Form 10K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required) For
the Year Ended December 31, 1999
OR
|_| Transition report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934 (no fee required)
For the transition period from ____ to ____
Commission File number 000-28368
ATEL Cash Distribution Fund VI, L.P.
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
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Limited Partnership
Units
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 |_|
State the aggregate market value of voting stock held by non-affiliates of the
registrant. Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |X|
1
<PAGE>
PART I
Item 1: BUSINESS
General Development of Business
ATEL Cash Distribution Fund VI, L.P. (the Partnership), was formed under the
laws of the State of California in June 1994. The Partnership was formed for the
purpose of acquiring equipment to engage in equipment leasing and sales
activities. The General Partner of the Partnership is ATEL Financial Corporation
(ATEL).
The Partnership conducted a public offering of 12,500,000 units of Limited
Partnership Interest (Units), at a price of $10 per Unit. On January 3, 1995,
the Partnership commenced operations in its primary business (leasing
activities). As of November 23, 1996, the Partnership had received subscriptions
for 12,500,000 ($125,000,000) Limited Partnership Units in addition to the
Initial Limited Partners' Units and terminated its offering.
The Partnership's principal objectives are to invest in a diversified portfolio
of equipment which will (i) preserve, protect and return the Partnership's
invested capital; (ii) generate substantial distributions to the partners of
cash from operations and cash from sales or refinancing, with any balance
remaining after certain minimum distributions to be used to purchase additional
equipment during the reinvestment period, ending December 31, 2002 and (iii)
provide significant distributions following the reinvestment period and until
all equipment has been sold. The Partnership is governed by its Limited
Partnership Agreement.
Narrative Description of Business
The Partnership has acquired and intends to acquire various types of equipment
and to lease such equipment pursuant to "Operating" leases and "Full Payout"
leases, where "Operating" leases are defined as being leases in which the
minimum lease payments during the initial lease term do not recover the full
cost of the equipment and "Full Payout" leases recover such cost. It is the
intention of ATEL that no more than 50% of the aggregate purchase price of
equipment will be subject to "Operating" leases upon final investment of the net
proceeds of the offering and that no more than 20% of the aggregate purchase
price of equipment will be invested in equipment acquired from a single
manufacturer.
The Partnership only purchases equipment for which a lease exists or for which a
lease will be entered into at the time of the purchase. During early 1997, the
Partnership completed its initial acquisition stage with the investment of the
net proceeds from the public offering of Units. As noted above, however, it
intends to continue to invest any cash flow in excess of certain amounts
required to be distributed to the Limited Partners in additional items of leased
equipment through December 31, 2002.
As of December 31, 1999, the Partnership had purchased equipment with a total
acquisition price of $208,275,158.
The Partnership's objective is to lease a minimum of 75% of the equipment
acquired with the net proceeds of the offering to lessees which (i) have an
aggregate credit rating by Moody's Investor Service, Inc. of Baa or better, or
the credit equivalent as determined by ATEL, with the aggregate rating weighted
to account for the original equipment cost for each item leased or (ii) are
established hospitals with histories of profitability or municipalities. The
balance of the original equipment portfolio may include equipment leased to
lessees which, although deemed creditworthy by ATEL, would not satisfy the
general credit rating criteria for the portfolio. In excess of 75% of the
equipment acquired with the net proceeds of the offering (based on original
purchase cost) had been leased to lessees with an aggregate credit rating of Baa
or better or to such hospitals or municipalities.
2
<PAGE>
During 1999, 1998 and 1997 certain lessees generated significant portions of the
Partnership's total lease revenues as follows:
1999 1998 1997
---- ---- ----
Lessee Type of Equipment
NEC Electronics Semiconductor manufacturing 13% 12% 10%
Consolidated Rail Corporation Locomotives & intermodal
containers 11% 10% 10%
The equipment leasing industry is highly competitive. Equipment manufacturers,
corporations, partnerships and others offer users an alternative to the purchase
of most types of equipment with payment terms which vary widely depending on the
lease term and type of equipment. The ability of the Partnership to keep the
equipment leased and/or operating and the terms of the acquisitions, leases and
dispositions of equipment depends on various factors (many of which are not in
the control of ATEL or the Partnership), such as general economic conditions,
including the effects of inflation or recession, and fluctuations in supply and
demand for various types of equipment resulting from, among other things,
technological and economic obsolescence.
ATEL will seek to limit the amount invested in equipment to any single lessee to
not more than 20% of the aggregate purchase price of equipment owned at any time
during the reinvestment period.
The business of the Partnership is not seasonal.
The Partnership has no full time employees.
Equipment Leasing Activities:
Through December 31, 1999, the Partnership has disposed of certain leased assets
as set forth below:
Original
Equipment Cost, Excess of
Type of Excluding Rents Over
Equipment Acquisition Fees Sale Price Expenses *
--------- ---------------- ---------- ----------
Transportation $ 7,482,267 $ 4,105,578 $ 5,982,147
Office automation 6,268,303 978,686 5,281,783
Manufacturing 652,232 240,000 397,992
Construction 465,037 216,367 368,001
Mining 428,466 80,000 833,678
Materials handling 251,309 101,500 218,184
Railcars 200,479 191,303 14,316
Containers 164,399 169,344 22,426
Other 103,752 41,247 40,512
---------------- ---------------- ----------------
$16,016,244 $ 6,124,025 $13,159,039
================ ================ ================
* Includes only those expenses directly related to the
production of the related rents.
3
<PAGE>
The Partnership has acquired a diversified portfolio of equipment. The equipment
has been leased to lessees in various industries. The following tables set forth
the types of equipment acquired by the Partnership through December 31, 1999 and
the industries to which the assets have been leased.
Purchase price excluding Percentage of total
Asset types acquisition fees acquisitions
----------- ---------------- ------------
Transportation, rail cars $ 39,275,195 18.86%
Manufacturing 30,469,834 14.63%
Transportation, other 24,476,511 11.75%
Materials handling 24,043,881 11.54%
Railroad locomotives 22,353,332 10.73%
Transportation, intermodal
containers 21,694,688 10.42%
Mining equipment 18,557,225 8.91%
Office automation 13,824,024 6.64%
Construction 9,259,221 4.45%
Other 4,321,247 2.07%
---------------- ----------------
$ 208,275,158 100.00%
================ ================
Purchase price excluding Percentage of total
Industry of lessee acquisition fees acquisitions
------------------ ---------------- ------------
Transportation, rail $ 55,950,904 26.86%
Electronics manufacturing 29,030,626 13.94%
Business services 28,360,969 13.62%
Mining 24,793,242 11.90%
Transportation, other 23,217,066 11.15%
Manufacturing, other 18,922,229 9.09%
Oil & gas 16,535,633 7.94%
Communications 5,282,291 2.54%
Other 6,182,198 2.96%
---------------- ----------------
$ 208,275,158 100.00%
================ ================
For further information regarding the Partnership's equipment lease portfolio as
of December 31, 1999, see Note 3 to the financial statements, Investments in
equipment and leases, set forth in Item 8, Financial Statements and
Supplementary Data.
Item 2. PROPERTIES
The Partnership does not own or lease any real property, plant or materially
important physical properties other than the equipment held for lease as set
forth in Item 1.
Item 3. LEGAL PROCEEDINGS
On December 31, 1997, Quaker Coal Company requested a moratorium on lease
payments from January through March 1998. No lease payments were made through
June of 1998. As a result, the General Partner declared the lease in default.
Subsequently, the lessee made the outstanding payments, however, the General
Partner refused to waive the default and insisted on additional damages in the
range of $1,428,000 to $1,743,000. The General Partner sued the lessee for
damages and is currently awaiting judgement from the court. The General Partner
believes that an adverse ruling would not have a material impact on the
operations of the Partnership. The amounts of these damages have not been
included in the financial statements included in Item 8 of this report.
4
<PAGE>
In January 2000, Applied Magnetics Corporation, a lessee of the Partnership,
filed for protection from creditors under Chapter 11 of the U. S. Bankruptcy
Act. The Partnership has assets with a total net book value of $5,113,290 leased
to Applied Magnetics Corporation. On January 31, 2000, the General Partner was
appointed to the Official Committee of Unsecured Creditors. Procedures are under
way for the liquidation of the Partnership's leased equipment. The Committee is
also evaluating: (i) a liquidation of the lessee's assets to pay off creditors
or (ii) receiving an equity stake in a new venture undertaken by the lessee.
Recoveries by the Partnership, resulting from this default, are fairly certain
in the range of 10% to 20% due to the liquidation of the Partnership's
equipment. Recoveries above this amount are more uncertain; however, the
Partnership anticipates an additional 6% to 15% to be recoverable through the
liquidation or reorganization of the lessee's business. Any recoveries above
these amounts are highly uncertain and speculative. See Note 10 to the financial
statements included in Item 8 of this report.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
PART II
Item 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS
AND RELATED MATTERS
Market Information
The Units are transferable subject to restrictions on transfers which have been
imposed under the securities laws of certain states. However, as a result of
such restrictions, the size of the Partnership and its investment objectives, to
the General Partner's knowledge, no established public secondary trading market
has developed and it is unlikely that a public trading market will develop in
the future.
Holders
As of December 31, 1999, a total of 6,656 investors were record holders of Units
in the Partnership.
Dividends
The Partnership does not make dividend distributions. However, the Limited
Partners of the Partnership are entitled to certain distributions as provided
under the Limited Partnership Agreement.
The rate for monthly distributions from 1999 operations was $0.0875 per Unit.
The distributions were made in February 1999 through December 1999 and in
January 2000. For each quarterly distribution (made in April, July and October
1999 and in January 2000) the rate was $0.2625 per Unit. Distributions were from
1999 cash flows from operations. The amounts paid to holders of Units were
adjusted based on the length of time within the previous calendar month or
quarter that the Units were outstanding.
The rate for monthly distributions from 1998 operations was $0.0833 per Unit.
The distributions were made in February 1998 through December 1998 and in
January 1999. For each quarterly distribution (made in April, July and October
1998 and in January 1999) the rate was $0.25 per Unit. Distributions were from
1998 cash flows from operations. The amounts paid to holders of Units were
adjusted based on the length of time within the previous calendar month or
quarter that the Units were outstanding.
5
<PAGE>
The rate for monthly distributions from 1997 operations was $0.0833 per Unit.
The distributions were made in February 1997 through December 1997 and in
January 1998. For each quarterly distribution (made in April, July and October
1997 and in January 1998) the rate was $0.25 per Unit. Distributions were from
1997 cash flows from operations. The amounts paid to holders of Units were
adjusted based on the length of time within the previous calendar month or
quarter that the Units were outstanding.
ATEL shall have sole discretion in determining the amount of distributions;
provided, however, that the General Partner will not reinvest in equipment, but
will distribute, subject to payment of any obligations of the Partnership, such
available cash from operations and cash from sales or refinancing as may be
necessary to cause total distributions to the Limited Partners for each year
during the reinvestment period to equal the following amounts per unit: $1.00 in
1997 and 1998; $1.05 in 1999 and 2000; and $1.10 in 2001 and 2002.
Holders of Units may make the election without charge to receive distributions
on a monthly basis.
The following table presents summarized information regarding distributions to
Limited Partners:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Distributions of net income (loss) $ (0.07) $ 0.06 $ (0.18) $ (0.23) $ (0.19)
Return of investment 1.11 0.94 1.18 1.16 0.97
---------------- ---------------- -------------------------------- ----------------
Distributions per unit 1.04 1.00 1.00 0.93 0.78
Differences due to timing of
distributions 0.01 0.00 0.00 0.07 0.22
---------------- ---------------- -------------------------------- ----------------
Nominal distribution rates from above $ 1.05 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================ ================ ================================ ================
</TABLE>
Item 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Partnership at
December 31, 1999, 1998, 1997, 1996 and 1995. This financial data should be read
in conjunction with the financial statements and related notes included under
Item 8 of this report.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross revenues $34,400,228 $ 36,149,061 $ 36,485,165 $ 25,729,470 $ 6,444,037
Net income (loss) $ (906,676) $ 710,923 $ (2,297,964) $ (2,210,330) $ (602,674)
Weighted average Units 12,500,050 12,500,050 12,500,050 9,424,045 3,154,291
Net income (loss) per Unit, based on
weighted average Units
outstanding $ (0.07) $ 0.06 $ (0.18) $ (0.23) $ (0.19)
Distributions per Unit, based on
weighted average Units
outstanding $ 1.04 $ 1.00 $ 1.00 $ 0.93 $ 0.78
Total Assets $110,704,998 $ 140,096,180 $ 170,290,581 $ 192,831,691 $96,883,645
Non-recourse Debt $46,490,585 $ 65,164,309 $ 77,647,591 $ 80,789,732 $ 836,181
Total Partners' Capital $52,207,752 $ 66,322,437 $ 78,274,435 $ 93,201,156 $50,576,037
</TABLE>
6
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
The Partnership's public offering provided for a total maximum capitalization of
$125,000,000 and was completed as of November 23, 1996. As of that date
subscriptions had been received and accepted for $125,000,000.
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases and proceeds of 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 asset sales.
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 ATEL's success in re-leasing or selling the equipment as it comes off
lease.
The Partnership participates with ATEL and certain of its affiliates in a
$95,000,000 revolving line of credit with a financial institution that includes
certain financial covenants. The line of credit expires on April 30, 2000. As of
December 31, 1999, the Partnership had $8,350,000 of borrowings under this line
of credit and the remaining availability was $21,857,103.
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 ATEL and providing
for cash distributions to the Limited Partners. At December 31, 1999, the
Partnership had no commitments to purchase lease assets.
As of December 31, 1999, all cash balances consisted of amounts reserved for
distributions in January 2000, generated from operations in 1999.
The Partnership currently has available adequate reserves to meet its immediate
cash requirements, 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. ATEL envisions no such requirements for
operating purposes.
The Partnership's long-term borrowings are generally non-recourse to the
Partnership, that is, the only recourse of the lender is to the equipment or
corresponding lease acquired with the loan proceeds. ATEL expects that aggregate
borrowings in the future will be approximately 40%-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. The Partnership may only
incur additional debt to the extent that the then outstanding balance of all
such debt, including the additional debt, does not exceed 50% of the original
cost of the lease assets then owned by the Partnership, including any such
assets purchased with the proceeds of such additional debt.
The Partnership commenced regular distributions, based on cash flows from
operations, beginning with the month of January 1995. See Items 5 and 6 of this
report for additional information regarding the distributions.
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.
7
<PAGE>
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.
Cash Flows
1999 vs. 1998:
In 1999, the Partnership's primary source of cash was the rents from operating
leases. Cash flows from operations decreased from $24,079,438 in 1998 to
$23,773,594 in 1999, a decrease of $305,844. The decrease resulted from
decreased operating lease rents.
In 1999, sources of cash from investing activities consisted of proceeds from
sales of lease assets and cash flows from direct financing leases. The cash
flows from direct financing leases decreased from $428,622 in 1998 to $255,610
in 1999 due to reductions in the balance of direct finance lease assets both
from normal amortization of the leases and from sales of the lease assets.
Proceeds from asset sales decreased from $3,357,017 in 1998 to $1,802,696 in
1999. Proceeds from sales of lease assets are not expected to be consistent from
one year to another.
In 1999, the only source of cash from financing activities was borrowings under
the line of credit. Distributions to the Limited Partners increased as a result
of an increase in the per Unit distribution rate effective with distributions
made starting in February 1999 (see Item 5 of this report). Repayments of debt
increased slightly (from $15,747,720 in 1998 to $15,977,760 in 1999) as a result
of borrowings in 1998.
1998 vs. 1997:
Cash flows from operations increased by $179,668 compared to 1997. The increase
was not significant and resulted from a number of offsetting fluctuations of
revenues, expenses and changes in operating accounts.
Cash flows from investing activities in 1998 consisted of proceeds from sales of
lease assets ($3,357,017) and rents from direct financing leases ($428,622).
Sources of cash from financing activities consisted of the proceeds on
non-recourse debt ($4,199,995) and borrowings under the line of credit
($2,200,000). The most significant uses of cash related to financing activities
were distributions to the limited partners ($12,500,645), repayments of
non-recourse debt ($15,747,720) and repayments of borrowings under the line of
credit ($5,850,000).
Results of Operations
As of January 3, 1995, subscriptions for the minimum amount of the offering
($1,200,000) had been received and accepted by the Partnership. As of that date,
the Partnership commenced operations in its primary business (leasing
activities).
1999 vs. 1998
Revenues in 1999 decreased to $34,400,228 compared to $36,149,061 in 1998.
Almost all of the Partnership's revenues are generated from operating leases.
These rents have decreased as a result of 1998 and 1999 asset sales.
Depreciation and interest are the most significant ongoing Partnership expenses.
Depreciation expense is directly related to the Partnership's investment in
operating leases and is therefore also directly related to the revenues
generated by those assets. The 1998 and 1999 sales which led to 1999 revenue
decreases also gave rise to the 1999 decrease in depreciation expense
($25,325,663 in 1998 and $22,002,111 in 1999).
8
<PAGE>
In 1999, Applied Magnetics, one of the Partnership's lessees defaulted on its
lease obligations to the Partnership. The General Partner does not expect to
recover any of the uncollected rentals outstanding under the leases. The
Partnership has written down the related lease assets to their net realizable
value as of December 31, 1999. All accounts receivable for amounts billed and
outstanding under the leases have been fully reserved. In 1999, a provision
lease losses of $5,113,290 was provided in relation to this lessee. In addition,
a provision for doubtful accounts of $282,911 was made against trade
receivables.
The assets under the operating leases with Applied Magnetics were financed
primarily with non-recourse debt. The balance of the debt was $3,320,774 at
December 31, 1999. Upon the expected foreclosure by the lender, the Partnership
will recognize an extraordinary gain on extinguishment of debt in the amount of
the unpaid debt. This is expected to occur in 2000.
Interest expense has decreased as a result of scheduled debt payments.
Equipment management fees are related to lease revenues. In 1999, revenues
decreased as noted above and as a result, the management fees also decreased
from $1,033,556 in 1998 to $959,511 in 1999, a decrease of $74,045.
1998 vs. 1997
Operations resulted in net income of $710,923 in 1998 compared to a loss of
$2,297,964 in 1997. Operating lease revenues decreased by $1,007,698 compared to
1997. This decrease resulted from scheduled lease terminations and asset sales.
This decrease in lease revenues was largely offset by an increase in the gains
recognized on the sales of assets coming off lease. Gains on sales of assets
increased by $759,639. Overall, revenues decreased by $336,104 or about one
percent.
Expenses decreased by $3,344,991 compared to 1997. Most significant were the
decreases in depreciation and amortization and interest expenses. Depreciation
and amortization expense decreased by $1,403,401. This decrease resulted from
the sales of operating lease assets noted above. Interest decreased by
$1,436,195 as a result of decreased debt balances compared to 1997. Non-recourse
debt balances have been reduced as a result of scheduled debt payments.
Impact of the Year 2000
To date, the Partnership has experienced no significant year 2000 problems and
the General Partner believes it does not have continued exposure to the year
2000 problem.
Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership, like most other companies, is exposed to certain market risks,
including primarily changes in interest rates. The Partnership believes its
exposure to other market risks including foreign currency exchange rate risk,
commodity risk and equity price risk are insignificant to both its financial
position and results of operations.
In general, the Partnership manages its exposure to interest rate risk by
obtaining fixed rate debt. The fixed rate debt is structured so as to match the
cash flows required to service the debt to the payment streams under fixed rate
lease receivables. The payments under the leases are assigned to the lenders in
satisfaction of the debt. Furthermore, the Partnership has historically been
able to maintain a stable spread between its cost of funds and lease yields in
both periods of rising and falling rates. Nevertheless, the Partnership
frequently funds leases with its floating rate line of credit and is therefore
exposed to interest rate risk until fixed rate financing is arranged, or the
floating rate line of credit is repaid. As of December 31, 1999, $8,350,000 was
outstanding on the floating rate line of credit.
9
<PAGE>
To hedge its interest rate risk related to this variable rate debt, the
Partnership may enter into interest rate swaps. As of December 31, 1999, no
swaps or other derivative financial instruments were held by the Partnership.
The Partnership does not hold or issue derivative financial instruments for
speculative purposes.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Report of Independent Auditors, Financial Statements and Notes to
Financial Statements attached hereto at pages 11 through 25.
10
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Partners
ATEL Cash Distribution Fund VI, L.P.
We have audited the accompanying balance sheets of ATEL Cash Distribution Fund
VI, L.P. as of December 31, 1999 and 1998, and the related statements of
operations, changes in partners' capital, and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ATEL Cash Distribution Fund VI,
L.P. at December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
San Francisco, California
January 26, 2000
11
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
---- ----
Cash and cash equivalents $ 390,463 $ 744,132
Accounts receivable, net of allowance for
doubtful accounts of $282,991 in 1999,
none in 1998 10,368,154 9,786,041
Investments in equipment and leases 99,946,381 129,566,007
---------------- ----------------
Total assets $ 110,704,998 $140,096,180
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 46,490,585 $65,164,309
Line of credit 8,350,000 5,100,000
Accounts payable and accruals:
General Partner 1,076,757 171,050
Equipment purchases 5,452 255,252
Other 593,862 604,768
Accrued interest payable 1,551,104 2,275,444
Unearned lease income 429,486 202,920
---------------- ----------------
58,497,246 73,773,743
Partners' capital (deficit):
General Partner (567,944) (409,182)
Limited Partners 52,775,696 66,731,619
---------------- ----------------
Total partners' capital 52,207,752 66,322,437
---------------- ----------------
Total liabilities and partners' capital $ 110,704,998 $140,096,180
================ ================
See accompanying notes.
12
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Leasing activities:
Operating leases $ 33,987,395 $ 35,178,175 $36,185,873
Direct financing leases 111,799 137,159 243,423
Gain on sales of assets 262,067 786,070 26,431
Interest income 10,231 23,292 19,461
Other 28,736 24,365 9,977
---------------- --------------- ----------------
34,400,228 36,149,061 36,485,165
Expenses:
Depreciation and amortization 22,710,097 26,193,147 27,596,548
Provision for losses and impairments 5,113,290 97,528 364,852
Interest 4,783,105 6,557,551 7,993,746
Equipment and incentive management fees to affiliates 1,178,105 1,394,138 1,492,716
Other 776,273 693,512 807,883
Administrative cost reimbursements to General Partner 397,125 427,872 435,759
Provision for doubtful accounts 282,991 - -
Professional fees 65,918 74,390 91,625
---------------- --------------- ----------------
35,306,904 35,438,138 38,783,129
---------------- --------------- ----------------
Net (loss) income $ (906,676) $ 710,923 $ (2,297,964)
================ =============== ================
Net (loss) income:
General Partner $ (9,067) $ 7,109 $ (22,980)
Limited Partners (897,609) 703,814 (2,274,984)
---------------- --------------- ----------------
$ (906,676) $ 710,923 $ (2,297,964)
================ =============== ================
Net (loss) income per Limited Partnership unit $ (0.07) $ 0.06 $ (0.18)
Weighted average number of units outstanding 12,500,050 12,500,050 12,500,050
</TABLE>
See accompanying notes.
13
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<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 paid to affiliates (41,174) (41,174)
Distributions to limited partners ($1.00 per Unit) (12,475,238) (12,475,238)
Distributions to General Partner (112,345) (112,345)
Net loss (2,274,984) (22,980) (2,297,964)
---------------- ---------------- --------------- ----------------
Balance December 31, 1997 12,500,050 78,528,450 (254,015) 78,274,435
Distributions to limited partners ($1.00 per Unit) (12,500,645) (12,500,645)
Distributions to General Partner (162,276) (162,276)
Net income 703,814 7,109 710,923
---------------- ---------------- --------------- ----------------
Balance December 31, 1998 12,500,050 66,731,619 (409,182) 66,322,437
Distributions to limited partners ($1.05 per Unit) (13,058,314) (13,058,314)
Distributions to General Partner (149,695) (149,695)
Net loss (897,609) (9,067) (906,676)
---------------- ---------------- --------------- ----------------
Balance December 31, 1999 12,500,050 $ 52,775,696 $ (567,944) $52,207,752
================ ================ =============== ================
</TABLE>
See accompanying notes.
14
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net (loss) income $ (906,676) $ 710,923 $ (2,297,964)
Adjustment to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization 22,710,097 26,193,147 27,596,548
Provision for doubtful accounts 282,991 - -
Provision for losses and impairments 5,113,290 97,528 364,852
Gain on sales of assets (262,067) (786,070) (26,431)
Changes in operating assets and liabilities:
Accounts receivable (5,665,104) (3,891,412) (4,496,371)
Accounts payable, General Partner 905,707 (143,308) 269,288
Accounts payable, other (10,906) 189,108 652
Accrued interest payable 1,379,696 2,030,965 2,362,716
Unearned lease income 226,566 (321,443) 126,480
Net cash provided by operating activities 23,773,594 24,079,438 23,899,770
---------------- --------------- ----------------
Investing activities:
Purchases of equipment on operating leases (249,800) - (2,661,808)
Purchases of equipment on direct financing leases - - (94,469)
Purchases of residual value interests - - -
Initial direct lease costs paid to affiliate - - -
Reduction of net investment in direct financing leases 255,610 428,622 685,665
Proceeds from sales of assets 1,802,696 3,357,017 406,362
---------------- --------------- ----------------
Net cash provided by (used in) investing activities 1,808,506 3,785,639 (1,664,250)
---------------- --------------- ----------------
Financing activities:
Payment of syndication costs to General Partner - - (41,174)
Distributions to Limited Partners (13,058,314) (12,500,645) (12,475,238)
Distributions to General Partner (149,695) (162,276) (112,345)
Borrowings under line of credit 3,250,000 2,200,000 3,210,974
Repayments of borrowings under line of credit - (5,850,000) (10,059,231)
Proceeds of non-recourse debt - 4,199,995 10,701,894
Repayments of non-recourse debt (15,977,760) (15,747,720) (13,844,035)
---------------- --------------- ----------------
Net cash used in financing activities (25,935,769) (27,860,646) (22,619,155)
---------------- --------------- ----------------
Net (decrease) increase in cash and cash equivalents (353,669) 4,431 (383,635)
Cash and cash equivalents at beginning of period 744,132 739,701 1,123,336
---------------- --------------- ----------------
Cash and cash equivalents at end of period $ 390,463 $ 744,132 $ 739,701
================ =============== ================
</TABLE>
15
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 3,403,409 $ 4,526,586 $ 5,631,030
================ =============== ================
Schedule 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.
16
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. Organization and Partnership matters:
ATEL Cash Distribution Fund VI, L.P. (the Partnership), 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.
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 General Partner of the Partnership is ATEL Financial Corporation (ATEL).
The Partnership or ATEL on behalf of the Partnership, incurred costs in
connection with the organization, registration and issuance of the Units. The
amount of such costs to be born by the Partnership was limited to 15% of Gross
Proceeds of up to $25,000,000 and 14% of Gross Proceeds in excess of
$25,000,000.
The Partnership's business consists of leasing various types of equipment. As of
December 31, 1999, the original terms of the leases ranged from one month to
twenty years.
Pursuant to the Limited Partnership Agreement, ATEL receives compensation and
reimbursements for services rendered on behalf of the Partnership (Note 5). ATEL
is required to maintain in the Partnership reasonable cash reserves for working
capital, the repurchase of Units and contingencies.
2. Summary of significant accounting policies:
Equipment on operating leases:
Equipment on operating leases is stated at cost. Depreciation is being provided
by use of the straight-line method over the terms of the related leases to the
estimated residual values of the equipment at the end of the leases.
Revenues from operating leases are recognized evenly over the life of the
related leases.
Direct financing leases:
Income from direct financing lease transactions is reported on the financing
method of accounting, in which the Partnership's investment in the leased
property is reported as a receivable from the lessee to be recovered through
future rentals. The income portion of each rental payment is calculated so as to
generate a constant rate of return on the net receivable outstanding.
Statements of cash flows:
For purposes of the Statements of Cash Flows, cash and cash equivalents includes
cash in banks and cash equivalent investments with original maturities of ninety
days or less.
Income taxes:
The Partnership does not provide for income taxes since all income and losses
are the liability of the individual partners and are allocated to the partners
for inclusion in their individual tax returns.
17
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
2. Summary of significant accounting policies (continued):
Income taxes (continued):
The tax basis of the Partnership's net assets and liabilities varies from the
amounts presented in these financial statements (unaudited):
1999 1998
---- ----
Financial statement basis of net assets $ 52,207,752 $ 66,322,437
Tax basis of net assets 13,505,457 39,757,262
---------------- ---------------
Difference $ 38,702,295 $ 26,565,175
================ ===============
The primary differences between the tax basis of net assets and the amounts
recorded in the financial statements are the result of differences in accounting
for syndication costs and differences between the depreciation methods used in
the financial statements and the Partnership's tax returns.
The following reconciles the net income (loss) reported in these financial
statements to the loss reported on the Partnership's federal tax return
(unaudited):
1999 1998
---- ----
Net (loss) income per financial statements $ (906,676) $ 710,923
Adjustment to depreciation expense (1,309,581) (19,855,425)
Other adjustments to revenues and expenses 371,417 (644,595)
Provision for losses and impairments 5,113,290 364,852
Provision for doubtful accounts 282,991 -
---------------- ---------------
Net income (loss) per federal tax return $ 3,551,441 $ (19,424,245)
================ ===============
Per unit data:
Net income and distributions per unit are based upon the weighted average number
of units outstanding during the period.
Credit Risk:
Financial instruments which potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents and accounts
receivable. The Partnership places its cash deposits and temporary cash
investments with creditworthy, high quality financial institutions. The
concentration of such deposits and temporary cash investments is not deemed to
create a significant risk to the Partnership. Accounts receivable represent
amounts due from lessees in various industries, related to equipment on
operating and direct financing leases. See Note 7 for a description of lessees
by industry as of December 31, 1999, 1998 and 1997.
Reclassifications:
Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
18
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
2. Summary of significant accounting policies (continued):
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Such estimates primarily
relate to the determination of residual values at the end of the lease term.
Reserve for losses and impairments:
The Partnership maintains a reserve on its investments in equipment and leases
for losses and impairments which are inherent in the portfolio as of the balance
sheet dates. The General Partner's evaluation of the adequacy of the allowance
is a judgmental estimate that is based on a review of individual leases, past
loss experience and other factors. While the General Partner believes the
allowance is adequate to cover known losses, it is reasonably possible that the
allowance may change in the near term. However, such change is not expected to
have a material effect on the financial position or future operating results of
the Partnership. It is the Partnership's policy to charge off amounts which, in
the opinion of the General Partner, are not recoverable from lessees or the
disposition of the collateral. See Note 10.
3. Investments in equipment and leases:
As of December 31, 1999, the Partnership's investments in equipment and leases
consist of the following:
<TABLE>
<CAPTION>
Depreciation
Expense or Reclass-
December 31, Amortization ifications or December 31,
1998 Additions of Leases Dispositions 1999
---- --------- --------- ------------ ----
<S> <C> <C> <C> <C> <C>
Net investment in operating leases $126,447,049 $ (22,002,111) $ (2,139,665) $102,305,273
Net investment in direct financing
leases 1,222,716 (255,610) 52,481 1,019,587
Assets held for sale or lease 99,038 - 546,555 645,593
Residual value interests 379,551 - - 379,551
Reserve for losses and impairments (785,086) $ (5,113,290) - - (5,898,376)
Initial direct costs, net of accumulated
amortization of $2,702,979 in 1999
and $2,423,318 in 1998 2,202,739 - (707,986) - 1,494,753
---------------- ---------------- -------------------------------- ----------------
$129,566,007 $ (5,113,290) $ (22,965,707) $ (1,540,629) $99,946,381
================ ================ ================================ ================
</TABLE>
19
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. Investments in equipment and leases (continued):
Operating leases:
Property on operating leases consists of the following as of December 31, 1998,
additions and dispositions during 1999 and as of December 31, 1999:
<TABLE>
<CAPTION>
Reclass-
December 31, ifications or December 31,
1998 Additions Dispositions 1999
---- --------- ------------ ----
<S> <C> <C> <C> <C>
Transportation $ 110,003,574 $ (275,683) $109,727,891
Manufacturing 29,440,009 - 29,440,009
Materials handling 22,575,723 (3,067,983) 19,507,740
Construction 19,596,825 (1,843,244) 17,753,581
Office automation 8,064,509 (1,486,499) 6,578,010
Miscellaneous 6,250,795 (3,286,257) 2,964,538
---------------- ---------------- --------------- ----------------
195,931,435 (9,959,666) 185,971,769
Less accumulated depreciation (69,484,386) $ (22,002,111) 7,820,001 (83,666,496)
---------------- ---------------- --------------- ----------------
$ 126,447,049 $ (22,002,111) $ (2,139,665) $102,305,273
================ ================ =============== ================
</TABLE>
Direct financing leases:
As of December 31, 1999 and 1998, 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 December 31, 1999 and 1998:
1999 1998
---- ----
Total minimum lease payments receivable $ 1,154,481 $ 1,369,085
Estimated residual values of leased equipment
(unguaranteed) 206,767 255,570
---------------- ---------------
Investment in direct financing leases 1,361,248 1,624,655
Less unearned income (341,661) (401,939)
---------------- ---------------
Net investment in direct financing leases $ 1,019,587 $ 1,222,716
================ ===============
All of the property on leases was acquired in 1997, 1996 and 1995.
20
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. Investments in equipment and leases (continued):
At December 31, 1999, the aggregate amounts of future minimum lease payments
under operating and direct financing leases are as follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
------------ ------ ------ -----
2000 $21,191,448 $ 293,502 $21,484,950
2001 12,147,536 220,297 12,367,833
2002 5,380,875 146,882 5,527,757
2003 3,305,030 98,760 3,403,790
2004 2,813,276 98,760 2,912,036
Thereafter 14,873,637 296,280 15,169,917
---------------- ---------------- ----------------
$59,711,802 $1,154,481 $60,866,283
================ ================ ================
Reserves for losses and impairments:
Activity in the reserve for losses and impairments consists of the following:
Balance 12/31/96 $ 322,706
Provision 364,852
----------------
Balance 12/31/97 687,558
Provision 97,528
----------------
Balance 12/31/98 785,086
Provision 5,113,290
----------------
Balance 12/31/99 $ 5,898,376
================
4. Non-recourse debt:
At December 31, 1999, non-recourse debt consists of notes payable to financial
institutions. The notes are due in varying monthly, quarterly and semi-annual
payments. Interest on the notes is at rates from 6.5% to 15.2%. The notes are
secured by assignments of lease payments and pledges of assets. At December 31,
1999, the carrying value of the pledged assets is approximately $70,082,280. The
notes mature from 2000 through 2016.
Future minimum payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
2000 $15,908,504 $ 3,710,924 $ 19,619,428
2001 8,823,031 2,526,688 11,349,719
2002 5,745,613 1,826,553 7,572,166
2003 5,487,689 1,239,498 6,727,187
2004 822,894 635,737 1,458,631
Thereafter 9,702,854 3,649,283 13,352,137
---------------- ---------------- ----------------
$46,490,585 $ 13,588,683 $ 60,079,268
================ ================ ================
21
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that ATEL 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 ATEL in providing administrative services to the Partnership. Administrative
services provided include Partnership accounting, investor relations, legal
counsel and lease and equipment documentation. ATEL is not reimbursed for
services where it is entitled to receive a separate fee as compensation for such
services, such as acquisition and disposition of equipment. Reimbursable costs
incurred by ATEL 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 ATEL record time incurred in performing
administrative services on behalf of all of the Partnerships serviced by ATEL.
ATEL 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.
ATEL and/or Affiliates earned fees, commissions and reimbursements, pursuant to
the Limited Partnership Agreement as follows during 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Incentive management fees (computed as 3.25% of distributions of cash from
operations, as defined in the Limited Partnership Agreement) and equipment
management fees (computed as 3.5% 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). $ 1,178,105 $ 1,394,138 $ 1,492,716
Administrative cost reimbursements to ATEL 397,125 427,872 435,759
Reimbursement of other syndication costs - - 41,174
---------------- --------------- ----------------
$ 1,575,230 $ 1,822,010 $ 1,969,649
================ =============== ================
</TABLE>
22
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
6. Partners' capital:
As of December 31, 1999 and 1998, 12,500,050 Units were issued and outstanding,
including the 50 Units issued to the Initial Limited Partners. The Partnership's
registration statement with the Securities and Exchange Commission became
effective November 23, 1994. The Partnership is authorized to issue up to
12,500,000 Units, in addition to those 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% of Distributions of Cash from Operations to the Limited Partners,
1% of Distributions of Cash from Operations to ATEL and 3.25% to an affiliate of
ATEL as an Incentive Management Fee, 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 ATEL will receive as an Incentive Management Fee, 4% of
remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
7. Concentration of credit risk and major customers:
The Partnership leases equipment to lessees in diversified industries. Leases
are subject to ATEL's credit committee review. The leases provide for the return
of the equipment upon default.
As of December 31, 1999, 1998 and 1997 there were concentrations (greater than
10%) of equipment leased to lessees in certain industries (as a percentage of
total equipment cost) as follows:
1999 1998 1997
---- ---- ----
Rail transportation 30% 22% 21%
Other transportation services 14% 13% 12%
Electronics manufacturing * 12% 14%
Business services * 10% 11%
* Less than 10%.
23
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
7. Concentration of credit risk and major customers (continued):
During 1999, two customers each comprised 13% and 11% of the Partnership's
revenues from leases. During 1998, two customers each comprised 12% and 10% of
the Partnership's revenues from leases. During 1997, two customers each
comprised 10% of the Partnership's revenues from leases.
8. Lines of credit:
The Partnership participates with ATEL and certain of its Affiliates in a
$95,000,000 revolving credit agreement with a group of financial institutions
which expires on April 30, 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 ATEL.
During 1998, the Partnership borrowed $2,200,000 under the line of credit.
Repayments on the line of credit were $5,850,000 during 1998 and $5,100,000
remained outstanding as of December 31, 1998. During 1999, the Partnership
borrowed $3,250,000 under the line of credit. At December 31, 1999, the
remaining outstanding balance was $8,350,000. At December 31, 1999, the rates on
such borrowings varied from 7.71% to 7.73%. Interest on the line of credit is
based on either the thirty day LIBOR rate or the bank's prime rate.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of December
31, 1999. At December 31, 1999, $21,857,103 was available under this agreement.
9. Fair value of financial instruments:
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value.
Cash and cash equivalents:
The carrying amount of cash and cash equivalents approximates fair value because
of the short-term maturity of these instruments.
Non-recourse debt:
The fair value of the Partnership's non-recourse debt is estimated using
discounted cash flow analyses, based on the Partnership's current incremental
borrowing rates for similar types of borrowing arrangements. The estimated fair
value of the Partnership's non-recourse debt at December 31, 1999 is
$45,856,203.
Line of credit:
The carrying amounts of the Partnership's variable rate lines of credit
approximate fair value.
24
<PAGE>
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
10. Provision for losses and impairments:
In January 2000, one of the Partnership's lessees filed for reorganization under
Chapter 11 of the United States Bankruptcy Code. The Partnership has determined
that the assets under operating lease with a net book value of $5,113,290 at
December 31, 1999 leased to this particular lessee were impaired as of December
31, 1999. The Partnership has estimated that the proceeds from the sales of the
assets will not be sufficient to satisfy the non-recourse lender. The debt
balance was $3,320,774 at December 31, 1999. As result, the Partnership has
fully reserved for these assets as of December 31, 1999.
Upon foreclosure by the lender and upon sale of the financed assets, the
Partnership expects to report a gain on the sale of the assets or an
extraordinary gain on the extinguishment of the debt or a combination of the two
totaling $3,320,774.
25
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
Inapplicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The registrant is a Limited Partnership and, therefore, has no officers or
directors.
All of the outstanding capital stock of ATEL Financial Corporation (the General
Partner) is held by ATEL Capital Group ("ACG"), a holding company formed to
control ATEL and affiliated companies pursuant to a corporate restructuring
completed in July 1994. The outstanding capital stock of ATEL Capital Group is
owned 73.125% by A. J. Batt and 24.375% by Dean Cash, and was obtained in the
restructuring in exchange for their capital interests in ATEL Financial
Corporation. The remaining 2.5% is owned by Paritosh K. Choksi.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"),
ATEL Investor services ("AIS") and ATEL Financial Corporation ("AFC") is a
wholly-owned subsidiary of ATEL Capital Group and performs services for the
Partnership. Acquisition services are performed for the Partnership by ALC,
equipment management, lease administration and asset disposition services are
performed by AEC, investor relations and communications services are performed
by AIS and general administrative services for the Partnership are performed by
AFC. ATEL Securities Corporation ("ASC"), is a wholly-owned subsidiary of ATEL
Financial Corporation.
The officers and directors of ATEL Capital Group and its affiliates are as
follows:
A. J. Batt Chairman of the Board of Directors of ACG, AFC, ALC,
AEC, AIS and ASC; President and Chief Executive
Officer of ACG, AFC and AEC
Dean L. Cash Director, Executive Vice President and Chief Operating
Officer of ACG, AFC, and AEC; Director, President
and Chief Executive Officer of ALC, AIS and ASC
Paritosh K. Choksi Director, Senior Vice President and Chief Financial
Officer of ACG, AFC, ALC, AEC and AIS
Donald E. Carpenter Vice President and Controller of ACG, AFC, ALC, AEC
and AIS; Chief Financial Officer of ASC
Vasco H. Morais Senior Vice President, Secretary and General Counsel
for ACG, AFC, ALC, AIS and AEC
Carl W. Magnuson Vice President - Syndication of ALC
Barbara F.
Medwadowski Vice President - Syndication of ALC
James A. Kamradt Director of Pricing and Syndication of ALC
Thomas D. Sbordone Senior Vice President - Marketing of ALC
Russell H. Wilder Vice President - Credit of AEC
John P. Scarcella Vice President of ASC
26
<PAGE>
A. J. Batt, age 63, founded ATEL in 1977 and has been its president and chairman
of the board of directors since its inception. From 1973 to 1977, he was
employed by GATX Leasing Corporation as manager-data processing and equity
placement for the lease underwriting department, which was involved in equipment
financing for major corporations. From 1967 to 1973 Mr. Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support services for computer time-sharing applications for corporations and
financial institutions. Prior to that time, he was employed by North American
Aviation as an engineer involved in the Apollo project. Mr. Batt received a
B.Sc. degree with honors in mathematics and physics from the University of
British Columbia in 1961.
Dean L. Cash, age 49, joined ATEL as director of marketing in 1980 and has been
a vice president since 1981, executive vice president since 1983 and a director
since 1984. Prior to joining ATEL, Mr. Cash was a senior marketing
representative for Martin Marietta Corporation, data systems division, from 1979
to 1980. From 1977 to 1979, he was employed by General Electric Corporation,
where he was an applications specialist in the medical systems division and a
marketing representative in the information services division. Mr. Cash was a
systems engineer with Electronic Data Systems from 1975 to 1977, and was
involved in maintaining and developing software for commercial applications. Mr.
Cash received a B.S. degree in psychology and mathematics in 1972 and an M.B.A.
degree with a concentration in finance in 1975 from Florida State University.
Mr. Cash is an arbitrator with the American Arbitration Association.
Paritosh K. Choksi, age 46, joined ATEL in 1999 as a director, senior vice
president and its chief financial officer. Prior to joining ATEL, Mr. Choksi was
chief financial officer at Wink Communications, Inc. from 1997 to 1999. From
1977 to 1997, Mr. Choksi was with Phoenix American Incorporated, a financial
services and management company, where he held various positions during his
tenure, and was senior vice president, chief financial officer and director when
he left the company. Mr. Choksi was involved in all corporate matters at Phoenix
and was responsible for Phoenix's capital market needs. He also served on the
credit committee overseeing all corporate investments, including its venture
lease portfolio. Mr. Choksi was a part of the executive management team which
caused Phoenix's portfolio to increase from $50 million in assets to over $2
billion. Mr. Choksi received a bachelor of technology degree in mechanical
engineering from the Indian Institute of Technology, Bombay; and an M.B.A.
degree from the University of California, Berkeley.
Donald E. Carpenter, age 51, joined ATEL in 1986 as controller. Prior to joining
ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath, certified
public accountants in San Francisco, California, from 1983 to 1986. From 1979 to
1983, Mr. Carpenter was an audit senior with Deloitte, Haskins & Sells,
certified public accountants, in San Jose, California. From 1971 to 1975, Mr.
Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter received a
B.S. degree in mathematics (magna cum laude) from California State University,
Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter
has been a California certified public accountant since 1981.
Vasco H. Morais, age 41, joined ATEL in 1989 as general counsel to provide legal
support in the drafting and reviewing of lease documentation, advising on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of
America's equipment leasing subsidiaries, providing in-house legal support on
the documentation of tax-oriented and non-tax oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital
Companies in the corporate and securities legal department involved in drafting
and reviewing contracts, advising on corporate law matters and securities law
issues. Mr. Morais received a B.A. degree in 1982 from the University of
California in Berkeley, a J.D. degree in 1986 from Golden Gate University Law
School and an M.B.A. (Finance) in 1997 from Golden Gate University. Mr. Morais
has been an active member of the State Bar of California since 1986.
27
<PAGE>
Carl W. Magnuson, age 56, joined ATEL in 1994 and is vice president -
syndication for ALC. Mr. Magnuson is responsible for acquiring third party lease
transactions and debt placement. Prior to joining ATEL he was a regional group
manager and portfolio sales manager for Bell Atlantic Systems Leasing for 10
years. From 1983 to 1984 he was vice president and chief financial officer of
the Handi-Kup Company, a plastics manufacturer, and from 1981 to 1982 he was
controller for the Cyclotron Corporation, engaged in nuclear medicine research
and development. From 1978 to 1981 he was executive vice president of Shannon
Financial Corporation, a middle market leasing corporation. From 1975 to 1978 he
was a deputy program manager for the Watkins Johnson Company. From 1968 to 1973
Mr. Magnuson was an engineering duty officer in the U. S. Navy. Mr. Magnuson
received a B.S. in Engineering Science and an M.S. in applied mathematics from
the Rensselaer Polytechnic Institute, an M.S. in industrial
engineering/operations research from Stanford University, and an M.B.A. from the
University of California at Berkeley.
Barbara F. Medwadowski, age 60, joined ATEL in 1997 and is vice president -
syndication for ALC. Ms. Medwadoski is responsible for acquiring third party
lease transactions. Prior to joining ATEL, she was a syndications manager for
Mellon US Leasing (successor to USL Capital and U.S. Leasing Corporation) for
nine years. From 1985 to 1987, she was a vice president with Great Western
Leasing where she acquired lease and loan transactions from intermediaries. From
1982 through 1984, she was a portfolio manager with U.S. Leasing Corporation.
Ms. Medwadowski received an M.B.A. degree from the University of California at
Berkeley in 1982. From 1964 through 1979, she was a senior researcher in lipids
and lipoproteins at the University of California at Berkeley. In 1964, she
earned an M.S. degree in nutrition and in 1961 a B.S. degree in child
development, each from the University of California at Berkeley.
James A. Kamradt, age 38, director of pricing and syndication for ALC, joined
ATEL in 1997. Mr. Kamradt is involved in the pricing of lease transactions and
the placement of debt to leverage certain transactions. From 1985 to 1997, Mr.
Kamradt managed his own private consulting business, providing underwriting and
operational services for numerous leasing companies. Prior to that, Mr. Kamradt
was the national operations officer for the computer leasing division of Phoenix
American; and regional credit manager for Dana Commercial Credit Corporation.
Mr. Kamradt received a B.S. from Michigan Technological University's Engineering
School of Business, and an M.B.A. from Haas School of Business of the University
of California, Berkeley.
Thomas D. Sbordone, age 41, senior vice president - marketing for ALC, joined
ATEL in 1993, as a regional vice president in the northeastern United States.
Mr. Sbordone is currently responsible for new business development within the
eastern U.S., including management of filed sales personnel and directly
interfacing with ATEL's existing and prospective clients to achieve the
company's lease investment objectives. Prior to joining ATEL, Mr. Sbordone was
employed, from 1985, by American Finance Group, a Boston-based equipment lessor.
While there, Mr. Sbordone's various responsibilities involved lease origination
of vendor finance relationships. Mr. Sbordone earned a B.S., with honors, in
finance and marketing from Northeastern University, and has attended Bentley
College Graduate School of Business.
Russell H. Wilder, age 45, joined ATEL in 1992 as vice president of ATEL
Business Credit, a wholly-owned subsidiary of ACG. Immediately prior to joining
ATEL, Mr. Wilder was a personal property broker specializing in equipment
leasing and financing and an outside contractor in the areas of credit and
collections. From 1985 to 1990 he was vice president and manager of leasing for
Fireside Thrift Co., a Teledyne subsidiary, and was responsible for all aspects
of setting up and managing the department, which operated as a small ticket
lease funding source. From 1983 to 1985 he was with Wells Fargo Leasing
Corporation as assistant vice president in the credit department where he
oversaw all credit analysis on transactions in excess of $2 million. From 1978
to 1983 he was district credit manager with Westinghouse Credit Corporation's
Industrial Group and was responsible for all non-marketing operations of various
district offices. Mr. Wilder holds a B.S. with honors in agricultural economics
and business management from the University of California, Davis. He has been
awarded the Certified Lease Professional designation by the Western Association
of Equipment Lessors.
28
<PAGE>
John P. Scarcella, age 38, joined ATEL Securities as vice president in 1992. He
is involved in the marketing of securities offered by ASC. Prior to joining ASC,
from 1987 to 1991, he was employed by Lansing Pacific Fund, a real estate
investment trust in San Mateo, California and acted as director of investor
relations. From 1984 to 1987, Mr. Scarcella acted as broker dealer
representative for Lansing Capital Corporation, where he was involved in the
marketing of direct participation programs and REITs. Mr. Scarcella received a
B.S.C. degree with emphasis in investment finance in 1983 and an M.B.A. degree
with a concentration in marketing in 1991 from Santa Clara University.
Item 11. EXECUTIVE COMPENSATION
The registrant is a Limited Partnership and, therefore, has no officers or
directors.
Set forth hereinafter is a description of the nature of remuneration paid and to
be paid to ATEL and their Affiliates. The amount of such remuneration paid for
the years ended December 31, 1999, 1998 and 1997 is set forth in Item 8 of this
report under the caption "Financial Statements and Supplementary Data - Notes to
the Financial Statements - Related party transactions," at Note 5 thereof, which
information is hereby incorporated by reference.
Selling Commissions
The Partnership will pay selling commissions in the amount of 9.5% of Gross
Proceeds, as defined, to ATEL Securities Corporation, an affiliate of ATEL. Of
this amount, the majority is expected to be reallowed to other broker/dealers.
Through December 31, 1996, $11,875,000 of such commissions (the maximum
allowable) had been paid to ATEL or its affiliates. Of that amount, $10,163,554
was reallowed to other broker/dealers.
Acquisition Fees
Acquisition fees were paid to ATEL for services rendered in finding, reviewing
and evaluating equipment to be purchased by the Partnership and rejecting
equipment not to be purchased by the Partnership. The total amount of
acquisition fees paid to ATEL or their affiliates was not to exceed 3% of the
aggregate purchase price of equipment acquired with the net proceeds of the
offering and was not to exceed 4.5% of the Gross Proceeds of the Offering.
Through December 31, 1996, $5,625,000 of such fees (the maximum allowable
amount) had been paid to ATEL or its affiliates.
Equipment Management Fees
As compensation for its services rendered generally in managing or supervising
the management of the Partnership's equipment and in supervising other ongoing
services and activities including, among others, arranging for necessary
maintenance and repair of equipment, collecting revenue, paying operating
expenses, determining the equipment is being used in accordance with all
operative contractual arrangements, property and sales tax monitoring and
preparation of financial data, ATEL or its affiliates are entitled to receive
management fees which are payable for each fiscal quarter and are to be in an
amount equal to (i) 3.5% of the gross lease revenues from "operating" leases, as
defined, and (ii) 2% of gross lease revenues from "full payout" leases, as
defined, which contain net lease provisions.
See Notes to the financial statements included at Item 8 of this report for
amounts paid.
29
<PAGE>
Incentive Management Fees
As compensation for its services rendered in establishing and maintaining the
composition of the Partnership's equipment portfolio and its acquisition and
debt strategies and supervising fund administration including supervising the
preparation of reports and maintenance of financial and operating data of the
Partnership, Securities and Exchange Commission and Internal Revenue Service
filings, returns and reports, ATEL shall be entitled to receive the Incentive
management fee which shall be payable for each fiscal quarter and shall be an
amount equal to 1% of cash distributions from operations, sales or refinancing
and 3.25% (4% prior to July 1, 1995) of cash distributions from operations to an
affiliate of ATEL until such time as the Limited Partners have received
aggregate distributions of cash from operations in an amount equal to their
original invested capital plus a 10% per annum return on their average adjusted
invested capital (as defined in the Limited Partnership Agreement). Thereafter,
the incentive management fee paid to the affiliate of ATEL shall be 4% of all
distributions of cash from operations, sales or refinancing.
See Notes to the financial statements included at Item 8 of this report for
amounts paid.
Equipment Resale Fees
As compensation for services rendered in connection with the sale of equipment,
ATEL shall be entitled to receive an amount equal to the lesser of (i) 3% of the
sales price of the equipment, or (ii) one-half the normal competitive equipment
sales commission charged by unaffiliated parties for such services. Such fee is
payable only after the Limited Partners have received a return of their adjusted
invested capital (as defined in the Limited Partnership Agreement) plus 10% of
their adjusted invested capital per annum calculated on a cumulative basis,
compounded daily, commencing the last day of the quarter in which the limited
partner was admitted to the Partnership. To date, none have been accrued or
paid.
Equipment Re-lease Fee
As compensation for providing re-leasing services, ATEL is entitled to receive
fees equal to 2% of the gross rentals or the comparable competitive rate for
such services relating to comparable equipment, whichever is less, derived from
the re-lease provided that (i) ATEL or their affiliates have and will maintain
adequate staff to render such services to the Partnership, (ii) no such re-lease
fee is payable in connection with the re-lease of equipment to a previous lessee
or its affiliates, (iii) ATEL or its affiliates have rendered substantial
re-leasing services in connection with such re-lease and (iv) ATEL or its
affiliates are compensated for rendering equipment management services. To date,
none have been accrued or paid.
General Partner's Interest in Operating Proceeds
Net income, net loss and investment tax credits are allocated 99% to the Limited
Partners and 1% to ATEL. See financial statements included in Item 8, Part I of
this report for amounts allocated to ATEL in 1999, 1998 and 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
At December 31, 1999 no investor is known to the Partnership to hold
beneficially more than 5% of the issued and outstanding Units.
30
<PAGE>
Security Ownership of Management
The shareholders of ATEL are beneficial owners of Limited Partnership Units as
follows:
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
-------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Limited Partnership Units A. J. Batt Initial Limited Partner Units 0.0002%
235 Pine Street, 6th Floor 25 Units ($250)
San Francisco, CA 94104 (owned by wife)
Limited Partnership Units Dean Cash Initial Limited Partner Units 0.0002%
235 Pine Street, 6th Floor 25 Units ($250)
San Francisco, CA 94104 (owned by wife)
</TABLE>
Changes in Control
The Limited Partners have the right, by vote of the Limited Partners owning more
than 50% of the outstanding limited Partnership units, to remove a General
Partner.
ATEL may at any time call a meeting of the Limited Partners or a vote of the
Limited Partners without a meeting, on matters on which they are entitled to
vote, and shall call such meeting or for vote without a meeting following
receipt of a written request therefor of Limited Partners holding 10% or more of
the total outstanding Limited Partnership units.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to Item 1 of this report under the caption "Equipment Leasing
Activities," Item 8 of this report under the caption "Financial Statements and
Supplemental Data - Notes to the Financial Statements - Related party
transactions" at Note 5 thereof, and Item 11 of this report under the caption
"Executive Compensation," are hereby incorporated by reference.
31
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a)Financial Statements and Schedules
1. Financial Statements
Included in Part II of this report:
Report of Independent Auditors
Balance Sheets at December 31, 1999 and 1998
Statements of Operations for the years ended December
31, 1999, 1998 and 1997
Statements of Changes in Partners' Capital for the
years ended December 31, 1999, 1998 and 1997
Statements of Cash Flows for the years ended December
31, 1999, 1998 and 1997
Notes to Financial Statements
2. Financial Statement Schedules
Allschedules 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)Reports on Form 8-K for the fourth quarter of 1999
None
(c)Exhibits
(3)and (4) Agreement of Limited Partnership, included
as Exhibit B to Prospectus (Exhibit 28.1), is
incorporated herein by reference to the report on
Form 10K for the period ended December 31, 1994
(File No. 33-81952).
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: 3/22/2000
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
ATEL Financial Corporation (General
Partner)
By: /s/ Dean Cash
--------------------------------------------------
Dean Cash,
Executive Vice President of ATEL
Financial Corporation (General Partner)
33
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the persons in the capacities and on the dates
indicated.
SIGNATURE CAPACITIES DATE
/s/ A. J. Batt President, Chairman and Chief 3/22/2000
- --------------------------- Executive Officer of ATEL Financial
A. J. Batt Corporation
/s/ Dean Cash Executive Vice President and director 3/22/2000
- --------------------------- of ATEL Financial Corporation
Dean Cash
/s/ Paritosh K. Choksi Principal financial officer of registrant; 3/22/2000
- --------------------------- principal financial officer and director
Paritosh K. Choksi of ATEL Financial Corporation
/s/ Donald E. Carpenter Principal accounting officer of 3/22/2000
- --------------------------- registrant; principal accounting officer
Donald E. Carpenter of ATEL Financial Corporation
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act:
No proxy materials have been or will be sent to security holders. An annual
report will be furnished to security holders subsequent to the filing of this
report on Form 10-K, and copies thereof will be furnished supplementary to the
Commission when forwarded to the security holders.
34
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> dec-31-1999
<PERIOD-END> dec-31-1999
<CASH> 390,463
<SECURITIES> 0
<RECEIVABLES> 10,651,145
<ALLOWANCES> 282,991
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 110,704,998
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 52,207,752
<TOTAL-LIABILITY-AND-EQUITY> 110,704,998
<SALES> 0
<TOTAL-REVENUES> 34,400,228
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 25,127,518
<LOSS-PROVISION> 5,396,281
<INTEREST-EXPENSE> 4,783,105
<INCOME-PRETAX> (906,676)
<INCOME-TAX> 0
<INCOME-CONTINUING> (906,676)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (906,676)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
