Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended September 30, 1997
|_| Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number 000-21552
ATEL Cash Distribution Fund IV, L.P.
(Exact name of registrant as specified in its charter)
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
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 IV, L.P.
BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
ASSETS
1997 1996
---- ----
Cash and cash equivalents $332,521 $696,421
Accounts receivable 470,514 633,329
Investment in leases 32,763,761 52,264,526
----------------- -----------------
$33,566,796 $53,594,276
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $7,778,056 $20,450,921
Lines of credit 500,000 1,500,000
Accounts payable:
General Partner 91,674 74,487
Equipment purchases - 42,227
Other 348,472 138,590
Accrued interest 40,475 96,904
Deposit due to lessee - 97,772
Unearned operating lease income 198,935 463,160
----------------- -----------------
Total liabilities 8,957,612 22,864,061
Partners' capital:
General Partner 84,892 67,497
Limited Partners 24,524,292 30,662,718
----------------- -----------------
Total partners' capital 24,609,184 30,730,215
----------------- -----------------
$33,566,796 $53,594,276
================= =================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
Revenues: 1997 1996 1997 1996
---- ---- ---- ----
Lease revenues:
<S> <C> <C> <C> <C>
Operating $5,420,170 $7,853,459 $1,508,791 $2,665,750
Direct financing 1,014,640 927,152 447,483 333,657
Leveraged 186,039 141,398 62,013 47,132
Gain on sales of assets 1,091,776 1,221,635 (12,859) 431,245
Other 724 9,285 (418) 6,684
Interest income 22,310 17,507 5,352 5,842
----------------- ----------------- ----------------- -----------------
7,735,659 10,170,436 2,010,362 3,490,310
Expenses:
Depreciation and amortization 4,216,157 5,992,865 954,870 1,945,759
Interest 822,510 1,389,409 140,931 402,743
Management fees 506,568 793,726 93,261 310,428
Administrative cost reimbursements 229,871 192,711 89,615 76,017
Professional fees 30,174 41,723 14,662 18,462
Provision for losses 57,231 102,796 - 36,000
Other 133,634 77,399 46,841 19,011
----------------- ----------------- ----------------- -----------------
5,996,145 8,590,629 1,340,180 2,808,420
----------------- ----------------- ----------------- -----------------
Income before extraordinary item 1,739,514 1,579,807 670,182 681,890
Extraordinary gain on early extinguishment of debt - 112,546 - 112,546
----------------- ----------------- ----------------- -----------------
Net income $1,739,514 $1,692,353 $670,182 $794,436
================= ================= ================= =================
Net income:
General Partner $17,395 $16,924 $6,702 $7,944
Limited Partners 1,722,119 1,675,429 663,480 786,492
----------------- ----------------- ----------------- -----------------
$1,739,514 $1,692,353 $670,182 $794,436
================= ================= ================= =================
Income before extraordinary item per limited
partnership unit $0.23 $0.21 $0.09 $0.09
Extraordinary gain on early extinguishment of
debt per limited partnership unit - 0.01 - 0.01
----------------- ----------------- ----------------- -----------------
Net income per Limited Partnership unit $0.23 $0.22 $0.09 $0.10
================= ================= ================= =================
Weighted average number of units outstanding 7,487,350 7,487,350 7,487,350 7,487,850
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
<S> <C> <C> <C> <C>
Balance December 31, 1996 7,487,350 $30,662,718 $67,497 $30,730,215
Distributions to limited partners (7,860,545) - (7,860,545)
Net income 1,722,119 17,395 1,739,514
----------------- ----------------- ----------------- -----------------
Balance September 30, 1997 7,487,350 $24,524,292 $84,892 $24,609,184
================= ================= ================= =================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Operating activities:
<S> <C> <C> <C> <C>
Net income $1,739,514 $1,692,353 $670,182 $794,436
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 4,216,157 5,992,865 954,870 1,945,759
Leveraged lease income (186,039) (141,398) (62,013) (47,132)
Gain on sales of assets (1,091,776) (1,221,635) 12,859 (431,245)
Provision for losses 57,231 102,796 - 36,000
Extraordinary gain on early extinguishment of
non-recourse debt - (112,546) - (112,546)
Changes in operating assets and liabilities:
Accounts receivable 162,815 71,923 3,218,421 (88,738)
Accounts payable, General Partner 17,187 49,046 28,583 108,625
Accounts payable, other 209,882 66,321 218,277 153,115
Accrued interest (56,429) (7,239) (13,338) (24,604)
Deposits due to lessees (97,772) (857,895) - (86,871)
Unearned operating lease income (264,225) (123,188) (116,665) (27,743)
----------------- ----------------- ----------------- -----------------
Net cash from operations 4,706,545 5,511,403 4,911,176 2,219,056
----------------- ----------------- ----------------- -----------------
Investing activities:
Purchase of equipment on operating leases (42,227) (199,481) - 1,370,272
Purchase of equipment on direct financing leases (77,518) (2,274,344) - (1,375,395)
Reduction of net investment in direct financing
leases 1,955,389 2,183,351 528,711 463,883
Reduction of net investment in leveraged leases 177,571 16,725 - 3,718
Proceeds from sales of lease assets 14,449,750 3,615,483 80,898 1,463,263
Principal payments received on notes receivable - 101,267 - 33,756
----------------- ----------------- ----------------- -----------------
Net cash (used in) provided by investing
activities 16,462,965 3,443,001 609,609 1,959,497
----------------- ----------------- ----------------- -----------------
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
(CONTINUED)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Financing activities:
Proceeds of non-recourse debt - 2,847,801 - 2,847,801
Repayment of non-recourse debt (12,672,865) (5,817,677) (2,822,170) (2,650,037)
Borrowings under lines of credit 500,000 4,000,000 500,000 1,500,000
Repayments of lines of credit (1,500,000) (3,000,000) (500,000) (3,000,000)
Distributions to limited partners (7,860,545) (7,773,292) (2,619,388) (2,623,777)
Repurchase of units - (2,929) - -
----------------- ----------------- ----------------- -----------------
Net cash used in financing activities (21,533,410) (9,746,097) (5,441,558) (3,926,013)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) in cash and cash
equivalents (363,900) (791,693) 79,227 252,540
Cash and cash equivalents at beginning of
period 696,421 1,355,258 253,294 311,025
----------------- ----------------- ----------------- -----------------
Cash and cash equivalents at end of period $332,521 $563,565 $332,521 $563,565
================= ================= ================= =================
Supplemental disclosures of cash flow
information:
Cash paid for interest $878,939 $1,415,797 $154,269 $488,471
================= ================= ================= =================
Supplemental disclosure of non-cash
transactions:
Gain on extinguishment of non-recourse debt $112,546 $112,546
================= =================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
1. Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the most recent report on Form
10K.
2. Investment in leases:
The Partnership's investment in leases consists of the following:
<TABLE>
<CAPTION>
Depreciation
Expense or Reclass-
December 31, Amortization ifications & September 30,
1996 Additions of Leases Dispositions 1997
---- --------- --------- - ------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $33,943,386 ($3,593,640) ($12,955,014) $17,394,732
Net investment in direct
financing leases 11,855,610 $77,518 (1,955,389) (357,675) 9,620,064
Net investment in leveraged
leases 4,844,014 - 8,468 - 4,852,482
Equipment held for sale or lease 16,464 - - (16,464) -
Residual value interests 610,878 - - (28,821) 582,057
Initial direct costs, net of
accumulated amortization of
$1,222,149 in 1997 and
$1,365,512 in 1996 1,300,152 - (622,517) - 677,635
Reserve for losses (305,978) (57,231) - - (363,209)
------------------- ----------------- ----------------- ----------------- -----------------
$52,264,526 $20,287 ($6,163,078) ($13,357,974) $32,763,761
=================== ================= ================= ================= =================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
2. Investment in lease assets (continued):
At September 30, 1997, equipment on operating leases consists of the following:
<TABLE>
<CAPTION>
Balance Balance
December 31, Acquisitions, Dispositions & Reclassifications September 30,
1996 1st Quarter 2nd Quarter 3rd Quarter 1997
---- ----------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
Transportation $21,497,670 ($7,105,011) ($26,223) ($1,248,000) $13,118,436
Corporate aircraft 9,635,969 (1,890,000) - - 7,745,969
Printing 4,393,249 - - - 4,393,249
Other 4,726,040 - (1,708,303) (14,619) 3,003,118
Manufacturing 1,587,670 - - - 1,587,670
Mining 4,347,960 - (3,347,960) - 1,000,000
Ground support equipment 1,127,988 - - (274,730) 853,258
Data processing 851,561 - - - 851,561
Office equipment 216,080 - - - 216,080
Construction equipment 4,985,297 - (4,985,297) - -
Materials handling 3,915,999 - (3,915,999) - -
------------------- ----------------- ----------------- ----------------- -----------------
57,285,483 (8,995,011) (13,983,782) (1,537,349) 32,769,341
Accumulated depreciation (23,342,097) 3,234,447 4,647,253 85,788 (15,374,609)
------------------- ----------------- ----------------- ----------------- -----------------
$33,943,386 ($5,760,564) ($9,336,529) ($1,451,561) $17,394,732
=================== ================= ================= ================= =================
</TABLE>
All of the equipment on operating leases was acquired during 1992, 1993, 1994,
1995 and 1996.
At September 30, 1997, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Operating Financing Total
--------- --------- -----
Three months ending December 31, 1997 $1,431,008 $985,087 $2,416,095
Year ending December 31, 1998 3,905,942 3,621,257 7,527,199
1999 3,003,855 2,579,270 5,583,125
2000 1,731,571 1,652,153 3,383,724
2001 1,202,728 1,128,109 2,330,837
Thereafter 1,501,292 580,737 2,082,029
------------- ------------- -------------
$12,776,396 $10,546,613 $23,323,009
============= ============= =============
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
7.04% to 13.3%.
Future minimum principal payments of non-recourse debt as of September 30, 1997
are as follows:
Principal Interest Total
--------- -------- -----
Three months ending December 31, 1997 $838,057 $160,351 $998,408
Year ending December 31, 1998 2,305,286 458,329 2,763,615
1999 2,045,296 287,129 2,332,425
2000 1,535,205 151,656 1,686,861
2001 697,282 56,062 753,344
Thereafter 356,930 22,731 379,661
------------ ------------ ------------
$7,778,056 $1,136,258 $8,914,314
============ ============ ============
5. Related party transactions:
The terms of the Agreement of Limited Partnership provide that the General
Partners and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
The General Partners and/or Affiliates earned the following fees and
commissions, pursuant to the Agreement of Limited Partnership as follows:
1997 1996
---- ----
Incentive and equipment management fees $506,568 $793,726
Administrative cost reimbursements 229,871 192,711
----------------- -----------------
$736,439 $986,437
================= =================
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
6. Partner's capital:
The Fund is authorized to issue up to 7,500,000 Units of Limited Partnership
interest in addition to the Initial Limited Partners.
The Fund's Net Profits, Net Losses and Tax Credits are to be allocated 99% to
the Limited Partners and 1% to the General Partner.
As more fully described in the Partnership Agreement, available Cash from
Operations and Cash from Sales or Refinancing shall be distributed as follows:
First, 5% of Distributions of Cash from Operations to the General Partner
as Incentive Management Fees.
Second, the balance to the Limited Partners until the Limited Partners have
received aggregate Distributions, as defined, in an amount equal to
their Original Invested Capital, as defined, plus a 10% per annum
cumulative (compounded daily) return on their Adjusted Invested
Capital, as defined.
Third,the General Partner will receive as Incentive Management Fees, the
following: (A) 10% of remaining Cash from Operations, as defined, (B)
15% of remaining Cash from Sales or Refinancing, as defined.
Fourth, the balance to the Limited Partners.
7. Line of credit:
The Partnership participates with the General Partner and certain of its
Affiliates in a $90,000,000 revolving credit agreement with a group of financial
institutions which expires on October 28, 1998. The agreement includes an
acquisition facility to be used by the Partnership and Affiliates to provide
bridge financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases.
At September 30, 1997, the Partnership had $500,000 of borrowings under the line
of credit.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of September
30, 1997.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
The Partnership's primary source of liquidity during 1997 was proceeds from
sales of lease assets. The liquidity of the Partnership will vary in the future,
increasing to the extent cash flows from leases exceed expenses, and decreasing
as lease assets are acquired, as distributions are made to the Limited Partners
and to the extent expenses exceed cash flows from leases.
The Partnership currently has available adequate reserves to meet contingencies,
but in the event those reserves were found to be inadequate, the Partnership
would likely be in a position to borrow against its current portfolio to meet
such requirements. The General Partner envisions no such requirements for
operating purposes.
As of September 30, 1997, the Partnership had borrowed approximately
$38,342,000, with a remaining unpaid balance of approximately $7,778,000.
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 or
secured with the loan proceeds. The General Partner expects that aggregate
borrowings in the future will be approximately 40% of aggregate equipment cost.
In any event, the Agreement of Limited Partnership limits such borrowings to 40%
of the total cost of equipment, in aggregate.
The Partnership participates with the General Partner and certain of its
affiliates in a $90,000,000 revolving line of credit with a financial
institution. The line of credit expires on October 28, 1998.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. As of September 30, 1997, there were no
such commitments.
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.
1997 vs. 1996:
Nine months:
During the first nine months of 1997, the primary source of operating cash flows
was operating lease revenues. Total lease revenues decreased by $2,301,160
compared to 1996.
In 1997 and 1996, the most significant source cash flows from investing
activities was the proceeds from the sales of assets. Proceeds from asset sales
and the use of cash for asset acquisitions are not comparable to prior periods
nor are they expected to be comparable to future periods.
<PAGE>
In 1997, the only source of cash from financing activities was borrowings under
the line of credit. In 1996 , proceeds from non-recourse debt and borrowings
under the line of credit were the only sources of financing cash flows. Cash
used to repay non-recourse debt has increased due to both scheduled and
unscheduled debt reductions. Distributions to Limited Partners have not changed
significantly.
Three months:
The primary source of cash from operations for the third quarter was lease
rents. Lease rents have decreased from the prior year due to asset sales during
the preceding twelve months.
The investing sources of cash in 1997 were the same as noted above for the nine
month period. Amounts of cash used for purchases of assets is not comparable nor
is it expected to be comparable from one period to another.
In 1997, the only source of cash from financing activities was borrowings under
the line of credit. In 1996, proceeds from non-recourse debt and borrowings
under the line of credit were the Partnership's only financing sources of cash.
Results of Operations
Operations in 1996 resulted in net income of $1,692,353 for the nine month
period and $794,436 for the three month period. In 1997, operations resulted in
net income of $1,739,514 for the nine month period and $670,182 for the three
month period.
1997 vs. 1996:
Operating lease revenues have decreased due to sales of leased assets during the
last twelve months. Revenues from financing and leveraged leases have not
changed significantly compared to 1996.
Depreciation expense is directly related to the amounts of operating lease
assets and has decreased from 1996 to 1997 as a result of sales of operating
lease assets over the last year. Management fees are related to the amounts of
lease revenues and distributions to Limited Partners. As assets have been sold,
lease revenues have decreased and as a result, management fees have also
decreased.
<PAGE>
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Inapplicable.
Item 2. CHANGES IN SECURITIES.
Inapplicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
Inapplicable.
Item 5. OTHER INFORMATION.
Inapplicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Documents filed as a part of this report
1. Financial Statements Included in Part I of this
report:
Balance Sheets, September 30, 1997 and December 31, 1996.
Income statements for the nine and three month
periods ended September 30, 1997 and 1996.
Statement of changes in partners' equity for the
nine month period ended September 30, 1997.
Statements of cash flows for the nine and three
month periods ended September 30, 1997 and 1996.
Notes to the Financial Statements
2. Financial Statement Schedules
All other schedules for which provision is made in
the applicable accounting regulations of the
Securities and Exchange Commission are not
required under the related instructions or are
inapplicable, and therefore have been omitted.
(b) Report on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
November 12, 1997
ATEL CASH DISTRIBUTION FUND 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 General Partner
By: /s/ DEAN L. CASH
-----------------------------------
Dean L. Cash
Executive Vice President
of General Partner
By: /s/ F. RANDALL BIGONY
--------------------------------------
F. Randall Bigony
Principal financial officer of
registrant
By: /s/ DONALD E. CARPENTER
--------------------------------------
Donald E. Carpenter
Principal accounting officer of
registrant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-END> sep-30-1997
<CASH> 332,521
<SECURITIES> 0
<RECEIVABLES> 470,514
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,566,796
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 24,609,184
<TOTAL-LIABILITY-AND-EQUITY> 33,566,796
<SALES> 0
<TOTAL-REVENUES> 7,735,659
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,116,404
<LOSS-PROVISION> 57,231
<INTEREST-EXPENSE> 822,510
<INCOME-PRETAX> 1,739,514
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,739,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,739,514
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
