-----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, PFIs+DFO5sOTLP+ojpCgLE3FLqodZwBeORTlgDBAYOCuSisNNT+AB0B6mbwWN7Zi OFufpr+FiI7xmoYiZD5PQQ== 0001019542-99-000010.txt : 19991117 0001019542-99-000010.hdr.sgml : 19991117 ACCESSION NUMBER: 0001019542-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99752389 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 THIRD 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 September 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 SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 (Unaudited) ASSETS 1999 1998 ---- ---- Cash and cash equivalents $ 1,071,226 $ 1,576,029 Accounts receivable 4,807,711 6,380,886 Other assets 140,006 170,003 Investments in leases 188,793,710 204,329,984 ------------------ ------------------ Total assets $194,812,653 $212,456,902 ================== ================== LIABILITIES AND PARTNERS' CAPITAL Long-term debt $ 57,077,000 $ 61,553,000 Non-recourse debt 22,602,274 16,599,347 Line of credit 2,000,000 11,781,707 Accounts payable: General Partner 371,072 377,955 Other 569,553 684,475 Accrued interest payable 435,897 805,753 Unearned operating lease income 1,077,744 943,419 ------------------ ------------------ Total liabilities 84,133,540 92,745,656 Partners' capital: General Partner (1,415,428) (717,165) Limited Partners 112,094,541 120,428,411 ------------------ ------------------ Total partners' capital 110,679,113 119,711,246 ------------------ ------------------ Total liabilities and partners' capital $194,812,653 $212,456,902 ================== ================== See accompanying notes. ATEL CAPITAL EQUIPMENT FUND VII, L.P. INCOME STATEMENTS NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 (Unaudited)
Nine Months Three Months Ended September 30, Ended September 30, 1999 1998 1999 1998 Revenues: Leasing activities: Operating leases $ 27,434,445 $20,536,470 $ 9,384,429 $ 7,423,969 Direct financing 1,426,625 1,226,303 450,491 417,267 Leveraged leases 107,616 98,636 35,872 32,879 Gain on sales of assets 778,259 1,485,935 31,065 642,142 Interest 42,405 34,690 8,501 12,294 Other 15,743 11,254 2,938 7,791 ----------------- ------------------ ------------------ ------------------ 29,805,093 23,393,288 9,913,296 8,536,342 Expenses: Depreciation 18,352,622 13,928,035 6,188,566 5,234,029 Interest expense 4,594,693 3,127,366 1,491,892 1,165,166 Administrative cost reimbursements to General Partner 418,021 763,032 167,943 317,641 Other 1,086,341 474,886 390,943 192,284 Equipment and incentive management fees to General Partner 1,329,633 1,026,501 445,045 380,780 Professional fees 146,774 101,790 27,358 64,580 Provision for losses 750,000 56,954 750,000 - ----------------- ------------------ ------------------ ------------------ 26,678,084 19,478,564 9,461,747 7,354,480 ----------------- ------------------ ------------------ ------------------ Net income $ 3,127,009 $ 3,914,724 $ 451,549 $ 1,181,862 ================= ================== ================== ================== Net income: General Partner $ 234,526 $ 293,604 $ 33,866 $ 88,640 Limited Partners 2,892,483 3,621,120 417,683 1,093,222 ----------------- ------------------ ------------------ ------------------ $ 3,127,009 $ 3,914,724 $ 451,549 $ 1,181,862 ================= ================== ================== ================== Net income per Limited Partnership Unit $ 0.19 $ 0.38 $ 0.03 $ 0.09 Weighted average number of Units outstanding 14,996,050 9,554,273 14,996,050 11,635,928
See accompanying notes. ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENT OF CHANGES IN PARTNERS' CAPITAL NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 (Unaudited)
Limited Partners General Units Amount Partner Total Balance December 31, 1998 6,716,896 $120,428,411 $ (717,165) $119,711,246 Distributions to partners (11,226,353) (932,789) (12,159,142) Net income 2,892,483 234,526 3,127,009 ----------------- ------------------ ------------------ ------------------ Balance September 30, 1999 6,716,896 $112,094,541 $(1,415,428) $110,679,113 ================= ================== ================== ==================
See accompanying notes. STATEMENTS OF CASH FLOWS NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
Nine Months Three Months Ended September 30, Ended September 30, Operating activities: 1999 1998 1999 1998 ---- ---- ---- ---- Net income $ 3,127,009 $ 3,914,724 $ 451,549 $ 1,181,862 Adjustments to reconcile net income (loss) to cash provided by operating activities: Leveraged lease income (107,616) (98,636) (35,872) (32,879) Depreciation 18,352,622 13,928,035 6,188,566 5,234,029 Gain on sales of assets (778,259) (1,485,935) (31,065) (642,142) Provision for losses 750,000 56,954 750,000 - Changes in operating assets and liabilities: Accounts receivable 1,573,175 (2,188,297) (834,103) 528,597 Other assets 29,997 19,998 9,999 19,998 Accounts payable, General Partner (6,883) (59,937) 32,235 104,144 Accounts payable, other (114,922) 82,466 136,062 (21,024) Accrued interest expense (369,856) 411,905 (126,604) 234,440 Unearned lease income 134,325 242,305 (108,903) 36,581 ----------------- ------------------ ------------------ ------------------ Net cash provided by operations 22,589,592 14,823,582 6,431,864 6,643,606 ----------------- ------------------ ------------------ ------------------ Investing activities: Purchases of equipment on operating leases (6,617,689) (77,120,556) (1,924,811) (47,227,759) Purchases of equipment on direct financing leases (812,462) (5,618,148) (34,520) (207,553) Proceeds from sales of assets 2,162,469 5,213,023 888,599 2,882,830 Reduction in net investment in direct financing leases 2,587,209 924,120 844,906 52,855 Purchases of equipment held for sale or lease - (441,187) - - Payment of initial direct costs - (33,992) - (33,988) ----------------- ------------------ ------------------ ------------------ Net cash used in investing activities (2,680,473) (77,076,740) (225,826) (44,533,615) ----------------- ------------------ ------------------ ------------------
ATEL CAPITAL EQUIPMENT FUND VII, L.P. STATEMENTS OF CASH FLOWS (Continued) SEPTEMBER 30, 1999 AND 1998
Six Months Three Months Ended September 30, Ended September 30, 1999 1998 1999 1998 Financing activities: Borrowings under line of credit 6,672,824 37,365,043 2,000,000 19,230,336 Repayments of borrowings under line of credit (16,454,531) (66,977,843) - (23,200,436) Proceeds of long-term debt 9,000,000 46,770,000 - 25,000,000 Repayments of long-term debt (13,476,000) (2,753,000) (4,206,000) (2,012,000) Proceeds of non-recourse debt 9,520,748 6,087,415 - 4,630,831 Repayments of non-recourse debt (3,517,821) (2,160,402) (1,287,603) (650,553) Distributions to partners (12,159,142) (7,114,959) (4,054,389) (3,088,703) Capital contributions received - 59,303,920 - 20,852,300 Payment of selling commissions to affiliate of General Partner - (5,633,872) - (1,980,968) Payment of syndication costs to General Partner - (2,512,374) - (917,841) ----------------- ------------------ ------------------ ------------------ Net cash (used in) provided by financing activities (20,413,922) 62,373,928 (7,547,992) 37,862,966 -------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (504,803) 120,770 (1,341,954) (27,043) Cash and cash equivalents at beginning of period 1,576,029 2,014,706 2,413,180 2,162,519 ----------------- ------------------ ------------------ ------------------ Cash and cash equivalents at end of period $ 1,071,226 $ 2,135,476 $ 1,071,226 $ 2,135,476 ================= ================== ================== ================== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 4,964,549 $ 2,715,461 $ 1,618,496 $ 930,726 ================= ================== ================== ==================
See accompanying notes. ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 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. Contributions in the amount of $600 were received as of July 17, 1996, $100 of which represented the General Partner's (ATEL Financial Corporation's) continuing interest, and $500 of which represented the Initial Limited Partners' capital investment. Upon the sale of the minimum amount of Units of Limited Partnership interest (Units) of $1,200,000 and the receipt of the proceeds thereof on January 7, 1997, the Partnership commenced operations. The Partnership does not make a provision for income taxes since all income and losses will be allocated to the Partners for inclusion in their individual tax returns. 3. Investment in leases: The Partnership's investment in leases consists of the following:
Depreciation Balance Expense or Reclassi- Balance December 31, Amortization fications or September 30, 1998 Additions of Leases Dispositions 1999 ---- --------- --------- ------------ ---- Net investment in operating leases $ 177,401,763 $ 6,617,689 $ (18,344,439) $(1,536,904) $164,138,109 Net investment in direct financing leases 25,063,961 812,462 (2,587,209) - 23,289,214 Net investment in leveraged leases 1,580,583 - 107,616 - 1,688,199 Assets held for sale or lease 355,633 - - 152,694 508,327 Reserve for losses (131,232) (750,000) - - (881,232) Initial direct costs, net of accumulated amortization 59,276 - (8,183) - 51,093 ------------------- ----------------- ------------------ ------------------ ------------------ $ 204,329,984 $ 6,680,151 $ (20,832,215) $ (1,384,210) $188,793,710 =================== ================= ================== ================== ==================
ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (Unaudited) 3. Investment in leases (continued): Property on operating leases consists of the following:
Balance Balance December 31, Acquisitions & Dispositions September 30, 1998 1st Quarter 2nd Quarter 3rd Quarter 1999 ---- ----------- ----------- ----------- ---- Transportation $ 102,138,178 $ (417,559) $ (5,044,946) $ 4,815,377 $101,491,050 Manufacturing 24,391,341 3,149,912 (1,209,350) (219,287) 26,112,616 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) 1,183,442 996,016 5,547,188 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) 5,592,106 208,124,764 Less accumulated depreciation (26,955,236) (5,279,419) (2,789,512) (8,962,488) (43,986,655) ------------------- ----------------- ------------------ ------------------ ------------------ $ 177,401,763 $ (2,018,840) $ (7,874,432) $ (3,370,382) $164,138,109 =================== ================= ================== ================== ==================
All of the property on leases was acquired in 1997, 1998 and 1999. At September 30, 1999, the aggregate amounts of future minimum lease payments are as follows:
Direct Year ending Operating Financing December 31, Leases Leases Total ------------ ------ ------ ----- Three months ending December 31, 1999 $ 8,137,074 $ 1,278,940 $ 9,416,014 Year ending December 31, 2000 34,965,167 4,660,094 39,625,261 2001 27,584,674 4,502,824 32,087,498 2002 19,438,372 3,555,471 22,993,843 2003 10,761,017 2,252,958 13,013,975 Thereafter 12,723,335 5,404,634 18,127,969 ------------------ ------------------ ------------------ $113,609,639 $ 21,654,921 $135,264,560 ================== ================== ==================
ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (Unaudited) 4. Non-recourse debt: Notes payable to financial institutions are due in varying monthly, quarterly and semi-annual installments of principal and interest. The notes are secured by assignments of lease payments and pledges of the assets which were purchased with the proceeds of the particular notes. Interest rates on the notes vary from 7.4% to 8.828%. Future minimum principal payments of non-recourse debt are as follows:
Year ending December 31, Principal Interest Total ------------ --------- -------- ----- Three months ending December 31, 1999 $ 939,459 $ 375,935 $ 1,315,394 Year ending December 31, 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 ------------------ ------------------ ------------------ $ 22,602,274 $ 4,591,434 $ 27,193,708 ================== ================== ==================
5. Long-term debt: The Partnership has established a $65 million dollar receivables funding program with a receivables financing company that issues commercial paper rated A1 from Standard and Poors and P1 from Moody's Investor Services. In this receivables funding program, the lenders will receive a general lien against all of the otherwise unencumbered assets of the Partnership. The program provides for borrowing at a variable interest rate and requires the General Partner to enter into hedge agreements with certain hedge counterparties (also rated A1/P1) to mitigate the interest rate risk associated with a variable rate note. The General Partner anticipates that this program will allow the Partnership to avail itself of lower cost debt than that available for individual non-recourse debt transactions. It is the intention of the Partnership to use the receivables funding 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 then 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 transaction basis as a means of mitigating credit risk. Through hedge agreements, the interest rates have been effectively fixed. Borrowings under this facility are as follows:
Variable Interest Original Balance Rate on Rate at Date Amount September 30, Interest Swap September 30, Borrowed Borrowed 1999 Agreement 1999 -------- -------- ---- --------- ---- 4/1/98 $ 21,770,000 $ 14,952,000 6.22000% 5.71342% 7/1/98 25,000,000 17,704,000 6.15500% 5.71342% 10/1/98 20,000,000 16,197,000 5.55000% 5.71342% 4/16/99 9,000,000 8,224,000 5.89000% 5.81342% ------------------- ----------------- $ 75,770,000 $ 57,077,000 =================== =================
ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (Unaudited) 5. Long-term debt (continued): Future minimum principal payments of long-term debt are as follows:
Principal Interest Total --------- -------- ----- Three months ending December 31, 1999 $ 3,896,000 $ 828,314 $ 4,724,314 Year ending December 31, 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 ------------------ ------------------ ------------------ $ 57,077,000 $ 7,563,979 $ 64,640,979 ================== ================== ==================
6. Related party transactions: The terms of the Limited Partnership Agreement provide that the General Partner and/or Affiliates are entitled to receive certain fees for equipment management and resale and for management of the Partnership. The Limited Partnership Agreement allows for the reimbursement of costs incurred by the General Partner in providing administrative services to the Partnership. Administrative services provided include Partnership accounting, investor relations, legal counsel and lease and equipment documentation. The General Partner is not reimbursed for services where it is entitled to receive a separate fee as compensation for such services, such as management of equipment. Reimbursable costs incurred by the General Partner are allocated to the Partnership based upon actual time incurred by employees working on Partnership business and an allocation of rent and other costs based on utilization studies. Substantially all employees of the General Partner record time incurred in performing administrative services on behalf of all of the Partnerships serviced by the General Partner. The General Partner believes that the costs reimbursed are the lower of actual costs incurred on behalf of the Partnership or the amount the Partnership would be required to pay independent parties for comparable administrative services in the same geographic location and are reimbursable in accordance with the Limited Partnership Agreement. ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 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). $ 1,329,633 $ 1,026,501 Administrative costs reimbursed to General Partner 418,021 763,032 Selling commissions (equal to 9.5% of the selling price of the Limited Partnership units, deducted from Limited Partners' capital) - 5,633,872 Reimbursement of other syndication costs - 2,512,374 ------------------ ------------------ $ 1,747,654 $ 9,935,779 ================== ==================
7. Partner's capital: As of September 30, 1999, 14,996,050 Units ($149,960,050) were issued and outstanding. The Fund's registration statement with the Securities and Exchange Commission became effective November 29, 1996. The Fund is authorized to issue up to 15,000,050 Units, including the 50 Units issued to the initial limited partners. Available Cash from Operations, as defined in the Limited Partnership Agreement, shall be distributed as follows: First, Distributions of Cash from Operations shall be 88.5% to the Limited Partners, 7.5% to the General Partner and 4% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee, until the Limited Partners have received Aggregate Distributions in an amount equal to their Original Invested Capital, as defined, plus a 10% per annum cumulative (compounded daily) return on their Adjusted Invested Capital, as defined in the Limited Partnership Agreement. Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee. Available Cash from Sales or Refinancing, as defined in the Limited Partnership Agreement, shall be distributed as follows: First, Distributions of Sales or Refinancings shall be 92.5% to the Limited Partners and 7.5% to the General Partner, until the Limited Partners have received Aggregate Distributions in an amount equal to their Original Invested Capital, as defined, plus a 10% per annum cumulative (compounded daily) return on their Adjusted Invested Capital. Second, 85% to the Limited Partners, 7.5% to the General Partner and 7.5% to the General Partner or its affiliate designated as the recipient of the Incentive Management Fee. ATEL CAPITAL EQUIPMENT FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 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 28, 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 September 30, 1999, the Partnership had $2,000,000 of 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 September 30, 1999. 9. Commitments: As of September 30, 1999, the Partnership had outstanding commitments to purchase lease equipment totaling approximately $1,171,000. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity During the first three quarters of 1999, the Partnership's primary activity was engaging in equipment leasing activities. During the funding period, the Partnership's primary source of liquidity is subscription proceeds from the public offering of Units. 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 28, 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 $1,171,000 as of September 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. During 1999, the Partnership's primary source of liquidity was rents from operating leases. Cash from operating activities was almost entirely from operating lease rents in both 1999 and in 1998 for both the three and nine month periods. Sources of cash from investing activities consisted of proceeds from sales of assets and direct financing lease rents. Rents from direct financing leases increased significantly compared to 1998 as a result of asset acquisitions over the last year. Proceeds from sales of assets are not expected to be consistent from one period to another. Cash was used in investing activities to purchase assets on operating and direct financing leases. In 1999, sources of cash from financing activities consisted of borrowings (from the line of credit or in the form of either non-recourse or long-term debt). In 1998, cash from financing sources consisted primarily of cash received for subscriptions for Units, borrowings under the line of credit and proceeds of non-recourse and other long-term debt. The purchase of lease assets was primarily funded with borrowings on this line of credit, proceeds of the Partnership's public offering of Units and proceeds of non-recourse and other long-term debt. Results of operations Operations in 1999 resulted in a net income of $3,877,009 (nine months) and $1,201,549 (three months). Operations in 1998 resulted in a net income of $3,914,724 (nine months) and $1,181,862 (three months). The Partnership's primary source of revenues is from operating leases. Lease revenues and depreciation expenses have increased compared to 1998 for both the three and nine month periods as a result of asset acquisitions over the last year. Equipment management fees are based on the Partnership's rental revenues and have increased due to increases in the Partnership's revenues from leases. Incentive management fees are based on the levels of distributions to limited partners. The number of units outstanding increased (as a result of the continuing offering of such units through November 1998), and as a result, the incentive management fees increased. Interest expense has increased due to the higher average debt balances in 1999 than in 1998. 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, September 30, 1999 and December 31, 1998. Statement of changes in partners' capital for the nine months ended September 30, 1999. Statements of operations for the nine and three month periods ended September 30, 1999 and 1998. Statement of cash flows for the nine and three month periods ended September 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: November 12, 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 9-MOS Dec-31-1999 Sep-30-1999 1071226 0 4807711 0 0 0 0 0 194812653 0 0 0 0 0 110679113 194812653 0 29805093 0 0 21333391 750000 4594693 3127009 0 3127009 0 0 0 3127009 0 0
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