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, 1997
|_| 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 000-28368
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
None
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(Unaudited)
ASSETS
1997 1996
---- ----
Cash and cash equivalents $812,610 $1,123,336
Accounts receivable 6,141,086 6,198,258
Investments in leases 178,786,474 185,510,097
----------------- ------------------
Total assets $185,740,170 $192,831,691
================= ==================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $78,605,611 $80,789,732
Lines of credit 14,500,000 15,598,257
Accounts payable:
General Partner 160,028 45,070
Equipment purchases 441,852 638,379
Other 318,573 415,008
Accrued interest payable 2,019,582 1,746,206
Unearned operating lease income 591,158 397,883
----------------- ------------------
Total liabilities 96,636,804 99,630,535
Partners' capital:
General Partner (128,374) (118,690)
Limited Partners 89,231,740 93,319,846
----------------- ------------------
Total partners' capital 89,103,366 93,201,156
----------------- ------------------
Total liabilities and partners' capital $185,740,170 $192,831,691
================= ==================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenues:
Leasing activities:
Operating leases $8,800,728 $3,991,927
Direct financing leases 65,241 56,311
Gain on sales of assets 10,805 5,524
Interest 5,872 16,286
Other 1,965 1,328
----------------- ------------------
8,884,611 4,071,376
Expenses:
Depreciation and amortization 6,959,760 3,302,083
Interest expense 2,135,295 767,632
Administrative cost reimbursements to General Partner 98,526 116,780
Equipment and incentive management fees to General Partner 363,186 276,360
Other 189,367 17,309
Professional fees 18,036 43,865
Provision for losses 88,846 40,714
----------------- ------------------
9,853,016 4,564,743
----------------- ------------------
Net loss ($968,405) ($493,367)
================= ==================
Net loss:
General Partner ($9,684) ($4,934)
Limited Partners (958,721) (488,433)
----------------- ------------------
($968,405) ($493,367)
================= ==================
Net loss per Limited Partnership Unit ($0.08) ($0.07)
Weighted average number of Units outstanding 12,500,050 7,041,804
</TABLE>
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, 1996 12,500,050 $93,319,846 ($118,690) $93,201,156
Other syndication costs to affiliates (31,547) - (31,547)
Distributions to partners (3,097,838) - (3,097,838)
Net loss (958,721) (9,684) (968,405)
----------------- ----------------- ----------------- ------------------
Balance March 31, 1997 12,500,050 $89,231,740 ($128,374) $89,103,366
================= ================= ================= ==================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Operating activities:
Net loss ($968,405) ($493,367)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 6,959,760 3,302,083
Gain on sales of assets (10,805) (5,524)
Provision for losses 88,846 40,714
Changes in operating assets and liabilities:
Accounts receivable 57,172 883,348
Accounts payable, General Partner 114,958 (187,413)
Accounts payable, other (96,435) 178,450
Accrued interest payable 273,376 (195,167)
Unearned lease income 193,275 122,014
----------------- ------------------
Net cash provided by operations 6,611,742 3,645,138
----------------- ------------------
Investing activities:
Purchases of equipment on operating leases (735,210) (33,742,387)
Purchases of equipment on direct financing leases (33,815) -
Purchase of residual interests - (335,140)
Reduction of net investment in direct financing leases 148,465 116,867
Initial direct costs paid to General Partner - (1,066,168)
Proceeds from sales of assets 109,855 75,925
----------------- ------------------
Net cash used in investing activities (510,705) (34,950,903)
----------------- ------------------
Financing activities:
Borrowings under line of credit - 26,274,173
Repayments of borrowings under line of credit (1,098,257) (22,316,009)
Proceeds of non-recourse debt 911,036 17,720,449
Repayments of non-recourse debt (3,095,157) (235,117)
Capital contributions received - 14,839,280
Payment of syndication costs to General Partner (31,547) (1,651,564)
Distributions to partners (3,097,838) (1,604,162)
----------------- ------------------
Net cash (used in) provided by financing activities (6,411,763) 33,027,050
----------------- ------------------
Net (decrease) increase in cash and cash equivalents (310,726) 1,721,285
Cash and cash equivalents at beginning of period 1,123,336 2,074,913
----------------- ------------------
Cash and cash equivalents at end of period $812,610 $3,796,198
================= ==================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $1,861,919 $767,632
================= ==================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(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,
1996 Additions of Leases Dispositions 1997
---- --------- --------- - ------------- ----
<S> <C> <C> <C> <C> <C>
Net investment in operating
leases $177,700,195 $538,683 ($6,634,451) ($64,858) $171,539,569
Net investment in direct
financing leases 3,442,129 33,815 (148,465) - 3,327,479
Residual interests 379,551 - - - 379,551
Assets held for sale or lease 44,318 - - (34,192) 10,126
Reserve for losses (322,706) (88,846) - - (411,552)
Initial direct costs, net of
accumulated amortization 4,266,610 - (325,309) - 3,941,301
------------------- ----------------- ----------------- ----------------- ------------------
$185,510,097 $483,652 ($7,108,225) ($99,050) $178,786,474
=================== ================= ================= ================= ==================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
<TABLE>
<CAPTION>
Balance Balance
December 31, March 31,
1996 Additions Dispositions 1997
---- --------- ------------ ----
<S> <C> <C> <C> <C>
Transportation $101,516,495 ($67,540) $101,448,955
Construction 32,643,774 - 32,643,774
Manufacturing 30,738,706 - 30,738,706
Materials handling 18,727,504 - 18,727,504
Office automation 11,352,842 $538,683 - 11,891,525
Miscellaneous 3,683,663 - - 3,683,663
Communications 658,185 - - 658,185
Medical 343,409 - - 343,409
Food processing 317,520 - - 317,520
----------------- ----------------- ----------------- ------------------
199,982,098 538,683 (67,540) 200,453,241
Less accumulated depreciation (22,281,903) ($6,634,451) 2,682 (28,913,672)
----------------- ----------------- ----------------- ------------------
$177,700,195 ($6,095,768) ($64,858) $171,539,569
================= ================= ================= ==================
</TABLE>
All of the property on leases was acquired in 1995, 1996 and 1997. There were no
significant dispositions of such property.
At March 31, 1997, the aggregate amounts of future minimum lease payments are as
follows:
<TABLE>
<CAPTION>
Direct
Year ending Operating Financing
December 31, Leases Leases Total
<S> <C> <C> <C> <C>
1997 $21,860,465 $879,439 $22,739,904
1998 32,474,951 471,458 32,946,409
1999 29,393,780 231,052 29,624,832
2000 24,903,636 170,983 25,074,619
2001 15,548,120 105,538 15,653,658
Thereafter 34,015,320 592,560 34,607,880
----------------- ----------------- -----------------
$158,196,272 $2,451,030 $160,647,302
================= ================= =================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
6.5% to 10.53%.
Future minimum principal payments of non-recourse debt are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Principal Interest Total
<S> <C> <C> <C> <C>
1997 $9,320,172 $2,791,281 $12,111,453
1998 14,143,884 7,190,862 21,334,746
1999 15,845,346 4,428,644 20,273,990
2000 12,941,483 3,207,920 16,149,403
2001 6,541,467 2,282,609 8,824,076
Thereafter 19,813,259 7,228,370 27,041,629
----------------- ----------------- -----------------
$78,605,611 $27,129,686 $105,735,297
================= ================= =================
</TABLE>
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.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
5. Related party transactions (continued):
The General Partner and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Selling commissions (equal to 9.5% of the selling price of the Limited Partnership
units, deducted from Limited Partners' capital) $1,409,732
Reimbursement of other syndication costs $31,547 241,832
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
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). 363,186 276,360
Administrative costs reimbursed to General Partner 98,526 116,780
----------------- ------------------
$493,259 $3,110,872
================= ==================
</TABLE>
6. Partner's capital:
As of March 31, 1996, 12,500,050 Units ($125,000,500) were issued and
outstanding.
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.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
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, 1997. 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 March 31, 1997, the Partnership had $14,500,000 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 March 31,
1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first quarter of 1997, the Partnership's primary activity was
engaging in equipment leasing activities.
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 $90,000,000 revolving line of credit with a financial
institution. The line of credit expires on October 28, 1997.
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.
Through March 31, 1997, the Partnership had borrowed $86,530,552 on a
non-recourse basis. As of that date, $78,605,611 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
$4,323,000 as of May 1, 1997.
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>
During the first quarter of 1997, the Partnership's primary source of cash was
rents from operating leases. During the first quarter of 1996, the 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 in
both years.
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 (in 1996) initial direct
costs related to those purchases.
In 1997, the only financing source of cash was proceeds of non-recourse debt.
Those proceeds were used to make repayments on the line of credit. Repayments of
non-recourse debt have increased compared to 1996. The increase resulted from
making scheduled payments on non-recourse debt, the balances of which have
increased due to borrowings over the last twelve months. Distributions have
increased due to the increase in the number of Units outstanding compared to
1996.
In 1996, 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 $968,405
in 1997. The Partnership's primary source of revenues is from operating leases.
Depreciation expense is directly related to operating lease assets. During the
last year, there have been significant acquisitions of operating lease assets.
This has given rise to the increase in depreciation expense and to the increase
in operating lease revenues.
From April 1996 through March 1997, the Partnership borrowed approximately
$67,867,000 on non-recourse debt. This has led to the increase in interest
expense from $767,632 in 1996 to $2,135,295 in 1997.
<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, 1997 and December 31, 1996.
Statement of changes in partners' capital for the three
months ended March 31, 1997.
Statements of operations for the three month periods ended
March 31, 1997 and 1996.
Statements of cash flows for the three month periods ended
March 31, 1997 and 1996.
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, 1997
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 812,610
<SECURITIES> 0
<RECEIVABLES> 6,141,086
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 185,740,170
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 89,103,366
<TOTAL-LIABILITY-AND-EQUITY> 185,740,170
<SALES> 0
<TOTAL-REVENUES> 8,884,611
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,628,875
<LOSS-PROVISION> 88,846
<INTEREST-EXPENSE> 2,135,295
<INCOME-PRETAX> (968,405)
<INCOME-TAX> 0
<INCOME-CONTINUING> (968,405)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (968,405)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
