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 March 31, 1999
|_|Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number 000-21552
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
MARCH 31, 1999
(Unaudited)
ASSETS
Cash and cash equivalents $ 1,352,080
Accounts receivable 509,009
Investments in leases 17,916,688
----------------
Total assets $19,777,777
================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 4,040,049
Accounts payable:
General Partner 104,843
Other 260,432
Accrued interest payable 17,752
Unearned operating lease income 125,168
----------------
Total liabilities 4,548,244
Partners' capital:
General Partner 148,358
Limited Partners 15,081,175
----------------
Total partners' capital 15,229,533
----------------
Total liabilities and partners' capital $19,777,777
================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
INCOME STATEMENTS
THREE MONTH PERIODS ENDED
MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenues:
Leasing activities:
Operating leases $ 894,736 $ 904,403
Direct financing leases 207,251 295,608
Leveraged leases 67,619 46,872
Gain on sale of assets 1,980,007 31,132
Interest 2,094 33,439
Other 4,851 3,042
---------------- ----------------
3,156,558 1,314,496
---------------- ----------------
Expenses:
Depreciation and amortization 537,595 613,784
Equipment and incentive management fees to General Partner 182,397 110,081
Interest 99,461 128,412
Other 60,702 18,094
Administrative cost reimbursements to General Partner 30,609 78,798
Professional fees 5,959 3,138
Provision for losses - 13,145
---------------- ----------------
916,723 965,452
---------------- ----------------
Net income $2,239,835 $ 349,044
================ ================
Net income:
General Partner $ 22,398 $ 3,490
Limited Partners 2,217,437 345,554
---------------- ----------------
$2,239,835 $ 349,044
================ ================
Net income per Limited Partnership unit $ 0.30 $ 0.05
Weighted average number of units outstanding 7,487,350 7,487,350
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTH PERIOD ENDED
MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
<S> <C> <C> <C> <C>
Balance December 31, 1998 7,487,350 $15,484,740 $ 125,960 $15,610,700
Distributions to limited partners (2,621,002) (2,621,002)
Net income 2,217,437 22,398 2,239,835
---------------- ----------------- ---------------- ----------------
Balance March 31, 1999 7,487,350 $15,081,175 $ 148,358 $15,229,533
================ ================= ================ ================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Operating activities: 1999 1998
---- ----
<S> <C> <C>
Net income $2,239,835 $ 349,044
Adjustments to reconcile net income to net cash provided by operations:
Leveraged lease income (67,619) (46,872)
Depreciation and amortization 537,595 613,784
Gain on sale of asset (1,980,007) (31,132)
Provision for losses - 13,145
Changes in operating assets and liabilities:
Accounts receivable (100,261) 79,288
Accounts payable, General Partner (353,401) 46,323
Accounts payable, other 43,251 (25,808)
Accrued interest payable (2,454) (3,293)
Unearned operating lease income (137,757) (50,480)
---------------- ----------------
Net cash from operations 179,182 943,999
---------------- ----------------
Investing activities:
Proceeds from sales of lease assets 3,620,439 130,676
Reduction in investment in direct financing leases 394,994 666,838
Reduction in investment in leveraged leases 1,240 -
---------------- ----------------
Net cash provided by investing activities 4,016,673 797,514
---------------- ----------------
Financing activities:
Distributions to limited partners (2,621,002) (2,618,605)
Repayment of non-recourse debt (594,664) (561,023)
---------------- ----------------
Net cash used in financing activities (3,215,666) (3,179,628)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 980,189 (1,438,115)
Cash and cash equivalents at beginning of period 371,891 3,990,096
---------------- ----------------
Cash and cash equivalents at end of period $1,352,080 $ 2,551,981
================ ================
Supplemental disclosures of cash flow information:
Cash paid during period for interest $ 101,915 $ 131,705
================ ================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
1. Summary of significant accounting policies:
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. Organization and partnership matters:
ATEL Cash Distribution Fund IV, L.P. (the Partnership), was formed under the
laws of the State of California on September 19, 1991, for the purpose of
acquiring equipment to engage in equipment leasing and sales activities.
Contributions in the aggregate of $600 were received as of October 8, 1991, $100
of which represented the General Partner's continuing interest, and $500 of
which represented the Initial Limited Partners' 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 or the General Partner on
behalf of the Partnership, will incur costs in connection with the organization,
registration and issuance of the Units. The amount of such costs to be born by
the Partnership is limited by certain provisions in the Partnership Agreement.
As of February 3, 1993, the Partnership had received subscriptions for 7,500,000
Limited Partnership Units ($75,000,000) in addition to the Initial Limited
Partners' 50 Units. Of those subscriptions, 7,487,350 Units ($74,873,500) were
issued and outstanding as of March 31, 1999.
The Partnership's business consists of leasing various types of equipment. As of
March 31, 1999, the original terms of the Partnership's leases were from two to
ten years.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
3. Investment in leases:
The Partnership's investment in leases consists of the following:
<TABLE>
<CAPTION>
Depreciation
Expense or Reclassi-
December 31, Amortization fications or March 31,
1998 of Leases Dispositions 1999
---- --------- -------------- ----
<S> <C> <C> <C> <C>
Net investment in operating leases $9,415,647 $ (448,027) $ (338,813) $ 8,628,807
Net investment in direct financing leases 5,252,294 (394,994) (773,195) 4,084,105
Net investment in leveraged leases 4,791,326 66,379 (409,323) 4,448,382
Residual value interests 582,057 - - 582,057
Reserve for losses (915,999) - - (915,999)
Assets held for sale or lease 964,358 - (119,101) 845,257
Initial direct costs, net of accumulated amortization
of $911,060 in 1999 and $887,930 in 1998 333,647 (89,568) - 244,079
------------------ ----------------- ---------------- ----------------
$20,423,330 $ (866,210) $ (1,640,432) $17,916,688
================== ================= ================ ================
</TABLE>
The following schedule provides an analysis of the Partnership's investment in
property on operating leases by major classifications as of December 31, 1998,
acquisitions and dispositions during the quarter ended March 31, 1999 and as of
March 31, 1999.
<TABLE>
<CAPTION>
December 31, 1st Quarter March 31,
1998 Additions Dispositions 1999
---- --------- ------------ ----
<S> <C> <C> <C> <C>
Construction $4,985,297 $ 4,985,297
Printing 4,393,249 4,393,249
Transportation 3,005,244 $ (795,725) 2,209,519
Other 2,130,174 - 2,130,174
Manufacturing 1,587,670 - 1,587,670
Corporate aircraft 1,328,569 - 1,328,569
Ground support 1,127,988 - 1,127,988
Materials handling 786,160 - 786,160
Data processing 419,412 - 419,412
Office equipment 216,080 (152,104) 63,976
---------------- ----------------- ---------------- ----------------
19,979,843 (947,829) 19,032,014
Less accumulated depreciation (10,564,196) $ (448,027) 609,016 (10,403,207)
---------------- ----------------- ---------------- ----------------
$9,415,647 $ (448,027) $ (338,813) $ 8,628,807
================ ================= ================ ================
</TABLE>
All of the property on operating leases was acquired during 1992, 1993, 1994,
1995 and 1996.
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
3. Investment in leases (continued):
At March 31, 1999, the aggregate amounts of future minimum lease payments are as
follows:
Year ending Operating Direct Financing
December 31, Leases Leases Total
1999 $1,944,392 $1,313,431 $3,257,823
2000 1,555,134 1,245,769 2,800,903
2001 1,002,493 730,189 1,732,682
2002 852,339 292,157 1,144,496
2003 620,887 205,200 826,087
Thereafter - 17,100 17,100
---------------- ----------------- ----------------
$5,975,245 $3,803,846 $9,779,091
================ ================= ================
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
6.5% to 8.85%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1999 $1,450,632 $ 200,404 $1,651,036
2000 1,535,205 151,656 1,686,861
2001 697,282 56,062 753,344
2002 250,450 19,870 270,320
2003 106,480 2,861 109,341
---------------- ----------------- ----------------
$4,040,049 $ 430,853 $4,470,902
================ ================= ================
<PAGE>
ATEL CASH DISTRIBUTION FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
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 General Partner and/or Affiliates earned the following fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Incentive management fees (computed as 5% of distributions of cash from
operations, as defined in the Limited Partnership Agreement) and equipment
management fees (computed as 5% of gross revenues from operating leases, as
defined in the Limited Partnership Agreement plus 2% of gross revenues from full
payout leases, as defined in the Limited Partnership Agreement). $ 182,397 $ 110,081
Administrative costs reimbursed to General Partner 30,609 78,798
---------------- ----------------
$ 213,006 $ 188,879
================ ================
</TABLE>
6. 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 January 31, 2000. The agreement includes an
acquisition facility to be used by the Partnership and Affiliates to provide
bridge financing for assets on leases. Draws on the acquisition facility by any
individual borrower are secured only by that borrower's assets, including
equipment and related leases.
The Partnership had no borrowings under the agreement during 1999.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of March 31,
1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During 1998, the Partnership's primary source of liquidity was rents from
operating leases. During 1999, the Partnership's primary source of liquidity 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 proceeds from lease asset sales, 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 lease 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. The line of credit expires on January 31, 2000.
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.
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 Partners envision no such requirements for
operating purposes.
Through March 31, 1999, the Partnership had borrowed approximately $38,342,000
with a remaining unpaid balance of approximately $4,040,000. Borrowings are to
be generally non-recourse to the Partnership, that is, the only recourse of the
lender for a default by the lessee on the underlying lease will be to the
equipment or corresponding lease acquired with the loan proceeds. The General
Partners expect 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.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. At March 31, 1999, 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>
The Partnership made distributions of cash from 1999 first quarter operations in
February, March and April 1999. The amount of the distributions totaled $.35 per
Unit. This was paid in either monthly amounts of $.11667 per Unit or in one
quarterly payment of $.35 per Unit in April 1999. These distributions are equal
to an annualized distribution rate of 14%.
Rents from operating leases were the primary sources of cash flows from
operations in the first quarter of both 1999 and 1998. The amounts of such rents
decreased from 1998 to 1999 by $9,667.
Sources of cash from investing activities in 1999 and 1998 consisted primarily
of the proceeds of the sales of lease assets and cash flows from direct
financing leases. Proceeds from the sales of lease assets are not expected to be
consistent from one period to another. Cash flows from direct financing leases
decreased by $271,844. Lease rents have declined due to lease terminations and
sales of assets.
In the first quarter of 1999 and 1998, there were no financing sources of cash
flows. Repayments of non-recourse debt have decreased as a larger portion of the
scheduled debt payments has been applied to principal reductions as opposed to
interest payments.
Results of Operations
Operations in the first quarter of 1999 resulted in net income of $2,239,835
compared to $$349,044 in 1998.
Operating lease revenues and the related depreciation expense have decreased as
a result of asset sales over the last year. Sales of these assets were not
significant in the first quarter of 1998. In 1999, sales of lease assets
increased significantly and the amounts of gains recognized on those sales has
increased as well.
Depreciation expense has decreased as a result of operating lease asset sales
over the last year.
As scheduled debt payments have been made over the last year, debt balances have
been significantly reduced. As a result, interest expense has decreased compared
to the prior year.
In 1999, a larger portion of the cash distributed to the Limited Partners was
subject to the incentive management fee. This resulted in an increase of $77,861
of these fees although the distributions to the Limited Partners were virtually
unchanged.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Inapplicable.
Item 2. Changes In Securities.
Inapplicable.
Item 3. Defaults Upon Senior Securities.
Inapplicable.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Inapplicable.
Item 5. Other Information.
Inapplicable.
Item 6. Exhibits And Reports On Form 8-K.
(a)Documents filed as a part of this report
1. Financial Statements
Included in Part I of this report:
Balance Sheet, March 31, 1999.
Income statements for the three month
periods ended March 31, 1999 and
1998.
Statement of changes in partners'
capital for the three months ended
March 31, 1999.
Statements of cash flows for the three
month periods ended March 31, 1999
and 1998.
Notes to the Financial Statements
2. Financial Statement Schedules
All other schedules for which provision
is made in the applicable accounting
regulations of the Securities and
Exchange Commission are not required
under the related instructions or are
inapplicable, and therefore have been
omitted.
(b) Report on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
May 14, 1999
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/ Paritosh K. Choksi
-----------------------------------
Paritosh K. Choksi
Principal financial officer
of registrant
By:/s/ Donald E. Carpenter
-----------------------------------
Donald E. Carpenter
Principal accounting
officer of registrant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1352080
<SECURITIES> 0
<RECEIVABLES> 509009
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19777777
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15229533
<TOTAL-LIABILITY-AND-EQUITY> 19777777
<SALES> 0
<TOTAL-REVENUES> 3156558
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 817262
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99461
<INCOME-PRETAX> 2239835
<INCOME-TAX> 0
<INCOME-CONTINUING> 2239835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2239835
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
