-----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, O81TxDjnhzm8sRITTnExw7kCOl9HckaGhpSUkEU//sr7qguYPmDU/6fqLLv0coMV qejl+CNj63vndvkpAypPGg== 0001019542-05-000002.txt : 20050516 0001019542-05-000002.hdr.sgml : 20050516 20050513193713 ACCESSION NUMBER: 0001019542-05-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050516 DATE AS OF CHANGE: 20050513 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24175 FILM NUMBER: 05831122 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 10QSB 1 fund7q12005.txt REPORT FOR THE QUARTER ENDED 3-31-05 Form 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 2005 |_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from to ----- ----- Commission File number 000-24175 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.) 600 California Street, 6th Floor, San Francisco, California 94108-2733 (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 |_| Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes |_| No |X| State the issuer's revenues for the most recent fiscal year: $15,165,578 The number of Limited Partnership Units outstanding as of March 31, 2005 was 14,999,550. DOCUMENTS INCORPORATED BY REFERENCE None 1 ATEL CAPITAL EQUIPMENT FUND VII, L. P. Index Part I. Financial Information Item 1. Financial Statements (Unaudited) Balance Sheet, March 31, 2005. Statement of Operations for the three month periods ended March 31, 2005 and 2004. Statements of Changes in Partners' Capital for the year ended December 31, 2004 and for the three month period ended March 31, 2005. Statements of Cash Flows for the three month periods ended March 31, 2005 and 2004. Notes to the Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits 2 Part I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited). ATEL CAPITAL EQUIPMENT FUND VII, L.P. BALANCE SHEET MARCH 31, 2005 (Unaudited) ASSETS
Cash and cash equivalents $ 1,205,373 Accounts receivable, net of allowance for doubtful accounts of $584,330 1,125,538 Other assets 151,212 Investments in equipment and leases 51,280,876 ------------------- Total assets $ 53,762,999 =================== LIABILITIES AND PARTNERS' CAPITAL Non-recourse debt $ 398,018 Other long-term debt 7,557,000 Line of credit 13,500,000 Accounts payable and accruals: General Partner 766,111 Other 310,853 Accrued interest payable 15,724 Interest rate swap contracts 184,349 Unearned operating lease income 490,341 ------------------- Total liabilities 23,222,396 Partners' capital: Accumulated other comprehensive loss (263,190) Partners' capital 30,803,793 ------------------- Total Partners' capital 30,540,603 ------------------- Total liabilities and Partners' capital $ 53,762,999 ===================
See accompanying notes. 3 ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENTS OF OPERATIONS THREE MONTH PERIODS ENDED MARCH 31, 2005 AND 2004 (Unaudited)
Revenues: 2005 2004 ---- ---- Leasing activities: Operating leases $ 3,379,137 $ 4,179,569 Direct financing leases 128,494 103,716 Gain (loss) on sales of assets 518,241 (91,915) Interest income 2,124 1,160 Other 21,573 33,046 ------------------- ------------------- 4,049,569 4,225,576 Expenses: Depreciation of operating lease assets 2,354,194 3,038,259 Cost reimbursements to General Partner 761,739 763,872 Impairment losses - 455,367 Interest expense 251,611 452,377 Railcar maintenance 53,034 385,274 Marine vessel maintenance and other operating cost 315,942 - Equipment and incentive management fees to General Partner 116,154 156,212 Professional fees 67,360 86,737 Insurance 53,559 72,317 Equipment storage 13,850 69,732 Other management fees 38,088 65,639 Provision for doubtful accounts 47,500 77,000 Fair value adjustments on interest rate swap contracts (83,961) - Amortization of initial direct costs 8,711 11,155 Other 94,651 185,009 ------------------- ------------------- 4,092,432 5,818,950 ------------------- ------------------- Net loss $ (42,863) $ (1,593,374) =================== =================== Net income (loss): General Partner $ 61,206 $ 213,941 Limited Partners (104,069) (1,807,315) ------------------- ------------------- $ (42,863) $ (1,593,374) =================== =================== Net loss per Limited Partnership Unit $ (0.00) $ (0.12) Weighted average number of Units outstanding 14,995,550 14,995,550
See accompanying notes. 4 ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2004 AND FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2005 (Unaudited)
Accumulated Other Comprehensive Limited Partners General Partner Income (Loss) Total ---------------- ------- ------------- ----- Units Amount ----- ------ Balance December 31, 2003 14,995,550 $ 42,292,230 $ - $ (886,207) $ 41,406,023 Distributions to Limited Partners ($0.55 per Unit) - (8,261,432) - - (8,261,432) Distributions to General Partner - - ((681,964) - (681,964) Reclassification adjustment for portion of swap liability charged to net income - - - 5,120 5,120 Unrealized change in value of interest rate swap contracts - - - 593,321 593,321 Net income (loss) - (2,360,499) 681,964 - (1,678,535) -------------- ------------------ ------------ ---------------- ----------------- Balance December 31, 2004 14,995,550 31,670,299 - (287,766) 31,382,533 Distributions to Limited Partners ($0.05 per Unit) - (762,437) - - (762,437) Distributions to General Partner - - (61,206) - (61,206) Reclassification adjustment for portion of swap liability charged to net income - - - 24,576 24,576 Net income (loss) - (104,069) 61,206 - (42,863) -------------- ------------------ ------------ ---------------- ----------------- Balance March 31, 2005 14,995,550 30,803,793 - (263,190) 30,540,603 ============== ================== ============ ================ =================
See accompanying notes. 5 ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENTS OF CASH FLOWS THREE MONTH PERIODS ENDED MARCH 31, 2005 AND 2004 (Unaudited)
2005 2004 ---- ---- Operating activities: Net loss $ (42,863) $ (1,593,374) Adjustment to reconcile net loss to net cash provided by operating activities: Depreciation of operating lease assets 2,354,194 3,038,259 Amortization of initial direct costs 8,711 11,155 Impairment losses - 455,367 Provision for doubtful accounts 47,500 77,000 (Gain)/Loss on sales of lease assets (518,241) 91,915 Changes in operating assets and liabilities: Accounts receivable 84,846 761,282 Other assets (14,265) (44,897) Accounts payable, General Partner 307,651 (319,041) Accounts payable, other (220,184) (379,983) Accrued interest payable (45,999) (6,184) Interest rate swap contracts (83,961) 70,193 Unearned lease income 91,647 295,324 -------------------- ----------------- Net cash provided by operating activities 1,969,036 2,457,016 -------------------- ----------------- Investing activities: Reduction of net investment in direct financing leases 281,472 503,857 Proceeds from sales of assets 785,943 1,087,555 Purchase of capital improvement (720,367) - -------------------- ----------------- Net cash provided by investing activities 347,048 1,591,412 -------------------- ----------------- Financing activities: Distributions to Limited Partners (762,437) (2,636,713) Borrowings under line of credit 1,500,000 2,800,000 Repayments of borrowings under line of credit (1,500,000) (1,800,000) Repayments of other long-term debt (1,440,000) (1,695,000) Repayments of non-recourse debt (69,691) (592,767) Distributions to General Partners (61,206) (213,941) -------------------- ----------------- Net cash used in financing activities (2,333,334) (4,138,421) -------------------- ----------------- Net decrease in cash and cash equivalents (17,250) (89,993) Cash and cash equivalents at beginning of period 1,222,623 835,628 -------------------- ----------------- Cash and cash equivalents at end of period $ 1,205,373 $ 745,635 ==================== ================= Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 297,610 $ 458,561 Schedule of non-cash transactions: Change in fair value of interest rate swap contracts $ - $ 83,199 ==================== =================
See accompanying notes. 6 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 1. Summary of significant accounting policies: Basis of presentation: The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with instructions to Form 10-QSB and Article 10 of Regulation S-X. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the General Partner, 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. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that effect reported amounts in the financial statements and accompanying notes. Therefore, actual results could differ from those estimates. Operating results for the three months ended March 31, 2005 are not necessarily indicative of the results for the year ending December 31, 2005. Certain prior year balances have been reclassified to conform to the current period presentation. These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-K for the year ended December 31, 2004, filed with the Securities and Exchange Commission. 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 equipment's estimated residual values at the end of the leases. Asset Valuation: Recorded values of the Partnership's asset portfolio are periodically reviewed for impairment in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset's expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by the discounted estimated future cash flows) of the assets and its carrying value on the measurement date. Revenue recognition: Operating leases Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally expected to be for 36 to 84 months. Income from step rent provisions, escalation clauses, capital improvement funding provisions or other lease concessions in lease contracts, and lease rates subject to variation based on changes in market indexes or interest rates are recognized on a straight line basis. 7 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 1. Summary of significant accounting policies (continued): Direct finance leases Income from direct financing lease transactions is reported using 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. Notes receivable Income from notes receivable is reported using the financing method of accounting. The Partnership's investment in notes receivable is reported as the present value of the future note payments. The income portion of each note payment is calculated so as to generate a constant rate of return on the net balance outstanding. Initial direct costs: The Partnership capitalizes initial direct costs associated with the acquisition of lease assets. These costs are amortized over a five year period, which approximates average lease term, using a straight line method. Segment Reporting: The Partnership adopted the provisions of SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes annual and interim standards for operating segments of a company. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assts and reports revenue, and its major customers. The Partnership is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly the Partnership operates in one reportable operating segment in the United States. 2. Organization and partnership matters: ATEL Capital Equipment Fund VII, L.P. (the Partnership) was formed under the laws of the state of California on May 17, 1996 for the purpose of acquiring equipment to engage in equipment leasing and sales activities, primarily in the United States. The Partnership may continue until December 31, 2017. Upon the sale of the minimum amount of Units of Limited Partnership interest (Units) (120,000 Units) ($1,200,000) and the receipt of the proceeds thereof on January 7, 1997, the Partnership commenced operations. The General Partner of the Partnership is ATEL Financial Services LLC ("AFS"). Prior to converting to a limited liability company structure, AFS was formerly known as ATEL Financial Corporation. The Partnership's business consists of leasing various types of equipment. As of March 31, 2005, the original terms of the leases ranged from six months to ten years. 8 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 2. Organization and partnership matters (continued): Pursuant to the Limited Partnership Agreement, AFS receives compensation and reimbursements for services rendered on behalf of the Partnership. AFS is required to maintain in the Partnership reasonable cash reserves for working capital, the repurchase of Units and contingencies. The Partnership's principal objectives are to invest in a diversified portfolio of equipment that will (i) preserve, protect and return the Partnership's invested capital; (ii) generate regular 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, ended December 31, 2004 and (iii) provide additional distributions following the Reinvestment Period and until all equipment has been sold. The Partnership is governed by its Limited Partnership Agreement. 3. Investment in equipment and leases: The Partnership's Investments in equipment and leases consists of the following:
Depreciation/ Amortization Expense or Amortization of Reclassifications & Balance March, Balance December Direct Financing Additions/ 31, 2004 Leases (Dispositions) 31, 2005 ---- ------ -------------- ---- Net investment in operating leases $ 46,674,048 $ (2,354,194) $ 1,004,023 $ 45,323,877 Net investment in direct financing lease 2,745,719 (281,472) - 2,464,247 Assets held for sale or lease, net of accumulated depreciation of $5,498,524 in 2005 and $4,796,259 in 2004 3,376,017 - 61,326 3,437,343 Initial direct costs, net of accumulated amortization of $999,845 in 2005 and $991,134 in 2004 64,120 (8,711) - 55,409 ------------------ --------------- --------------- ----------------- $ 52,859,904 $ (2,644,377) $ 1,065,349 $ 51,280,876 ================== =============== =============== =================
9 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 3. Investment in leases (continued): Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. As a result of the review during the three month period ended March 31, 2004, management determined that the value of certain refuse and other vehicles had declined in value to the extent that the carrying values had become impaired. This decline is the result of decreased long-term demand for these types of assets and a corresponding reduction in the amounts of rental payments that these assets could command. Management recorded provisions for the declines in value of those assets in the amounts of $455,367. No assets were identified as impaired during management's review for the three month period ended March 31, 2005. Impairment losses are recorded as an addition to accumulated depreciation of the impaired assets. Depreciation expense and impairment losses on property subject to operating leases and property held for lease or sale consist of the following for the three month periods ended March 31: 2005 2004 ---- ---- Depreciation expense $ 2354,194 $ 3,038,259 Impairment losses - 455,367 -------------- -------------- $ 2,354,194 $ 3,493,626 ============== ============== Net investment in operating leases: Property on operating leases consists of the following:
Balance Depreciation Reclassifications Balance & December 31, Additions/ March 31, 2004 Expense (Dispositions) 2005 ---- ------- ------------- ---- Transportation $ 94,975,087 $ - $ (14,849,800) $ 80,125,287 Construction 7,954,379 - (145,087) 7,809,292 Marine vessels/barges 5,664,792 - 16,006,669 21,671,461 Mining equipment 4,699,575 - - 4,699,575 Manufacturing 3,870,348 - (3,500,000) 370,348 Communications 140,380 - - 140,380 Materials handling 3,447,312 - (1,383,386) 2,063,926 Office automation 3,521,046 - - 3,521,046 Other 3,956,466 - (62,270) 3,894,196 --------------------- ----------------- ----------------- -------------------- 128,229,385 - (3,933,874) 124,295,511 Less accumulated depreciation (81,555,337) (2,354,194) 4,937,897 (78,971,634) --------------------- ----------------- ----------------- -------------------- $ 46,674,048 $ (2,354,194) $ 1,004,023 $ 45,323,877 ===================== ================= ================= ====================
10 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 3. Investment in leases (continued): The Partnership utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of lease transactions. The useful lives for investment in leases by category are as follows: Equipment category Useful Life ------------------ ----------- Mining equipment 30 - 40 Marine vessels/barges 20 - 30 Manufacturing 10 - 20 Materials Handling 7 - 10 Transportation 7 - 10 Construction 7 - 10 Office automation 3 - 5 Communications 3 - 5 Other 3 - 5 Net investment in direct financing leases: Investment in direct financing leases consist of various transportation, manufacturing and medical equipment. The following lists the components of the Partnership's investment in direct financing leases as of March 31, 2005: Total minimum lease payments receivable $ 2,416,444 Estimated residual values of leased equipment (unguaranteed) 1,106,650 ---------------- Investment in direct financing leases 3,523,094 Less unearned income (1,058,847) ---------------- Net investment in direct financing leases $ 2,464,247 ================ At March 31, 2005, the aggregate amounts of future minimum lease payments under operating and direct financing leases are as follows:
Operating Leases Direct Financing Total ------ ----- Leases Nine months ending December 31, 2005 $ 6,816,863 $ 1,001,747 $ 7,818,610 Year ending December 31, 2006 6,091,662 708,415 6,800,077 2007 4,816,508 512,748 5,329,256 2008 3,512,875 193,534 3,706,409 2009 3,064,783 - 3,064,783 2010 150,166 - 150,166 Thereafter 225,249 - 225,249 ------------------ ------------------- ------------------- $ 24,678,106 $ 2,416,444 $ 27,094,550 ================== =================== ===================
All of the equipment on leases was acquired in 1997, 1998, 1999, 2001 and 2002. 11 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (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 are fixed and range from 5.5% to 7.0%. At March 31, 2005, the carrying value of the pledged assets was $789,566. The notes mature from 2005 through 2008. Future minimum payments of non-recourse debt are as follows:
Principal Interest Total Nine months ending December 31, 2005 $ 181,895 $ 16,431 $ 198,326 Year ending December 31, 2006 101,568 11,462 113,030 2007 90,838 5,141 95,979 2008 23,717 277 23,994 --- ------------- --- ----------- --- ----------- $ 398,018 $ 33,311 $ 431,329 === ============= === =========== === ===========
5. Other 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 Poor's 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 (3.30% at March 31, 2005), based on an index of A1 commercial paper. The Program expired as to new borrowings in February 2002. The Program requires AFS, on behalf of the Partnership, 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 March 31, 2005, the Partnership receives or pays interest on a notional principal of $7,867,323 based on the difference between nominal rates ranging from 4.36% to 7.58% and the variable rate under the Program. No actual borrowing or lending is involved. The termination of the swaps coincides with the maturity of the debt with the last of the swaps maturing in 2008. Through the swap agreements, the interest rates have been effectively fixed. 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. The Partnership had utilized hedge accounting as prescribed under Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, in prior periods. Beginning in the quarter ended March 31, 2005, the Partnership is discontinuing hedge accounting and will recognize any future gain/loss in the statement of operations. Previous amounts recorded in Accumulated Other Comprehensive Income related to the interest rate swaps will be recognized in earnings when the previously hedged items impact earnings. 12 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 5. Other long-term debt (continued): Borrowings under the Program are as follows:
Date Borrowed Original Balance March Notional Swap Payment Rate -------- Balance On Interest March 31, Value Swap Amount Borrowed 31, 2005 2005 March 31, 2005 Agreement -------- ---- ---- ---- --------- 4/1/1998 $ 21,770,000 $ - $ - $ - ** 7/1/1998 25,000,000 1,640,000 1,653,213 (47,181) 6.155% 10/1/1998 20,000,000 965,000 1,055,135 (7,649) 5.550% 4/16/1999 9,000,000 839,000 843,142 (10,505) 5.890% 1/26/2000 11,700,000 2,414,000 2,411,212 (107,479) 7.580% 5/25/2001 2,000,000 430,000 472,526 (6,790) 5.790% 9/28/2001 6,000,000 1,217,000 1,432,095 (4,745) 4.360% 1/31/2002 4,400,000 52,000 - - * 2/19/2002 5,700,000 - - - * ------------------ ----------------- -------------------- ----------------- $ 105,570,000 $ 7,557,000 $ 7,867,323 $ (184,349) ================== ================= ==================== =================
* Under the terms of the Program, no interest rate swap agreements were required for these borrowings. ** Interest rate swap terminated in prior period. Other long-term debt borrowings mature from 2005 through 2007. Future minimum principal payments are as follows:
Swapped Debt Interest Total Rates on -------- ----- Debt Principal Interest Swap Principal Not Swapped Agreements*** --------- ------- ------------- Nine months ending December 31, 2005 $ 3,968,000 $ 9,000 $ 271,940 $ 4,248,940 6.212%-6.450% Year ending December 31, 2006 2,033,000 43,000 167,037 2,243,037 6.593%-6.897% 2007 1,504,000 - 16,816 1,520,816 6.872%-6.879% ----------------- ---------------- --------------- ---------------- $ 7,505,000 $ 52,000 $ 455,793 $ 8,012,793 ================= ================ =============== ================
*** Represents the range of monthly weighted average fixed interest rates paid for amounts maturing in the particular year. The receive-variable rate portion of the swap represents commercial paper rates (3.30% at March 31, 2005). 13 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 6. Related party transactions: The terms of the Limited Partnership Agreement provide that AFS 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 AFS in providing administrative services to the Partnership. Administrative services provided include Partnership accounting, investor relations, legal counsel and lease and equipment documentation. AFS is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as disposition of equipment. Reimbursable costs incurred by AFS are allocated to the Partnership based upon estimated time incurred by employees working on Partnership business and an allocation of rent and other costs based on utilization studies. Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"), ATEL Investor Services ("AIS") and AFS 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 AFS. Cost reimbursements to the General Partner are based on costs incurred by AFS in performing administrative services for the Partnership that are allocated to each Partnership that AFS manages based on certain criteria such as existing or new leases, number of investors or equity depending on the type of cost incurred. AFS 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. Incentive management fees are computed as 4.0% of distributions of cash from operations, as defined in the Limited Partnership Agreement and equipment management fees are 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. During the three month periods ended March 31, 2005 and 2004, AFS and/or affiliates earned fees, commissions and reimbursements, pursuant to the Limited Partnership Agreement as follows:
2005 2004 ---- ---- Equipment and incentive management fees to General Partner $ 116,154 $ 156,212 Cost reimbursements to General Partner 761,739 763,872 -------------- --------------- $ 877,893 $ 920,084 ============== ===============
The General Partner makes certain payments to third parties on behalf of the Partnership for convenience purposes. During the three month periods ended March 31, 2005 and 2004, the General Partner made such payments of $110,215 and $76,251, respectively. 14 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 7. Financing arrangement: The Partnership participates with AFS and certain of its affiliates in a financing arrangement (comprised of a term loan to AFS and a line of credit) with a group of financial institutions that includes certain financial covenants. The financial arrangement is $75,000,000 and expires in June 2006. The availability of borrowings available to the Partnership under this financing arrangement is reduced by the amount AFS has outstanding as a term loan. As of March 31, 2005 borrowings under the facility were as follows:
Total amount available under the financing arrangement $ 75,000,000 Term loan to AFS as of March 31, 2005 (1,482,182) --------------- Total available under the acquisition and warehouse facilities 73,517,818 Amount borrowed by the Partnership under the acquisition facility (13,500,000) Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition facility (2,500,000) --------------- Total remaining available under the acquisition and warehouse facilities $ 57,517,818 ===============
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 affiliated partnerships and limited liability companies, the Partnership and AFS. The credit agreement includes certain financial covenants applicable to each borrower. The Partnership was in compliance with its covenants as of March 31, 2005. The acquisition line of credit consists of five notes as of March 31, 2005. Any or the entire principal balances may be repaid then re-borrowed, on notes with maturities ranging from one day to six months, until the line is terminated in June 2006. As of March 31, 2005 the interest rates on the associated balances consisted of the following: Loan amount Interest rate $ 500,000 5.75 % 1,000,000 4.62 % 9,500,000 4.62 % 1,000,000 4.75 % 1,500,000 4.75 % --------------------- $ 13,500,000 ===================== 15 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 8. Comprehensive income (loss): For the three month periods ended March 31, 2005 and 2004, other comprehensive income (loss) consisted of the following: 2005 2004 Net income (loss) $ (42,863) $ (1,593,374) Other comprehensive income: Change in value of interest rate swap contracts - 83,199 ------------ --------------- Comprehensive net income (loss) $ (42,863) $ (1,510,175) ============ =============== There were no other sources of comprehensive net (loss) income. 9. Partners' Capital: As of March 31, 2005, 14,995,550 Units were issued and outstanding. The Partnership is authorized to issue up to 15,000,050 Units, including the 50 Units issued to the Initial Limited Partners, as defined. The Partnership's Net Profits, Net Losses, and Tax Credits are to be allocated 92.5% to the Limited Partners and 7.5% to AFS. In accordance with the terms of the Limited Partnership Agreement, additional allocations of income were made to AFS in 2004 and 2003. The amounts allocated were determined to bring AFS's ending capital account balance to zero at the end of each period. As defined in the Limited Partnership Agreement, available Cash from Operations, shall be distributed as follows: First, Distributions of Cash from Operations shall be 88.5% to the Limited Partners, 7.5% to AFS and 4% to AFS 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 AFS and 7.5% to AFS or its affiliate designated as the recipient of the Incentive Management Fee. As defined in the Limited Partnership Agreement, available Cash from Sales or Refinancing, are to be distributed as follows: First, Distributions of Sales or Refinancings shall be 92.5% to the Limited Partners and 7.5% to AFS, 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 AFS and 7.5% to AFS or its affiliate designated as the recipient of the Incentive Management Fee. 16 ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited) 9. Partners' Capital (Continued): Distributions to the Limited Partners were as follows:
Three Months Ended March 31, ------------------------ 2005 2004 ---- ---- Distributions $ 762,437 $ 2,636,713 Weighted average number of Units outstanding 14,995,550 14,995,550 Weighted average distributions per Unit $ 0.05 $ 0.18
10. Guarantees: The Partnership enters into contracts that contain a variety of indemnifications. The Partnership's maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. In the normal course of business, the Partnership enters into contracts of various types, including lease contracts, contracts for the sale or purchase of lease assets, management contracts, loan agreements, credit lines and other debt facilities. It is prevalent industry practice for most contracts of any significant value to include provisions that each of the contracting parties - in addition to assuming liability for breaches of the representations, warranties, and covenants that are part of the underlying contractual obligations - also assume an obligation to indemnify and hold the other contracting party harmless for such breaches, for harm caused by such party's gross negligence and willful misconduct, including, in certain instances, certain costs and expenses arising from the contract. The General Partner has substantial experience in managing similar leasing programs subject to similar contractual commitments in similar transactions, and the losses and claims arising from these commitments have been insignificant, if any. Generally, to the extent these contracts are performed in the ordinary course of business under the reasonable business judgment of the General Partner, no liability will arise as a result of these provisions. The General Partner has no reason to believe that the facts and circumstances relating to the Partnership's contractual commitments differ from those it has entered into on behalf of the prior programs it has managed. The General Partner knows of no facts or circumstances that would make the Partnership's contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Partnership believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability under the Partnership's similar commitments is remote. Should any such indemnification obligation become payable, the Partnership would separately record and/or disclose such liability in accordance with GAAP. 17 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Statements contained in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Form 10-QSB, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-QSB. We undertake no obligation to publicly release any revisions to these forward- looking statements to reflect events or circumstances after the date of this Form 10-QSB or to reflect the occurrence of unanticipated events, other than as required by law. Capital Resources and Liquidity During the first quarter of 2005 and 2004, the Partnership's primary activity was engaging in equipment leasing and sales activities. In the first quarter of 2005, the Partnership's primary source of liquidity was operating lease rents. In the first quarter of 2004, the Partnership's primary source of cash flows was from the proceeds of sales of lease assets. 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 AFS' success in re-leasing or selling the equipment as it comes off lease. The Partnership participates with AFS and certain of its affiliates in a financing arrangement (comprised of a term loan to AFS and a line of credit) with a group of financial institutions that includes certain financial covenants. The financial arrangement is $75,000,000 and expires in June 2006. The availability of borrowings available to the Partnership under this financing arrangement is reduced by the amount AFS has outstanding as a term loan. As of March 31, 2005 borrowings under the facility were as follows:
Total amount available under the financing arrangement $ 75,000,000 Term loan to AFS as of March 31, 2005 (1,482,182) --------------- Total available under the acquisition and warehouse facilities 73,517,818 Amount borrowed by the Partnership under the acquisition facility (13,500,000) Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition facility (2,500,000) --------------- Total remaining available under the acquisition and warehouse facilities $ 57,517,818 ===============
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 affiliated partnerships and limited liability companies, the Partnership and AFS. 18 To manage the warehousing line of credit for the holding of assets prior to allocation to specific investor programs, a Warehousing Trust Agreement has been entered into by the Partnership, ATEL Financial Services LLC ("AFS"), ATEL Leasing Corporation ("ALC"), and certain of the affiliated partnerships and limited liability companies. The warehousing line is used to acquire and hold, on a short-term basis, certain lease transactions that meet the investment objectives of each of such entities. Each of the leasing programs sponsored by AFS and ALC currently in its acquisition stage is a pro rata participant in the Warehousing Trust Agreement, as described below. When a program no longer has a need for short term financing provided by the warehousing facility, it is removed from participation, and as new leasing investment entities are formed by AFS and ALC and commence their acquisition stages, these new entities will be added. As of March 31, 2005, the investment program participants were ATEL Cash Distribution Fund VI, L.P., ATEL Capital Equipment Fund VII, L.P., ATEL Capital Equipment Fund VIII, LLC, ATEL Capital Equipment Fund IX, LLC, and ATEL Capital Equipment Fund X, LLC. Pursuant to the Warehousing Trust Agreement, the benefit of the lease transaction assets, and the corresponding liabilities under the warehouse borrowing facility, inure to each of such entities based upon each entity's pro-rata share in the warehousing trust estate. The "pro-rata share" is calculated as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the warehouse trust estate, excepting that the trustees, AFS and ALC, are both liable for their pro-rata shares of the obligations based on their respective net worths, and jointly liable for the pro rata portion of the obligations of each of the affiliated partnerships and limited liability companies participating under the borrowing facility. Transactions are financed through this warehousing line only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and ALC. When a determination is made to allocate the transaction to a specific program for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or by means of the acquisition facility financing, the asset is removed from the warehouse line collateral, and ownership of the asset and any debt obligation associated with the asset are assumed solely by the purchasing entity. The credit agreement includes certain financial covenants applicable to each borrower. The Partnership was in compliance with its covenants as of March 31, 2005. 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 AFS and providing for cash distributions to the Limited Partners. At March 31, 2005, the Partnership had no commitments to purchase lease assets. The Partnership currently has available adequate reserves to meet its immediate cash requirements and those of the next twelve months, 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. AFS envisions no such requirements for operating purposes. In 1998, the Partnership established a $65 million receivables funding program with a receivables financing company that issues commercial paper rated A1 from Standard and Poor's and P1 from Moody's Investor Services. In this receivables funding program, the lenders received a general lien against all of the otherwise unencumbered assets of the Partnership. The program provided for borrowing at a variable interest rate and required AFS to enter into interest rate swap agreements with certain hedge counterparties (also rated A1/P1) to mitigate the interest rate risk associated with a variable rate note. AFS anticipated that this program would allow the Partnership to avail itself of lower cost debt than that available for individual non-recourse debt transactions. The Partnership's ability to borrow under the program expired in February 2002. As of March 31, 2005, the Partnership had $7,557,000 outstanding under the receivables funding program. 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. For detailed information on the Partnership's debt obligations, see Notes 4, 5, and 7 in the notes to the financial statements in Item 1. Cash Flows In the first quarter of 2005 and 2004, the primary source of cash from operating activities was rents from operating leases. Cash from operating activities was almost entirely from operating lease rents in both quarters. 19 In the first quarter of 2005 and 2004, the only sources of cash from investing activities was proceeds from sales of assets and rents from direct financing leases accounted for as reductions of the Partnership's net investment in direct financing leases. In the first quarter of 2005, proceeds from sales of lease assets decreased from $1,087,555 to $785,943 compared to the first quarter of 2004. Proceeds from the sales of lease assets are not expected to be consistent from one period to another. Asset sales are made as leases expire, as purchasers can be found and as the sales can be negotiated and completed. In the first quarter of 2005, the Partnership invested $720,367 on capital improvements related to marine vessels. In the first quarters of 2005 and 2004, the only source of cash from financing activities was borrowings under the line of credit. Repayments of other long-term debt and non-recourse debt have decreased as a result of scheduled debt payments. Repayments of borrowings under the line of credit decreased from $1,800,000 in the first quarter of 2004 to $1,500,000 in the first quarter of 2005. Most of the proceeds from the sales of lease assets in the first quarter of 2005 were used to repay borrowings on the line of credit. Results of operations Operations resulted in a net loss of $42,863 in the first quarter of 2005 compared to a net loss of $1,593,374, in the first quarter of 2004. The Partnership's primary source of revenues is from operating leases. This is expected to remain true in future periods. Operating lease revenues have decreased quarter to quarter primarily as a result of net asset dispositions. Lower lease rates realized on renewals have also contributed to the decrease. Depreciation expense is the single largest expense of the Partnership. Depreciation is related to operating lease assets and thus, to operating lease revenues. In the first quarter of 2005, sales of lease assets resulted in a gain of $518,241 compared to a loss of $91,915 in the first quarter of 2004. Proceeds from sales of lease assets are not expected to be consistent from one period to another. The Partnership is a finite life equipment leasing fund, which will acquire leasing transactions during the period ending six years after completion of its public offering. On the termination of leases, assets may be re-leased or sold. Sales of assets are not scheduled and are created by opportunities within the marketplace. The Partnership will seek to acquire and lease a wide variety of assets and to enter into leases on a variety of terms. Some assets will be expected to have little or no value upon termination of the related leases, while others will be expected to have substantial value for re-lease or sale upon termination of the initial leases, and the anticipated residual values are a key factor in pricing and terms structured for each lease. The Partnership's goal is to seek maximum return on its leased assets and will determine when and under what terms to dispose such assets during the course of its term. Equipment management fees are based on the Partnership's rental revenues and have decreased in relation to decreases in the Partnership's revenues from leases. Such fees decreased from $150,868 in the first quarter of 2004 to $116,154 in the first quarter of 2005. Incentive management fees are based on the levels of distributions to Limited Partners and the sources of the cash distributed. The Partnership recorded incentive management fees of $5,343 in the first quarter of 2004. No fee was recorded for the first quarter of 2005. The decrease in interest expense from $452,377 in the first quarter of 2004 to $251,611 in the first quarter of 2005 is related to the reduction of total outstanding debt as a result of scheduled payments and other debt paydowns. Total debt balances were reduced from $29,557,636 at March 31, 2004 to $21,455,018 at March 31, 2005, a decrease of $8,102,618. Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. As a result of the reviews during the three month period ended March 31, 2004, management determined that the value of a fleet certain refuse and other vehicles in 2004 had declined in value to the extent that the carrying values had become impaired. This decline is the result of decreased long-term demand for these types of assets and a corresponding reduction in the estimated amounts of rental payments that these assets could command. Management recorded a provision for the decline in value of those assets in the amount of $455,367 for the three months ended March 31, 2004. As of March 31, 2005 and 2004, no assets were identified as impaired during the review of its assets on leases and assets held for lease or sale. Railcar maintenance decreased from $385,274 in the first quarter of 2004 to $53,034 in the first quarter of 2005. However, the Partnership recorded $315,942 related to maintenance of two marine vessels in the first quarter of 2005. These vessels came off lease in the second quarter of 2004 and placed back on lease in the first quarter of 2005. The provision for doubtful accounts decreased from $77,000 in the first quarter of 2004 to $47,500 in the first quarter of 2005. Most of the provision in the first quarter of 2004 related to the bankruptcy of a single lessee. Other expenses decreased from $185,009 in the first quarter of 2004 to $94,651 in the first quarter of 2005 due to the absence of a payment of carrying costs to the General Partner for warehoused leases related to prior periods that occurred in the first quarter of 2004. 20 Item 3. Controls and procedures. Evaluation of disclosure controls and procedures Under the supervision and with the participation of our management (ATEL Financial Services, LLC as General Partner of the registrant, including the chief executive officer and chief financial officer), an evaluation of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures [as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934] was performed as of March 31, 2005. Based upon this evaluation, the chief executive officer and the chief financial officer concluded that, as of the evaluation date, our disclosure controls and procedures were effective for the purposes of recording, processing, summarizing, and timely reporting information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934; and that such information is accumulated and communicated to our management in order to allow timely decisions regarding required disclosure. As disclosed in the Partnership's annual report on Form 10-K for the year ended December 31, 2003, the chief executive and chief financial officer of the General Partner had identified certain enhanced controls needed to facilitate a more effective closing of the Partnership's financial statements. Specifically, the Partnership's auditors advised management of a material weakness surrounding the financial statement closing process that they believe arose because ATEL's accounting resources were not adequate to complete the closing of the books and preparation of financial statements in a timely manner. However, it should be noted that the financial statements for that period were nevertheless issued with an unqualified opinion. Since the beginning of 2004, ATEL hired a new corporate controller, added two assistant controllers and additional accounting staff personnel, and has instituted new procedures or revised existing procedures to ensure that the Partnership's ability to execute internal controls in accounting and reconciliation in the closing process is adequate in all respects. In connection with management's review of the effectiveness of internal disclosure controls and procedures of the Partnership as of March 31, 2005, including communication with its auditors regarding the audit process, ATEL management has determined that it has successfully taken all steps necessary to resolve any outstanding issues with respect to its annual financial statement closing process and that its accounting resources are adequate to perform this process in a timely and accurate manner. In connection with their audit of the Partnership and related programs for the year ended December 31, 2004, the independent accountants issued a no material weakness letter which indicates that no matters were noted involving internal control and its operation that the auditor considered to be material weaknesses as defined by the Public Company Accounting Oversight Board (United States). Furthermore, all financial statements for the Partnership and related programs for 2004 were issued with unqualified opinions of the independent accountants. The General Partner will continue to review its accounting procedures and practices to determine their effectiveness and adequacy and will take any steps deemed necessary in the opinion of the General Partner's chief executive and chief financial officers to ensure the adequacy of the Partnership's disclosure and accounting controls and procedures. The General Partner's chief executive officer and chief financial officer have determined that no weakness in financial and accounting controls and procedures had any material effect on the accuracy and completeness of the Partnership's financial reporting and disclosure included in this report. Changes in internal controls There have been no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures subsequent to the evaluation date nor were there any significant deficiencies or material weaknesses in our internal controls, except as described in the prior paragraphs. 21 PART II. OTHER INFORMATION Item 1. Legal Proceedings. In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Partnership. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Partnership's financial position or results of operations. No material legal proceedings are currently pending against the Partnership or against any of its assets. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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. Documents filed as a part of this report 1. 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. 2. Other Exhibits 31.1 Certification of Paritosh K. Choksi 31.2 Certification of Dean L. Cash 32.1 Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash 32.2 Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 13, 2005 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 Principal Financial Officer of Registrant By: /s/ Donald E. Carpenter________ Donald E. Carpenter Principal Accounting Officer of Registrant By: /s/ Elif A Kuvvetli________ Elif A Kuvvetli Vice President and Corporate Controller 23 EX-31 2 ex311.txt CERTIFICATION OF PARITOSH CHOKSI Exhibit 31.1 CERTIFICATIONS I, Paritosh K. Choksi, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of ATEL Capital Equipment Fund VII, L.P.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13, 2005 /s/ Paritosh K. Choksi Paritosh K. Choksi Principal Financial Officer of Registrant, Executive Vice President of General Partner EX-31 3 ex312.txt CERTIFICATION OF DEAN CASH Exhibit 31.2 CERTIFICATIONS I, Dean L. Cash, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of ATEL Capital Equipment Fund VII, L.P.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13, 2005 /s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of General Partner EX-32 4 ex321.txt CERTIFICATION OF DEAN CASH Exhibit 32.1 CERTIFICATION I, Dean L. Cash, Chief Executive Officer of ATEL Financial Services, LLC, General Partner of ATEL Capital Equipment Fund VII, L.P. (the "Partnership"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: 1. The Quarterly Report on Form 10-QSB of the Partnership for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. Date: May 13, 2005 /s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of General Partner A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 5 ex322.txt CERTIFICATION OF PARITOSH CHOKSI Exhibit 32.2 CERTIFICATION I, Paritosh K. Choksi, Executive Vice President of ATEL Financial Services, LLC, General Partner of ATEL Capital Equipment Fund VII, L.P. (the "Partnership"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: 1. The Quarterly Report on Form 10-QSB of the Partnership for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. Date: May 13, 2005 /s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President of General Partner, Principal Financial Officer of Registrant A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----