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 March 31, 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.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(Unaudited)
ASSETS
1998 1997
---- ----
Cash and cash equivalents $303,122 $733,263
Accounts receivable 2,076,985 2,194,261
Notes receivable, net of allowance for
doubtful account of $100,605 in 1997
and 1998 364,214 382,048
Investments in leases 98,876,658 103,398,004
----------------- -----------------
Total assets $101,620,979 $106,707,576
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $37,737,922 $40,138,400
Accounts payable:
Equipment purchases 178,200 178,200
General Partner 317,507 317,715
Other 273,769 235,068
Accrued interest expense 204,714 219,569
Unearned operating lease income 958,914 1,004,385
----------------- -----------------
Total liabilities 39,671,026 42,093,337
Partners' capital:
General Partner 78,625 69,221
Limited Partners 61,871,328 64,545,018
----------------- -----------------
Total partners' capital 61,949,953 64,614,239
----------------- -----------------
Total liabilities and partners' capital $101,620,979 $106,707,576
================= =================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
INCOME STATEMENTS
THREE MONTH PERIODS ENDED
MARCH 31, 1998 AND 1997
(Unaudited)
Revenues: 1998 1997
---- ----
Leasing activities:
Operating leases $4,776,238 $5,099,467
Direct financing leases 644,450 732,441
Leveraged leases 27,442 40,373
Gain on sales of assets 77,089 73,417
Interest income 5,899 11,876
Other 9,819 2,227
----------------- -----------------
5,540,937 5,959,801
Expenses:
Depreciation and amortization 3,101,427 3,637,731
Interest expense 770,699 920,880
Equipment and incentive management
fees to General Partner 404,327 399,373
Administrative cost reimbursements
to General Partner 119,511 90,436
Provision for losses 55,409 59,598
Professional fees 12,633 12,342
Other 136,493 120,837
----------------- -----------------
4,600,499 5,241,197
----------------- -----------------
Net income $940,438 $718,604
================= =================
Net income:
General Partner $9,404 $7,186
Limited Partners 931,034 711,418
----------------- -----------------
$940,438 $718,604
================= =================
Net income per Limited Partnership Unit $0.07 $0.06
Weighted average number of Units outstanding 12,497,000 12,497,000
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTH PERIOD
ENDED MARCH 31, 1997
(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 (3,604,724) - (3,604,724)
Net income 931,034 9,404 940,438
----------------- ---------------- ----------------- -----------------
Balance March 31, 1998 12,497,000 $61,871,328 $78,625 $61,949,953
================= ================ ================= =================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Operating activities:
Net income $940,438 $718,604
Adjustment to reconcile net income to cash provided by operating activities:
Depreciation and amortization 3,101,427 3,637,731
Gain on sales of lease assets (77,089) (73,417)
Provision for losses 55,409 59,598
Changes in operating assets and liabilities:
Accounts receivable 117,276 903,035
Accounts payable, General Partner (208) (155,525)
Accounts payable, other 38,701 4,735
Accrued interest expense (14,855) (27,487)
Unearned operating lease income (45,471) (117,301)
----------------- -----------------
Net cash provided by operations 4,115,628 4,949,973
----------------- -----------------
Investing activities:
Purchases of equipment on operating leases - (132,900)
Reduction of net investment in direct financing leases 771,536 668,473
Proceeds from sales of lease assets 544,360 408,582
Payments received on notes receivable 17,834 -
Reduction of net investment in leveraged leases 125,703 115,622
Purchases of equipment on direct financing leases - (33,022)
----------------- -----------------
Net cash used in investing activities 1,459,433 1,026,755
----------------- -----------------
Financing activities:
Repayments of borrowings under line of credit - (2,721,190)
Proceeds of non-recourse debt - 1,121,365
Repayments of non-recourse debt (2,400,478) (1,730,155)
Distributions to Limited Partners (3,604,724) (3,435,311)
----------------- -----------------
Net cash (used in) provided by financing activities (6,005,202) (6,765,291)
----------------- -----------------
Net (decrease) increase in cash and cash equivalents (430,141) (788,563)
Cash and cash equivalents at beginning of period 733,263 1,917,349
----------------- -----------------
Cash and cash equivalents at end of period $303,122 $1,128,786
================= =================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $785,554 $948,367
================= =================
Supplemental schedule of non-cash transactions:
Leveraged lease assets reclassified to operating lease assets $902,362
=================
Operating lease assets reclassified to assets held or sale or lease $1,723,233 $55,818
================= =================
Direct financing lease assets reclassified as operating lease assets $2,233,747
=================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(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 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 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 November 15, 1994, the Partnership had received subscriptions for
12,500,000 Limited Partnership Units ($125,000,000) in addition to the Initial
Limited Partners' 50 Units. Of those Units, 12,497,000 ($124,970,000) were
issued and outstanding as of March 31, 1998.
The Partnership 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.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
3. Investment in leases:
The Partnership's investment in leases consists of the following:
<TABLE>
<CAPTION>
Depreciation
Balance Expense or Reclassi- Balance
December 31, Amortization fications or March 31,
1997 Additions of Leases Dispositions 1998
---- --------- --------- - ------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $74,586,944 ($2,912,752) $1,261,249 $72,935,441
Net investment in direct
financing leases 25,128,971 (771,536) (2,223,772) 22,133,663
Net investment in leveraged
leases 2,909,776 (125,703) - 2,784,073
Residual value interests 835,759 835,759
Assets held for sale or lease 65,533 - 495,252 560,785
Reserve for losses (2,199,400) ($55,409) - - (2,254,809)
Initial direct costs, net of
accumulated amortization of
$2,474,583 in 1997 and
$2,166,890 in 1998 2,070,421 (188,675) 1,881,746
-------------------- ----------------- ---------------- ----------------- -----------------
$103,398,004 ($55,409) ($3,998,666) ($467,271) $98,876,658
==================== ================= ================ ================= =================
</TABLE>
Property on operating leases consists of the following:
<TABLE>
<CAPTION>
Balance 1st Quarter Balance
December 31, Reclassifications March 31,
1997 Acquisitions & Dispositions 1998
---- ------------ -------------- ----
<S> <C> <C> <C> <C>
Transportation $41,483,244 $2,194,026 $43,677,270
Construction 24,075,113 - 24,075,113
Mining 15,164,692 (3,309,174) 11,855,518
Materials handling 17,409,425 (9,069) 17,400,356
Furniture and fixtures 5,977,981 - 5,977,981
Printing 2,325,000 - 2,325,000
Food processing 1,826,162 - 1,826,162
Manufacturing 3,475,585 - 3,475,585
Office automation 2,378,155 - 2,378,155
Other 278,396 - 278,396
----------------- ---------------- ----------------- -----------------
114,393,753 (1,124,217) 113,269,536
Less accumulated depreciation (39,806,809) ($2,912,752) 2,385,466 (40,334,095)
----------------- ---------------- ----------------- -----------------
$74,586,944 ($2,912,752) $1,261,249 $72,935,441
================= ================ ================= =================
</TABLE>
All of the property on leases was acquired in 1993, 1994, 1995, 1996 and 1997.
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
3. Investment in leases (continued):
At March 31, 1998, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
1998 $13,696,403 $4,238,119 $17,934,522
1999 10,641,421 5,067,681 15,709,102
2000 6,338,109 3,980,177 10,318,286
2001 4,492,045 3,106,913 7,598,958
2002 2,643,365 2,759,153 5,402,518
Thereafter 6,894,053 6,613,952 13,508,005
----------------- ---------------- -----------------
$44,705,396 $25,765,995 $70,471,391
================= ================ =================
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
6.7% to 10.53%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1998 $7,673,264 $2,168,578 $9,841,842
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 8,987,641 4,009,255 12,996,896
----------------- ---------------- -----------------
$37,737,922 $11,538,576 $49,276,498
================= ================ =================
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(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 Limited Partnership Agreement allows for the reimbursement of costs incurred
by the General Partner in providing administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. The General
Partner is not reimbursed for services where it is entitled to receive a
separate fee as compensation for such services, such as acquisition and
management of equipment. Reimbursable costs incurred by the General Partner are
allocated to the Partnership based upon actual time incurred by employees
working on Partnership business and an allocation of rent and other costs based
on utilization studies.
Substantially all employees of the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. The General Partner believes that the costs reimbursed
are the lower of (i) actual costs incurred on behalf of the Partnership or (ii)
the amount the Partnership would be required to pay independent parties for
comparable administrative services in the same geographic location and are
reimbursable in accordance with the Limited Partnership Agreement.
The General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<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). $404,327 $399,373
Administrative costs reimbursed to General Partner 119,511 90,436
----------------- -----------------
$523,838 $489,809
================= =================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
6. Partner's capital:
As of March 31, 1998, 12,500,000 Units of Limited Partnership (Units) interest
were issued and outstanding (in addition to the 50 Units issued to the initial
Limited Partners). The Partnership is authorized to issue up to 12,500,000 Units
in addition to those issued to the initial Limited Partners.
The Partnership'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 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.
The Partnership had no borrowings under the agreement during 1998.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of March 31,
1998.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
In 1998 and 1997, the Partnership's primary source of cash was operating lease
rents. The liquidity of the Partnership will vary in the future, increasing to
the extent cash flows from leases and proceeds from asset sales exceed expenses,
and decreasing as lease assets are acquired, as distributions are made to the
limited partners and to the extent expenses exceed cash flows from leases and
proceeds from sales of assets.
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 October 28, 1998.
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 Partner envisions no such requirements for
operating purposes.
As of March 31, 1997, the Partnership had borrowed $58,317,911 on a non-recourse
basis with remaining unpaid balances of $37,737,922. Borrowings are to be
generally non-recourse to the Partnership, that is, the only recourse of the
lender upon a default by the lessee on the underlying lease will be to the
equipment or corresponding lease acquired 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.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. As of March 31, 1998, the Partnership
had 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>
Cash Flows
In both 1998 and 1997, the Partnership's primary operating source of cash was
revenues from operating leases. Operating lease revenues decreased by $323,229,
primarily as a result of sales of operating lease assets over the last year.
In 1998 and 1997, the Partnership's primary sources of cash from investing
activities were rents on direct financing and leveraged leases (accounted for as
reductions in the net investment in such leases) and proceeds from the sales of
lease assets. Cash was used in investing activities for the purchase of
operating lease assets and direct financing lease assets. Cash flows from direct
financing increased from 1997 due to amortization of direct financing leases and
the consequent change in the allocation of the rents under those leases between
revenues and these financing cash flows.
In 1998 and 1997, the single largest financing use of cash was distributions to
limited partners. The amount of such distributions increased from 1997 to 1998
due to an increase in the per Unit distribution rate. Distributions from
operations in the fourth quarter of 1996 (distributed in the first quarter of
1997) were less than the amounts distributed in the first quarter of 1998 (from
1997 fourth quarter operations).
As the Partnership pays down its non-recourse debt (through scheduled payments),
a larger portion of each payment is allocated to reduce the outstanding balance.
As a result of this and additional borrowings in 1997, the amounts of cash used
to repay debt has increased compared to 1997.
Results of operations
Operations resulted in net income of $940,438 in 1998 compared to $718,604 in
1997. The Partnership's primary source of revenues is from operating leases.
This is expected to remain true in future periods. Depreciation expense is
related to operating lease assets and is the single largest expense of the
Partnership. It is expected to remain so in future periods. Operating lease
revenues and depreciation expense have both decreased as a result of sales of
operating lease assets over the previous twelve months. Equipment management
fees are based on the Partnership's rental revenues and are expected to decrease
in relation to expected decreases in the Partnership's revenues from leases.
Incentive management fees are based on the levels of distributions to limited
partners. Management fees have not changed significantly compared to 1997.
Interest expense is expected to decrease significantly in future periods as
scheduled debt payments reduce the balances of non-recourse debt.
<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, March 31, 1998 and December 31, 1997.
Statements of income for the three month periods ended
March 31, 1998 and 1997.
Statement of changes in partners' capital for the three
months ended March 31, 1998.
Statements of cash flows for the three month periods
ended March 31, 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:
May 12, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 303,122
<SECURITIES> 0
<RECEIVABLES> 2,076,985
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 101,620,979
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 61,949,953
<TOTAL-LIABILITY-AND-EQUITY> 101,620,979
<SALES> 0
<TOTAL-REVENUES> 5,540,937
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,774,391
<LOSS-PROVISION> 55,409
<INTEREST-EXPENSE> 770,699
<INCOME-PRETAX> 940,438
<INCOME-TAX> 0
<INCOME-CONTINUING> 940,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 940,438
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
