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. |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
(Exact name of registrant as specified in its charter)
California | 94-3248318 | |
(State or other jurisdiction of Incorporation or organization) |
(I. R. S. Employer Identification No.) |
600 California Street, 6th Floor, San Francisco, California 94108-2733
(Address of principal executive offices)
Registrants 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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No x
The number of Limited Partnership Units outstanding as of October 31, 2012 was 14,985,550.
None.
2
September 30, 2012 |
December 31, 2011 |
|||||||
ASSETS |
||||||||
Cash and cash equivalents | $ | 3,221 | $ | 1,354 | ||||
Accounts receivable, net of allowance for doubtful accounts of $118 as of September 30, 2012 and $11 as of December 31, 2011 | 210 | 307 | ||||||
Investments in equipment and leases, net of accumulated depreciation of $39,031 as of September 30, 2012 and $39,106 as of December 31, 2011 |
6,979 | 7,549 | ||||||
Prepaid expenses and other assets | 22 | 6 | ||||||
Total assets | $ | 10,432 | $ | 9,216 | ||||
LIABILITIES AND PARTNERS CAPITAL |
||||||||
Accounts payable and accrued liabilities: |
||||||||
General Partner | $ | 342 | $ | 670 | ||||
Other | 329 | 416 | ||||||
Unearned operating lease income | 178 | 247 | ||||||
Total liabilities | 849 | 1,333 | ||||||
Commitments and contingencies |
||||||||
Partners capital: |
||||||||
General Partner | | | ||||||
Limited Partners | 9,583 | 7,883 | ||||||
Total Partners capital | 9,583 | 7,883 | ||||||
Total liabilities and Partners capital | $ | 10,432 | $ | 9,216 |
See accompanying notes.
3
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenues: |
||||||||||||||||
Leasing activities: |
||||||||||||||||
Operating leases | $ | 1,085 | $ | 1,054 | $ | 3,204 | $ | 3,005 | ||||||||
Direct financing leases | 39 | 66 | 138 | 211 | ||||||||||||
Gain on sales of assets | 3 | 102 | 157 | 181 | ||||||||||||
Other | 7 | 1 | 13 | 12 | ||||||||||||
Total revenues | 1,134 | 1,223 | 3,512 | 3,409 | ||||||||||||
Expenses: |
||||||||||||||||
Depreciation of operating lease assets | 120 | 186 | 363 | 795 | ||||||||||||
Marine vessel maintenance and other operating costs |
| | | 159 | ||||||||||||
Cost reimbursements to General Partner | 45 | | 177 | 750 | ||||||||||||
Equipment and incentive management fees to General Partner | 33 | 35 | 95 | 97 | ||||||||||||
Railcar and equipment maintenance | 145 | 155 | 514 | 435 | ||||||||||||
Professional fees | 114 | 5 | 221 | 69 | ||||||||||||
Insurance | 3 | 2 | 9 | (16 | ) | |||||||||||
Outside services | 16 | 18 | 53 | 43 | ||||||||||||
Other management fees | 35 | 60 | 121 | 111 | ||||||||||||
Equipment storage | 4 | 1 | 8 | 54 | ||||||||||||
Franchise fees and state taxes | 8 | 20 | 23 | 62 | ||||||||||||
Freight and shipping | 1 | 3 | 4 | 247 | ||||||||||||
(Reversal of) provision for doubtful accounts | (154 | ) | (35 | ) | 107 | 8 | ||||||||||
Property taxes | | 2 | 1 | 58 | ||||||||||||
Postage | | | 14 | 13 | ||||||||||||
Printing and photocopying | | | 21 | 17 | ||||||||||||
Other | 30 | 32 | 81 | 78 | ||||||||||||
Total operating expenses | 400 | 484 | 1,812 | 2,980 | ||||||||||||
Income from operations | 734 | 739 | 1,700 | 429 | ||||||||||||
Other loss, net | | (2 | ) | | (9 | ) | ||||||||||
Net income | $ | 734 | $ | 737 | $ | 1,700 | $ | 420 | ||||||||
Net income: |
||||||||||||||||
General Partner | $ | | $ | | $ | | $ | | ||||||||
Limited Partners | 734 | 737 | 1,700 | 420 | ||||||||||||
$ | 734 | $ | 737 | $ | 1,700 | $ | 420 | |||||||||
Net income per Limited Partnership Unit | $ | 0.05 | $ | 0.05 | $ | 0.11 | $ | 0.03 | ||||||||
Weighted average number of Units outstanding | 14,985,550 | 14,985,550 | 14,985,550 | 14,985,550 |
See accompanying notes.
4
Limited Partners | General Partner | |||||||||||||||
Units | Amount | Total | ||||||||||||||
Balance December 31, 2010 | 14,985,550 | $ | 10,838 | $ | | $ | 10,838 | |||||||||
Distributions to Limited Partners ($0.25 per Unit) | | (3,747 | ) | | (3,747 | ) | ||||||||||
Distributions to General Partner | | | (304 | ) | (304 | ) | ||||||||||
Net income | | 792 | 304 | 1,096 | ||||||||||||
Balance December 31, 2011 | 14,985,550 | 7,883 | | 7,883 | ||||||||||||
Net income | | 1,700 | | 1,700 | ||||||||||||
Balance September 30, 2012 | 14,985,550 | $ | 9,583 | $ | | $ | 9,583 |
See accompanying notes.
5
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Operating activities: |
||||||||||||||||
Net income | $ | 734 | $ | 737 | $ | 1,700 | $ | 420 | ||||||||
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||||||||||
Gain on sales of assets | (3 | ) | (102 | ) | (157 | ) | (181 | ) | ||||||||
Depreciation of operating lease assets | 120 | 186 | 363 | 795 | ||||||||||||
(Reversal of) provision for doubtful accounts | (154 | ) | (35 | ) | 107 | 8 | ||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||
Accounts receivable | 125 | 65 | (10 | ) | 108 | |||||||||||
Prepaid expenses and other assets | (7 | ) | (8 | ) | (16 | ) | (2 | ) | ||||||||
Accounts payable: |
||||||||||||||||
General Partner | 33 | (78 | ) | (328 | ) | 147 | ||||||||||
Other | (35 | ) | (118 | ) | (87 | ) | 30 | |||||||||
Unearned lease income | (61 | ) | 195 | (69 | ) | 324 | ||||||||||
Net cash provided by operating activities | 752 | 842 | 1,503 | 1,649 | ||||||||||||
Investing activities: |
||||||||||||||||
Proceeds from sales of lease assets | 14 | 193 | 224 | 380 | ||||||||||||
Principal payments received on direct financing leases |
50 | 31 | 140 | 80 | ||||||||||||
Net cash provided by investing activities | 64 | 224 | 364 | 460 | ||||||||||||
Financing activities: |
||||||||||||||||
Net cash provided by financing activities | | | | | ||||||||||||
Net increase in cash and cash equivalents | 816 | 1,066 | 1,867 | 2,109 | ||||||||||||
Cash and cash equivalents at beginning of period |
2,405 | 3,680 | 1,354 | 2,637 | ||||||||||||
Cash and cash equivalents at end of period | $ | 3,221 | $ | 4,746 | $ | 3,221 | $ | 4,746 | ||||||||
Supplemental disclosures of cash flow information: |
||||||||||||||||
Cash paid during the period for taxes | $ | | $ | 16 | $ | 39 | $ | 78 | ||||||||
Schedule of non-cash transactions: |
||||||||||||||||
Improvements to operating lease equipment | $ | | $ | | $ | | $ | 150 |
See accompanying notes.
6
ATEL Capital Equipment Fund VII, L.P. (the Partnership or the Fund) 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. The General Partner of the Partnership is ATEL Financial Services, LLC (AFS), a California limited liability company. Prior to converting to a limited liability company structure, AFS was formerly known as ATEL Financial Corporation.
The Partnership conducted a public offering of 15,000,000 Units of Limited Partnership Interest (Units), at a price of $10 per Unit. On January 7, 1997, subscriptions for the minimum number of Units (120,000, $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Partnership. On that date, the Partnership commenced operations in its primary business. Gross contributions in the amount of $150 million (15,000,000 units) were received as of November 27, 1998, exclusive of $500 of Initial Partners capital investment and $100 of AFS capital investment. The offering was terminated on November 27, 1998. As of September 30, 2012, 14,985,550 Units remain issued and outstanding.
The Partnerships principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Partnerships invested capital; (ii) generates 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 (Reinvestment Period) (defined as six full years following the year the offering was terminated), which ended December 31, 2004 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Partnership is governed by its Limited Partnership Agreement (Partnership Agreement).
Pursuant to the Partnership Agreement, AFS receives compensation for services rendered and reimbursements for costs incurred on behalf of the Partnership (Note 5). The Partnership is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.
As of September 30, 2012, the Partnership continues in the liquidation phase of its life cycle as defined in the Partnership Agreement.
On or about December 1, 2012, the offices of the Fund and the General Partner will be relocated to The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111. The telephone number for the General Partner will be the same in its new location.
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, 2011, filed with the Securities and Exchange Commission.
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 the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the General Partner, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year.
Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no significant effect on the reported financial position or results from operations.
Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.
7
In preparing the accompanying unaudited financial statements, the General Partner has reviewed events that have occurred after September 30, 2012, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements, or adjustments thereto.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term, expected future cash flows used for impairment analysis purposes, and determination of the allowance for doubtful accounts.
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.
However, certain of the Partnerships lessee customers may have international operations. In these instances, the Partnership is aware that certain equipment, primarily rail and transportation, may periodically exit the country. However, these lessee customers are US-based, and it is impractical for the Partnership to track, on an asset-by-asset and day-by-day basis, where these assets are deployed. The primary geographic regions in which the Partnership sought leasing opportunities were North America and Europe.
The table below summarizes geographic information relating to the sources, by nation, of the Partnerships total revenues for the nine months ended September 30, 2012 and 2011 and long-lived tangible assets as of September 30, 2012 and December 31, 2011 (dollars in thousands):
For The Nine Months Ended September 30, | ||||||||||||||||
2012 | % of Total | 2011 | % of Total | |||||||||||||
Revenue |
||||||||||||||||
United States | $ | 3,272 | 93 | % | $ | 3,179 | 93 | % | ||||||||
United Kingdom | | 0 | % | 16 | 0 | % | ||||||||||
Canada | 240 | 7 | % | 214 | 7 | % | ||||||||||
Total International | 240 | 7 | % | 230 | 7 | % | ||||||||||
Total | $ | 3,512 | 100 | % | $ | 3,409 | 100 | % |
As of September 30, | As of December 31, | |||||||||||||||
2012 | % of Total | 2011 | % of Total | |||||||||||||
Long-lived assets |
||||||||||||||||
United States | $ | 6,739 | 97 | % | $ | 7,309 | 97 | % | ||||||||
United Kingdom | | 0 | % | | 0 | % | ||||||||||
Canada | 240 | 3 | % | 240 | 3 | % | ||||||||||
Total International | 240 | 3 | % | 240 | 3 | % | ||||||||||
Total | $ | 6,979 | 100 | % | $ | 7,549 | 100 | % |
Other loss, net represents $2 thousand and $9 thousand of foreign currency translation losses during the three and nine months ended September 30, 2011. The Partnerships foreign currency translation transactions were nominal during the three and nine months ended September 30, 2012.
8
Net income and distributions per Unit are based upon the weighted average number of Limited Partnership Units outstanding during the period.
Activity in the allowance for credit losses consists of the following (in thousands):
Accounts Receivable Allowance for Doubtful Accounts |
Valuation Adjustments on Financing Receivables | Total Allowance for Credit Losses |
||||||||||||||
Finance Leases | Operating Leases | Finance Leases | ||||||||||||||
Balance December 31, 2010 | $ | 10 | $ | 1 | $ | | $ | 11 | ||||||||
Provision | | | | | ||||||||||||
Balance December 31, 2011 | 10 | 1 | | 11 | ||||||||||||
(Reversal of provision) provision | (10 | ) | 117 | | 107 | |||||||||||
Balance September 30, 2012 | $ | | $ | 118 | $ | | $ | 118 |
Accounts receivable represent the amounts billed under operating and direct financing lease contracts which are currently due to the Partnership.
Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness of specifically identified lessees, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received.
Accounts receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with lease payments outstanding less than 90 days. Based upon managements judgment, such leases may be placed in non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, all payments received are applied only against outstanding principal balances.
In addition to the allowance established for delinquent accounts receivable, the total allowance related solely to financing receivables also includes anticipated impairment charges on direct financing leases.
The asset underlying a direct financing lease contract is considered impaired if the estimated undiscounted future cash flows of the asset are less than its 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 assets 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.
9
As of September 30, 2012 and December 31, 2011, the Partnership did not record an allowance for credit losses related to its financing receivables. The Partnerships recorded investment in financing receivables at September 30, 2012 and December 31, 2011 are as follows (in thousands):
September 30, 2012 | Finance Leases | Total | ||||||
Allowance for credit losses: |
||||||||
Ending balance | $ | | $ | | ||||
Ending balance: individually evaluated for impairment | $ | | $ | | ||||
Ending balance: collectively evaluated for impairment | $ | | $ | | ||||
Ending balance: loans acquired with deteriorated credit quality |
$ | | $ | | ||||
Financing receivables: |
||||||||
Ending balance | $ | 255 | $ | 255 | ||||
Ending balance: individually evaluated for impairment | $ | 255 | $ | 255 | ||||
Ending balance: collectively evaluated for impairment | $ | | $ | | ||||
Ending balance: loans acquired with deteriorated credit quality |
$ | | $ | |
December 31, 2011 | Finance Leases | Total | ||||||
Allowance for credit losses: |
||||||||
Ending balance | $ | | $ | | ||||
Ending balance: individually evaluated for impairment | $ | | $ | | ||||
Ending balance: collectively evaluated for impairment | $ | | $ | | ||||
Ending balance: loans acquired with deteriorated credit quality |
$ | | $ | | ||||
Financing receivables: |
||||||||
Ending balance | $ | 405 | $ | 405 | ||||
Ending balance: individually evaluated for impairment | $ | 405 | $ | 405 | ||||
Ending balance: collectively evaluated for impairment | $ | | $ | | ||||
Ending balance: loans acquired with deteriorated credit quality |
$ | | $ | |
The Partnership evaluates the credit quality of its financing receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:
Pass Any account whose lessee/debtor, co-lessee/debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moodys or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the General Partner to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the General Partner and the account is not considered by the Chief Credit Officer of the General Partner to fall into one of the three risk profiles below.
Special Mention Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve managements close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Funds receivable at some future date.
10
Substandard Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the General Partners Credit Watch List.
Doubtful Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the General Partners Credit Watch List, and has been declared in default and the General Partner has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired leases as applicable.
At September 30, 2012 and December 31, 2011, the Partnerships financing receivables by credit quality indicator and by class of financing receivables are as follows (in thousands):
Finance Leases | ||||||||
September 30, 2012 | December 31, 2011 | |||||||
Pass | $ | 255 | $ | 405 | ||||
Special mention | | | ||||||
Substandard | | | ||||||
Doubtful | | | ||||||
Total | $ | 255 | $ | 405 |
At September 30, 2012 and December 31, 2011, investment in financing receivables is aged as follows (in thousands):
September 30, 2012 | 30 59 Days Past Due | 60 89 Days Past Due | Greater Than 90 Days | Total Past Due |
Current | Total Financing Receivables | Recorded Investment >90 Days and Accruing | |||||||||||||||||||||
Finance leases | $ | | $ | | $ | | $ | | $ | 255 | $ | 255 | $ | |
December 31, 2011 | 30 59 Days Past Due | 60 89 Days Past Due | Greater Than 90 Days |
Total Past Due |
Current | Total Financing Receivables | Recorded Investment >90 Days and Accruing | |||||||||||||||||||||
Finance leases | $ | | $ | | $ | | $ | | $ | 405 | $ | 405 | $ | |
The Partnership did not carry an impairment reserve on its financing receivables at September 30, 2012 and December 31, 2011.
11
The Partnerships investments in equipment and leases consist of the following (in thousands):
Balance December 31, 2011 | Reclassifications & Additions/ Dispositions | Depreciation/ Amortization Expense or Amortization of Leases | Balance September 30, 2012 | |||||||||||||
Net investment in operating leases | $ | 7,075 | $ | (1,270 | ) | $ | (363 | ) | $ | 5,442 | ||||||
Net investment in direct financing leases |
405 | (10 | ) | (140 | ) | 255 | ||||||||||
Assets held for sale or lease, net | 69 | 1,213 | | 1,282 | ||||||||||||
Total | $ | 7,549 | $ | (67 | ) | $ | (503 | ) | $ | 6,979 |
Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. Impairment losses are recorded as an adjustment to the net investment in operating leases. No impairment losses were recorded during the three and nine months ended September 30, 2012 and 2011.
The Partnership utilizes a straight line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Partnerships equipment was approximately $120 thousand and $186 thousand for the respective three months ended September 30, 2012 and 2011, and was $363 thousand and $795 thousand for the respective nine months ended September 30, 2012 and 2011.
All of the property subject to leases was acquired in the years 1997 through 2002.
Property on operating leases consists of the following (in thousands):
Balance December 31, 2011 | Additions | Reclassifications or Dispositions | Balance September 30, 2012 | |||||||||||||
Transportation | $ | 29,707 | $ | | $ | (933 | ) | $ | 28,774 | |||||||
Marine vessels/barges | 15,675 | | (8,275 | ) | 7,400 | |||||||||||
Materials handling | 83 | | | 83 | ||||||||||||
Construction | 156 | | (156 | ) | | |||||||||||
45,621 | | (9,364 | ) | 36,257 | ||||||||||||
Less accumulated depreciation | (38,546 | ) | (363 | ) | 8,094 | (30,815 | ) | |||||||||
Total | $ | 7,075 | $ | (363 | ) | $ | (1,270 | ) | $ | 5,442 |
The average estimated residual value for assets on operating leases was 14% of the assets original cost at September 30, 2012 and December 31, 2011.
The Partnership earns revenues from its marine vessels and certain lease assets based on utilization of such assets or through fixed term leases. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of Operating Lease Revenues. Prior to 2011, the most significant sources of contingent rentals were the Partnerships two largest marine vessels. Such vessels were converted to fixed term leases in August 2010 and March 2011. The revenues associated with these rentals are included as a component of Operating Lease Revenues, and totaled $25 thousand and $30 thousand for the respective three months ended September 30, 2012 and 2011, and was $83 thousand and $208 thousand for the respective nine months ended September 30, 2012 and 2011.
12
As of September 30, 2012, certain operating leases with a total book value of $135 thousand continue to be in non-accrual status. Such leases were originally placed on non-accrual status during the first quarter of 2012 as a result of a lessee bankruptcy. No impairment was deemed necessary as the carrying amount of the underlying equipment was well below estimated scrap value.
As of September 30, 2012 and December 31, 2011, investment in direct financing leases consists primarily of various transportation, ground support and manufacturing equipment. The components of the Partnerships investment in direct financing leases as of September 30, 2012 and December 31, 2011 are as follows (in thousands):
September 30, 2012 | December 31, 2011 | |||||||
Total minimum lease payments receivable | $ | 254 | $ | 533 | ||||
Estimated residual values of leased equipment (unguaranteed) |
65 | 75 | ||||||
Investment in direct financing leases | 319 | 608 | ||||||
Less unearned income | (64 | ) | (203 | ) | ||||
Net investment in direct financing leases | $ | 255 | $ | 405 |
There were no net investments in direct financing leases in non-accrual status as of September 30, 2012 and December 31, 2011.
At September 30, 2012, the aggregate amounts of future minimum lease payments are as follows (in thousands):
Operating Leases | Direct Financing Leases | Total | ||||||||||
Three months ending December 31, 2012 | $ | 593 | $ | 89 | $ | 682 | ||||||
Year ending December 31, 2013 | 1,134 | 165 | 1,299 | |||||||||
2014 | 398 | | 398 | |||||||||
2015 | 321 | | 321 | |||||||||
2016 | 27 | | 27 | |||||||||
$ | 2,473 | $ | 254 | $ | 2,727 |
The terms of the 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 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. The Partnership would be liable for certain future costs to be incurred by AFS to manage the administrative services provided to the Partnership.
Each of ATEL Leasing Corporation (ALC) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Partnership. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications services and general administrative services are performed by AFS.
Cost reimbursements to the General Partner are based on its costs incurred in performing administrative services for the Partnership. These costs are allocated to each managed entity based on certain criteria such as managed assets, number of investors or contributed capital based upon the type of cost incurred, subject to limitations as described below.
13
Incentive management fees are computed as 4.0% of distributions of cash from operations, as defined in the Partnership Agreement and equipment management fees are computed as 3.5% of gross revenues from operating leases, as defined in the Partnership Agreement plus 2.0% of gross revenues from full payout leases, as defined in the Partnership Agreement.
During the three and nine months ended September 30, 2012 and 2011, AFS and/or affiliates earned fees and commissions, and billed for reimbursements, pursuant to the Partnership Agreement as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Equipment and incentive management fees to General Partner | $ | 33 | $ | 35 | $ | 95 | $ | 97 | ||||||||
Cost reimbursements to General Partner | 45 | | 177 | 750 | ||||||||||||
$ | 78 | $ | 35 | $ | 272 | $ | 847 |
The Funds Limited Partnership Agreement places an annual and cumulative limit for cost reimbursements to AFS and/or its affiliates. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be reimbursable in future years to the extent such amounts may be payable if within the annual and cumulative limits in such future years. The Fund is a finite life and self liquidating entity, and AFS and its affiliates have no recourse against the Fund for the amount of any unpaid excess reimbursable administrative expenses. The Fund will continue to require administrative services from AFS and its affiliates through the end of its term, and will therefore continue to incur reimbursable administrative expenses in each year. For the year ending December 31, 2012, it is not anticipated that the amount of reimbursable expenses billed to the Fund will exceed either the annual or the cumulative limitations. Such is reflective of the continued diminishing Fund asset base over which reimbursements are calculated.
The Partnerships vessel activity in the Gulf of Mexico was severely impacted by the British Petroleum (BP) Deep Water Horizon oil spill of 2010 which severely adversely impacted charter activity in the Gulf region. BP established a program to compensate those businesses and individuals suffering economic hardship and loss as a result of the Deep Water Horizon oil spill. The Partnership submitted a claim to the BP program administrator seeking an approximate $2.8 million for loss of revenues during the period of the vessels diminished activity commencing at the time of the oil spill and continuing through 2010. The BP claim administrator has denied the Partnerships claim on the basis that the Partnership suffered damages as a result of the Presidents moratorium on oil drilling subsequent to the Deep Water Horizon accident. The Partnership believes its claim continues to be of merit, and has opted out of the BP claims fund, and is pursuing a claim in a collective action with other similarly situated plaintiffs. Currently, the amount of any compensation or award from BP is extremely difficult to determine. As such, the potential for compensation or award has not been recorded on the Partnerships books and records.
ATEL filed a claim on behalf of the Partnership and certain affiliated entities in Federal court in New Orleans for the under-reporting of revenue by a fleet manager of three marine vessels, seeking to recover an approximate amount of 10% of gross proceeds, which in the aggregate for all affiliated entities represents $2.8 million for the years 2005-2007 (of which the Partnerships portion is an approximate $1.4 million). The annual allocable portion of the claim is not considered material to the Partnership in any given year. The trial date for this dispute had been rescheduled several times, however the trial was ultimately concluded during the first week of August 2012. As of October 10, 2012, the matter has been in the hands of the Federal Judge to render a decision on both the law and the facts. The decision of the Court is imminent, and the Partnership is hopeful for a recovery of all or portion of its asserted claims, but the outcome of the litigation remains uncertain as of such date. While the Partnership's recovery with respect to this matter may be significant, there is no assurance that judgment will be rendered in favor of the Partnership.
14
The Partnership enters into contracts that contain a variety of indemnifications. The Partnerships 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.
The General Partner knows of no facts or circumstances that would make the Partnerships 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 Partnerships 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.
As of September 30, 2012 and December 31, 2011, 14,985,550 Units were issued and outstanding. The Partnership had been authorized to issue up to 15,000,050 Units, including the 50 Units issued to the Initial Limited Partners, as defined.
The Partnership has the right, exercisable at the General Partners discretion, but not the obligation, to repurchase Units of a Unitholder who ceases to be a U.S. Citizen, for a price equal to 100% of the holders capital account. The Partnership is otherwise permitted, but not required, to repurchase Units upon a holders request. The repurchase of Fund Units is made in accordance with Section 13 of the Amended and Restated Agreement of Limited Partnership. The repurchase would be at the discretion of the General Partner on terms it determines to be appropriate under given circumstances, in the event that the General Partner deems such repurchase to be in the best interest of the Partnership; provided, the Partnership is never required to repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered Units are cancelled. Units repurchased in prior periods were repurchased at amounts representing the original investment less cumulative distributions made to the Unitholder with respect to the Units. All Units repurchased during a quarter are deemed to be repurchased effective the last day of the preceding quarter, and are not deemed to be outstanding during, or entitled to allocations of net income, net loss or distributions for the quarter in which such repurchase occurs.
As defined in the Partnership Agreement, the Partnerships Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Limited Partners and 7.5% to AFS.
As defined in the 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 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 Partnership Agreement, available Cash from Sales or Refinancing are to be distributed as follows:
First, Distributions of Sales or Refinancing 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.
There were no distributions to Limited Partners for the three and nine months ended September 30, 2012 and 2011.
15
Statements contained in this Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations, (MD&A) and elsewhere in this Form 10-Q, 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. In particular, the economic recession and changes in general economic conditions, including, fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Partnerships performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Partnerships performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. 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-Q or to reflect the occurrence of unanticipated events, other than as required by law.
ATEL Capital Equipment Fund VII, L.P. (the Partnership or the Fund) is a California partnership that was formed in May 1996 for the purpose of engaging in the sale of limited liability investment units and acquiring equipment to generate revenues from equipment leasing and sales activities, primarily in the United States.
The Partnership conducted a public offering of 15,000,000 Units of Limited Partnership Interest (Units), at a price of $10 per Unit. The offering was terminated in November 1998. During early 1999, the Partnership completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, throughout the reinvestment period (Reinvestment Period) (defined as six full years following the year the offering was terminated), the Partnership reinvested cash flow in excess of certain amounts required to be distributed to the Limited Partners and/or utilized its credit facilities to acquire additional equipment.
The Partnership may continue until December 31, 2017. However, pursuant to the guidelines of the Limited Partnership Agreement (Partnership Agreement), the Partnership began to liquidate its assets and distribute the proceeds thereof after the end of the Reinvestment Period which ended in December 2004.
As of September 30, 2012, the Partnership continues in its liquidation phase. Accordingly, assets that mature will be returned to inventory and most likely will be subsequently sold, which will result in decreasing revenue as earning assets decrease. Periodic distributions are paid at the discretion of the General Partner.
The Partnership had net income of $734 thousand and $737 thousand for the three months ended September 30, 2012 and 2011, respectively. The results for the third quarter of 2012 reflect decreases in both total revenues and total operating expenses when compared to the prior year period.
Total revenues for the third quarter of 2012 decreased by $89 thousand, or 7%, as compared to the prior year period. The decrease was largely a result of a $99 thousand decline in gain on sales of assets which was mainly attributable to the lower volume and change in the mix of assets sold.
Total operating expenses for the third quarter of 2012 decreased by $84 thousand, or 17%, as compared to the prior year period. The net reduction in expenses was primarily a result of reversals of the provision for doubtful accounts and a decrease in depreciation expense offset, in part, by an increase in professional fees.
The provision for doubtful accounts was reduced by $119 thousand largely due to a period over period increase in collection of amounts previously reserved; and, depreciation expense declined by $66 thousand primarily as a result of an increase in the number of assets that have been fully depreciated since the third quarter of 2011, combined with run-off and sales of lease assets.
16
Partially offsetting the aforementioned decreases in expenses was a $109 thousand increase in professional fees. Such increase was mainly due to an increase in legal expenses pursuant to litigation against a former vessel manager.
The Partnership had net income of $1.7 million and $420 thousand for the nine months ended September 30, 2012 and 2011, respectively. The results for the first nine months of 2012 reflect a decrease in total operating expenses and an increase in total revenues when compared to the prior year period.
Total revenues for the first nine months of 2012 increased by $103 thousand, or 3%, as compared to the prior year period. The net increase in total revenues was mostly attributable to increases in operating lease revenues offset, in part, by a decrease in direct financing lease revenues.
The increase in operating lease revenues totaled $199 thousand and was largely a result of the following: i) higher rental income from one of the Funds marine vessels, which was in drydock status for a portion of the prior year period, ii) incremental income from moving certain off-lease equipment into rental contracts at various times during the first nine months of 2011, and iii) a higher negotiated rate on a lease that renewed during the first quarter of 2012. Such increases in operating lease revenues were partially offset by the impact of continued run-off and dispositions of lease assets consistent with a Fund in liquidation.
Partially offsetting the aforementioned increase in operating lease revenues was a $73 thousand reduction in direct financing lease revenues. The decrease in direct financing lease revenues was largely due to the continued run-off of the portfolio.
Total operating expenses for the first nine months of 2012 decreased by $1.2 million, or 39%, as compared to the prior year period. The net reduction in expenses was primarily a result of decreases in costs reimbursed to AFS, depreciation expense, freight and shipping expense, and marine vessel maintenance and operating costs offset, in part, by increases in professional fees and the provision for doubtful accounts.
Costs reimbursed to AFS decreased by $573 thousand as the Fund no longer has the accumulation of reimbursable administrative expenses in excess of the limitations as defined in the Operating Agreement. As such, the costs reimbursed to AFS during the first nine months of 2012 only represent current period charges. It is not anticipated that any further billings to the Fund will equal or exceed the annual or cumulative reimbursable expense limitation. Depreciation expense was reduced by $432 thousand mainly due to an increase in the number of assets that have been fully depreciated since September 30, 2011, combined with run-off and sales of lease assets. Freight and shipping expense declined by $243 thousand as the prior year period amount included costs reimbursed to a rail management company for transferring certain railcars from the United States to Canada as part of a lease deal restructuring. Finally, marine vessel maintenance and operating costs decreased by $159 thousand as the amount for the first nine months of 2011 included incremental costs incurred to prepare the marine vessels for new lessees. There were no marine vessel maintenance and other operating costs during the current year period as, by the end of the first quarter of 2011, the responsibility for all such expenses pertaining to both vessels were assumed by its respective lessee under a bareboat charter provision. The bareboat charter provision transfers possession and full control of the vessels (but not title), including all legal and financial responsibility, to the lessee. Under this type of arrangement, the lessee pays for all operating expenses, including fuel, crew, port expenses and all required insurance coverage.
Partially offsetting the aforementioned decreases in expenses were increases in professional fees and the provision for doubtful accounts totaling $152 thousand and $99 thousand, respectively. The increase in professional fees was mainly due to an increase in legal expenses pursuant to litigation against a former vessel manager. The provision for doubtful accounts was higher due to a period over period increase in reserves relative to certain leases placed on non-accrual status resulting from a lessee bankruptcy and certain other receivables that have been delinquent more than 90 days.
At September 30, 2012 and December 31, 2011, the Partnerships cash and cash equivalents totaled $3.2 million and $1.4 million, respectively. The liquidity of the Partnership varies, increasing to the extent cash flows from leases and proceeds from lease asset sales exceed expenses and decreasing as distributions are made to the partners and to the extent expenses exceed cash flows from leases and proceeds from asset sales.
17
The primary source of liquidity for the Partnership has been its cash flow from leasing activities. As the initial lease terms have expired, the Partnership ventured to re-lease or sell the equipment. Future liquidity will depend on the Partnerships success in remarketing or selling the equipment as it comes off rental.
If inflation in the general economy becomes significant, it may affect the Partnership in as much as the residual (resale) values and rates on re-leases of the Partnerships leased assets may increase as the costs of similar assets increase. However, the Partnerships revenues from existing leases would not increase; as such rates are generally fixed for the terms of the leases without adjustment for inflation. In addition, if interest rates increase significantly under such circumstances, 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.
The Partnership currently believes it 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.
The following table sets forth summary cash flow data (in thousands):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Net cash provided by: |
||||||||||||||||
Operating activities | $ | 752 | $ | 842 | $ | 1,503 | $ | 1,649 | ||||||||
Investing activities | 64 | 224 | 364 | 460 | ||||||||||||
Financing activities | | | | | ||||||||||||
Net increase in cash and cash equivalents | $ | 816 | $ | 1,066 | $ | 1,867 | $ | 2,109 |
During the three months ended September 30, 2012 and 2011, the Partnerships primary sources of liquidity were cash flows from its portfolio of operating lease contracts and direct financing leases. In addition, the Partnership realized proceeds from sales of lease assets totaling $14 thousand and $193 thousand for the three months ended September 30, 2012 and 2011, respectively.
During the same comparative periods, cash was primarily used to pay invoices related to other payables. As the Fund is in its liquidation phase, any future financing activity is anticipated to only include distributions to Partners.
During the nine months ended September 30, 2012 and 2011, the Partnerships primary sources of liquidity were cash flows from its portfolio of operating lease contracts and direct financing leases. In addition, the Partnership realized proceeds from sales of lease assets totaling $224 thousand and $380 thousand for the nine months ended September 30, 2012 and 2011, respectively.
During the same comparative periods, cash was primarily used to pay invoices related to General Partner fees and expenses, and other payables.
The Partnership commenced periodic distributions, based on cash flows from operations, beginning with the month of January 1997. During its liquidation phase, the rates and frequency of periodic distributions paid by the Fund are solely at the discretion of the General Partner.
18
At September 30, 2012, the Partnership had no commitments to purchase lease assets and pursuant to the Partnership Agreement, the Partnership will no longer purchase any new lease assets.
The Partnerships vessel activity in the Gulf of Mexico was severely impacted by the British Petroleum (BP) Deep Water Horizon oil spill of 2010 which severely adversely impacted charter activity in the Gulf region. BP established a program to compensate those businesses and individuals suffering economic hardship and loss as a result of the Deep Water Horizon oil spill. The Partnership submitted a claim to the BP program administrator seeking an approximate $2.8 million for loss of revenues during the period of the vessels diminished activity commencing at the time of the oil spill and continuing through 2010. The BP claim administrator has denied the Partnerships claim on the basis that the Partnership suffered damages as a result of the Presidents moratorium on oil drilling subsequent to the Deep Water Horizon accident. The Partnership believes its claim continues to be of merit, and has opted out of the BP claims fund, and is pursuing a claim in a collective action with other similarly situated plaintiffs. Currently, the amount of any compensation or award from BP is extremely difficult to determine. As such, the potential for compensation or award has not been recorded on the Partnerships books and records.
ATEL filed a claim on behalf of the Partnership and certain affiliated entities in Federal court in New Orleans for the under-reporting of revenue by a fleet manager of three marine vessels, seeking to recover an approximate amount of 10% of gross proceeds, which in the aggregate for all affiliated entities represents $2.8 million for the years 2005-2007 (of which the Partnerships portion is an approximate $1.4 million). The annual allocable portion of the claim is not considered material to the Partnership in any given year. The trial date for this dispute had been rescheduled several times, however the trial was ultimately concluded during the first week of August 2012. As of October 10, 2012, the matter has been in the hands of the Federal Judge to render a decision on both the law and the facts. The decision of the Court is imminent, and the Partnership is hopeful for a recovery of all or portion of its asserted claims, but the outcome of the litigation remains uncertain as of such date. While the Partnership's recovery with respect to this matter may be significant, there is no assurance that judgment will be rendered in favor of the Partnership.
None.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Partnership evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.
The Partnerships critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2011. There have been no material changes to the Partnerships critical accounting policies since December 31, 2011.
The Partnerships General Partners President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (Management), evaluated the effectiveness of the Partnerships disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Partnerships disclosure controls and procedures, Management concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.
19
The Partnership does not control the financial reporting process, and is solely dependent on the Management of the General Partner, which is responsible for providing the Partnership with financial statements in accordance with generally accepted accounting principles in the United States. The General Partners disclosure controls and procedures, as applicable to the Partnership, were effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
There were no changes in the General Partners internal control over financial reporting, as it is applicable to the Partnership, during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the General Partners internal control over financial reporting, as it is applicable to the Partnership.
20
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 Partnerships financial position or results of operations. No material legal proceedings are currently pending against the Partnership or against any of its assets.
None.
None.
Not Applicable
None.
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 not applicable, and therefore have been omitted.
2. | Other Exhibits |
31.1 | Rule 13a-14(a)/ 15d-14(a) Certification of Dean L. Cash | |
31.2 | Rule 13a-14(a)/ 15d-14(a) Certification of Paritosh K. Choksi | |
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 | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
* | In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be furnished and not filed. |
21
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 13, 2012
By: | ATEL Financial Services, LLC General Partner of Registrant |
By: | /s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (General Partner) |
By: | /s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (General Partner) |
By: | /s/ Samuel Schussler Samuel Schussler Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (General Partner) |
22
Exhibit 31.1
I, Dean L. Cash, certify that:
1. | I have reviewed this quarterly report on Form 10-Q 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 registrants other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants 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 |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: November 13, 2012
/s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (General Partner) |
Exhibit 31.2
I, Paritosh K. Choksi, certify that:
1. | I have reviewed this quarterly report on Form 10-Q 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 registrants other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants 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 |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: November 13, 2012
/s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (General Partner) |
Exhibit 32.1
In connection with the Quarterly Report of ATEL Capital Equipment Fund VII, L.P. (the Partnership) on Form 10-Q for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Dean L. Cash, President and Chief Executive Officer of ATEL Financial Services, LLC, General Partner of the Partnership, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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: November 13, 2012
/s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (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.
Exhibit 32.2
In connection with the Quarterly Report of ATEL Capital Equipment Fund VII, L.P. (the Partnership) on Form 10-Q for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Paritosh K. Choksi, Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC, General Partner of the Partnership, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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: November 13, 2012
/s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (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.
Related Party Transactions - Additional Information (Detail) (General Partner)
|
9 Months Ended |
---|---|
Sep. 30, 2012
|
|
Related Party Transaction [Line Items] | |
Percentage of cash distributions from operations as incentive management fee | 4.00% |
Operating Leases
|
|
Related Party Transaction [Line Items] | |
Equipment management fees as percentage of gross revenues | 3.50% |
Full Payout Leases
|
|
Related Party Transaction [Line Items] | |
Equipment management fees as percentage of gross revenues | 2.00% |
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