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, 1999
|_| Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number 000-28368
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, 1999 AND DECEMBER 31, 1998
(Unaudited)
ASSETS
1999 1998
---- ----
Cash and cash equivalents $ 214,283 $ 744,132
Accounts receivable 4,606,599 9,786,041
Investments in leases 123,073,700 129,566,007
------------------ ------------------
Total assets $127,894,582 $140,096,180
================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $54,680,956 $65,164,309
Lines of credit 5,100,000 5,100,000
Accounts payable:
General Partner 168,120 171,050
Equipment purchases 125,400 255,252
Other 1,848,055 604,768
Accrued interest payable 221,025 2,275,444
Unearned operating lease income 1,077,196 202,920
------------------ ------------------
Total liabilities 63,220,752 73,773,743
Partners' capital:
General Partner (504,176) (409,182)
Limited Partners 65,178,006 66,731,619
------------------ ------------------
Total partners' capital 64,673,830 66,322,437
------------------ ------------------
Total liabilities and partners' capital $127,894,582 $140,096,180
================== ==================
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
INCOME STATEMENTS
THREE MONTH PERIODS ENDED
MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Revenues: 1999 1998
---- ----
Leasing activities:
<S> <C> <C>
Operating leases $ 9,508,632 $ 9,022,658
Direct financing leases 28,220 36,015
Gain on sales of assets 70,965 677,397
Interest 1,738 11,119
Other 6,058 5,591
------------------ ------------------
9,615,613 9,752,780
Expenses:
Depreciation and amortization 6,058,255 6,801,704
Interest expense 1,226,348 1,729,830
Administrative cost reimbursements to General Partner 43,679 121,773
Equipment and incentive management fees to General Partner 385,195 370,638
Other 215,027 198,369
Professional fees 11,032 10,190
Provision for losses - 97,528
------------------ ------------------
7,939,536 9,330,032
------------------ ------------------
Net income $ 1,676,077 $ 422,748
================== ==================
Net income:
General Partner $ 16,761 $ 4,227
Limited Partners 1,659,316 418,521
------------------ ------------------
$ 1,676,077 $ 422,748
================== ==================
Net income per Limited Partnership Unit $ 0.13 $ 0.03
Weighted average number of Units outstanding 12,500,050 12,500,050
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTH PERIOD
ENDED MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
<S> <C> <C> <C> <C>
Balance December 31, 1998 12,500,050 $66,731,619 $ (409,182) $66,322,437
Distributions to partners (3,212,929) (111,755) (3,324,684)
Net income 1,659,316 16,761 1,676,077
------------------ ---------------- ------------------ ------------------
Balance March 31, 1999 12,500,050 $65,178,006 $ (504,176) $64,673,830
================== ================ ================== ==================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Operating activities: 1999 1998
---- ----
<S> <C> <C>
Net income $ 1,676,077 $ 422,748
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 6,058,255 6,801,704
Gain on sales of assets (70,965) (677,397)
Provision for losses - 97,528
Changes in operating assets and liabilities:
Accounts receivable 379,442 1,473,796
Accounts payable, General Partner (2,930) (91,442)
Accounts payable, other 1,243,287 999,289
Accrued interest payable 49,617 149,312
Unearned lease income 874,276 957,507
------------------ ------------------
Net cash provided by operations 10,207,059 10,133,045
------------------ ------------------
Investing activities:
Proceeds from sales of assets 456,789 1,883,554
Reduction of net investment in direct financing leases 48,228 149,537
Purchases of equipment on operating leases (129,852) -
------------------ ------------------
Net cash provided by investing activities 375,165 2,033,091
------------------ ------------------
Financing activities:
Repayments of non-recourse debt (7,787,389) (6,914,040)
Repayments of borrowings under line of credit - (5,850,000)
Proceeds of non-recourse debt - 4,199,995
Distributions to partners (3,324,684) (3,156,698)
------------------ ------------------
Net cash used in financing activities (11,112,073) (11,720,743)
------------------ ------------------
Net (decrease) increase in cash and cash equivalents (529,849) 445,393
Cash and cash equivalents at beginning of period 744,132 739,701
------------------ ------------------
Cash and cash equivalents at end of period $ 214,283 $ 1,185,094
================== ==================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 1,176,731 $ 1,580,518
================== ==================
Supplemental disclosure of non-cash transactions:
Offset of accounts receivable and debt service per
lease and debt agreement:
Accrued interest payable $ (2,104,036) $ (3,864,443)
Non-recourse debt (2,695,964) (935,557)
------------------ ------------------
Accounts receivable $ (4,800,000) $ (4,800,000)
================== ==================
</TABLE>
See accompanying notes.
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
1. Summary of significant accounting policies:
Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the most recent report on Form
10K.
2. Organization and partnership matters:
ATEL Cash Distribution Fund 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,
1998 of Leases Dispositions 1999
---- --------- - ------------- ----
<S> <C> <C> <C> <C>
Net investment in operating leases $126,447,049 $ (5,860,859) $ (338,389) $120,247,801
Net investment in direct financing leases 1,222,716 (48,228) (8,206) 1,166,282
Residual interests 379,551 - - 379,551
Assets held for sale or lease 99,038 (39,229) 59,809
Reserve for losses (785,086) - - (785,086)
Initial direct costs, net of
accumulated amortization 2,202,739 (197,396) - 2,005,343
------------------ ---------------- ------------------ ------------------
$129,566,007 $ (6,106,483) $ (385,824) $123,073,700
================== ================ ================== ==================
</TABLE>
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
<TABLE>
<CAPTION>
Balance Balance
December 31, March 31,
1998 Additions Dispositions 1999
---- --------- ------------ ----
<S> <C> <C> <C> <C>
Transportation $99,965,294 $ (46,242) $99,919,052
Construction 32,178,737 - 32,178,737
Manufacturing 30,086,474 - 30,086,474
Materials handling 18,442,909 (516,356) 17,926,553
Office automation 10,485,156 (1,206,953) 9,278,203
Miscellaneous 3,453,751 - 3,453,751
Communications 658,185 - 658,185
Medical 343,409 - 343,409
Food processing 317,520 - 317,520
------------------ ---------------- ------------------ ------------------
195,931,435 (1,769,551) 194,161,884
Less accumulated depreciation (69,484,386) ($5,860,859) 1,431,162 (73,914,083)
------------------ ---------------- ------------------ ------------------
$126,447,049 $ (5,860,859) $ (338,389) $120,247,801
================== ================ ================== ==================
</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, 1999, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
1999 $19,972,440 $ 269,046 $20,241,486
2000 20,285,928 259,074 20,545,002
2001 10,777,239 158,238 10,935,477
2002 4,847,069 112,480 4,959,549
2003 3,050,287 98,760 3,149,047
Thereafter 12,975,397 395,040 13,370,437
------------------ ---------------- ------------------
$71,908,360 $1,292,638 $73,200,998
================== ================ ==================
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(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
6.33% to 12.22%.
Future minimum principal payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
1999 $ 8,152,477 $1,952,150 $10,104,627
2000 15,889,562 3,714,499 19,604,061
2001 8,834,242 2,531,010 11,365,252
2002 5,755,960 1,831,550 7,587,510
2003 5,488,995 1,241,942 6,730,937
Thereafter 10,559,720 4,302,772 14,862,492
------------------ ---------------- ------------------
$54,680,956 $15,573,923 $70,254,879
================== ================ ==================
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, 1999
(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>
1999 1998
---- ----
<S> <C> <C>
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). $ 385,195 $ 370,638
Administrative costs reimbursed to General Partner 43,679 121,773
----------------- -------------------
$ 428,874 $ 492,411
================== ==================
</TABLE>
6. Partner's capital:
As of March 31, 1999, 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, 1999
(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 January 31, 2000. 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, 1999, the Partnership had $5,100,000 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,
1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first quarter of 1999 and 1998, the Partnership's primary activity
was engaging in equipment leasing activities. In each year, the Partnership's
primary source of liquidity was rents from operating leases.
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 January 31, 2000.
The Partnership anticipates reinvesting a portion of lease payments from assets
owned in new leasing transactions. Such reinvestment will occur only after the
payment of all obligations, including debt service (both principal and
interest), the payment of management and acquisition fees to the General Partner
and providing for cash distributions to the Limited Partners.
The Partnership currently has available adequate reserves to meet contingencies,
but in the event those reserves were found to be inadequate, the Partnership
would likely be in a position to borrow against its current portfolio to meet
such requirements. The General Partner envisions no such requirements for
operating purposes.
Through March 31, 1999, the Partnership had borrowed $100,521,405 on a
non-recourse basis. As of that date, $54,691,399 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. As of March 31, 1999, there were no
such commitments.
If inflation in the general economy becomes significant, it may affect the
Partnership inasmuch as the residual (resale) values and rates on re-leases of
the Partnership's leased assets may increase as the costs of similar assets
increase. However, the Partnership's revenues from existing leases would not
increase, as such rates are generally fixed for the terms of the leases without
adjustment for inflation.
If interest rates increase significantly, the lease rates that the Partnership
can obtain on future leases will be expected to increase as the cost of capital
is a significant factor in the pricing of lease financing. Leases already in
place, for the most part, would not be affected by changes in interest rates.
<PAGE>
Cash Flows
During the first quarters of 1999 and 1998, the Partnership's primary source of
cash was rents from operating leases. 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. The only investing use of cash in 1999
was to make a deferred payment on the purchase of assets on operating leases.
There were no sources of cash from financing activities in 1999. In 1998, the
only financing source of cash was proceeds of non-recourse debt. Those proceeds
(in 1998) were used to make repayments on the line of credit. Repayments of
non-recourse debt have increased compared to 1998. In 1999, a larger portion of
debt payments were applied to principal reductions than in 1998.
Results of operations
Operations resulted in a net income of $1,665,634 in 1999 compared to $422,748
in 1998. The Partnership's primary source of revenues is from operating leases.
In 1998, almost all of the gains recognized on the sales of lease assets
resulted from the sale of rail tank cars. The assets had been carried as direct
financing lease assets and had been leased to IMC Fertilizer. There were no
similar large sales of assets in 1999.
Interest expense has been reduced due to scheduled payments on the Partnership's
non-recourse debt and due to reductions of the amounts borrowed under the line
of credit. Debt has been reduced from a total of $86,397,591 at December 31,
1997 to $59,791,399 at March 31, 1999.
<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, 1999 and December 31, 1998.
Statement of changes in partners' capital for the three
months ended March 31, 1999.
Income statements for the three month periods ended March
31, 1999 and 1998.
Statements of cash flows for the three month periods
ended March 31, 1999 and 1998.
Notes to the Financial Statements
2. Financial Statement Schedules
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
(b) Report on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
May 14, 1999
ATEL CASH DISTRIBUTION FUND 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/ Paritosh K. Choksi
---------------------------------------
Paritosh K. Choksi
Principal financial officer
of registrant
By: /s/ Donald E. Carpenter
---------------------------------------
Donald E. Carpenter
Principal accounting
officer of registrant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 214283
<SECURITIES> 0
<RECEIVABLES> 4606599
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 127894582
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 64673830
<TOTAL-LIABILITY-AND-EQUITY> 127894582
<SALES> 0
<TOTAL-REVENUES> 9615613
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6713188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1226348
<INCOME-PRETAX> 1676077
<INCOME-TAX> 0
<INCOME-CONTINUING> 1676077
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1676077
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
