-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HOtywvemt2ikAw1dYRrZdkxPddIb9Q8PbYow1KH8yRKkA74kRDkndWB3DobNURe8 n/fk9Mjp603HYpHb2jxu7g== /in/edgar/work/0001019542-00-000004/0001019542-00-000004.txt : 20001110 0001019542-00-000004.hdr.sgml : 20001110 ACCESSION NUMBER: 0001019542-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATEL CAPITAL EQUIPMENT FUND VII LP CENTRAL INDEX KEY: 0001019542 STANDARD INDUSTRIAL CLASSIFICATION: [7359 ] IRS NUMBER: 943248318 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24175 FILM NUMBER: 756981 BUSINESS ADDRESS: STREET 1: 235 PINE STREET 6TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159898800 MAIL ADDRESS: STREET 1: 235 PINE STREET STREET 2: SIXTH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 10-Q 1 0001.txt REPORT FOR THE THIRD QUARTER OF 2000 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 September 30, 2000 |_| 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 0-24175 ATEL Capital Equipment Fund VII, L.P. (Exact name of registrant as specified in its charter) California 94-3248318 - ---------- ---------- (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 1 Part I. FINANCIAL INFORMATION Item 1. Financial Statements. 2 ATEL CAPITAL EQUIPMENT FUND VII, L.P. BALANCE SHEETS SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (Unaudited) ASSETS 2000 1999 ---- ---- Cash and cash equivalents $ 5,083,837 $ 1,674,372 Accounts receivable 6,774,456 5,626,105 Other assets 100,010 130,007 Investments in leases 152,452,585 183,993,816 ----------------- ----------------- Total assets $164,410,888 $191,424,300 ================= ================= LIABILITIES AND PARTNERS' CAPITAL Long-term debt $ 48,704,000 $ 53,181,000 Non-recourse debt 15,581,752 21,780,420 Line of credit - 11,150,000 Accounts payable: General Partner 720,696 1,435,651 Other 855,064 425,896 Accrued interest payable 328,156 714,697 Unearned operating lease income 1,663,062 1,422,852 ----------------- ----------------- Total liabilities 67,852,730 90,110,516 Partners' capital: General Partner (1,514,601) (1,514,601) Limited Partners 98,072,759 102,828,385 ----------------- ----------------- Total partners' capital 96,558,158 101,313,784 ----------------- ----------------- Total liabilities and partners' capital $164,410,888 $191,424,300 ================= ================= See accompanying notes. 3 ATEL CAPITAL EQUIPMENT FUND VII, L.P. INCOME STATEMENTS NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
Nine Months Three Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenues: Leasing activities: Operating leases $ 28,720,782 $27,434,445 $ 7,928,336 $ 9,384,429 Direct financing 1,108,390 1,426,625 498,323 450,491 Leveraged leases 195,693 107,616 - 35,872 Gain on sales of assets 1,552,711 778,259 1,302,399 31,065 Interest 91,129 42,405 54,191 8,501 Other 58,164 15,743 21,167 2,938 ------------------ ------------------ ----------------- ----------------- 31,726,869 29,805,093 9,804,416 9,913,296 Expenses: Depreciation 19,496,912 18,352,622 6,244,786 6,188,566 Interest expense 4,126,058 4,594,693 1,299,542 1,491,892 Equipment and incentive management fees to General Partner 1,364,126 1,329,633 485,338 445,045 Other 728,658 1,086,341 277,984 390,943 Administrative cost reimbursements to General Partner 477,104 418,021 172,499 167,943 Professional fees 86,617 146,774 9,673 27,358 Provision for losses - 750,000 - 750,000 ------------------ ------------------ ----------------- ----------------- 26,279,475 26,678,084 8,489,822 9,461,747 ------------------ ------------------ ----------------- ----------------- Income before extraordinary item 5,447,394 3,127,009 1,314,594 451,549 Extraordinary gain on early extinguishment of debt 2,056,574 - 2,056,574 - ------------------ ------------------ ----------------- ----------------- Net income $ 7,503,968 $ 3,127,009 $ 3,371,168 $ 451,549 ================== ================== ==================================== Net income: General Partner $ 916,420 $ 234,526 $ 311,775 $ 33,866 Limited Partners 6,587,548 2,892,483 3,059,393 417,683 ------------------ ------------------ ----------------- ----------------- $ 7,503,968 $ 3,127,009 $ 3,371,168 $ 451,549 ================== ================== ================= ================= Income before extraordinary item per limited partnership unit $ 0.32 $ 0.19 $ 0.08 $ 0.03 Extraordinary gain on early extinguishment of debt per limited partnership unit 0.12 - 0.12 - ------------------ ------------------ ----------------- ----------------- Net income per limited partnership unit $ 0.44 $ 0.19 $ 0.20 $ 0.03 ================== ================== ================= ================= Weighted average number of Units outstanding 14,996,050 14,996,050 14,996,050 14,996,050
See accompanying notes. 4 ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENT OF CHANGES IN PARTNERS' CAPITAL NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 (Unaudited)
Limited Partners General Units Amount Partner Total Balance December 31, 1999 6,716,896 $102,828,385 $(1,514,601) $101,313,784 Distributions to partners (11,343,174) (916,420) (12,259,594) Net income 6,587,548 916,420 7,503,968 ------------------ ------------------ ----------------- ----------------- Balance September 30, 2000 6,716,896 $98,072,759 $(1,514,601) $ 96,558,158 ================== ================== ================= =================
See accompanying notes. STATEMENTS OF CASH FLOWS NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Nine Months Three Months Ended September 30, Ended September 30, ------------------- ------------------- Operating activities: 2000 1999 2000 1999 ---- ---- ---- ---- Net income $ 7,503,968 $ 3,127,009 $ 3,371,168 $ 451,549 Adjustments to reconcile net income (loss) to cash provided by operating activities: Leveraged lease income (195,693) (107,616) - (35,872) Depreciation 19,496,912 18,352,622 6,244,786 6,188,566 Gain on sales of assets (1,552,711) (778,259) (1,302,399) (31,065) Provision for losses - 750,000 - 750,000 Extraordinary gain on early extinguishment of debt (2,056,574) - (2,056,574) - Changes in operating assets and liabilities: Accounts receivable (1,148,351) 1,573,175 637,815 (834,103) Other assets 29,997 29,997 9,999 9,999 Accounts payable, General Partner (714,955) (6,883) (79,235) 32,235 Accounts payable, other 429,168 (114,922) (414,342) 136,062 Accrued interest expense (386,541) (369,856) (103,274) (126,604) Unearned lease income 240,210 134,325 349,761 (108,903) ------------------ ------------------ ----------------- ----------------- Net cash provided by operations 21,645,430 22,589,592 6,657,705 6,431,864 ------------------ ------------------ ----------------- ----------------- Investing activities: Proceeds from sales of assets 9,538,556 2,162,469 5,170,197 888,599 Reduction in net investment in direct financing leases 4,254,167 2,587,209 1,668,053 844,906 Purchases of equipment on operating leases - (6,617,689) - (1,924,811) Purchases of equipment on direct financing leases - (812,462) - (34,520) ------------------ ------------------ ----------------- ----------------- Net cash provided by (used in) investing activities 13,792,723 (2,680,473) 6,838,250 (225,826) ------------------ ------------------ ----------------- -----------------
5 ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENTS OF CASH FLOWS (Continued) SEPTEMBER 30, 2000 AND 1999 (Unaudited)
Nine Months Three Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Financing activities: Distributions to partners (12,259,594) (12,159,142) (4,156,898) (4,054,389) Borrowings under line of credit 450,000 6,672,824 450,000 2,000,000 Repayments of borrowings under line of credit (11,600,000) (16,454,531) (2,500,000) - Proceeds of long-term debt 11,700,000 9,000,000 - - Repayments of long-term debt (16,177,000) (13,476,000) (4,370,000) (4,206,000) Proceeds of non-recourse debt - 9,520,748 - - Repayments of non-recourse debt (4,142,094) (3,517,821) (1,024,137) (1,287,603) ------------------ ------------------ ----------------- ----------------- Net cash used in financing activities (32,028,688) (20,413,922) (11,601,035) (7,547,992) ------------------ ------------------ ----------------- ----------------- Net increase (decrease) in cash and cash equivalents 3,409,465 (504,803) 1,894,920 (1,341,954) Cash and cash equivalents at beginning of period 1,674,372 1,576,029 3,188,917 2,413,180 ------------------ ------------------ ----------------- ----------------- Cash and cash equivalents at end of period $ 5,083,837 $ 1,071,226 $ 5,083,837 $ 1,071,226 ================== ================== ================= ================= Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 4,512,599 $ 4,964,549 $ 1,402,816 $ 1,618,496 ================== ================== ================= =================
See accompanying notes. 6 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (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 Capital Equipment Fund VII, L.P. (the Fund), was formed under the laws of the State of California on July 17 , 1996, 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 17, 1996, $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 7, 1997, 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:
Depreciation Balance Expense or Reclassi- Balance December 31, Amortization fications or September 30, 1999 of Leases Dispositions 2000 ---- --------- ------------ ---- Net investment in operating leases $164,971,672 $ (19,356,675) $(7,057,840) $138,557,157 Net investment in direct financing leases 22,388,627 (4,254,167) (613,445) 17,521,015 Net investment in leveraged leases 1,724,071 195,693 (1,919,764) - Assets held for sale or lease 491,758 - (310,286) 181,472 Reserve for losses (6,185,366) - 1,915,490 (4,269,876) Initial direct costs, net of accumulated amortization 603,054 (140,237) - 462,817 ------------------ ------------------ ----------------- ----------------- $183,993,816 $ (23,555,386) $ (7,985,845) $152,452,585 ================== ================== ================= =================
7 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (Unaudited) 3. Investment in leases (continued): Property on operating leases consists of the following:
Balance Balance December 31, Acquisitions, Dispositions & Reclassifications September 30, ---------------------------------------------- 1999 1st Quarter 2nd Quarter 3rd Quarter 2000 ---- ----------- ----------- ----------- ---- Transportation $ 100,584,087 $ 3,575,639 $ (514,038) $ (1,749,047) $101,896,641 Marine vessels/barges 27,609,897 (333,418) - - 27,276,479 Construction 23,002,563 - - - 23,002,563 Manufacturing 22,508,006 - (2,093,102) (6,799,934) 13,614,970 Office automation 11,100,543 - - (533,697) 10,566,846 Mining 8,536,249 - - - 8,536,249 Materials handling 5,907,524 (95,598) (212,836) 212,836 5,811,926 Other 7,855,730 (1,589,844) 665,164 (1,617,409) 5,313,641 Communications 7,740,986 (3,235,940) (3,370) 3,370 4,505,046 ----------------------- ------------------ ------------------ ----------------- ----------------- 214,845,585 (1,679,161) (2,158,182) (10,483,881) 200,524,361 Less accumulated depreciation (49,873,913) (3,496,378) (7,371,187) (1,225,726) (61,967,204) ----------------------- ------------------ ------------------ ----------------- ----------------- $ 164,971,672 $ (5,175,539) $ (9,529,369) $(11,709,607) $138,557,157 ======================= ================== ================== ================= =================
All of the property on leases was acquired in 1997, 1998 and 1999. At September 30, 2000, the aggregate amounts of future minimum lease payments are as follows:
Direct Year ending Operating Financing December 31, Leases Leases Total Three months ending December 31, 2000 $ 7,023,653 $ 796,876 $ 7,820,529 Year ending December 31, 2001 27,556,507 2,998,058 30,554,565 2002 20,219,539 2,376,469 22,596,008 2003 12,370,559 2,015,803 14,386,362 2004 8,028,875 1,966,212 9,995,087 Thereafter 7,597,614 3,256,052 10,853,666 ------------------ ------------------ ----------------- $ 82,796,747 $ 13,409,470 $ 96,206,217 ================== ================== =================
8 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (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 7.4% to 8.828%. Future minimum principal payments of non-recourse debt are as follows:
Year ending December 31, Principal Interest Total Three months ending December 31, 2000 $ 596,095 $ 125,941 $ 722,036 Year ending December 31, 2001 5,406,043 1,285,919 6,691,962 2002 5,766,175 772,941 6,539,116 2003 3,175,482 250,880 3,426,362 2004 203,560 38,208 241,768 Thereafter 434,397 40,373 474,770 ------------------ ------------------ ----------------- $ 15,581,752 $ 2,514,262 $ 18,096,014 ================== ================== =================
5. Long-term debt: In 1998, the Partnership entered into a $65 million receivables funding program (the Program) with a receivables financing company that issues commercial paper rated A1 by Standard and Poors and P1 by Moody's Investor Services. Under the Program, the receivables financing company receives a general lien against all of the otherwise unencumbered assets of the Partnership. The Program provides for borrowing at a variable interest rate (6.7087% at September 30, 2000). The Program requires the General Partner to enter into various interest rate swaps with a financial institution (also rated A1/P1) to manage interest rate exposure associated with variable rate obligations under the Program by effectively converting the variable rate debt to fixed rates. As of September 30, 2000, the Partnership receives or pays interest on a notional principal of $48,704,000, based on the difference between nominal rates ranging from 5.55% to 7.58% and the variable rate under the Program. No actual borrowing or lending is involved. The last of the swaps terminates in 2008. The differential to be paid or received is accrued as interest rates change and is recognized currently as an adjustment to interest expense related to the debt. Through hedge agreements, the interest rates have been effectively fixed. Borrowings under this facility are as follows: Original Balance Rate on Date Amount September 30, Interest Swap Borrowed Borrowed 2000 Agreement -------- -------- ---- --------- 4/1/1998 $ 21,770,000 $ 10,111,000 6.22000% 7/1/1998 25,000,000 10,834,000 6.15500% 10/1/1998 20,000,000 12,787,000 5.55000% 4/16/1999 9,000,000 4,367,000 5.89000% 1/26/2000 11,700,000 10,605,000 7.58000% ----------------------- ------------------ $ 87,470,000 $ 48,704,000 ======================= ================== 9 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (Unaudited) 5. Long-term debt (continued): Future minimum principal payments of long-term debt are as follows:
Year ending December 31, Principal Interest Total Three months ending December 31, 2000 $ 3,827,000 $ 757,361 $ 4,584,361 Year ending December 31, 2001 13,724,000 2,410,467 16,134,467 2002 11,131,000 1,640,179 12,771,179 2003 7,200,000 1,075,640 8,275,640 2004 5,422,000 676,854 6,098,854 Thereafter 7,400,000 701,275 8,101,275 ------------------ ------------------ ----------------- $ 48,704,000 $ 7,261,776 $ 55,965,776 ================== ================== =================
6. 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 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 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 actual costs incurred on behalf of the Partnership or 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. 10 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (Unaudited) 6. Related party transactions (continued): The General Partner and/or Affiliates earned fees, commissions and reimbursements, pursuant to the Limited Partnership Agreement as follows:
2000 1999 ---- ---- 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 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). $ 1,364,126 $ 1,329,633 Administrative costs reimbursed to General Partner 477,104 418,021 ----------------- ----------------- $ 1,841,230 $ 1,747,654 ================= =================
7. Partner's capital: As of September 30, 1999, 14,996,050 Units ($149,960,050) were issued and outstanding. The Fund's registration statement with the Securities and Exchange Commission became effective November 29, 1996. The Fund is authorized to issue up to 15,000,050 Units, including the 50 Units issued to the initial limited partners. Available Cash from Operations, as defined in the Limited Partnership Agreement, shall be distributed as follows: First, Distributions of Cash from Operations shall be 88.5% to the Limited Partners, 7.5% to the General Partner and 4% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee, 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, as defined in the Limited Partnership Agreement. Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee. Available Cash from Sales or Refinancing, as defined in the Limited Partnership Agreement, shall be distributed as follows: First, Distributions of Sales or Refinancings shall be 92.5% to the Limited Partners and 7.5% to the General Partner, 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. Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee. 11 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (Unaudited) 8. Line of credit: The Partnership participates with the General Partner and certain of its Affiliates in a $77,500,000 revolving credit agreement with a group of financial institutions which expires on July 28, 2001. 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 September 30, 2000, the Partnership had no borrowings under the line of credit. The credit agreement includes certain financial covenants applicable to each borrower. The Partnership was incompliance with its covenants as of September 30, 2000. 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity During the first three quarters of 2000 and 1999, the Partnership's primary activity was engaging in equipment leasing activities. The liquidity of the Partnership will vary in the future, increasing to the extent cash flows from leases exceed expenses, and decreasing as lease assets are acquired, as distributions are made to the limited partners and to the extent expenses exceed cash flows from leases. As another source of liquidity, the Partnership has contractual obligations with a diversified group of lessees for fixed lease terms at fixed rental amounts. As the initial lease terms expire the Partnership will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on the General Partner's success in re-leasing or selling the equipment as it comes off lease. The Partnership participates with the General Partner and certain of its affiliates in a $77,500,000 revolving line of credit with a group of financial institutions. The line of credit expires on July 28, 2001. 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 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. No commitments of capital have been or are expected to be made other than for the acquisition of additional equipment. There were no such commitments as of September 30, 2000. If inflation in the general economy becomes significant, it may affect the Partnership inasmuch as the residual (resale) values and rates on re-leases of the Partnership's leased assets may increase as the costs of similar assets increase. However, the Partnership's revenues from existing leases would not increase, as such rates are generally fixed for the terms of the leases without adjustment for inflation. If interest rates increase significantly, the lease rates that the Partnership can obtain on future leases will be expected to increase as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates. During 2000 and 1999, the Partnership's primary source of liquidity was rents from operating leases. Cash from operating activities was almost entirely from operating lease rents in both 2000 and in 1999 for both the three and nine month periods. Sources of cash from investing activities consisted of proceeds from sales of assets and direct financing lease rents. Rents from direct financing leases increased significantly compared to 1999 as a result of asset acquisitions over the last year. Proceeds from sales of assets are not expected to be consistent from one period to another. In 1999, cash was used in investing activities to purchase assets on operating and direct financing leases. In 2000, the only sources of cash from financing sources was borrowings on the line of credit and proceeds of long-term debt. In 1999, sources of cash from financing activities consisted of borrowings (from the line of credit or in the form of either non-recourse or long-term debt). Distributions to partners have not changed significantly compared to 1999. Repayments of non-recourse debt increased for the none month period as a result of borrowings in the first half of 1999. Repayments decreased for the three month periods as a result of scheduled debt payments. 13 Results of operations Operations in 2000 resulted in a net income of $7,503,968 (nine months) and $3,371,009 (three months). Operations in 1999 resulted in a net income of $3,877,009 (nine months) and $1,201,549 (three months). The Partnership's primary source of revenues is from operating leases. Lease revenues and depreciation expenses have increased compared to 1999 as a result of asset acquisitions over the last two years. Equipment management fees are based on the Partnership's rental revenues and have increased due to increases in the Partnership's revenues from leases. Incentive management fees are based on the levels of distributions to limited partners. Lease revenues and distributions increased very slightly compared to 1999, and as a result, management fees also increased by only a small amount. Interest expense has decreased as a result of scheduled debt payments. In December 1999, one of the Partnership's lessees (Applied Magnetics) defaulted on its leases and sought protection under the Bankruptcy Act. As a result, reserves were established related to those assets which had been leased to Applied Magnetics as of December 31, 1999. During the third quarter of 2000, most of the lease assets were sold at auction and the non-recourse debt which had been used to finance a significant portion of the assets was extinguished, giving rise to an extraordinary gain. PART II. OTHER INFORMATION Item 1. Legal Proceedings. 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 $8,048,095 leased to Applied Magnetics Corporation. On January 31, 2000, the General Partner was appointed to the Official Committee of Unsecured Creditors and currently serves as the Chairperson of the Committee. Procedures were quickly undertaken for the liquidation of the Partnership's leased equipment, which has resulted in recoveries of $1,773,798 or 21.7% of original equipment cost. Additional recoveries by the Partnership, resulting from this default, are fairly speculative, other than the proceeds received from the liquidation of the Partnership's equipment. The Partnership anticipates additional amounts to be recoverable through the reorganization of the lessee's business, however, any recoveries above the amounts received upon liquidation of the Partnership's equipment are highly uncertain and speculative. As of November 1, 2000, liquidation of the assets was completed. 14 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, September 30, 2000 and December 31, 1999. Statements of operations for the nine and three month periods ended September 30, 2000 and 1999. Statement of changes in partners' capital for the nine months ended September 30, 2000. Statement of cash flows for the nine and three month periods ended September 30, 2000 and 1999. 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 15 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: November 9, 2000 ATEL CAPITAL EQUIPMENT FUND VII, 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 16 EX-27 2 0002.txt FDS --
5 9-MOS Dec-31-2000 Sep-30-2000 5083837 0 6774456 0 0 0 0 0 164410888 0 0 0 0 0 96558158 164410888 0 31726869 0 0 22153417 0 4126058 5447394 0 5447394 0 2056574 0 7503968 0 0
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