Form 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended September 30, 1998
|_| 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 SHEET
SEPTEMBER 30, 1998
(Unaudited)
ASSETS
Cash and cash equivalents $756,088
Accounts receivable 264,327
Investment in leases 23,369,707
-----------------
$24,390,122
=================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $5,230,799
Accounts payable:
General Partner 45,581
Other 1,443,921
Accrued interest 23,237
Unearned operating lease income 246,212
-----------------
Total liabilities 6,989,750
Partners' capital:
General Partner 117,637
Limited Partners 17,282,735
-----------------
Total partners' capital 17,400,372
-----------------
$24,390,122
=================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
Revenues: 1998 1997 1998 1997
---- ---- ---- ----
Lease revenues:
<S> <C> <C> <C> <C>
Operating $2,751,484 $5,420,170 $845,349 $1,508,791
Direct financing 821,370 1,014,640 255,571 447,483
Leveraged 140,614 186,039 46,872 62,013
Gain (loss) on sales of assets 153,476 1,091,776 105,133 (12,859)
Other 26,486 724 22,393 (418)
Interest income 71,424 22,310 11,737 5,352
----------------- ----------------- ----------------- -----------------
3,964,854 7,735,659 1,287,055 2,010,362
Expenses:
Depreciation and amortization 1,762,137 4,216,157 558,025 954,870
Interest 352,431 822,510 100,691 140,931
Management fees 366,309 506,568 101,029 93,261
Administrative cost reimbursements 189,635 229,871 70,550 89,615
Professional fees 25,767 30,174 17,398 14,662
Provision for losses 13,145 57,231 - -
Other 75,113 133,634 15,885 46,841
----------------- ----------------- ----------------- -----------------
2,784,537 5,996,145 863,578 1,340,180
----------------- ----------------- ----------------- -----------------
Net income $1,180,317 $1,739,514 $423,477 $670,182
================= ================= ================= =================
Net income:
General Partner $11,803 $17,395 $4,235 $6,702
Limited Partners 1,168,514 1,722,119 419,242 663,480
----------------- ----------------- ----------------- -----------------
$1,180,317 $1,739,514 $423,477 $670,182
================= ================= ================= =================
Net income per Limited Partnership unit $0.16 $0.23 $0.06 $0.09
Weighted average number of units outstanding 7,487,350 7,487,350 7,487,350 7,487,350
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
<S> <C> <C> <C> <C>
Balance December 31, 1997 7,487,350 $23,976,764 $105,834 $24,082,598
Distributions to limited partners (7,862,543) - (7,862,543)
Net income 1,168,514 11,803 1,180,317
----------------- ----------------- ----------------- -----------------
Balance September 30, 1998 7,487,350 $17,282,735 $117,637 $17,400,372
================= ================= ================= =================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Operating activities:
<S> <C> <C> <C> <C>
Net income $1,180,317 $1,739,514 $423,477 $670,182
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 1,762,137 4,216,157 558,025 954,870
Leveraged lease income (140,614) (186,039) (46,872) (62,013)
(Gain) loss on sales of assets (153,476) (1,091,776) (105,133) 12,859
Provision for losses 13,145 57,231 - -
Changes in operating assets and liabilities:
Accounts receivable 155,611 162,815 31,454 3,218,421
Accounts payable, General Partner 721 17,187 166,211 28,583
Accounts payable, other 1,248,094 209,882 698,111 218,277
Accrued interest (8,679) (56,429) (8,045) (13,338)
Deposits due to lessees - (97,772) - -
Unearned operating lease income (244,111) (264,225) (189,246) (116,665)
----------------- ----------------- ----------------- -----------------
Net cash from operations 3,813,145 4,706,545 1,527,982 4,911,176
----------------- ----------------- ----------------- -----------------
Investing activities:
Purchase of equipment on operating leases - (42,227) - -
Purchase of equipment on direct financing leases - (77,518) - -
Reduction of net investment in direct financing
leases 1,871,948 1,955,389 592,673 528,711
Reduction of net investment in leveraged leases - 177,571 - -
Proceeds from sales of lease assets 652,642 14,449,750 156,092 80,898
----------------- ----------------- ----------------- -----------------
Net cash (used in) provided by investing
activities 2,524,590 16,462,965 748,765 609,609
----------------- ----------------- ----------------- -----------------
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
(CONTINUED)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Financing activities:
Repayment of non-recourse debt (1,709,200) (12,672,865) (574,097) (2,822,170)
Borrowings under lines of credit - 500,000 - 500,000
Repayments of lines of credit - (1,500,000) - (500,000)
Distributions to limited partners (7,862,543) (7,860,545) (2,620,630) (2,619,388)
Repurchase of units - - -
----------------- ----------------- ----------------- -----------------
Net cash used in financing activities (9,571,743) (21,533,410) (3,194,727) (5,441,558)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) in cash and cash
equivalents (3,234,008) (363,900) (917,980) 79,227
Cash and cash equivalents at beginning of
period 3,990,096 696,421 1,674,068 253,294
----------------- ----------------- ----------------- -----------------
Cash and cash equivalents at end of period $756,088 $332,521 $756,088 $332,521
================= ================= ================= =================
Supplemental disclosures of cash flow
information:
Cash paid for interest $361,110 $878,939 $108,736 $154,269
================= ================= ================= =================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1. Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the most recent report on Form
10K.
2. Investment in leases:
The Partnership's investment in leases consists of the following:
<TABLE>
<CAPTION>
Depreciation
Expense or Reclass-
December 31, Amortization ifications & September 30,
1997 Additions of Leases Dispositions 1998
---- --------- --------- - ------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $13,166,852 ($1,602,905) ($985,853) $10,578,094
Net investment in direct
financing leases 8,803,127 (1,871,948) (501,188) 6,429,991
Net investment in leveraged
leases 4,722,893 140,614 - 4,863,507
Equipment held for sale or lease 131,158 - 996,354 1,127,512
Residual value interests 582,057 - - 582,057
Initial direct costs, net of
accumulated amortization of
$934,748 in 1998 and
$1,022,825 in 1997 597,256 (159,232) (8,479) 429,545
Reserve for losses (627,854) ($13,145) - - (640,999)
------------------- ----------------- ----------------- ----------------- -----------------
$27,375,489 ($13,145) ($3,493,471) ($499,166) $23,369,707
=================== ================= ================= ================= =================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(Unaudited)
2. Investment in lease assets (continued):
At September 30, 1998, equipment on operating leases consists of the following:
<TABLE>
<CAPTION>
Balance Balance
December 31, Acquisitions, Dispositions & Reclassifications September 30,
1997 1st Quarter 2nd Quarter 3rd Quarter 1998
---- ----------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
Construction equipment $4,985,297 ($59,740) $4,925,557
Printing 4,393,249 - 4,393,249
Transportation 5,412,784 ($1,861,391) ($490,466) 3,060,927
Corporate aircraft 2,470,969 - - - 2,470,969
Materials handling 2,389,826 - - (122,268) 2,267,558
Manufacturing 1,587,670 - - - 1,587,670
Ground support equipment 1,127,988 - - - 1,127,988
Data processing 851,561 - (165,767) - 685,794
Other 2,054,576 (1,495,048) - - 559,528
Office equipment 216,080 - - - 216,080
------------------- ----------------- ----------------- ----------------- -----------------
25,490,000 (3,356,439) (656,233) (182,008) 21,295,320
Accumulated depreciation (12,323,148) 1,983,425 (19,148) (358,355) (10,717,226)
------------------- ----------------- ----------------- ----------------- -----------------
$13,166,852 ($1,373,014) ($675,381) ($540,363) $10,578,094
=================== ================= ================= ================= =================
</TABLE>
All of the equipment on operating leases was acquired during 1992, 1993, 1994,
1995 and 1996.
At September 30, 1998, the aggregate amounts of future minimum lease payments
are as follows:
<TABLE>
<CAPTION>
Direct
Operating Financing Total
<S> <C> <C> <C>
Three months ending December 31, 1998 $782,916 $1,121,786 $1,904,702
Year ending December 31, 1998 2,577,038 2,163,464 4,740,502
2000 1,745,565 1,639,902 3,385,467
2001 1,192,923 1,128,109 2,321,032
2002 854,403 557,077 1,411,480
Thereafter 622,951 23,660 646,611
----------------- ----------------- -----------------
$7,775,796 $6,633,998 $14,409,794
================= ================= =================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
7.04% to 13.3%.
Future minimum principal payments of non-recourse debt as of September 30, 1998
are as follows:
<TABLE>
<CAPTION>
Principal Interest Total
<S> <C> <C> <C>
Three months ending December 31, 1998 $596,086 $98,664 $694,750
Year ending December 31, 1998 2,045,296 287,128 2,332,424
2000 1,535,205 151,657 1,686,862
2001 697,282 56,062 753,344
2002 356,930 22,731 379,661
----------------- ----------------- -----------------
$5,230,799 $616,242 $5,847,041
================= ================= =================
</TABLE>
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:
1998 1997
---- ----
Incentive and equipment management fees $366,309 $506,568
Administrative cost reimbursements 189,635 229,871
----------------- -----------------
$555,944 $736,439
================= =================
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(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 November 28, 1999. 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, 1998, the Partnership had no 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, 1998. At September 30, 1998, $32,612,740 was available under this agreement.
<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 1998 was lease revenues.
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, 1998, the Partnership had borrowed approximately
$38,342,000, with a remaining unpaid balance of approximately $5,231,000.
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 not exceed 40% of aggregate equipment cost. In any
event, the Agreement of Limited Partnership limits such borrowings to 40% of the
total cost of equipment, in aggregate.
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 November 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, 1998, 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.
<PAGE>
1998 vs. 1997:
Nine months:
During the first nine months of 1998, the primary source of operating cash flows
was operating lease revenues. Total lease revenues decreased by $2,907,381
compared to 1997.
In 1998, the most important source of cash from investing activities was rents
from direct financing leases. Such rents decreased by $83,441 compare to 1997.
In 1997, the most significant source cash flows from investing activities was
the proceeds from the sales of assets. Proceeds from asset sales are not
comparable to prior periods nor are they expected to be comparable to future
periods.
In 1997, the only source of cash from financing activities was borrowings under
the line of credit. There were no sources of cash from financing activities in
1998. Cash used to repay non-recourse debt has decreased due to scheduled 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 1998 and 1997 were the same as noted above for
the nine month period.
In 1997, the only source of cash from financing activities was borrowings under
the line of credit. There were no sources of cash from financing activities in
1998.
Results of Operations
Operations in 1998 resulted in net income of $1,180,317 for the nine month
period and $423,477 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.
1998 vs. 1997:
Operating lease revenues and direct financing lease revenues have decreased due
to sales of leased assets during the last twelve months. Revenues from leveraged
leases have not changed significantly compared to 1997.
Depreciation expense is directly related to the amounts of operating lease
assets and has decreased from 1997 to 1998 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. As a result of reductions in the amounts of outstanding non-recourse
debt, interest expense has decreased compared to 1997.
Other
<PAGE>
Year 2000 Issues
The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any computer programs
that have time sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruptions of operations, including, among other things,
a temporary inability to process transactions or engage in similar normal
business activities.
The Partnership uses primarily third party software and is communicating with
key vendors to ensure that the Partnership's systems are year 2000 compliant.
Based on these discussions, the Partnership does not expect that the costs
related to the year 2000 issue will be significant. Ultimately, the potential
impact of the year 2000 issue will depend on the way in which the year 2000
issue is addressed by businesses and other entities whose financial condition or
operational capability is important to the Partnership.
<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, 1998 and December
31, 1997.
Income statements for the nine and three month
periods ended September 30, 1998 and 1997.
Statement of changes in partners' equity for the
nine month period ended September 30, 1998.
Statements of cash flows for the nine and three
month periods ended September 30, 1998 and 1997.
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 10, 1998
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-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 756,088
<SECURITIES> 0
<RECEIVABLES> 264,327
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,390,122
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,400,372
<TOTAL-LIABILITY-AND-EQUITY> 24,390,122
<SALES> 0
<TOTAL-REVENUES> 3,964,854
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,418,961
<LOSS-PROVISION> 13,145
<INTEREST-EXPENSE> 352,431
<INCOME-PRETAX> 1,180,317
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,180,317
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,180,317
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
