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, 1996
|_| 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 33-81952
ATEL Cash Distribution Fund VI, L.P.
(Exact name of registrant as specified in its charter)
California 94-3207229
(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
Report on Form 8-K dated March 29, 1996, filed April 12, 1996 (Commission File
No. 33-81952) is hereby incorporated by reference into Part II hereof.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Unaudited)
ASSETS
1996 1995
---- ----
Cash and cash equivalents $3,796,198 $2,074,913
Accounts receivable 1,123,355 2,006,703
Investments in leases 123,799,691 92,802,029
----------------- ------------------
Total assets $128,719,244 $96,883,645
================= ==================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $18,321,513 $836,181
Lines of credit 42,326,836 38,368,672
Accounts payable:
General Partner 1,091,653 1,279,066
Equipment purchases 4,560,538 5,176,506
Other 295,933 117,483
Accrued interest payable 35,800 230,967
Unearned operating lease income 420,747 298,733
----------------- ------------------
Total liabilities 67,053,020 46,307,608
Partners' capital:
General Partner (34,109) (23,675)
Limited Partners 61,700,333 50,599,712
----------------- ------------------
Total partners' capital 61,666,224 50,576,037
----------------- ------------------
Total liabilities and partners' capital $128,719,244 $96,883,645
================= ==================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1995
(Unaudited)
Revenues: 1996 1995
---- ----
Leasing activities:
Operating leases $3,991,927 $769,009
Direct financing leases 56,311 -
Gain on sales of assets 5,524 1,429
Interest 16,286 -
Other 1,328 530
----------------- ------------------
4,071,376 770,968
Expenses:
Depreciation and amortization 3,302,083 510,166
Interest expense 767,632 361,640
Administrative cost reimbursements to
General Partner 116,780 68,306
Equipment and incentive management fees to
General Partner 276,360 35,630
Other 17,309 30,530
Professional fees 43,865 14,192
Provision for losses 40,714 7,710
----------------- ------------------
4,564,743 1,028,174
----------------- ------------------
Net loss ($493,367) ($257,206)
================= ==================
Net loss:
General Partner ($4,934) ($2,572)
Limited Partners (488,433) (254,634)
----------------- ------------------
($493,367) ($257,206)
================= ==================
Net loss per Limited Partnership Unit ($0.07) ($0.33)
Weighted average number of Units outstanding 7,041,804 775,945
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTH PERIOD
ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
<S> <C> <C> <C> <C>
Balance December 31, 1995 6,269,013 $50,599,712 ($23,675) $50,576,037
Capital contributions 1,483,928 14,839,280 - 14,839,280
Less selling commissions to affiliates (1,409,732) - (1,409,732)
Other syndication costs to affiliates (241,832) - (241,832)
Distributions to partners (1,598,662) (5,500) (1,604,162)
Net loss (488,433) (4,934) (493,367)
----------------- ----------------- ----------------- ------------------
Balance March 31, 1996 7,752,941 $61,700,333 ($34,109) $61,666,224
================= ================= ================= ==================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1995
Operating activities: 1996 1995
---- ----
Net loss ($493,367) ($257,206)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 3,302,083 510,166
Gain on sales of assets (5,524) (1,429)
Provision for losses 40,714 7,710
Changes in operating assets and
liabilities:
Accounts receivable 883,348 (317,287)
Accounts payable, General Partner (187,413) 94,065
Accounts payable, other 178,450 10,228
Accrued interest payable (195,167) -
Unearned lease income 122,014 28,857
----------------- ------------------
Net cash provided by operations 3,645,138 75,104
----------------- ------------------
Investing activities:
Purchases of equipment on operating leases (33,742,387) (14,009,836)
Purchases of equipment on direct financing
leases - (25,030)
Purchase of residual interests (335,140) -
Reduction of net investment in direct
financing leases 116,867 -
Initial direct costs paid to General Partner (1,066,168) (456,133)
Proceeds from sales of assets 75,925 31,531
----------------- ------------------
Net cash used in investing activities (34,950,903) (14,459,468)
----------------- ------------------
Financing activities:
Borrowings under line of credit 26,274,173 11,950,501
Repayments of borrowings under line of credit (22,316,009) (9,650,000)
Proceeds of non-recourse debt 17,720,449 -
Repayments of non-recourse debt (235,117) -
Unadmitted subscriptions for Limited
Partnership Units - 808,930
Capital contributions received 14,839,280 15,315,940
Payment of syndication costs to General
Partner (1,651,564) (2,152,166)
Distributions to partners (1,604,162 (70,312)
----------------- ------------------
Net cash provided by financing activities 33,027,050 16,202,893
----------------- ------------------
Net increase in cash and cash equivalents 1,721,285 1,818,529
Cash and cash equivalents at beginning of
period 2,074,913 600
----------------- ------------------
Cash and cash equivalents at end of period $3,796,198 $1,819,129
================= ==================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $767,632 $361,640
================= ==================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(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 VI, L.P. (the Fund), was formed under the laws of
the State of California on June 29 , 1994, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. Contributions in
the amount of $600 were received as of July 21, 1994, $100 of which represented
the General Partner's (ATEL Financial Corporation'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 January 3,
1995, the Partnership commenced operations.
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.
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,
1995 Additions of Leases Dispositions 1996
---- --------- --------- --------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $87,360,104 $33,126,418 ($3,143,148) ($70,401) $117,272,973
Net investment in direct
financing leases 2,765,945 - (116,867) - 2,649,078
Residual interests - 335,140 - - 335,140
Assets held for sale or lease 45,160 - (7,392) - 37,768
Reserve for losses (64,892) (40,714) - - (105,606)
Initial direct costs, net of
accumulated amortization 2,695,712 1,066,168 (151,542) - 3,610,338
------------------- ----------------- ----------------- ----------------- ------------------
$92,802,029 $34,487,012 ($3,418,949) ($70,401) $123,799,691
=================== ================= ================= ================= ==================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
<TABLE>
<CAPTION>
Balance Balance
December 31, March 31,
1995 Additions Dispositions 1996
---- --------- ------------ ----
<S> <C> <C> <C> <C>
Transportation $58,140,854 $28,237,996 ($77,140) $86,301,710
Construction 14,741,280 1,849,333 - 16,590,613
Materials handling 12,919,801 2,546,032 - 15,465,833
Office automation 5,015,082 175,537 - 5,190,619
Manufacturing 1,298,697 317,520 - 1,616,217
----------------- ----------------- ----------------- ------------------
92,115,714 33,126,418 (77,140) 125,164,992
Less accumulated depreciation (4,755,610) (3,143,148) 6,739 (7,892,019)
----------------- ----------------- ----------------- ------------------
$87,360,104 $29,983,270 ($70,401) $117,272,973
================= ================= ================= ==================
</TABLE>
As of December 31, 1995, investment in direct financing leases consists of
railroad tank cars and various office automation equipment. The following lists
the components of the Partnership's investment in direct financing leases as of
March 31, 1996:
Total minimum lease payments receivable $1,680,889
Estimated residual values of leased equipment (unguaranteed) 1,292,219
------------------
Investment in direct financing leases 2,973,108
Less unearned income (324,030)
------------------
Net investment in direct financing leases $2,649,078
==================
All of the property on leases was acquired in 1995 and 1996. There were no
significant dispositions of such property.
At March 31, 1996, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
1996 $13,791,213 $505,248 $14,296,461
1997 17,905,021 677,663 18,582,684
1998 14,791,250 317,770 15,109,020
1999 11,723,956 120,139 11,844,095
2000 8,941,315 60,069 9,001,384
Thereafter 25,079,436 - 25,079,436
----------------- ----------------- -----------------
$92,232,191 $1,680,889 $93,913,080
================= ================= =================
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
4. 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:
1996 1995
---- ----
Selling commissions (equal to 9.5% of the
selling price of the Limited Partnership
units, deducted from Limited Partners' capital) $1,409,732 $1,455,014
Reimbursement of other syndication costs 241,832 697,152
Acquisition fees equal to 3% (3.25% prior
to July 1, 1995) of the equipment purchase
price, for evaluating and selecting equipment
to be acquired (not to exceed approximately
4.5% of Gross Proceeds, included in investment
in leases) 1,066,168 456,133
Incentive management fees (computed as
4% 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). 276,360 35,630
Administrative costs reimbursed to General
Partner 116,780 68,306
----------------- ------------------
$3,110,872 $2,712,235
================= ==================
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
5. Partner's capital:
As of March 31, 1996, 7,752,941 Units ($77,529,410) were issued and outstanding.
The Fund's registration statement with the Securities and Exchange Commission
became effective November 23, 1994. The Fund is authorized to issue up to
12,500,050 Units, including the 50 Units issued to the initial limited partners.
The Partnership Net Profits, Net Losses, and Tax Credits are to be allocated 99%
to the Limited Partners and 1% to the General Partner.
Available Cash from Operations and Cash from Sales and Refinancing, as defined
in the Limited Partnership Agreement, shall be distributed as follows:
First, 95.75% (95% prior to July 1, 1995) of Distributions of Cash from
Operations to the Limited Partners, 1% of Distributions of Cash from Operations
to the General Partner and 3.25% (4% prior to July 1, 1995) to an affiliate of
the General Partner as Incentive Management Compensation, 99% of Distributions
of Cash from Sales or Refinancing to the Limited Partners and 1% of Cash from
Sales or Refinancing to the General Partner.
Second, the balance to the Limited Partners until the Limited Partners have
received Aggregate Distributions 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.
Third, an affiliate of the General Partner will receive as Incentive Management
Compensation, 4% of remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
6. Line of credit:
The Partnership participates with ATEL and certain of its Affiliates in a
$70,000,000 revolving line of credit with a financial institution that includes
certain financial covenants. The line of credit expires on January 31, 1997.
The current line of credit, when used, is collateralized by (i) specific lease
assets assigned or (ii) all lease receivables and other lease related proceeds
owned by the Partnership, all equipment subject to leases and related insurance
policies and maintenance contracts owned by the Partnership and all deposit
accounts with the lender and all cash on deposit.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first quarter of 1996, the Partnership's primary activities were
raising funds through its offering of Limited Partnership Units (Units) and
engaging in equipment leasing activities. Through March 31, 1996, the
Partnership had received subscriptions for 7,752,941 Units ($77,529,410) all of
which were issued and outstanding.
During the funding period, the Partnership's primary source of liquidity is
subscription proceeds from the public offering of Units. 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.
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 $70,000,000 revolving line of credit with a financial
institution. The line of credit expires on January 31, 1997.
The current line of credit, when used, is collateralized by (i) specific lease
assets assigned or (ii) all lease receivables and other lease related proceeds
owned by the Partnership, all equipment subject to leases and related insurance
policies and maintenance contracts owned by the Partnership and all deposit
accounts with the lender and all cash on deposit.
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, nor have they explored with lenders the possibility of
obtaining loans. There can be no assurance as to the terms of any such financing
or that the Partnership will be able to obtain such loans.
Through March 31, 1996, the Partnership had borrowed $18,663,985 on a
non-recourse basis. As of that date, $18,321,513 remained outstanding. The
General Partner expects that aggregate borrowings in the future will not exceed
50% of aggregate equipment cost. In any event, the Agreement of Limited
Partnership limits such borrowings to 50% 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. Such commitments totaled approximately
$30,968,000 as of May 1, 1996.
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.
During the first quarter of 1996, the Partnership's primary sources of liquidity
were the proceeds of its offering of Units and funds borrowed on the line of
credit or on a non-recourse basis.
Cash from operating activities was almost entirely from operating lease rents.
Proceeds from the sales of assets and direct financing lease rents accounted for
as reductions of the Partnership's net investment in direct financing leases
were the only investing sources of cash. They were not significant relative to
other sources of cash. The primary investing use of cash was the purchase of
assets on operating and direct financing leases and initial direct costs related
to those purchases.
Cash from financing sources consisted of cash received for subscriptions for
Units, proceeds of non-recourse debt and borrowings under the line of credit.
The purchase of lease assets was primarily funded with borrowings on this line
of credit and the non-recourse debt proceeds.
Results of operations
Operations resulted in a net loss of $493,367 in 1996 and a net loss of $257,206
in 1995. The Partnership's primary source of revenues is from operating leases.
This is expected to remain true in future periods although the amounts are
expected to increase as a result of additional equipment acquisitions.
Depreciation expense is the single largest expense of the Partnership and is
expected to remain so in future periods although at a higher amount. Equipment
management fees are based on the Partnership's rental revenues and are expected
to increase in relation to expected increases in the Partnership's revenues from
leases. Incentive management fees are based on the levels of distributions to
limited partners. As the effective distribution rate increases and as the number
of units outstanding increases (as a result of the continuing offering of such
units), the incentive management fee is expected to increase. Interest expense
has increased due to higher debt balances in 1996 compared to 1995. Interest
expense for the first quarter of 1995 related to the borrowings under the line
of credit. It included all amounts related to those borrowings, going back as
far as September 1994 when the General Partner started to fund the related
transactions on behalf of the Partnership. All of the revenues and related
carrying costs for these transactions have been attributed to the Partnership in
the first quarter of 1995.
<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, 1996 and December 31, 1995.
Statement of changes in partners' capital for the three
months ended March 31, 1996.
Statements of operations for the three month periods ended
March 31, 1996 and 1995.
Statements of cash flows for the three month periods ended
March 31, 1996 and 1995.
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
Report dated March 29, 1996.
<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 10, 1996
ATEL CASH DISTRIBUTION FUND VI, 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3796198
<SECURITIES> 0
<RECEIVABLES> 1123355
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 128719244
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 61666224
<TOTAL-LIABILITY-AND-EQUITY> 128719244
<SALES> 0
<TOTAL-REVENUES> 4071376
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3756397
<LOSS-PROVISION> 40714
<INTEREST-EXPENSE> 767632
<INCOME-PRETAX> (493367)
<INCOME-TAX> 0
<INCOME-CONTINUING> (493367)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (493367)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
