------------- ---------------
$18,746,815 $12,793,217 $11,664,963
============== ================ ===============
* Includes only those expenses directly related to the
production of the related rents.
Equipment Leasing Activities:
The Partnership has acquired a diversified portfolio of equipment. The equipment
has been leased to lessees in various industries. The following tables set forth
the types of equipment acquired by the Partnership through December 31, 1996 and
the industries to which the assets have been leased.
<PAGE>
<TABLE>
<CAPTION>
urchase price excluding Percentage of total
Asset types acquisition fees acquisitions
----------- ---------------- ------------
<S> <C> <C>
Transportation, over-the-road tractors and trailers $11,779,416 10.58%
Earth moving 10,819,793 9.72%
Transportation, rail cars 10,417,680 9.36%
Manufacturing, chemicals 9,669,946 8.69%
Railroad locomotives 8,799,216 7.91%
Materials handling 8,753,869 7.87%
Aircraft, executive, fixed wing 7,165,000 6.44%
Printing 6,819,073 6.13%
Manufacturing, other 6,621,667 5.95%
Construction 5,581,178 5.01%
Mining, coal 5,482,739 4.93%
Furniture and fixtures 5,102,534 4.58%
Aircraft, executive, helicopter 4,360,969 3.92%
Office automation 3,823,346 3.44%
Transportation , intermodal containers 3,001,930 2.70%
Airport ground support 2,270,388 2.04%
Food processing 821,146 0.73%
---------------- ---------------
$111,289,890 100.00%
================ ===============
</TABLE>
<TABLE>
<CAPTION>
Purchase price excluding Percentage of total
Industry of lessee acquisition fees acquisitions
------------------ ---------------- ------------
<S> <C> <C>
Transportation, rail $16,712,912 15.02%
Mining 14,216,044 12.77%
Manufacturing, chemicals 11,891,174 10.68%
Manufacturing, medical instruments 9,635,969 8.66%
Primary metals 9,237,803 8.30%
Printing 7,975,165 7.17%
Retail, foods 7,135,671 6.41%
Transportation, other 5,272,318 4.74%
Manufacturing, other 5,033,997 4.52%
Retail, restaurant 3,543,856 3.18%
Manufacturing, auto/truck 3,253,000 2.92%
Other 3,155,340 2.84%
Utilities 2,835,800 2.55%
Food processing 2,705,998 2.43%
Oil and gas 2,690,272 2.42%
Retail, apparel 2,353,608 2.11%
Construction 1,905,181 1.71%
Health services 1,003,073 0.90%
Communications 732,709 0.67%
---------------- ---------------
$111,289,890 100.00%
================ ===============
</TABLE>
For further information regarding the Partnership's equipment lease portfolio as
of December 31, 1996, see Note 3 to the financial statements, Investments in
equipment and leases, set forth in Item 8, Financial Statements and
Supplementary Data.
<PAGE>
Item 2. PROPERTIES
The Partnership does not own or lease any real property, plant or materially
important physical properties other than the equipment held for lease as set
forth in Item 1.
Item 3. LEGAL PROCEEDINGS
No material legal proceedings are currently pending against the Partnership or
against any of its assets.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
PART II
Item 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS
AND RELATED MATTERS
Market Information
The Units are transferable subject to restrictions on transfers which have been
imposed under the securities laws of certain states and by the Partnership
Agreement. However, as a result of such restrictions, the size of the
Partnership and its investment objectives, to the General Partner's knowledge,
no established public secondary trading market has developed and it is unlikely
that a public trading market will develop in the future.
Holders
As of December 31, 1996, a total of 5,108 investors were record holders of Units
in the Partnership.
Dividends
The Partnership does not make dividend distributions. However, the Limited
Partners of the Partnership are entitled to certain distributions as provided
under the Limited Partnership Agreement.
The General Partner shall have sole discretion in determining the amount of
distributions; provided, however, that the General Partner will not reinvest in
equipment, but will distribute, subject to payment of any obligations of the
Partnership, such available cash from operations and cash from sales or
refinancing as may be necessary to cause total distributions to the Limited
Partners for each year during the reinvestment period to equal the following
amounts per unit: $1.20 in 1994; $1.30 in 1995 and 1996; $1.40 in 1997, 1998 and
1999.
The rate for each of the monthly distributions from 1996 operations was $.11666
per Unit. The distributions were made in February 1996 through December 1996 and
in January 1997. For each of the quarterly distributions (made in April, July
and October 1996 and in January 1997) the rate was $.35 per Unit. Distributions
were from cash flows from operations and sales proceeds in 1996.
The rate for each of the monthly distributions from 1995 operations was $.10833
per Unit. The distributions were made in February 1995 through December 1995 and
in January 1996. For each of the quarterly distributions (made in April, July
and October 1995 and in January 1996) the rate was $.325 per Unit. Distributions
were from cash flows from operations and sales proceeds in 1995.
<PAGE>
The rate for each of the monthly distributions from 1994 operations was $.10833
per Unit. The distributions were made in February 1994 through December 1994 and
in January 1995. For each of the quarterly distributions (made in April, July
and October 1994 and in January 1995) the rate was $.325 per Unit. Distributions
were from cash flows from operations in 1994.
The following table presents summarized information regarding distributions to
Limited Partners:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Distributions of net income $0.30 $0.11 $0.19 $0.26 $0.12
Return of investment 1.09 1.19 1.10 0.90 0.62
--------------- ---------------- --------------- --------------- --------------
Distributions per unit 1.39 1.30 1.29 1.16 0.74
Differences due to timing of distributions 0.01 - 0.01 0.04 0.23
--------------- ---------------- --------------- --------------- --------------
Nominal distribution rates from above $1.40 $1.30 $1.30 $1.20 $0.97
=============== ================ =============== =============== ==============
</TABLE>
Owners of 1,000 or more units may make the election without charge to receive
distributions on a monthly basis. Owners of less than 1,000 units may make the
election upon payment of a $20.00 annual fee.
Item 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Partnership for the
years ended December 31, 1996, 1995, 1994 and 1993 and for the period from March
6, 1992 (commencement of operations) to December 31, 1992. This financial data
should be read in conjunction with the financial statements and related notes
included under Item 8 of this report.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross revenues $13,239,354 $13,588,760 $13,143,213 $10,471,860 $2,123,081
Net income $2,266,613 $799,204 $1,413,416 $1,934,762 $325,748
Weighted average Limited Partner
Units (Units) outstanding 7,487,725 7,485,850 7,495,350 7,456,730 2,627,122
Net income per Unit, based on
weighted average Units outstanding $0.30 $0.11 $0.19 $0.26 $0.12
Distributions per Unit, based on
weighted average Units outstanding $1.39 $1.30 $1.29 $1.16 $0.74
Total Assets $53,594,276 $66,139,691 $73,343,357 $74,925,882 $58,407,543
Total Non-recourse Debt $20,450,921 $25,298,767 $22,648,573 $15,871,292 None
Total Partners' Capital $30,730,215 $38,859,760 $47,818,325 $56,078,027 $54,581,891
</TABLE>
<PAGE>
Item 7. 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 public offering provided for a total maximum
capitalization of $75,000,000. At the time the offering was completed on
February 3, 1993, the Partnership had received and accepted subscriptions for a
total of 7,500,000 Units ($75,000,000).
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases and proceeds from asset sales 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
proceeds from asset sales.
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 $90,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on October 28, 1997. At December 31, 1996, the Partnership had
$1,500,000 of borrowings under this line of credit and the remaining
availability was $38,857,117.
The Partnership anticipates reinvesting 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 and acquisition fees to the General Partner
and providing for cash distributions to the Limited Partners. At December 31,
1996, commitments to purchase lease assets totaled $79,515.
As of December 31, 1996, all cash balances consisted of amounts reserved for
distributions in January 1997, generated from operations in 1996.
The Partnership currently has available adequate reserves to meet its immediate
cash requirements, 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 Partner envisions no such
requirements for operating purposes.
As of December 31, 1996, the Partnership had borrowed approximately $38,342,000
with remaining unpaid balances of approximately $20,451,000. The Partnership's
expected long-term borrowings are to be 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 Partnership may only incur additional
debt to the extent that the then outstanding balance of all such debt, including
the additional debt, does not exceed 40% of the original cost of the lease
assets then owned by the Partnership, including any such assets purchased with
the proceeds of such additional debt.
The Partnership commenced regular distributions, based on cash flows from
operations, beginning with the second quarter of 1992. See Items 5 and 6 of this
report for additional information regarding the distributions.
<PAGE>
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:
1996 vs. 1995:
Cash flows from operations decreased by $1,319,009 compared to 1995. Operating
lease revenues were the Partnership's primary source of cash flows in 1996 and
these revenues declined by $1,651,513.
In 1996, the proceeds from sales of lease assets and cash flows from direct
financing leases were the Partnership's only sources of cash from investing
activities. Proceeds from sales of lease assets increased from $2,722,954 in
1995 to $4,376,555 in 1996. The increase was due to increased sales of lease
assets, primarily operating lease assets. In 1995, the original cost of
operating lease assets sold was approximately $2,400,000. In 1996, this
increased to about $6,850,000. Cash flows from direct financing leases increased
from $2,189,178 in 1995 to $2,991,035 in 1996. Total rents on such leases
increased by $1,195,085 compared to 1995. These increases resulted from
acquisitions of direct financing lease assets and reclassifications of operating
lease assets upon terminations of the initial lease terms and subsequent
re-leasing of the assets under financing leases. The primary investing use of
cash was investments in direct financing and operating lease assets.
In 1996, the only sources of cash from financing activities were borrowings
under the line of credit and proceeds of non-recourse debt. Such borrowings
decreased from 1995 and are not expected to be consistent from one year to
another. The most significant financing uses of cash were distributions to the
limited partners, scheduled repayments of non-recourse debt and repayments on
the line of credit.
1995 vs. 1994:
Cash flows from operations decreased by approximately $1,535,000 compared to
1994. In both years, the Partnership's primary source of cash from operating
activities was rents from operating leases. Such rents decreased by $480,648
compared to 1994. The remaining decrease relates primarily to an increase of
$628,281 in interest expense.
In 1995, the Partnership's sources of cash from investing activities consisted
primarily of proceeds from the sales of lease assets and from rents from direct
financing leases accounted for as reductions in the Partnership's net investment
in direct financing leases. Uses of cash in investing activities consisted
primarily of purchases of operating and direct financing lease assets.
In 1995, the Partnership had only two financing sources of cash flows, proceeds
of non-recourse debt and borrowings under lines of credit. The borrowings under
the line of credit were repaid during the year. Significant financing uses of
cash were for scheduled debt payments, the repayments of the line of credit and
distributions to the limited partners.
<PAGE>
Results of Operations:
Based on the lease assets owned and lease contracts in place at December 31,
1996, the amounts of such rents are expected to decrease by about $1,480,000 in
1997. This assumes that all of the equipment on maturing leases will be sold,
that is, none will be re-leased to the current lessees, none of the current
leases will be extended and none will be leased to new lessees. Over the next
five years, lease rents are expected to decline significantly as leases mature
and the underlying assets are either sold or re-leased at lower lease rates.
1996 vs. 1995:
In 1996, total revenues declined by $349,406 compared to 1995. Three
significant, and partially offsetting factors contributed to the decrease.
Operating lease revenues declined by $1,651,513, direct financing lease revenues
increased by $393,228 and gains on sales of assets increased by $959,904.
Operating lease revenues decreased due to scheduled lease terminations and due
to the default of Barney's, Inc. (Barney's), one of the Partnership's lessees,
in January 1996. The default contributed about $494,000 to the decline in
operating lease revenues. Direct financing lease revenues increased due to
acquisitions in 1995 and 1996 and due to certain assets which came off operating
leases at their scheduled termination dates and were re-leased under direct
financing leases. Gains on sales of assets varies from one year to another. In
1996, gains also included a gain of $481,941 on the sale of the assets which had
been leased to Barney's, as further described below.
Depreciation and amortization expense decreased by $891,221 in 1996 compared to
1995. The decrease was primarily due to sales of operating lease assets as the
underlying leases reached their scheduled maturities.
The Partnership's provision for losses and impairments decreased by $543,669 in
1996 compared to 1995. In 1995, a specific reserve of $544,126 was provided for
the Barney's lease assets. There were no similar defaults in 1996 for which
specific reserves were needed.
1995 vs. 1994:
In 1995, the Partnership's revenues increased by $445,547. Three factors
contributed to the net increase. First, operating lease revenues decreased by
$480,648 as a result of scheduled lease terminations and subsequent asset sales.
Second, direct financing lease revenues increased by $250,155 as a result an
increased investment in direct financing lease assets due to purchases of such
assets in 1994 and in 1995. Third, asset sales in 1995 resulted in net gains of
$615,042 compared to net losses on such sales in 1994 of $102,932, an
improvement of $717,974.
In 1995, interest expense increased by $628,281 compared to 1994. The increase
resulted from the Partnership's borrowings in 1994 and in 1995. The
Partnership's non-recourse debt balances increased from $22,648,573 at the end
of 1994 to $25,298,767 at the end of 1995.
Equipment and incentive management fees decreased by $187,816 compared to 1994.
In 1995, a larger portion of the distributions to the limited partners was made
from the proceeds of asset sales. No incentive management fees are currently
paid on distributions of these amounts and this gave rise to the decrease in
fees.
In January 1996, 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 had 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.
<PAGE>
The following table summarizes the cash flows relating to the lease transaction
with Barney's through December 31, 1995:
Purchase of lease assets, at cost ($2,353,608)
Rents received and retained by the Partnership 868,068
Non-recourse debt proceeds received by the Partnership 1,413,224
---------------
(72,316)
Deposits received from lessee which were retained by
the Partnership 86,870
---------------
Net cash flows $14,554
===============
Effective January 1, 1995, the Partnership adopted Financial Accounting
Standards Board Statement Number 121 (FAS 121). As a result, the Partnership
established a reserve for the impairment of the value of assets leased to
Barney's in the amount of $544,126. Of this amount, $389,946 related to the
adoption of FAS 121. See Note 9 to the financial statements included as Item 8
of Part I of this report for additional information regarding the reserve.
The reserve related to Barney's constituted the majority of the Partnership's
provision for losses and impairments. Reserves for losses were first established
in the fourth quarter of 1994. The amounts provided, exclusive of the amounts
related to Barney's, increased over 1994. Provisions for losses and impairments
were made in one quarter in 1994 and were made in all four quarters in 1995.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Notes to Financial Statements attached hereto at
pages 11 through 26.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
ATEL Cash Distribution Fund IV, L.P.
We have audited the accompanying balance sheets of ATEL Cash Distribution Fund
IV, L.P. as of December 31, 1996 and 1995 and the related statements of
operations, changes in partners' capital and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ATEL Cash Distribution Fund IV,
L.P. at December 31, 1996 and 1995 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Francisco, California
February 7, 1997
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
---- ----
Cash and cash equivalents $696,421 $1,355,258
Accounts receivable 633,329 682,207
Investments in equipment and leases 52,264,526 63,967,204
Notes receivable - 135,022
--------------- --------------
Total assets $53,594,276 $66,139,691
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $20,450,921 $25,298,767
Bank line of credit 1,500,000 -
Accounts payable:
Equipment purchases 42,227 42,227
General Partner 74,487 216,347
Other 138,590 201,642
Deposits due to lessees 97,772 984,213
Accrued interest payable 96,904 123,629
Unearned lease income 463,160 413,106
--------------- --------------
Total liabilities 22,864,061 27,279,931
Partners' capital:
General Partner 67,497 44,831
Limited Partners 30,662,718 38,814,929
--------------- --------------
Total partners' capital 30,730,215 38,859,760
--------------- --------------
Total liabilities and partners' capital $53,594,276 $66,139,691
=============== ==============
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Leasing activities:
Operating leases $10,208,585 $11,860,098 $12,340,746
Direct financing leases 1,236,764 843,536 593,381
Leveraged leases 188,531 194,916 199,387
Gain (loss) on sales of assets 1,574,946 615,042 (102,932)
Interest income 18,901 69,466 57,020
Other 11,627 5,702 55,611
--------------- --------------- --------------
13,239,354 13,588,760 13,143,213
Expenses:
Depreciation and amortization 7,849,010 8,740,231 8,743,149
Interest expense 1,858,316 1,960,823 1,332,542
Equipment and incentive management fees to General Partner 821,328 872,374 1,060,190
Administrative cost reimbursements to General Partner 275,778 349,663 358,441
Provision for losses and impairments 135,965 679,634 34,505
Professional fees 46,419 76,365 86,594
Other 98,471 110,466 114,376
--------------- --------------- --------------
11,085,287 12,789,556 11,729,797
--------------- --------------- --------------
Income before extraordinary item 2,154,067 799,204 1,413,416
Extraordinary gain on early extinguishment of debt 112,546 - -
--------------- --------------- --------------
Net income $2,266,613 $799,204 $1,413,416
=============== =============== ==============
Net income:
General Partner $22,666 $7,992 $14,134
Limited Partners 2,243,947 791,212 1,399,282
--------------- --------------- --------------
$2,266,613 $799,204 $1,413,416
=============== =============== ==============
Income before extraordinary item per limited partnership unit $0.28 $0.11 $0.19
Extraordinary gain on early extinguishment of debt per limited
partnership unit 0.02 - -
--------------- --------------- --------------
Net income per Limited Partnership unit $0.30 $0.11 $0.19
=============== =============== ==============
Weighted average number of units outstanding 7,487,725 7,485,850 7,495,350
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
----- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1994 7,496,550 $56,055,322 $22,705 $56,078,027
Repurchase of units (3,700) (20,080) (20,080)
Distributions to limited partners ($1.29 per Unit) (9,653,038) (9,653,038)
Net income 1,399,282 14,134 1,413,416
---------------- --------------- --------------- --------------
Balance December 31, 1994 7,492,850 47,781,486 36,839 47,818,325
Other syndication costs to affiliates (5,368) (5,368)
Repurchase of units (4,000) (15,501) (15,501)
Distributions to limited partners ($1.30 per Unit) (9,736,900) (9,736,900)
Net income 791,212 7,992 799,204
---------------- --------------- --------------- --------------
Balance December 31, 1995 7,488,850 38,814,929 44,831 38,859,760
Repurchase of units (1,500) (2,929) (2,929)
Distributions to limited partners ($1.39 per Unit) (10,393,229) (10,393,229)
Net income 2,243,947 22,666 2,266,613
---------------- --------------- --------------- --------------
Balance December 31, 1996 7,487,350 $30,662,718 $67,497 $30,730,215
================ =============== =============== ==============
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $2,266,613 $799,204 $1,413,416
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 7,849,010 8,740,231 8,743,149
Leveraged lease income (168,088) - -
(Gain) loss on sales of assets (1,574,946) (615,042) 102,932
Provision for losses and impairments 135,965 679,634 34,505
Extraordinary gain on early extinguishment of debt (112,546) - -
Changes in operating assets and liabilities:
Accounts receivable 48,878 (13,527) 59,977
Notes receivable 135,022 135,021 135,022
Accounts payable, General Partner (141,860) (915,671) (763,223)
Accounts payable, other (63,052) 164,185 (269,244)
Deposits due to lessees (886,441) - 384,213
Accrued interest payable (26,725) (7,314) 130,943
Unearned operating lease income 50,054 (135,828) 394,635
--------------- --------------- --------------
Net cash provided by operating activities 7,511,884 8,830,893 10,366,325
Investing activities:
Proceeds from sales of lease assets 4,376,555 2,722,954 5,648,425
Reductions in net investment in direct financing leases 2,991,035 2,189,178 1,364,313
Purchases of equipment on direct financing leases (1,749,600) (2,471,512) (4,953,275)
Purchases of equipment on operating leases (157,253) (9,721,435) (5,402,538)
Initial direct lease costs paid to affiliate - (258,268) (588,931)
Reductions in net investment in leveraged leases - 194,916 158,296
Purchase of residual value interests - (175,974) (434,904)
--------------- --------------- --------------
Net cash provided by (used in) investing activities 5,460,737 (7,520,141) (4,208,614)
Financing activities:
Distributions to limited partners (10,393,229) (9,736,900) (9,653,038)
Repayment of non-recourse debt (7,583,101) (6,750,703) (3,298,959)
Proceeds of non-recourse debt 2,847,801 9,400,897 10,076,240
Borrowings under line of credit 4,500,000 3,798,001 2,180,730
Repayments of borrowings under line of credit (3,000,000) (3,798,001) (2,180,730)
Units repurchased (2,929) (15,501) (20,080)
Payment of syndication costs to General Partner - (5,368) -
--------------- --------------- --------------
Net cash used in financing activities (13,631,458) (7,107,575) (2,895,837)
--------------- --------------- --------------
Net (decrease) increase in cash and cash equivalents (658,837) (5,796,823) 3,261,874
Cash and cash equivalents at beginning of period 1,355,258 7,152,081 3,890,207
--------------- --------------- --------------
Cash and cash equivalents at end of period $696,421 $1,355,258 $7,152,081
=============== =============== ==============
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Supplemental disclosures of cash flow information:
<S> <C> <C> <C>
Cash paid during the year for interest $1,885,041 $1,960,823 $1,332,542
=============== =============== ==============
Supplemental disclosure of non-cash transactions:
Operating lease assets reclassified to direct financing leases $2,339,000
Less accumulated depreciation (678,551)
---------------
$1,660,449
===============
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Organization and Partnership matters:
ATEL Cash Distribution Fund IV, L.P. (the Partnership), was formed under the
laws of the State of California in September 1991, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. Contributions in
the amount of $600 were received as of October 8, 1991, $100 of which
represented the General Partners' continuing interest, and $500 of which
represented the Initial Limited Partner's 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 6, 1992,
the Partnership commenced operations.
The Partnership's business consists of leasing various types of equipment. As of
December 31, 1996, the original terms of the leases ranged from two to ten
years.
Pursuant to the Limited Partnership Agreement, the General Partner receives
compensation and reimbursements for services rendered on behalf of the
Partnership (Note 5). The General Partner is required to maintain in the
Partnership reasonable cash reserves for working capital, the repurchase of
Units and contingencies.
2. Summary of significant accounting policies:
Equipment on operating leases:
Equipment on operating leases is stated at cost. Depreciation is being provided
by use of the straight-line method over the terms of the related leases to the
equipment's estimated residual values at the end of the leases.
Revenues from operating leases are recognized evenly over the life of the
related leases.
Direct financing leases:
Income from direct financing lease transactions is reported on the financing
method of accounting, in which the Partnership's investment in the leased
property is reported as a receivable from the lessee to be recovered through
future rentals and realization of residual values. The income portion of each
rental payment is calculated so as to generate a constant rate of return on the
net receivable outstanding.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
2. Summary of significant accounting policies (continued):
Investment in leveraged leases:
Leases which are financed principally with non-recourse debt at lease inception
and which meet certain other criteria are accounted for as leveraged leases.
Leveraged lease contracts receivable are stated net of the related non-recourse
debt service (which includes unpaid principal and aggregate interest on such
debt) plus estimated residual values. Unearned income represents the excess of
anticipated cash flows (after taking into account the related debt service and
residual values) over the investment in the lease and is amortized using a
constant rate of return applied to the net investment when such investment is
positive.
Statements of cash flows:
For purposes of the Statements of Cash Flows, cash and cash equivalents includes
cash in banks and cash equivalent investments with original maturities of ninety
days or less.
Income taxes:
The Partnership does not provide for income taxes since all income and losses
are the liability of the individual partners and are allocated to the partners
for inclusion in their individual tax returns.
The tax basis of the Partnership's net assets and liabilities varies from the
amounts presented in these financial statements.
1996 1995
---- ----
Financial statement basis of net assets
and liabilities $30,730,215 $38,859,760
Tax basis of net assets and liabilities 13,811,870 23,106,777
--------------- ---------------
Difference $16,918,345 $15,752,983
=============== ===============
The following reconciles the net income reported in these financial statements
to the loss reported on the Partnership's federal tax return (unaudited):
1996 1995
---- ----
Net income per financial statements $2,266,613 $799,204
Adjustment to depreciation expense (6,410,079) (8,773,911)
Extraordinary gain on extinguishment of debt (112,546) -
Adjustments to revenues 5,221,299 5,221,989
Provision for losses 135,965 679,634
--------------- ---------------
Net income (loss) per federal tax return $1,101,252 ($2,073,084)
=============== ===============
Credit Risk:
Financial instruments which potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents. The Partnership
places its cash deposits and temporary cash investments with creditworthy, high
quality financial institutions. The concentration of such deposits and temporary
cash investments is not deemed to create a significant risk to the Partnership.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
2. Summary of significant accounting policies (continued):
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Per unit data:
Net income and distributions per unit are based upon the weighted average number
of units outstanding during the period.
3. Investments in equipment and leases:
As of December 31, 1996, the Partnership's investments in equipment and leases
consist of the following:
<TABLE>
<CAPTION>
Depreciation
Expense or Reclass-
Amortization ifications or
1995 Additions of Leases Dispositions 1996
---- --------- --------- -------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating leases $45,593,701 $157,253 ($7,296,585) ($4,510,983) $33,943,386
Net investment in direct financing leases 11,948,261 1,749,600 (2,991,035) 1,148,784 11,855,610
Net investment in leveraged leases 4,675,926 - 168,088 - 4,844,014
Residual value interests 610,878 - - - 610,878
Assets held for lease or sale - - - 16,464 16,464
Reserve for losses (714,139) (135,965) - 544,126 (305,978)
Initial direct costs, net of accumulated
amortization of $1,365,512 in 1996
and $1,318,238 in 1995 1,852,577 - (552,425) - 1,300,152
--------------- ---------------- --------------- --------------- --------------
$63,967,204 $1,770,888 ($10,671,957) ($2,801,609) $52,264,526
=============== ================ =============== =============== ==============
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. Investments in equipment and leases (continued):
Operating leases:
Property on operating lease consists of the following as of December 31, 1995,
additions and dispositions during 1996 and as of December 31, 1996:
<TABLE>
<CAPTION>
Reclass-
ifications or
1995 Additions Dispositions 1996
---- --------- -------------- ----
<S> <C> <C> <C> <C>
Transportation $24,984,962 ($3,487,292) $21,497,670
Corporate aircraft 9,635,969 - 9,635,969
Construction 4,985,297 - 4,985,297
Other 4,726,040 - 4,726,040
Printing 5,523,249 (1,130,000) 4,393,249
Mining 6,570,460 (2,222,500) 4,347,960
Materials handling 3,915,999 - 3,915,999
Manufacturing 1,587,670 - 1,587,670
Ground support 1,127,988 - 1,127,988
Data processing 694,308 $157,253 - 851,561
Office equipment 216,080 - - 216,080
Furniture and fixtures 2,353,608 - (2,353,608) -
---------------- --------------- --------------- --------------
66,321,630 157,253 (9,193,400) 57,285,483
Less accumulated depreciation (20,727,929) (7,296,585) 4,682,417 (23,342,097)
---------------- --------------- --------------- --------------
$45,593,701 ($7,139,332) ($4,510,983) $33,943,386
================ =============== =============== ==============
</TABLE>
Direct financing leases:
As of December 31, 1996, investment in direct financing leases consists of
office equipment, construction equipment, transportation, printing, mining and
materials handling equipment and retail store fixtures. The following lists the
components of the Partnership's investment in direct financing leases as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Total minimum lease payments receivable $12,419,284 $12,038,632
Estimated residual values of leased equipment (unguaranteed) 2,827,353 1,980,963
--------------- ---------------
Investment in direct financing leases 15,246,637 14,019,595
Less unearned income (3,391,027) (2,071,334)
--------------- ---------------
Net investment in direct financing leases $11,855,610 $11,948,261
=============== ===============
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. Investments in equipment and leases (continued):
At December 31, 1996, the aggregate amounts of future minimum lease payments
under operating and direct financing leases are as follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
------------ ------ ------ -----
1997 $9,061,245 $3,892,548 $12,953,793
1998 6,989,751 3,469,493 10,459,244
1999 6,138,150 2,390,141 8,528,291
2000 2,543,155 1,410,221 3,953,376
2001 1,837,104 858,516 2,695,620
Thereafter 1,941,141 398,365 2,339,506
--------------- ---------------- ---------------
$28,510,546 $12,419,284 $40,929,830
=============== ================ ===============
Leveraged leases:
As of December 31, 1996, investment in leveraged leases consists of an air
separation plant and materials handling equipment. The following lists the
components of the Partnership's investment in leveraged leases as of December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Aggregate rentals receivable 5,662,595 $7,778,941
Less aggregate principal and interest payable on non-recourse loans (3,020,486) (5,116,389)
Estimated residual value of leased assets 3,188,067 3,188,067
Less unearned income (986,162) (1,174,693)
--------------- ---------------
Net investment in leveraged leases $4,844,014 $4,675,926
=============== ===============
</TABLE>
4. Non-recourse debt:
At December 31, 1996 and 1995, non-recourse debt, other than that related to
leveraged leases which are accounted for as a part of the net investment in
leveraged leases, consists of notes payable to financial institutions. The notes
are due in varying monthly, quarterly and semi-annual payments. Interest on the
notes is at rates from 6.19% to 9.00%. The notes are secured by assignments of
lease payments and pledges of assets. At December 31, 1996, the carrying value
of the pledged assets is approximately $24,983,648. The notes mature from 1997
through 2002.
Future minimum payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1997 $5,828,339 $1,425,131 $7,253,470
1998 5,167,306 992,328 6,159,634
1999 5,055,577 585,451 5,641,028
2000 2,324,358 276,272 2,600,630
2001 1,313,315 121,001 1,434,316
Thereafter 762,026 39,505 801,531
--------------- ---------------- ---------------
$20,450,921 $3,439,688 $23,890,609
=============== ================ ===============
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 the General Partner in providing administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. The General
Partner 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 the General Partner 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.
Substantially all employees of the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. The General Partner believes that the costs reimbursed
are the lower of (i) actual costs incurred on behalf of the Partnership or (ii)
the amount the Partnership would be required to pay independent parties for
comparable administrative services in the same geographic location and are
reimbursable in accordance with the Limited Partnership Agreement.
The General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows during
1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Acquisition fees equal to 3.5% of the equipment purchase price, for evaluating
and selecting equipment to be acquired (not to exceed approximately 4.75% of
Gross Proceeds, included in property on
operating leases) $258,268 $588,931
Incentive and equipment management fees $821,328 872,374 1,060,190
Administrative costs reimbursed to General Partner 275,778 349,663 358,441
--------------- --------------- --------------
$1,097,106 $1,480,305 $2,007,562
=============== =============== ==============
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
6. Partners' capital:
As of December 31, 1996, 7,487,350 Units were issued and outstanding (including
the 50 Units issued to the Initial Limited Partners). The Partnership was
authorized to issue up to 7,500,000 Units of Limited Partnership Interest in
addition to those issued to the initial limited partners.
The Partnership Net Profits, Net Losses, and Tax Credits are to be allocated 99%
to the Limited Partners and 1% to the General Partner.
Available Cash from Operations and Cash from Sales and Refinancing, as defined
in the Limited Partnership Agreement, shall be distributed as follows:
First, 5% of Distributions of Cash from Operations to the General Partner
as Incentive Management Compensation.
Second, the balance to the Limited Partners until the Limited Partners have
received Aggregate Distributions in an amount equal to their Original
Invested Capital, as defined, plus a 10% per annum cumulative (compounded
daily) return on their Adjusted Invested Capital.
Third, the General Partner will receive as Incentive Management
Compensation, the following:
(A) 10% of remaining Cash from Operations,
(B) 15% of remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
7. Concentration of credit risk and major customers:
The Partnership leases equipment to lessees in diversified industries. Leases
are subject to the General Partner's credit committee review. The leases provide
for the return of the equipment upon default.
There were concentrations (greater than 10%) of equipment leased to lessees in
certain industries (as a percentage of total equipment cost) as follows:
1996 1995 1994
---- ---- ----
Mining 15% 17% 15%
Chemicals manufacturing 13% * 14%
Medical supplies manufacturing 11% 12% *
Retail * 10% *
Railroad transportation * * 10%
* Less than 10%.
During 1996, one customer comprised 11% of the Partnership's revenues from
leases. During 1995, no customers comprised more than 10% of the Partnership's
revenues from leases. During 1994, two customers comprised 17% and 10% of the
Partnership's revenues from leases.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
8. 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.
During 1996, the Partnership had borrowed $4,500,000 under the line of credit.
Repayments on the line of credit were $3,000,000 during 1996 and $1,500,000
remained outstanding as of December 31, 1996. At December 31, 1996, the rate on
such borrowings was 7.12%.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of December
31, 1996. At December 31, 1996, $38,857,117 was available under this agreement.
During 1995, the Partnership had borrowed $3,798,001 on a similar line of
credit. The money was borrowed during the first and second quarters and repaid
during the third and fourth quarters.
During 1994, the Partnership had borrowed $2,180,730 on a similar line of
credit. The money was borrowed and repaid during the fourth quarter of that
year.
9. Extraordinary gain on extinguishment of debt:
In January 1996, Barney's, Inc., one of the Partnership's lessees filed for
reorganization under Chapter 11 of the United States Bankruptcy Code. In
accordance with Financial Accounting Standards Board Statement No. 121 (FAS 121)
the Partnership determined that the assets under an operating lease to this
particular lessee were impaired as of December 31, 1995. The Partnership
estimated that only a portion of the contractual cash flows would be received
under the lease. Under FAS 121, the estimated cash flows were discounted at the
effective rate of the non-recourse debt related to the lease and the assets were
written down to the present value of those cash flows.
Assets and liabilities related to the lease transaction were as follows as of
December 31, 1995:
Assets at cost $2,353,608
Accumulated depreciation (900,255)
---------------
Book value of lease assets 1,453,353
Deposits from lessee (86,870)
Non-recourse debt (1,212,302)
---------------
Net assets included in the Partnership's balance sheet as of
December 31, 1995 before provision for impairment 154,181
Reserve for impairment (544,126)
---------------
Excess of non-recourse debt over net assets ($389,945)
===============
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
9. Extraordinary gain on extinguishment of debt (continued):
On July 19, 1996, the assets subject to the lease were purchased by a third
party. As part of the purchase and transaction restructure, the related
non-recourse debt was extinguished by the lender and the Partnership received a
small amount of cash proceeds. The sale resulted in a gain on the sale of the
assets and a gain on the extinguishment of the related non-recourse debt. The
following summarizes this transaction:
Assets at cost $2,353,608
Accumulated depreciation at June 30, 1996 (1,100,312)
---------------
Book value of lease assets at June 30, 1996 1,253,296
Reserve for impairment (544,126)
---------------
Carrying value at June 30, 1996 709,170
Deposits from lessee retained by Partnership (86,870)
---------------
Excess of carrying value over deposits from lessee 622,300
Gross sales proceeds 1,104,241
---------------
Gain on sale of assets $481,941
===============
Non-recourse debt $1,212,302
Gross sales proceeds used to extinguish non-recourse debt (1,099,756)
---------------
Extraordinary gain on extinguishment of debt $112,546
===============
Gross sales proceeds $1,104,241
Gross sales proceeds used to extinguish non-recourse debt (1,099,756)
---------------
Net cash proceeds to Partnership $4,485
===============
10. Fair value of financial instruments:
The Partnership has adopted Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," which requires
disclosure of the fair value of financial instruments for which it is
practicable to estimate fair value. The following methods and assumptions were
used to estimate the fair value of each class of financial instrument for which
it is practicable to estimate that value.
Cash and cash equivalents:
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.
Accounts payable, accrued interest and customer deposits:
The carrying amounts of accounts payable, accrued interest and customer deposits
approximate fair value because of the short maturity of these instruments.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
10. Fair value of financial instruments (continued):
Line of credit:
The carrying amount of the Partnership's variable rate line of credit
approximates fair value.
Non-recourse debt:
The fair value of the Partnership's non-recourse debt is estimated using
discounted cash flow analyses, based on the Partnership's current incremental
borrowing rates for similar types of borrowing arrangements. The estimated fair
value of the Partnership's non-recourse debt at December 31, 1996 is
$19,838,673.
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
Inapplicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The registrant is a Limited Partnership and, therefore, has no officers or
directors.
All of the outstanding capital stock of ATEL Financial Corporation (the General
Partner) is held by ATEL Capital Group ("ACG"), a holding company formed to
control the General Partner and affiliated companies pursuant to a corporate
restructuring completed in July 1994. The outstanding capital stock of ATEL
Capital Group is owned 75% by A. J. Batt and 25% by Dean Cash, and was obtained
in the restructuring in exchange for their capital interests in ATEL Financial
Corporation.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"),
ATEL Investor Services ("AIS") and ATEL Financial Corporation ("AFC") is a
wholly-owned subsidiary of ATEL Capital Group and performs services for the
Partnership. Acquisition services are performed for the Partnership by ALC,
equipment management, lease administration and asset disposition services are
performed by AEC, investor relations and communications services are performed
by AIS and general administrative services for the Partnership are performed by
AFC. ATEL Securities Corporation ("ASC"), is a wholly-owned subsidiary of ATEL
Financial Corporation.
The officers and directors of ATEL Capital Group, ATEL Financial Corporation and
their affiliates are as follows:
A. J. Batt . . . . . . . . Chairman of the Board of Directors of ACG, AFC, ALC,
AEC, AIS and ASC; President and Chief Executive
Officer of ACG, AFC and AEC
Dean L. Cash . . . . . . . Director, Executive Vice President and Chief
Operating Officer of ACG, AFC, and AEC; Director,
President and Chief Executive Officer of ALC, AIS
and ASC
F. Randall Bigony . . . . Senior Vice President and Chief Financial Officer of
ACG, AFC, ALC, AIS and AEC
Donald E. Carpenter . . . Vice President and Controller of ACG, AFC, ALC, AEC
and AIS; Chief Financial Officer of ASC
Vasco H. Morais . . . . . General Counsel for ACG, AFC, ALC, AIS and AEC
William J. Bullock . . . . Director of Asset Management of AEC
Jeffrey A. Schwager . . . Vice President - Syndication of ALC
Russell H. Wilder . . . . Vice President - Credit of AEC
John P. Scarcella . . . . Vice President of ASC
<PAGE>
A. J. Batt, age 60, founded ATEL in 1977 and has been its president and chairman
of the board of directors since its inception. From 1973 to 1977, he was
employed by GATX Leasing Corporation as manager-data processing and equity
placement for the lease underwriting department, which was involved in equipment
financing for major corporations. From 1967 to 1973 Mr. Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support services for computer time-sharing applications for corporations and
financial institutions. Prior to that time, he was employed by North American
Aviation as an engineer involved in the Apollo project. Mr. Batt received a
B.Sc. degree with honors in mathematics and physics from the University of
British Columbia in 1961.
Dean L. Cash, age 46, joined ATEL as director of marketing in 1980 and has been
a vice president since 1981, executive vice president since 1983 and a director
since 1984. Prior to joining ATEL, Mr. Cash was a senior marketing
representative for Martin Marietta Corporation, data systems division, from 1979
to 1980. From 1977 to 1979, he was employed by General Electric Corporation,
where he was an applications specialist in the medical systems division and a
marketing representative in the information services division. Mr. Cash was a
systems engineer with Electronic Data Systems from 1975 to 1977, and was
involved in maintaining and developing software for commercial applications. Mr.
Cash received a B.S. degree in psychology and mathematics in 1972 and an M.B.A.
degree with a concentration in finance in 1975 from Florida State University.
Mr. Cash is an arbitrator with the American Arbitration Association.
F. Randall Bigony, age 39, joined ATEL in 1992 to review administrative
operations within ATEL Financial Corporation and to develop and implement
functional plans to support company growth. He currently oversees ATEL's
accounting, MIS and treasury functions. From 1987 until joining ATEL, Mr. Bigony
was president of F. Randall Bigony & Co., a consulting firm that provided
financial and strategic planning services to emerging growth companies. From
1983 to 1987, he was a manager with the accounting firm of Ernst & Whinney,
serving clients in its management consulting practice. Mr. Bigony received a
B.A. degree in business from the University of Massachusetts and an M.B.A.
degree in finance from the University of California, Berkeley. He is a founding
board member and acting treasurer of the I Have a Dream Foundation Bay Area
Chapter.
Donald E. Carpenter, age 48, joined ATEL in 1986 as controller. Prior to joining
ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath, certified
public accountants in San Francisco, California, from 1983 to 1986. From 1979 to
1983, Mr. Carpenter was an audit senior with Deloitte, Haskins & Sells,
certified public accountants, in San Jose, California. From 1971 to 1975, Mr.
Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter received a
B.S. degree in mathematics (magna cum laude) from California State University,
Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter
has been a California certified public accountant since 1981.
Vasco H. Morais, age 38, joined ATEL in 1989 as general counsel to provide legal
support in the drafting and reviewing of lease documentation, advising on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of
America's equipment leasing subsidiaries, providing in-house legal support on
the documentation of tax-oriented and non-tax oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital
Companies in the Corporate and Securities Legal Department involved in drafting
and reviewing contracts, advising on corporate law matters and securities law
issues. Mr. Morais received a B.A. degree in 1982 from the University of
California in Berkeley and a J.D. degree in 1986 from Golden Gate University Law
School. Mr. Morais has been an active member of the State Bar of California
since 1986.
<PAGE>
William J. Bullock, age 33, joined ATEL in 1991, as the director of asset
management. He assumed responsibility for the disposition of off-lease equipment
and residual valuation analysis on new lease transactions. Prior to joining
ATEL, Mr. Bullock was a senior member of the equipment group at McDonnell
Douglas Finance Corporation("MDFC") responsible for managing its $4 billion
portfolio of leases. Mr. Bullock was involved in negotiating sales and renewals
as well as preparing and inspecting equipment. Prior to joining MDFC in 1989,
Mr. Bullock was the Senior Negotiator at Equitable Leasing (a subsidiary of GE
Capital Equipment Corp.) in San Diego. At Equitable, he handled the end-of-lease
negotiations and equipment dispositions of a portfolio comprised of equipment
leased primarily to Fortune 200 companies. Mr. Bullock has been a member of the
Equipment Lessors Association ("ELA") since 1987 and has authored ELA industry
articles. He received a B.S. degree in Finance in 1987 from San Diego State
University and is pursuing his M.B.A.
Jeffrey A. Schwager, age 36, joined ATEL in 1991 as vice president - syndication
and is responsible for acquiring transactions from intermediaries as well as
debt and equity placement. Prior to joining ATEL, Mr. Schwager was a member of
General Electric Capital Corporation's Institutional Financing Group. There, he
was responsible for originating equipment lease and corporate finance
opportunities, as well as soliciting equipment portfolios in conjunction with
marketing a proprietary capital enhancement product. From 1985 through 1990, Mr.
Schwager held several positions with Bank Ireland/First Financial, most recently
Vice President Marketing, where he was responsible for originating and
negotiating tax-oriented leveraged lease financings for Fortune 500 companies.
From 1983 to 1985 Mr. Schwager was an Associate Consultant with The Bigelow
Company, a middle market investment banking and management consulting firm,
developing and implementing strategic plans for a number of clients. Prior to
The Bigelow Company, he worked for Petro-Lewis Corporation as a joint-interest
accountant. Mr. Schwager received his B.S. in Business Administration from
Babson College in 1982, majoring in Finance and Entrepreneurial Studies.
Russell H. Wilder, age 42, joined ATEL in 1992 as Vice President of ATEL
Business Credit, a wholly-owned subsidiary of ACG. Immediately prior to joining
ATEL, Mr. Wilder was a personal property broker specializing in equipment
leasing and financing and an outside contractor in the areas of credit and
collections. From 1985 to 1990 he was Vice President and Manager of Leasing for
Fireside Thrift Co., a Teledyne subsidiary, and was responsible for all aspects
of setting up and managing the department, which operated as a small ticket
lease funding source. From 1983 to 1985 he was with Wells Fargo Leasing
Corporation as Assistant Vice President in the credit department where he
oversaw all credit analysis on transactions in excess of $2 million. From 1978
to 1983 he was District Credit Manager with Westinghouse Credit Corporation's
Industrial Group and was responsible for all non-marketing operations of various
district offices. Mr. Wilder holds a B.S. with Honors in Agricultural Economics
and Business Management from the University of California at Davis. He has been
awarded the Certified Lease Professional designation by the Western Association
of Equipment Lessors.
John P. Scarcella, age 35, joined ATEL Securities as vice president in 1992. He
is involved in the marketing of securities offered by ASC. Prior to joining ASC,
from 1987 to 1991, he was employed by Lansing Pacific Fund, a real estate
investment trust in San Mateo, California and acted as director of investor
relations. From 1984 to 1987, Mr. Scarcella acted as broker dealer
representative for Lansing Capital Corporation, where he was involved in the
marketing of direct participation programs and REITs. Mr. Scarcella received a
B.S.C. degree with emphasis in investment finance in 1983 and an M.B.A. degree
with a concentration in marketing in 1991 from Santa Clara University.
<PAGE>
Item 11. EXECUTIVE COMPENSATION
The registrant is a limited partnership and, therefore, has no officers or
directors.
Set forth hereinafter is a description of the nature of remuneration paid and to
be paid to the General Partner and their Affiliates. The amount of such
remuneration paid through December 31, 1996 is set forth in Item 8 of this
report under the caption "Financial Statements and Supplementary Data - Notes to
the Financial Statements - Related party transactions," at Note 5 thereof which
information is hereby incorporated by reference.
Selling Commissions
The Partnership paid selling commissions in the amount of 9.5% of Gross
Proceeds, as defined, ($7,121,675) to ATEL Securities Corporation, an affiliate
of the General Partner. Of this amount, $6,405,877 was reallowed to other
broker/dealers.
Acquisition Fees
Acquisition fees are to be paid to the General Partner for services rendered in
finding, reviewing and evaluating equipment to be purchased by the Partnership
and rejecting equipment not to be purchased by the Partnership. The total amount
of acquisition fees to be paid to the General Partner or their Affiliates is not
to exceed 3.5% of the aggregate purchase piece of equipment acquired, not to
exceed approximately 4.75% of the Gross Proceeds of the Offering.
The maximum amount of such fees is $3,569,047. As of December 31, 1995 all of
the allowable fees had been paid.
Equipment Management Fees
As compensation for its services rendered generally in managing or supervising
the management of the Partnership's equipment and in supervising other ongoing
services and activities including, among others, broker assistance, cash
management, product development, property and sales tax monitoring and
preparation of financial data, the General Partner or its Affiliates are
entitled to receive management fees which are payable for each fiscal quarter
and are to be in an amount equal to (i) 5% of the gross revenues from
"operating" leases and (ii) 2% of gross revenues from "full payout" leases which
contain net lease provisions. See Note 5 to the financial statements included at
Item 8 of this report for amounts paid.
Incentive Management Fees
As compensation for its services rendered in connection with the management of
the Partnership, including but not limited to employment and supervision of
supervisory managing agents, insurance brokers, equipment lease brokers,
accountants and other professional advisors, and for supervising the preparation
of reports and maintenance of financial and operating data of the Partnership,
Securities and Exchange Commission and Internal Revenue Service filings, returns
and reports, the General Partner shall be entitled to receive the Partnership
management fee which shall be payable for each fiscal quarter and shall be an
amount equal to 5% of distributions of cash from operations until such time as
the Limited Partners have received aggregate distributions of cash from
operations in an amount equal to their original invested capital plus a 10% per
annum return on their average adjusted invested capital (as defined in the
Limited Partnership Agreement). Thereafter, the incentive management fee shall
be 15% of all distributions of cash from operations, sales or refinancing. See
Note 5 to the financial statements included at Item 8 of this report for amounts
paid.
<PAGE>
Equipment Resale Fees
As compensation for services rendered in connection with the sale of equipment,
the General Partner shall be entitled to receive an amount equal to the lesser
of (i) 3% of the sales price of the equipment, or (ii) one-half the normal
competitive equipment sales commission charged by unaffiliated parties for such
services. Such fee is payable only after the Limited Partners have received a
return of their adjusted invested capital (as defined in the Limited Partnership
Agreement) plus 10% of their adjusted invested capital per annum calculated on a
cumulative basis, compounded daily, commencing the last day of the quarter in
which the limited partner was admitted to the Partnership. To date, none have
been accrued or paid.
Equipment Re-lease Fee
As compensation for providing re-leasing services, the General Partner shall
receive fees equal to 2% of the gross rentals or the comparable competitive rate
for such services relating to comparable equipment, whichever is less, derived
from the re-lease provided that (i) the General Partner or its Affiliates have
and will maintain adequate staff to render such services to the Partnership,
(ii) no such re-lease fee is payable in connection with the re-lease of
equipment to a previous lessee or its Affiliates, (iii) the General Partner or
its Affiliates have rendered substantial re-leasing services in connection with
such re-lease and (iv) the General Partner or their Affiliates are compensated
for rendering equipment management services.
General Partner's Interest in Operating Proceeds
Net income, net loss and investment tax credits are allocated 99% to the Limited
Partners and 1% to the general partner. See the statements of income included in
Item 8 of this report for the amounts allocated to the general and Limited
Partners in 1996, 1995 and 1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
At December 31, 1996 no investor is known to the Partnership to hold
beneficially more than 5% of the issued and outstanding Units.
Security Ownership of Management
The shareholders of the General Partner are beneficial owners of Limited
Partnership Units as follows:
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
<S> <C> <C> <C>
Limited Partnership Units A. J. Batt Initial Limited Partner Units 0.0003%
235 Pine Street, 6th Floor 25 Units ($250)
San Francisco, CA 94104 (owned by wife)
Limited Partnership Units Dean Cash Initial Limited Partner Units 0.0003%
235 Pine Street, 6th Floor 25 Units ($250)
San Francisco, CA 94104 (owned by wife)
</TABLE>
<PAGE>
Changes in Control
The Limited Partners have the right, by vote of the Limited Partners owning more
than 50% of the outstanding Limited Partnership Units, to remove a General
Partner.
The General Partner may at any time call a meeting of the Limited Partners or a
vote of the Limited Partners without a meeting, on matters on which they are
entitled to vote, and shall call such meeting or for a vote without a meeting
following receipt of a written request therefor of Limited Partners holding 10%
or more of the total outstanding Limited Partnership Units.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to Item 8 of this report under the caption "Financial Statements
and Supplemental Data - Notes to the Financial Statements - Related party
transactions" at Note 5 thereof, and Item 11 of this report under the caption
"Executive Compensation," are hereby incorporated herein by reference.
The Partnership owns a one-half undivided interest in the Falcon 50 aircraft on
lease to ARR, Inc., a subsidiary of U. S. Surgical, see Item 1 under the caption
"Equipment Leasing Activities". The Partnership's interest in the asset was
purchased on the same terms as that of the affiliated partnership (ATEL Cash
Distribution Fund III) which owns the remaining one-half interest. The term of
the lease is seven years and expires in September 1999. The monthly lease rent
from this lease is $57,439.
The Partnership also owns a 70% undivided interest in the Boeing 727 executive
aircraft on lease to DJ Aerospace (Bermuda) Ltd. The Partnership's interest was
purchased on the same terms as that of the affiliated partnership, ATEL Cash
Distribution Fund II which owns the remaining 30%. The aircraft was sold to the
lessee on January 2, 1997.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) Financial Statements and Schedules
1. Financial Statements
Included in Part II of this report:
Balance Sheets at December 31, 1996 and 1995
Statements of Income for the years ended December
31, 1996, 1995 and 1994 Statements of Changes in
Partners' Capital for the years ended December 31,
1996,
1995 and 1994
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 Notes to Financial
Statements
2. Financial Statement Schedules
Allschedules 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) Reports on Form 8-K for the fourth quarter of 1996
None
(c) Exhibits
(3)and (4) Agreement of Limited Partnership,
included as Exhibit B to Prospectus (Exhibit
28.1), is incorporated herein by reference to
the report on Form 10K for the period ended
December 31, 1992 (File No. 33-43157).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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:3/27/1997
ATEL Cash Distribution Fund IV, L.P.
(Registrant)
By: ATEL Financial Corporation,
General Partner of Registrant
By: /s/ A. J. Batt
-----------------------------------
A. J. Batt,
President and Chief Executive
Officer of ATEL Financial
Corporation (General Partner)
By: /s/ Dean Cash
-----------------------------------
Dean Cash,
Executive Vice President of ATEL
Financial Corporation (General
Partner)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the persons in the capacities and on the dates
indicated.
SIGNATURE CAPACITIES DATE
/s/ A. J. Batt President, chairman and 3/27/1997
- --------------------- chief executive officer of
A. J. Batt ATEL Financial Corporation
/s/ Dean Cash Executive vice president and 3/27/1997
- --------------------- director of ATEL Financial
Dean Cash Corporation
/s/ F. Randall Bigony Principal financial officer 3/27/1997
- ----------------------- of registrant; principal
F. Randall Bigony financial officer of ATEL
Financial Corporation
/s/ Donald E. Carpenter Principal accounting officer 3/27/1997
- ------------------------ of registrant; principal
Donald E. Carpenter accounting officer of ATEL
Financial Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 696,421
<SECURITIES> 0
<RECEIVABLES> 633,329
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 53,594,276
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,730,215
<TOTAL-LIABILITY-AND-EQUITY> 53,594,276
<SALES> 0
<TOTAL-REVENUES> 13,239,354
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,091,006
<LOSS-PROVISION> 135,965
<INTEREST-EXPENSE> 1,858,316
<INCOME-PRETAX> 2,154,067
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,154,067
<DISCONTINUED> 0
<EXTRAORDINARY> 112,546
<CHANGES> 0
<NET-INCOME> 2,266,613
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
