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, 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 000-23842
ATEL Cash Distribution Fund V, L.P.
(Exact name of registrant as specified in its charter)
California 94-3165807
(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.
ATEL CASH DISTRIBUTION FUND V, L.P.
BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
ASSETS
1998 1997
---- ----
Cash $1,198,709 $733,263
Accounts receivable 2,232,563 2,194,261
Notes receivable 727,328 382,048
Investments in leases 88,899,831 103,398,004
----------------- -----------------
$93,058,431 $106,707,576
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $32,653,038 $40,138,400
Line of credit 1,000,000 -
Accounts payable
Equipment purchases 178,552 178,200
General Partner 195,678 317,715
Other 1,564,083 235,068
Accrued interest 119,917 219,569
Unearned lease income 921,764 1,004,385
----------------- -----------------
Total liabilities 36,633,032 42,093,337
Partners' capital:
General Partner 98,364 69,221
Limited Partners 56,327,035 64,545,018
----------------- -----------------
Total partners' capital 56,425,399 64,614,239
----------------- -----------------
Total liabilities and partners' capital $93,058,431 $106,707,576
================= =================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Leasing activities:
<S> <C> <C> <C> <C>
Operating leases $13,997,923 $15,284,337 $4,547,932 $5,166,745
Direct financing leases 1,625,523 2,129,846 521,411 684,302
Leveraged leases 82,326 121,120 27,442 40,373
Gain on sales of assets 210,920 261,179 83,085 74,077
Interest income 13,160 27,657 3,722 6,116
Other 23,452 11,138 10,913 7,235
---------------- ----------------- ----------------- -----------------
15,953,304 17,835,277 5,194,505 5,978,848
Expenses:
Depreciation and amortization 8,962,402 9,978,846 2,916,726 3,135,265
Management fees 989,811 1,157,564 348,813 335,806
Interest 2,148,109 2,747,570 686,708 862,310
Administrative cost reimbursements 300,998 304,646 70,916 133,031
Provision for losses 55,409 118,564 - -
Other 582,323 522,721 272,600 175,474
---------------- ----------------- ----------------- -----------------
13,039,052 14,829,911 4,295,763 4,641,886
---------------- ----------------- ----------------- -----------------
Net income $2,914,252 $3,005,366 $898,742 $1,336,962
================ ================= ================= =================
Net income:
General Partner $29,143 $30,054 $8,987 $13,370
Limited Partners 2,885,109 2,975,312 889,755 1,323,592
---------------- ----------------- ----------------- -----------------
$2,914,252 $3,005,366 $898,742 $1,336,962
================ ================= ================= =================
Net income per Limited Partnership unit $0.23 $0.24 $0.07 $0.11
Weighted average number of units outstanding 12,497,000 12,497,000 12,497,000 12,497,000
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, 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 12,497,000 $64,545,018 $69,221 $64,614,239
Distributions to limited partners (11,103,092) - (11,103,092)
Net income 2,885,109 29,143 2,914,252
---------------- ----------------- ----------------- -----------------
Balance September 30, 1998 12,497,000 $56,327,035 $98,364 $56,425,399
================ ================= ================= =================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENT 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 $2,914,252 $3,005,366 $898,742 $1,336,962
Adjustments to reconcile net income to net cash
provided by operations
Depreciation and amortization 8,962,402 9,978,846 2,916,726 3,135,265
Leveraged lease income - -
Gain on sale of assets (210,920) (261,179) (83,085) (74,077)
Provision for losses 55,409 118,564 - -
Changes in operating assets and liabilities:
Accounts receivable (38,302) 651,069 (186,773) (389,982)
Other assets - 10,000 - -
Accounts payable, General Partner (122,037) 21,331 191,918 91,042
Accounts payable, other 1,329,015 (30,399) 1,303,729 (36,415)
Unearned lease income (82,621) (462,094) 56,090 (82,396)
Accrued interest (99,652) (11,982) (68,984) (5,546)
---------------- ----------------- ----------------- -----------------
Net cash provided by operating activities 12,707,546 13,019,522 5,028,363 3,974,853
---------------- ----------------- ----------------- -----------------
Investing activities:
Purchase of equipment on operating leases 352 (153,504) (11,796) -
Purchase of equipment on direct financing leases - (33,022) - -
Reductions in investment in direct financing leases 1,879,608 2,914,966 814,078 802,218
Reductions in investment in leveraged leases 259,681 236,190 118,952 115,622
Payments received on notes receivable (345,280) - (545,328) -
Proceeds from sales of assets 3,551,993 1,523,535 948,112 427,991
---------------- ----------------- ----------------- -----------------
Net cash provided by investing activities 5,346,354 4,488,165 1,324,018 1,345,831
---------------- ----------------- ----------------- -----------------
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENT 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
---- ---- ---- ----
<S> <C> <C> <C> <C>
Financing activities:
Proceeds of non-recourse debt - 5,092,723 - -
Borrowings under line of credit 1,000,000 - 500,000 -
Repayments of non-recourse debt (7,485,362) (5,788,780) (2,606,580) (2,228,261)
Repayment of line of credit - (7,921,190) - (1,200,000)
Distributions to limited partners (11,103,092) (10,307,769) (3,748,862) (3,436,773)
---------------- ----------------- ----------------- -----------------
Net cash used in financing activities (17,588,454) (18,925,016) (5,855,442) (6,865,034)
---------------- ----------------- ----------------- -----------------
Net increase (decrease) in cash and cash
equivalents 465,446 (1,417,329) 496,939 (1,544,350)
Cash and cash equivalents at beginning
of period 733,263 1,917,349 701,770 2,044,370
---------------- ----------------- ----------------- -----------------
Cash and cash equivalents at end of period $1,198,709 $500,020 $1,198,709 $500,020
================ ================= ================= =================
Supplemental disclosure of cash flow information:
Cash paid for interest during period $2,247,761 $2,759,552 $755,692 $867,856
================ ================= ================= =================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(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. Organization and partnership matters:
ATEL Cash Distribution Fund V, L.P. (the Partnership), was formed under the laws
of the State of California on September 23, 1992, 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 6, 1992, $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 19, 1993,
the Partnership commenced operations. The Fund or the General Partner on behalf
of the Fund, will incur costs in connection with the organization, registration
and issuance of the Units. The amount of such costs to be born by the Fund is
limited by certain provisions in the Agreement of Limited Partnership.
The Fund does not make a provision for income taxes since all income and losses
will be allocated to the Partners for inclusion in their individual tax returns.
3. 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 $74,586,944 ($8,454,185) $393,347 $66,526,106
Net investment in direct financing
leases 25,128,971 (1,879,608) (3,696,964) 19,552,399
Net investment in leveraged leases 2,909,776 (259,681) - 2,650,095
Residual value interests 835,759 - - 835,759
Equipment held for sale or lease 65,533 - (37,456) 28,077
Initial direct costs, net of
accumulated amortization of
$2,474,583 in 1997 and
$2,431,130 in 1998. 2,070,421 (508,217) - 1,562,204
Reserve for losses (2,199,400) ($55,409) - - (2,254,809)
----------------- ---------------- ----------------- ----------------- -----------------
$103,398,004 ($55,409) ($11,101,691) ($3,341,073) $88,899,831
================= ================ ================= ================= =================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
3. Investments in leases (continued):
The following schedule provides an analysis of the Partnership's investment in
property on operating leases by major classifications as of December 31, 1997,
acquisitions and dispositions during the quarters ended March 31, June 30 and
September 30, 1998 and as of September 30, 1998.
<TABLE>
<CAPTION>
December 31, Acquisitions, Dispositions & Reclassifications September 30,
1997 1st Quarter 2nd Quarter 3rd Quarter 1998
---- ----------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
Transportation $41,483,244 $2,194,026 ($1,826,129) ($54,685) $41,796,456
Construction 24,075,113 - - - 24,075,113
Materials handling 17,409,425 (9,069) - (269,889) 17,130,467
Mining 15,164,692 (3,309,174) - - 11,855,518
Furniture and fixtures 5,977,981 - - - 5,977,981
Manufacturing 3,475,585 - (113,673) - 3,361,912
Printing 2,325,000 - - - 2,325,000
Office automation 2,378,155 - (426,420) (13,308) 1,938,427
Food processing 1,826,162 - - - 1,826,162
Other 278,396 - - - 278,396
----------------- ---------------- ----------------- ----------------- -----------------
114,393,753 (1,124,217) (2,366,222) (337,882) 110,565,432
Less accumulated depreciation (39,806,809) (527,286) (1,164,986) (2,540,245) (44,039,326)
----------------- ---------------- ----------------- ----------------- -----------------
$74,586,944 ($1,651,503) ($3,531,208) ($2,878,127) $66,526,106
================= ================ ================= ================= =================
</TABLE>
All of the property on operating leases was acquired during 1993, 1994, 1995,
1996 and 1997.
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 $4,733,461 $1,395,770 $6,129,231
Year ending December 31, 1998 10,624,276 4,576,393 15,200,669
2000 6,325,404 3,790,243 10,115,647
2001 4,480,595 3,118,913 7,599,508
2002 2,640,019 2,771,153 5,411,172
Thereafter 6,894,053 6,613,951 13,508,004
---------------- ----------------- -----------------
$35,697,808 $22,266,423 $57,964,231
================ ================= =================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
3. Investments in leases (continued):
Direct financing leases:
The following lists the components of the Partnership's investment in direct
financing leases as of September 30, 1998.
Total minimum lease payments receivable $22,266,423
Estimated residual values of leased equipment (unguaranteed) 6,014,073
-------------
Investment in direct financing leases 28,280,496
Less unearned income (8,728,097)
-------------
Net investment in direct financing leases $19,552,399
=============
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
8% 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 $2,588,381 $658,799 $3,247,180
Year ending December 31, 1999 7,891,017 2,083,413 9,974,430
2000 5,680,723 1,506,847 7,187,570
2001 4,586,627 1,066,950 5,653,577
2002 2,918,650 703,533 3,622,183
Thereafter 8,987,640 4,009,255 12,996,895
---------------- ----------------- -----------------
$32,653,038 $10,028,797 $42,681,835
================ ================= =================
</TABLE>
5. Related party transactions:
The terms of the Agreement of Limited Partnership 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
amounts above are gross amounts incurred by the General Partner and/or
affiliates, including commissions to broker-dealers for the sales of Limited
Partnership Units.
The General Partner and/or Affiliates earned the following fees and commissions,
pursuant to the Agreement of Limited Partnership as follows:
1998 1997
---- ----
Equipment and incentive management fees $989,811 $1,157,564
Reimbursement of administrative costs 300,998 304,646
----------------- -----------------
$1,290,809 $1,462,210
================= =================
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
6. Partner's capital:
The Fund is authorized to issue up to 12,500,000 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 Agreement of Limited Partnership, 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, 1998. The agreement includes an
acquisition facility and a warehouse facility which are used 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. Borrowings on the warehouse facility are recourse
jointly to certain of the Affiliates, the Partnership and the General Partner.
At September 30, 1998, the Partnership had $1,000,000 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, 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 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 $58,317,911. The
remaining unpaid balance as of that date was $32,653,038. 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 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.
In 1998, the Partnership's most significant source of cash was lease rents.
Cash flows - 1998 vs. 1997:
In both 1998 and 1997, the Partnership's primary source of operating cash flows
was operating lease rents. Operating lease rents have decreased by $1,286,414
(8%) as a result of asset sales over the last year.
In 1998 the largest source of cash from investing activities was the proceeds
from sales of lease assets. In 1998, lease rents from direct financing and
leveraged lease transactions also provided a significant amount of cash flows.
In 1997, the largest source of cash from investing activities was rents from
direct financing leases.
In 1998 and 1997, the only financing sources of cash were borrowings, either as
the proceeds of non-recourse debt (1997) or as borrowings on the line of credit
(1998).
<PAGE>
Results of operations - 1998 vs. 1997
Operating leases are the Partnership's primary source of revenues. Such revenues
decreased by $1,286,414 (8%) compared to 1997. The decrease resulted from asset
sales over the last year. Depreciation expense is directly related to operating
lease assets and has also decreased compared to 1997 as a result of these asset
sales. Management fees are based on the Partnership's revenues and its
distributions to the Limited Partners. As a result of the decrease in lease
revenues, management fees have declined compared to 1997. Debt balances have
been reduced by scheduled debt payments and this has resulted in the decrease of
$599,461 in interest expense compared to 1997.
Other
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' capital for the
nine months 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 V, 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> 1,198,709
<SECURITIES> 0
<RECEIVABLES> 2,333,168
<ALLOWANCES> 100,605
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 93,058,431
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 56,425,399
<TOTAL-LIABILITY-AND-EQUITY> 93,058,431
<SALES> 0
<TOTAL-REVENUES> 15,953,304
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,835,534
<LOSS-PROVISION> 55,409
<INTEREST-EXPENSE> 2,148,109
<INCOME-PRETAX> 2,914,252
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,914,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,914,252
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
