-----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, O9Bn5Pi4py9oNbNQUKYpNwQeL6TvI7g+YRbhfzdnkhV9AxCM7/lue1MSl7Oep67+ wzEMyynrgD5guW9GL7LqGw== 0001019542-99-000007.txt : 19990816 0001019542-99-000007.hdr.sgml : 19990816 ACCESSION NUMBER: 0001019542-99-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: SEC FILE NUMBER: 000-24175 FILM NUMBER: 99686627 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 REPORT FOR THE SECOND QUARTER OF 1999 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, 1999 |_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from _______ to _______ Commission File Number 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 Part I. FINANCIAL INFORMATION Item 1. Financial Statements. ATEL CAPITAL EQUIPMENT FUND VII, L.P. BALANCE SHEETS JUNE 30, 1999 AND DECEMBER 31, 1998 (Unaudited) ASSETS 1999 1998 ---- ---- Cash and cash equivalents $ 2,413,180 $ 1,576,029 Accounts receivable 3,973,608 6,380,886 Other assets 150,005 170,003 Investments in leases 195,439,513 204,329,984 ------------------ ------------------ Total assets $201,976,306 $ 212,456,902 ================== ================== LIABILITIES AND PARTNERS' CAPITAL Long-term debt $61,283,000 $ 61,553,000 Non-recourse debt 23,889,877 16,599,347 Lines of credit - 11,781,707 Accounts payable: General Partner 338,837 377,955 Other 433,491 684,475 Accrued interest payable 562,501 805,753 Unearned operating lease income 1,186,647 943,419 ------------------ ------------------ Total liabilities 87,694,353 92,745,656 Partners' capital: General Partner (1,145,215) $ (717,165) Limited Partners 115,427,168 120,428,411 ------------------ ------------------ Total partners' capital 114,281,953 119,711,246 ------------------ ------------------ Total liabilities and partners' capital $201,976,306 $ 212,456,902 ================== ================== See accompanying notes. ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENT OF OPERATIONS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- Revenues: Leasing activities: Operating leases $18,050,016 $13,112,501 $ 9,034,907 $ 7,720,265 Direct financing 976,134 809,036 481,711 546,863 Leveraged leases 71,744 65,757 35,872 32,878 Gain on sales of assets 747,194 843,793 29,597 842,915 Interest 33,904 22,396 21,249 15,829 Other 12,805 3,463 8,933 2,740 ----------------- ----------------- ------------------ ------------------ 19,891,797 14,856,946 9,612,269 9,161,490 Expenses: Depreciation 12,164,056 8,694,006 6,177,819 5,780,645 Interest expense 3,102,801 1,962,200 1,591,989 1,115,963 Equipment and incentive management fees to General Partner 884,588 645,721 391,434 350,175 Other 695,398 282,602 339,094 137,306 Administrative cost reimbursements to General Partner 250,078 445,391 171,865 197,700 Professional fees 119,416 37,210 81,035 28,459 Provision for losses - 56,954 - - ----------------- ----------------- ------------------ ------------------ 17,216,337 12,124,084 8,753,236 7,610,248 ----------------- ----------------- ------------------ ------------------ Net income $ 2,675,460 $ 2,732,862 $ 859,033 $ 1,551,242 ================= ================= ================== ================== Net income: General Partner $ 200,660 $ 204,965 $ 64,427 $ 116,343 Limited Partners 2,474,800 2,527,897 794,606 1,434,899 ================= ================= ================== ================== $ 2,675,460 $ 2,732,862 $ 859,033 $ 1,551,242 ================= ================= ================== ================== Net income per Limited Partnership Unit $0.17 $0.30 $0.05 $0.15 Weighted average number of Units outstanding 14,996,050 8,499,596 14,996,050 9,483,808
ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENT OF CHANGES IN PARTNERS' CAPITAL SIX MONTH PERIOD ENDED JUNE 30, 1999 (Unaudited)
Limited Partners General Units Amount Partner Total Balance December 31, 1998 14,996,050 120,428,411 $ (717,165) $ 119,711,246 Distributions to partners (7,476,043) (628,710) (8,104,753) Net income 2,474,800 200,660 2,675,460 ----------------- ----------------- ------------------ ------------------ Balance June 30, 1999 14,996,050 $115,427,168 $(1,145,215) $ 114,281,953 ================= ================= ================== ==================
See accompanying notes. STATEMENTS OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, Operating activities: 1999 1998 1999 1998 ---- ---- ---- ---- Net income $2,675,460 $2,732,862 $859,033 $ 1,551,242 Adjustments to reconcile net income to cash provided by operating activities: Leveraged lease income (71,744) (65,757) (35,872) (32,878) Depreciation 12,164,056 8,694,006 6,177,819 5,780,645 Gain on sales of assets (747,194) (843,793) (29,597) (842,915) Provision for losses - 56,954 - - Changes in operating assets and liabilities: Accounts receivable 2,407,278 (2,716,894) 874,239 (1,549,382) Other assets 19,998 - 9,999 - Accounts payable, General Partner (39,118) (164,081) 98,786 (75,529) Accounts payable, other (250,984) 103,490 (385,145) 371,085 Accrued interest expense (243,252) 177,465 (428,027) 118,439 Unearned lease income 243,228 205,724 (373,351) 110,991 ----------------- ----------------- ------------------ ------------------ Net cash provided by operations 16,157,728 8,179,976 6,767,884 5,431,698 ----------------- ----------------- ------------------ ------------------ Investing activities: Purchases of equipment on operating leases (4,692,878) (29,892,797) (120,145) (18,332,769) Reduction in net investment in direct financing leases 1,742,303 871,265 1,328,152 765,189 Proceeds from sales of assets 1,273,870 2,330,193 (768,273) 2,319,585 Purchases of equipment on direct financing leases (777,942) (5,410,595) (222,754) (5,410,595) Purchases of equipment held for sale or lease - (441,187) - - Payment of initial direct costs - (4) - (4) ----------------- ----------------- ------------------ ------------------ Net cash (used in) provided by investing activities (2,454,647) (32,543,125) 216,980 (20,658,594) ================= ================= ================== ==================
ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENTS OF CASH FLOWS (Continued) SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- Financing activities: Repayments of borrowings under line of credit (16,454,531) (43,777,407) (16,172,824) (40,641,908) Borrowings under line of credit 4,672,824 18,134,707 1,500,000 18,134,707 Proceeds of long-term debt 9,000,000 21,770,000 9,000,000 21,770,000 Repayments of long-term debt (9,270,000) (741,000) (3,700,000) (741,000) Proceeds of non-recourse debt 9,520,748 1,456,584 9,520,748 1,456,584 Repayments of non-recourse debt (2,230,218) (1,509,849) (1,309,155) (1,327,616) Distributions to partners (8,104,753) (4,026,256) (4,065,391) (2,140,790) Capital contributions received - 38,451,620 - 21,960,980 Payment of syndication costs to General Partner - (5,247,437) - (3,084,876) ----------------- ----------------- ------------------ ------------------ Net cash (used in) provided by financing activities (12,865,930) 24,510,962 (5,226,622) 15,386,081 ----------------- ----------------- ------------------ ------------------ Net increase in cash and cash equivalents 837,151 147,813 1,758,242 159,185 Cash and cash equivalents at beginning of period 1,576,029 2,014,706 654,938 2,003,334 ----------------- ----------------- ------------------ ------------------ Cash and cash equivalents at end of period $ 2,413,180 $ 2,162,519 $ 2,413,180 $ 2,162,519 ================= ================= ================== ================== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 3,346,053 $ 1,784,735 $ 2,020,016 $ 1,784,735 ================= ================= ================== ==================
See accompanying notes. ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) 1. Summary of significant accounting policies: Interim financial statements: The unaudited interim financial statements reflect all adjustments which are, in the opinion of the general partners, necessary to a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim financial statements should be read in conjunction with the most recent report on Form 10K. 2. Organization and partnership matters: ATEL 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, 1998 Additions of Leases Dispositions 1999 ---- --------- --------- - ------------- ---- Net investment in operating leases $177,401,763 4,692,878 (12,158,600) (2,427,550) $ 167,508,491 Net investment in direct financing leases 25,063,961 777,942 (1,742,303) - 24,099,600 Net investment in leveraged leases 1,580,583 - 71,744 - 1,652,327 Assets held for sale or lease 355,633 - - 1,900,874 2,256,507 Reserve for losses (131,232) - - - (131,232) Initial direct costs, net of accumulated amortization 59,276 - (5,456) - 53,820 ------------------- ----------------- ----------------- ------------------ ------------------ $204,329,984 $ 5,470,820 $ (13,834,615) $ (526,676) $ 195,439,513 =================== ================= ================= ================== ==================
ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) 3. Investment in leases (continued): Property on operating leases consists of the following:
Balance Acquisitions, Dispositions & Balance December 31, Reclassifications June 30, 1998 1st Quarter 2nd Quarter 1999 ---- ----------- ----------- ---- Transportation $102,138,178 $ (417,559) $(5,044,946) $ 96,675,673 Manufacturing 24,391,341 3,149,912 (1,209,350) 26,331,903 Mining 26,099,674 - (19,310) 26,080,364 Marine vessels 22,335,250 - - 22,335,250 Motor vehicles 5,454,671 - - 5,454,671 Other 4,602,749 (1,235,019) 1,183,442 4,551,172 Materials handling 5,574,150 440,829 (23,648) 5,991,331 Aircraft 4,991,972 - - 4,991,972 Office automation 6,307,481 1,322,416 28,892 7,658,789 Furniture and fixtures 2,461,533 - - 2,461,533 ----------------- ----------------- ------------------ ------------------ 204,356,999 3,260,579 (5,084,920) 202,532,658 Less accumulated depreciation (26,955,236) (5,279,419) (2,789,512) (35,024,167) ----------------- ----------------- ------------------ ------------------ $177,401,763 $ (2,018,840) $(7,874,432) $ 167,508,491 ================= ================= ================== ==================
All of the property on leases was acquired in 1997, 1998 and 1999. At June 30, 1999, the aggregate amounts of future minimum lease payments are as follows: Direct Year ending Operating Financing December 31, Leases Leases Total 1999 $17,654,302 $ 2,492,608 $20,146,910 2000 34,679,385 4,660,094 39,339,479 2001 27,431,220 4,502,824 31,934,044 2002 19,280,546 3,555,471 22,836,017 2003 10,611,080 2,252,958 12,864,038 Thereafter 12,385,232 5,404,635 17,789,867 ----------------- ----------------- ------------------ $122,041,765 $22,868,590 $144,910,355 ================= ================= ================== ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (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 1999 $ 2,227,062 $ 1,035,757 $ 3,262,819 2000 5,654,438 1,862,541 7,516,979 2001 6,359,170 1,323,954 7,683,124 2002 6,180,266 728,117 6,908,383 2003 2,830,982 222,305 3,053,287 Thereafter 637,959 78,582 716,541 ----------------- ----------------- ------------------ $23,889,877 $ 5,251,256 $29,141,133 ================= ================= ================== 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. The General Partner anticipates that the Program will allow the Partnership to avail itself to lower cost debt than that available for individual non-recourse debt transactions. It is the intention of the Partnership to use the Program to finance assets leased to those credits which, in the opinion of the General Partner, have a relatively lower potential risk of lease default than those lessees with equipment financed with non-recourse debt. The Partnership will continue to use its traditional sources of non-recourse secured debt financing on a selected transaction basis as a means of mitigating credit risk. 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, 1999, the Partnership receives or pays interest on a notional principal of $61,283,000, based on the difference between nominal rates ranging from 5.55% to 6.22% 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. ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) 5. Long-term debt (continued): Borrowings under the Program are as follows: Variable Interest Original Balance Rate on Rate at Date Amount June 30, Interest Swap June 30, Borrowed Borrowed 1999 Agreement 1999 - -------- -------- ---- --------- ---- 4/1/98 $ 21,770,000 $16,065,000 6.220% 5.20984% 7/1/98 25,000,000 19,458,000 6.155% 5.20984% 10/1/98 20,000,000 17,106,000 5.550% 5.20984% 4/16/99 9,000,000 8,654,000 5.890% 5.30984% ------------------- ----------------- $ 75,770,000 $61,283,000 =================== ================= 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 1999 $ 8,102,000 $ 1,716,095 $ 9,818,095 2000 16,760,000 2,664,354 19,424,354 2001 12,868,000 1,752,333 14,620,333 2002 10,269,000 1,069,178 11,338,178 2003 5,365,000 619,417 5,984,417 Thereafter 7,919,000 630,383 8,549,383 ----------------- ----------------- ------------------ $61,283,000 $ 8,451,760 $69,734,760 ================= ================= ================== 6. Related party transactions: The terms of the Limited Partnership Agreement provide that the General Partner and/or Affiliates are entitled to receive certain fees for equipment management and resale and for management of the Partnership. The Limited Partnership Agreement allows for the reimbursement of costs incurred by the General Partner in providing administrative services to the Partnership. Administrative services provided include Partnership accounting, investor relations, legal counsel and lease and equipment documentation. The General Partner is not reimbursed for services where it is entitled to receive a separate fee as compensation for such services, such as management of equipment. Reimbursable costs incurred by the General Partner are allocated to the Partnership based upon actual time incurred by employees working on Partnership business and an allocation of rent and other costs based on utilization studies. Substantially all employees of the General Partner record time incurred in performing administrative services on behalf of all of the Partnerships serviced by the General Partner. The General Partner believes that the costs reimbursed are the lower of (i) actual costs incurred on behalf of the Partnership or (ii) the amount the Partnership would be required to pay independent parties for comparable administrative services in the same geographic location and are reimbursable in accordance with the Limited Partnership Agreement. ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) 6. Related party transactions (continued): The General Partner and/or Affiliates earned fees, commissions and reimbursements, pursuant to the Limited Partnership Agreement as follows:
1999 1998 ---- ---- 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). $ 884,588 $ 645,721 Administrative costs reimbursed to General Partner 250,078 445,391 Selling commissions (equal to 9.5% of the selling price of the Limited Partnership units, deducted from Limited Partners' capital) - 3,652,904 Reimbursement of other syndication costs - 1,594,533 -------------- --------------- $ 1,134,666 $ 6,338,549 ============== ===============
7. Partner's capital: As of June 30, 1999, 14,996,050 Units ($149,960,500) were issued and outstanding. Available Cash from Operations, as defined in the Limited Partnership Agreement, shall be distributed as follows: First, Distributions of Cash from Operations shall be 88.5% to the Limited Partners, 7.5% to the General Partner and 4% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee, until the Limited Partners have received Aggregate Distributions in an amount equal to their Original Invested Capital, as defined, plus a 10% per annum cumulative (compounded daily) return on their Adjusted Invested Capital, as defined in the Limited Partnership Agreement. Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee. Available Cash from Sales or Refinancing, as defined in the Limited Partnership Agreement, shall be distributed as follows: First, Distributions of Sales or Refinancings shall be 92.5% to the Limited Partners and 7.5% to the General Partner, until the Limited Partners have received Aggregate Distributions in an amount equal to their Original Invested Capital, as defined, plus a 10% per annum cumulative (compounded daily) return on their Adjusted Invested Capital. Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee. ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (Unaudited) 8. Line of credit: The Partnership participates with the General Partner and certain of its Affiliates in a $95,000,000 revolving credit agreement with a group of financial institutions which expires on January 31, 2000. The agreement includes an acquisition facility and a warehouse facility which are used to provide bridge financing for assets on leases. Draws on the acquisition facility by any individual borrower are secured only by that borrower's assets, including equipment and related leases. Borrowings on the warehouse facility are recourse jointly to certain of the Affiliates, the Partnership and the General Partner. At June 30, 1999, the Partnership had no borrowings under the line of credit. The credit agreement includes certain financial covenants applicable to each borrower. The Partnership was in compliance with its covenants as of June 30, 1999. 9. Commitments: As of June 30, 1999, the Partnership had outstanding commitments to purchase lease equipment totaling approximately $4,768,000. 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 1999, the Partnership's primary activity was engaging in equipment leasing activities. The liquidity of the Partnership will vary in the future, increasing to the extent cash flows from leases exceed expenses, and decreasing as lease assets are acquired, as distributions are made to the limited partners and to the extent expenses exceed cash flows from leases. As another source of liquidity, the Partnership has contractual obligations with a diversified group of lessees for fixed lease terms at fixed rental amounts. As the initial lease terms expire the Partnership will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on the General Partner's success in re-leasing or selling the equipment as it comes off lease. The Partnership participates with the General Partner and certain of its affiliates in a $95,000,000 revolving line of credit with a financial institution. The line of credit expires on January 31, 2000. The Partnership anticipates reinvesting a portion of lease payments from assets owned in new leasing transactions. Such reinvestment will occur only after the payment of all obligations, including debt service (both principal and interest), the payment of management 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. Such commitments totaled approximately $4,768,000 as of June 30, 1999. 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, 1999 vs. 1998: During the first half of 1999, 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 1999 and in 1998 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 increased significantly compared to 1998. Cash was used in investing activities to purchase assets on operating and direct financing leases. Cash from financing sources consisted of borrowings under the line of credit and proceeds of non-recourse and other long-term debt. Repayments of debt have increased as a result of borrowings over the last year. Distributions to partners have increases due to the larger number of outstanding Units in 1999 compared to 1998. Results of operations Operations in 1999 resulted in a net income of $2,675,337 (six months) and $859,033 (three months). Operations in 1998 resulted in a net income of $2,732,862 (six months) and $1,551,242 (three months). The Partnership's primary source of revenues is from operating leases. This is expected to remain true in future periods. These revenues in fact increased from $$13,112,501 (six months) and $7,720,265 (three months) in 1998 to $18,050,016 and $9,034,907, respectively, in 1999. Depreciation expense is the single largest expense of the Partnership and is expected to remain so in future periods. Equipment management fees are based on the Partnership's rental revenues and have increased in relation to increases in the Partnership's revenues from leases. Incentive management fees are based on the levels of distributions to limited partners. Incentive management fees have increased as a result of the increase in the number of outstanding Units in 1999 compared to 1998. These expenses have increased from 1998 to 1999 for both the three and six month periods as a result of these factors. Interest expense has increased due to the higher debt balances in 1999 than in 1998. As of June 30, 1998, the Partnership's public offering was continuing and was completed I November 1998. As a result, operations in 1998 are not comparable to those in 1999. PART II. OTHER INFORMATION Item 1. Legal Proceedings. Inapplicable. Item 2. Changes In Securities. Inapplicable. Item 3. Defaults Upon Senior Securities. Inapplicable. Item 4. Submission Of Matters To A Vote Of Security Holders. Inapplicable. Item 5. Other Information. Inapplicable. Item 6. Exhibits And Reports On Form 8-K. (a)Documents filed as a part of this report 1. Financial Statements Included in Part I of this report: Balance Sheets, June 30, 1999 and December 31, 1998. Statement of changes in partners' capital for the six months ended June 30, 1999. Statements of operations for the six and three month periods ended June 30, 1999 and 1998. Statement of cash flows for the six and three month periods ended June 30, 1999 and 1998. Notes to the Financial Statements. 2. Financial Statement Schedules All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (b) Report on Form 8-K None 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 13, 1999 ATEL CAPITAL EQUIPMENT FUND VII, L.P. (Registrant) By: ATEL Financial Corporation General Partner of Registrant By: /s/ A. J. BATT ------------------------------------ A. J. Batt President and Chief Executive Officer of General Partner By: /s/ DEAN L. CASH ------------------------------------ Dean L. Cash Executive Vice President of General Partner By: /s/ PARITOSH K. CHOKSI ------------------------------------- Paritosh K. Choksi Principal financial officer of registrant By: /s/ DONALD E. CARPENTER ------------------------------------- Donald E. Carpenter Principal accounting officer of registrant EX-27 2 FDS --
5 6-MOS DEC-31-1999 DEC-31-1999 2,413,180 0 3,973,608 0 0 0 0 0 201,976,306 0 0 0 0 0 114,281,953 201,976,306 0 19,891,797 0 0 14,113,536 0 3,102,801 2,675,460 0 2,675,460 0 0 0 2,675,460 0 0
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