-----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, Cz58ukbxGt7iemZcyz7IANH95KSTLVmzYwfH91EmWN2WVb7zvb6MsOmbw4sUzhKS BrwgsUwFK5YwlZ16JYXvZg== 0001019542-01-500002.txt : 20010809 0001019542-01-500002.hdr.sgml : 20010809 ACCESSION NUMBER: 0001019542-01-500002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATEL CAPITAL EQUIPMENT FUND VII LP CENTRAL INDEX KEY: 0001019542 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943248318 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24175 FILM NUMBER: 1700646 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 fund710q2q2001.txt REPORT FOR THE SIX MONTHS ENDED JUNE 30, 2001 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 June 30, 2001 |_| 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 JUNE 30, 2001 AND DECEMBER 31, 2000 (Unaudited) ASSETS 2001 2000 ---- ---- Cash and cash equivalents $ 880,383 $ 1,321,417 Accounts receivable, net of allowance for doubtful accounts of none in 2001 and $724,906 in 2000 4,757,855 6,222,311 Other assets 70,013 90,011 Investments in leases 139,126,707 149,967,007 ------------------ ------------------ Total assets $144,834,958 $ 157,600,746 ================== ================== LIABILITIES AND PARTNERS' CAPITAL Long-term debt $38,763,000 $ 44,877,000 Non-recourse debt 12,245,704 15,452,741 Line of credit 3,500,000 - Accounts payable: General Partner 783,711 605,684 Other 561,220 703,761 Accrued interest payable 323,731 533,858 Unearned operating lease income 927,110 1,264,094 ------------------ ------------------ Total liabilities 57,104,476 63,437,138 Partners' capital: General Partner (1,514,601) (1,514,601) Limited Partners 89,245,083 95,678,209 ------------------ ------------------ Total partners' capital 87,730,482 94,163,608 ------------------ ------------------ Total liabilities and partners' capital $144,834,958 $ 157,600,746 ================== ================== See accompanying notes. 3 ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENT OF OPERATIONS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2001 AND 2000 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 2001 2000 2001 2000 ---- ---- ---- ---- Revenues: Leasing activities: Operating leases $16,333,829 $20,792,446 $ 8,040,945 $ 10,814,256 Direct financing 543,677 610,067 264,834 412,149 Leveraged leases - 195,693 - - (Loss) gain on sales of assets (351,040) 250,312 (270,078) (436,239) Interest 36,770 36,938 14,378 23,730 Other 5,167 36,997 2,593 31,462 ----------------- ----------------- ------------------ ------------------ 16,568,403 21,922,453 8,052,672 10,845,358 Expenses: Depreciation and amortization 10,771,879 13,252,126 5,179,501 8,747,938 Interest expense 2,159,511 2,826,516 1,049,036 1,392,121 Equipment and incentive management fees to General Partner 689,171 878,788 362,185 337,944 Cost reimbursements to General Partner 492,543 304,605 297,166 180,755 Railcar maintenance 425,191 230,476 188,344 104,744 Other 340,215 220,198 151,016 108,930 Professional fees 103,909 76,944 49,619 57,528 ----------------- ----------------- ------------------ ------------------ 14,982,419 17,789,653 7,276,867 10,929,960 ----------------- ----------------- ------------------ ------------------ Net income (loss) $ 1,585,984 $ 4,132,800 $ 775,805 $ (84,602) ================= ================= ================== ================== Net income (loss): General Partner $ 518,964 $ 604,645 $ 303,981 $ 303,981 Limited Partners 1,067,020 3,528,155 471,824 (388,583) ----------------- ----------------- ------------------ ------------------ $ 1,585,984 $ 4,132,800 $ 775,805 $ (84,602) ================= ================= ================== ================== Net income (loss) per Limited Partnership Unit $0.07 $0.24 $0.03 ($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 SIX MONTH PERIOD ENDED JUNE 30, 2001 (Unaudited)
Limited Partners General Units Amount Partner Total Balance December 31, 2000 14,996,050 $95,678,209 $(1,514,601) $ 94,163,608 Distributions to partners (7,500,146) (518,964) (8,019,110) Net income 1,067,020 518,964 1,585,984 ----------------- ----------------- ------------------ ------------------ Balance June 30, 2001 14,996,050 $89,245,083 $(1,514,601) $ 87,730,482 ================= ================= ================== ==================
See accompanying notes. 5 STATEMENTS OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2001 AND 2000 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- Operating activities: 2001 2000 2001 2000 ---- ---- ---- ---- Net income (loss) $ 1,585,984 $ 4,132,800 $ 775,805 $ (84,602) Adjustments to reconcile net income (loss) to cash provided by operating activities: Leveraged lease income - (195,693) - - Depreciation 10,771,879 13,252,126 5,179,501 8,747,938 Loss (gain) on sales of assets 351,040 (250,312) 270,078 436,239 Changes in operating assets and liabilities: Accounts receivable 1,464,456 (1,786,166) 115,429 (1,904,644) Other assets 19,998 19,998 9,999 9,999 Accounts payable, General Partner 178,027 (635,720) 508,731 323,165 Accounts payable, other (142,541) 843,510 47,104 547,244 Accrued interest expense (210,127) (283,267) (140,400) (135,180) Unearned lease income (336,984) (109,551) (293,713) (86,406) ----------------- ----------------- ------------------ ------------------ Net cash provided by operations 13,681,732 14,987,725 6,472,534 7,853,753 ----------------- ----------------- ------------------ ------------------ Investing activities: Purchases of equipment on operating leases (1,950,111) - - - Reduction in net investment in direct financing leases 1,355,342 2,586,114 889,208 1,561,713 Proceeds from sales of assets 821,864 4,368,359 374,513 824,680 Purchases of equipment on direct financing leases (492,988) - (41,066) - Payment of initial direct costs to General Partner (16,726) - - - ----------------- ----------------- ------------------ ------------------ Net cash (used in) provided by investing activities (282,619) 6,954,473 1,222,655 2,386,393 ================= ================= ================== ==================
6 ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENTS OF CASH FLOWS (Continued) SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2001 AND 2000 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 2001 2000 2001 2000 ---- ---- ---- ---- Financing activities: Distributions to partners (8,019,110) (8,102,696) (4,054,171) (4,053,075) Repayments of long-term debt (8,114,000) (11,807,000) (3,174,000) (4,003,000) Proceeds of long-term debt 2,000,000 11,700,000 2,000,000 - Borrowings under line of credit 5,500,000 - 1,000,000 - Repayments of borrowings under line of credit (2,000,000) (9,100,000) (2,000,000) - Repayments of non-recourse debt (3,207,037) (3,117,957) (1,645,135) (1,721,145) ----------------- ----------------- ------------------ ------------------ Net cash used in financing activities (13,840,147) (20,427,653) (7,873,306) (9,777,220) ----------------- ----------------- ------------------ ------------------ Net (decrease) increase in cash and cash equivalents (441,034) 1,514,545 (178,117) 462,926 Cash and cash equivalents at beginning of period 1,321,417 1,674,372 1,058,500 2,725,991 ----------------- ----------------- ------------------ ------------------ Cash and cash equivalents at end of period $ 880,383 $ 3,188,917 $ 880,383 $ 3,188,917 ================= ================= ================== ================== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 2,369,638 $ 3,109,783 $ 1,189,436 $ 1,527,301 ================= ================= ================== ==================
See accompanying notes. 7 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (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. 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 June 30, 2000 Additions of Leases Dispositions 2001 ---- --------- --------- - ------------- ---- Net investment in operating leases $131,717,168 $ 1,950,111 $ (10,675,239) $(2,896,543) $ 120,095,497 Net investment in direct financing leases 17,087,466 492,988 (1,355,342) - 16,225,112 Assets held for sale or lease 1,233,078 - - 1,723,639 2,956,717 Reserve for losses (504,227) - - - (504,227) Initial direct costs, net of accumulated amortization 433,522 16,726 (96,640) - 353,608 ------------------- ----------------- ----------------- ------------------ ------------------ $149,967,007 $ 2,459,825 $ (12,127,221) $(1,172,904) $ 139,126,707 =================== ================= ================= ================== ==================
8 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 3. Investment in leases (continued): Property on operating leases consists of the following:
Balance Dispositions & Balance December 31, Reclassifications June 30, ----------------- 2000 1st Quarter 2nd Quarter 2001 ---- ----------- ----------- ---- Transportation $101,664,857 $ (5,900,528) $ 528,590 $ 96,292,919 Marine vessels / barges 27,276,479 (628,843) 382,500 27,030,136 Construction 23,002,563 - - 23,002,563 Manufacturing 11,801,318 (624,620) (330,230) 10,846,468 Mining 8,536,249 (1,604,082) 2,080,798 9,012,965 Office automation 9,880,540 476,716 (3,371,693) 6,985,563 Other 5,108,831 954,955 (271,005) 5,792,781 Materials handling 5,559,474 - - 5,559,474 Communications 4,387,819 - - 4,387,819 ----------------- ----------------- ------------------ ------------------ 197,218,130 (7,326,402) (981,040) 188,910,688 Less accumulated depreciation (65,500,962) 399,606 (3,713,835) (68,815,191) ----------------- ----------------- ------------------ ------------------ $131,717,168 $ (6,926,796) $(4,694,875) $ 120,095,497 ================= ================= ================== ==================
All of the property on leases was acquired in 1997, 1998, 1999 and 2001. At June 30, 2001, the aggregate amounts of future minimum lease payments are as follows: Direct Year ending Operating Financing December 31, Leases Leases Total ------------ ------ ------ ----- 2001 $12,885,649 $ 1,634,232 $14,519,881 2002 21,287,512 2,738,351 24,025,863 2003 12,805,697 2,345,686 15,151,383 2004 8,434,407 2,280,095 10,714,502 2005 5,837,657 2,235,644 8,073,301 Thereafter 2,126,026 1,701,567 3,827,593 ----------------- ----------------- ------------------ $63,376,948 $12,935,575 $76,312,523 ================= ================= ================== 9 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 4. Non-recourse debt: Notes payable to financial institutions are due in varying monthly and quarterly 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 7.40% to 8.828%. Future minimum principal payments of non-recourse debt are as follows: Year ending December 31, Principal Interest Total ------------ --------- -------- ----- 2001 $ 2,269,779 $ 467,435 $ 2,737,214 2002 5,761,771 799,843 6,561,614 2003 3,261,508 288,853 3,550,361 2004 298,403 67,364 365,767 2005 322,838 42,927 365,765 Thereafter 331,405 25,597 357,002 ----------------- ----------------- ------------------ $12,245,704 $ 1,692,019 $13,937,723 ================= ================= ================== 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 (4.4994% at June 30, 2001). 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 June 30, 2001, the Partnership receives or pays interest on a notional principal of $38,763,000, 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. 10 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 5. Long-term debt (continued): Borrowings under the Program are as follows: Original Balance Rate on Date Amount June 30, Interest Swap Borrowed Borrowed 2001 Agreement -------- -------- ---- --------- 4/1/1998 $ 21,770,000 $ 6,631,000 6.220% 7/1/1998 25,000,000 6,726,000 6.155% 10/1/1998 20,000,000 10,523,000 5.550% 4/16/1999 9,000,000 3,603,000 5.890% 1/26/2000 11,700,000 9,310,000 7.580% 5/25/2001 2,000,000 1,970,000 5.790% ------------------- ----------------- $ 89,470,000 $38,763,000 =================== ================= - The long-term debt borrowings mature from 2004 through 2008. Future minimum principal payments of long-term debt are as follows: Year ending December 31, Principal Interest Total ------------ --------- -------- ----- 2001 $ 5,825,000 $ 1,156,555 $ 6,981,555 2002 11,514,000 1,733,310 13,247,310 2003 7,604,000 1,146,123 8,750,123 2004 5,848,000 723,429 6,571,429 2005 4,374,000 392,050 4,766,050 Thereafter 3,598,000 339,742 3,937,742 ------------------- ----------------- ----------------- $ 38,763,000 $ 5,491,209 $44,254,209 =================== ================= ================= 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 acquisition and management of equipment. Reimbursable costs incurred by the General Partner are allocated to the Partnership based upon actual time incurred by employees working on Partnership business and an allocation of rent and other costs based on utilization studies. 11 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 6. Related party transactions (continued): Substantially all employees of the General Partner record time incurred in performing administrative services on behalf of all of the Partnerships serviced by the General Partner. The General Partner believes that the costs reimbursed are the lower of (i) actual costs incurred on behalf of the Partnership or (ii) the amount the Partnership would be required to pay independent parties for comparable administrative services in the same geographic location and are reimbursable in accordance with the Limited Partnership Agreement. The General Partner and/or Affiliates earned fees, commissions and reimbursements, pursuant to the Limited Partnership Agreement during the six month periods ended June 30, 2001 and 2000 as follows:
2001 2000 ---- ---- 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). $ 689,171 $ 878,788 Administrative costs reimbursed to General Partner 492,543 304,605 ------------------ ------------------ $ 1,181,714 $ 1,183,393 ================== ==================
7. Partner's capital: As of June 30, 2001, 14,996,050 Units ($149,960,500) were issued and outstanding. 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. 12 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) 8. Line of credit: The Partnership participates with the General Partner and certain of its Affiliates in a $62,000,000 revolving credit agreement with a group of financial institutions which expires on April 12, 2002. 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. The Partnership had $3,500,000 of borrowings under the agreement at June 30, 2001. The credit agreement includes certain financial covenants applicable to each borrower. The Partnership was in compliance with its covenants as of June 30, 2001. 9. Commitments: As of June 30, 2001, the Partnership had no outstanding commitments to purchase lease equipment. 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity During the first and second quarters of 2001, 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 $62,000,000 revolving line of credit with a group of financial institutions. The line of credit expires on April 12, 2002. 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 June 30, 2001. 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. Cash Flows, 2001 vs. 2000: During the first half of 2001 and 2000, the Partnership's primary sources of liquidity was rents from assets on operating leases. Cash from operating activities was almost entirely from operating lease rents in both 2001 and in 2000 for both the three and six month periods. Sources of cash from investing activities consisted of proceeds from sales of assets and direct financing lease rents. Proceeds from sales of lease assets decreased significantly compared to 2000. In 2001, cash was used in investing activities to purchase assets on operating and direct financing leases and to pay initial direct costs to the General Partner. 14 In 2001, cash from financing sources consisted of proceeds of long-term debt and borrowings under the line of credit. Borrowings in 2000 were used to repay amounts due on the line of credit. Repayments of long-term debt have changed as a result of scheduled payments. Distributions to partners did not change significantly compared to 2000. Results of operations, 2001 vs. 2000: Operations in 2001 resulted in a net income of $1,585,984 (six months) and $775,805 (three months). Operations in 2000 resulted in a net income of $4,132,800 (six months) and a net loss of $84,602 (three months). The Partnership's primary source of revenues is from operating leases. This is expected to remain true in future periods. Operating lease revenues for the six month periods decreased from $20,792,446 in 2000 to $16,333,829 in 2001. For the three month periods, they decreased from $10,814,256 in 2000 to $8,040,945 in 2001. The decreases were the result of asset sales in 2000 and in 2001. Depreciation expense is the single largest expense of the Partnership and is expected to remain so in future periods. Total debt has decreased from about $73,800,000 at June 30, 2000 to about $54,510,000 at June 30, 2001. This has resulted in decreases in interest expense compared to 2000. For the six month periods, interest decreased by $667,005. For the three month period, the decrease was $343,085. PART II. OTHER INFORMATION Item 1. Legal Proceedings. No material legal proceedings are currently pending against the Partnership or against any of its assets. The following is a discussion of legal matters involving the Partnership but which do not represent claims against the Partnership or its assets. In January 2000, Applied Magnetics Corporation filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. 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 proceeds resulted in recoveries of $1,773,798 or 21.7% of original equipment cost. As of November 1, 2000, liquidation of the assets was completed. The Partnership anticipates additional amounts may 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. 15 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, June 30, 2001 and December 31, 2000. Statement of changes in partners' capital for the six months ended June 30, 2001. Statements of operations for the six and three month periods ended June 30, 2001 and 2000. Statement of cash flows for the six and three month periods ended June 30, 2001 and 2000. 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 16 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: August 8, 2001 ATEL CAPITAL EQUIPMENT FUND VII, L.P. (Registrant) By: ATEL Financial Services, LLC General Partner of Registrant By: /s/ DEAN L. CASH ------------------------------------ Dean L. Cash President and Chief Executive Officer of General Partner By: /s/ PARITOSH K. CHOKSI ------------------------------------- Paritosh K. Choksi Executive Vice President of General Partner, Principal financial officer of registrant By: /s/ DONALD E. CARPENTER --------------------------------------- Donald E. Carpenter Principal accounting officer of registrant -----END PRIVACY-ENHANCED MESSAGE-----