x | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
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For the year ended December 31, 2015 | ||
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
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For the transition period from to |
(Exact name of registrant as specified in its charter)
California | 94-3307404 | |
(State or other jurisdiction of incorporation or organization) |
(I. R. S. Employer Identification No.) |
(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 Liability Company Units
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No x
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1934.Yes o No x
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o |
Smaller reporting company x |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x
State the aggregate market value of voting stock held by non-affiliates of the registrant: Not applicable
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) Not applicable
The number of Limited Liability Company Units outstanding as of February 29, 2016 was 13,560,188.
None.
ATEL Capital Equipment Fund VIII, LLC (the Company or the Fund) was formed under the laws of the State of California on July 31, 1998. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. The Managing Member of the Company is ATEL Financial Services, LLC (AFS), a California limited liability company. The Company may continue until December 31, 2019. Each Members personal liability for obligations of the Company generally will be limited to the amount of their respective contributions and rights to undistributed profits and assets of the Company.
The Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. On January 13, 1999, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities). Gross contributions in the amount of $135.7 million (13,570,188 units) were received as of November 30, 2000, inclusive of $500 of initial Members capital investment and $100 of AFS capital investment. The offering was terminated on November 30, 2000. As of December 31, 2015, 13,560,188 Units remain issued and outstanding.
The Companys principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Companys invested capital; (ii) generates regular distributions to the Members 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, 2006 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by its Limited Liability Company Operating Agreement (Operating Agreement), as amended.
Pursuant to the Operating Agreement, AFS and/or its affiliates receive compensation and reimbursements for services rendered on behalf of the Company (see Note 5 to the financial statements included in Item 8 of this report). The Company 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 December 31, 2015, the Company continues in the liquidation phase of its life cycle as defined in the Operating Agreement.
The Company had acquired various types of equipment to lease pursuant to Operating leases and High Payout leases, whereby Operating leases are defined as being leases in which the minimum lease payments during the initial lease term do not recover the full cost of the equipment and High Payout leases recover at least 90% of such cost. Guidelines provided by the offering indicated that a majority of the aggregate purchase price of equipment would represent equipment leased under High Payout leases upon final investment of the Net Proceeds of the Offering and that no more than 20% of the aggregate purchase price of equipment would be invested in equipment acquired from a single manufacturer.
The Company only purchased equipment under pre-existing leases or for which a lease would be concurrently entered into at the time of the purchase. From inception through December 31, 2015, the Company had purchased and/or capitalized improvements pursuant to lease assets totaling $248.8 million.
The Companys objective was to lease a minimum of 75% of the equipment acquired with the net proceeds of the offering to lessees that (i) have an average credit rating by Moodys Investors Service of Baa or better, or the credit equivalent as determined by AFS, with the average rating weighted to account for the original equipment cost for each item leased or (ii) are established hospitals with histories of profitability or municipalities. The balance of the original equipment portfolio may include equipment leased to lessees which, although deemed creditworthy by AFS, would not satisfy the general credit rating criteria for the portfolio. In excess of 75% of the equipment acquired with the net proceeds of the offering (based on original purchase cost) was originally leased to lessees with an average credit rating of Baa or better or to such hospitals or municipalities, as described in (ii) above.
1
During 2015 and 2014, certain lessees generated significant portions (defined as greater than or equal to 10%) of the Companys total lease revenues, excluding gains or losses from disposition of assets, as follows:
Percentage of Total Lease Revenues | ||||||||||||
Lessee | Type of Equipment | 2015 | 2014 | |||||||||
Exsif Worldwide Inc. | Transportation, other | 26 | % | 33 | % | |||||||
Interstate Commodities, Inc. | Transportation, rail | 20 | % | 16 | % |
These percentages are not expected to be comparable in future periods.
The equipment leasing industry is highly competitive. Equipment manufacturers, corporations, partnerships and others offer users an alternative to the purchase of most types of equipment with payment terms that vary widely depending on the lease term, type of equipment and creditworthiness of the lessee. The ability of the Company to keep the equipment leased and/or operating and the terms of the reinvestments, leases and dispositions of equipment depends on various factors (many of which are not in the control of AFS or the Company), such as raw material costs to manufacture equipment as well as general economic conditions, including the effects of inflation or recession, and fluctuations in supply and demand for various types of equipment resulting from, among other things, technological and economic obsolescence.
The business of the Company is not seasonal.
The Company has no full time employees. AFS employees and affiliates provide the services the Company requires to effectively operate. The cost of these services is reimbursed by the Company to AFS and affiliates per the Operating Agreement.
Equipment Leasing Activities The Company had acquired a diversified portfolio of equipment. The equipment had been leased to lessees in various industries. The following tables set forth the types of equipment acquired and/or improved by the Company through December 31, 2015 and the industries to which the assets were leased (dollars in thousands):
Asset Types | Purchase Price Excluding Acquisition Fees | Percentage of Total Acquisitions | ||||||
Transportation, rail | $ | 57,787 | 23.23 | % | ||||
Manufacturing | 47,781 | 19.21 | % | |||||
Transportation, other | 47,614 | 19.14 | % | |||||
Aircraft/aviation | 38,535 | 15.49 | % | |||||
Point of sale/office automation | 12,162 | 4.89 | % | |||||
Photo processing equipment | 10,782 | 4.33 | % | |||||
Storage tanks | 7,774 | 3.12 | % | |||||
Materials handling | 7,019 | 2.82 | % | |||||
Marine vessel | 4,793 | 1.93 | % | |||||
Gas compressors | 2,522 | 1.01 | % | |||||
Other | 12,021 | 4.83 | % | |||||
$ | 248,790 | 100.00 | % |
2
Industry of Lessee | Purchase Price Excluding Acquisition Fees | Percentage of Total Acquisitions | ||||||
Transportation, rail | $ | 60,604 | 24.35 | % | ||||
Transportation, air | 38,535 | 15.49 | % | |||||
Manufacturing, other | 35,204 | 14.15 | % | |||||
Transportation, other | 28,378 | 11.41 | % | |||||
Transportation, containers | 21,229 | 8.53 | % | |||||
Manufacturing, electronics | 20,901 | 8.40 | % | |||||
Retail | 18,056 | 7.26 | % | |||||
Natural gas | 13,848 | 5.57 | % | |||||
Other | 12,035 | 4.84 | % | |||||
$ | 248,790 | 100.00 | % |
Through December 31, 2015, the Company had disposed of certain leased assets as set forth below (in thousands):
Asset Types | Original Equipment Cost Excluding Acquisition Fees | Sale Price | Gross Rents | |||||||||
Manufacturing | $ | 47,155 | $ | 19,970 | $ | 48,560 | ||||||
Transportation, rail | 45,503 | 34,358 | 25,084 | |||||||||
Aircraft/aviation | 38,535 | 8,667 | 16,856 | |||||||||
Transportation, other | 35,352 | 11,385 | 33,834 | |||||||||
Point of sale/office automation | 12,162 | 2,393 | 13,086 | |||||||||
Storage tanks | 11,067 | 7,936 | 7,421 | |||||||||
Photo processing equipment | 10,782 | 6,555 | 9,618 | |||||||||
Materials handling | 7,019 | 2,017 | 6,776 | |||||||||
Gas compressors | 2,522 | 506 | 2,794 | |||||||||
Other | 12,007 | 3,734 | 14,613 | |||||||||
$ | 222,104 | $ | 97,521 | $ | 178,642 |
Proceeds from sales of lease assets are not expected to be consistent from one period to another. The Company is a finite life equipment leasing fund, which had acquired leasing transactions during the period ended six years after completion of its public offering. On the termination of leases, assets may be re-leased or sold. Sales of assets are not scheduled and are created by opportunities within the marketplace. The Company sought to acquire and lease a wide variety of assets and to enter into leases on a variety of terms. Some assets will be expected to have little or no value for re-lease or sale upon termination of the initial leases, and the anticipated residual values are a key factor in pricing and terms structured for each lease. The Companys goal is to seek maximum return on its leased assets and will determine when and under what terms to dispose of such assets during the course of its term.
For further information regarding the Companys equipment lease portfolio as of December 31, 2015, see Note 4 to the financial statements, Investments in equipment and leases, net, as set forth in Part II, Item 8, Financial Statements and Supplementary Data.
Certain of the Companys lessee customers have international operations. In these instances, the Company 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 Company to track, on an asset-by-asset, day-by-day basis, where these assets are deployed. For further information regarding the Companys geographic revenues and assets, and major customers, see Notes 2 and 3 to the financial statements as set forth in Part II, Item 8, Financial Statements and Supplementary Data.
3
The Company does not own or lease any real property, plant or material physical properties other than the equipment held for lease as set forth in Item 1, Business.
In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Company. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Companys financial position or results of operations. No material legal proceedings are currently pending against the Company or against any of its assets.
Not applicable.
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Item 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
There are certain material conditions and restrictions on the transfer of Units imposed by the terms of the Operating Agreement. Consequently, there is no public market for Units and it is not anticipated that a public market for Units will develop. In the absence of a public market for the Units, there is no currently ascertainable fair market value for the Units.
As of December 31, 2015, a total of 3,301 investors were Unitholders of record in the Company.
In order to permit custodial fiduciaries who hold Units to satisfy their annual reporting requirements, AFS estimated the value per Unit of the Companys assets as of December 31, 2015. AFS calculated the estimated liquidation proceeds that would be realized by the Company, assuming an orderly disposition of all of the Companys assets as of December 31, 2015, by estimating the aggregate net asset value of the Company. The valuation does not take into account any future business activity of the Company; rather it is a snapshot view of the Funds portfolio as of the valuation date.
The estimated values for non-interest bearing items such as any current assets and liabilities, as well as for any investment in securities, were assumed to equal their respective reported balances, which management believes approximate their respective fair values, as adjusted for impairment. And when applicable, the same was applied to loans incurred under the acquisition facility since they also bear variable rates of interest.
A discounted cash flow approach was used to estimate the values of investments in leases. Under such approach, the value of a financial instrument was estimated by calculating the present value of the instruments expected cash flows. The present value was determined by discounting the cash flows the instrument is expected to generate by discount rates as deemed appropriate by the Manager. In most cases, the discount rates used were based on U.S. Treasury yields reported as of the reporting date, plus a spread to account for the credit risk difference between the instrument being valued and Treasury securities.
After calculating the aggregate estimated disposition proceeds, AFS then calculated the portion of the aggregate estimated value of the Company assets that would be distributed to Unitholders on liquidation of the Company, and divided the total so distributable by the number of outstanding Units. As of December 31, 2015, the value of the Companys assets, calculated on this basis, was approximately $0.80 per Unit. The aforementioned valuation was performed solely for custodial purposes described above. There is no market for the Units, and, accordingly, this value does not represent an estimate of the amount a Unitholder would receive if he were to seek to sell his Units. Furthermore, there can be no assurance as to the amount the Company may actually receive if and when it seeks to liquidate its assets or the amount of lease payments and equipment disposition proceeds it will actually receive over the remaining term of the Company.
The Unitholders of record are entitled to certain distributions as provided under the Operating Agreement. AFS has sole discretion in determining the amount of distributions; provided, however, that AFS will not reinvest in equipment, but will distribute, subject to payment of any obligations of the Company. The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of January 1999.
The monthly distributions to Other Members were discontinued in 2007 as the Company entered its liquidation phase. Periodic distributions were paid in December 2015 and 2014. The annualized rates for distributions from 2015 and 2014 operations were $0.30 and $0.25 per Unit, respectively. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the Managing Member.
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The following table presents summarized per Unit information regarding distributions to Other Members:
2015 | 2014 | |||||||
Net income per Unit, based on weighted average Units outstanding | $ | 0.18 | $ | 0.14 | ||||
Return of investment | 0.12 | 0.11 | ||||||
Distributions declared per Unit, based on weighted average Other Member Units outstanding |
0.30 | 0.25 | ||||||
Differences due to timing of distributions | | | ||||||
Actual distributions paid per Unit | $ | 0.30 | $ | 0.25 |
Item 6. | SELECTED FINANCIAL DATA |
A smaller reporting company is not required to present selected financial data in accordance with item 301(c) of Regulation S-K.
Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Statements contained in this Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and elsewhere in this Form 10-K, 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, 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 Companys performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Companys 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-K. 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-K or to reflect the occurrence of unanticipated events, other than as required by law.
Overview
ATEL Capital Equipment Fund VIII, LLC (the Company) is a California limited liability company that was formed in July 1998 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 Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. The offering was terminated in November 2000. Total proceeds of the offering were $135.7 million. During early 2001, the Company 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 Company reinvested cash flow in excess of certain amounts required to be distributed to the Other Members and/or utilized its credit facilities to acquire additional equipment.
The Company may continue until December 31, 2019. However, pursuant to the guidelines of the Operating Agreement, the Company began to liquidate its assets and distribute the proceeds thereof after the end of the Reinvestment Period which ended in December 2006.
As of December 31, 2015, the Company continues in its liquidation phase. Accordingly, assets that mature will be returned to inventory and most likely subsequently sold, which will result in decreasing revenue as earning assets decrease. Periodic distributions are paid at the discretion of the Managing Member.
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As of December 31, 2015 and 2014, there were concentrations (defined as greater than or equal to 10%) of equipment leased to lessees in certain industries (as a percentage of total equipment cost) as follows:
2015 | 2014 | |||||||
Transportation, rail | 58 | % | 45 | % | ||||
Transportation, containers | 38 | % | 35 | % |
As previously indicated, certain lessees generated significant portions (defined as greater than or equal to 10%) of the Companys total lease revenues, excluding gains or losses from disposition of assets, during 2015 and 2014 as follows:
Percentage of Total Lease Revenues | ||||||||||||
Lessee | Type of Equipment | 2015 | 2014 | |||||||||
Exsif Worldwide Inc. | Transportation, other | 26 | % | 33 | % | |||||||
Interstate Commodities, Inc. | Transportation, rail | 20 | % | 16 | % |
These percentages are not expected to be comparable in future periods due to the expiration of lessee contracts during the Funds liquidation period.
It has been the Companys objective to maintain a 100% utilization rate for all equipment purchased in any given year. All equipment transactions were acquired subject to binding lease commitments, so equipment utilization remained high throughout the reinvestment stage. Initial lease terms of these leases were generally from 24 to 120 months, and as they expired, the Company attempted to re-lease or sell the equipment; as such, utilization rates may tend to decrease during the liquidation stage of the Company. All of the Companys remaining equipment on lease, including capitalized improvements, were acquired in the years 1999 through 2015. The utilization percentage of existing assets under lease was 97% and 94% as of December 31, 2015 and 2014, respectively. The increase in utilization percentage was a result of the transfer of certain lease equipment from inventory to revenue producing leases.
Cost reimbursements to the Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.
The Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or 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. For the year ended December 31, 2015, the amount of reimbursable expenses billed to the Fund did not exceed either the annual or the cumulative limitations. It is not anticipated that any further billings to the Fund will equal or exceed the annual or cumulative reimbursable expense limitation. Such is reflective of the continued diminishing Fund asset base over which reimbursements are calculated (see Note 5 to the financial statements, Related party transactions, as set forth in Part II, Item 8, Financial Statements and Supplementary Data).
The Company had net income of $2.8 million and $2.2 million for the years ended December 31, 2015 and 2014, respectively. The results for 2015 primarily reflect an increase in total revenues and a decrease in total expenses when compared to prior year.
Total revenues for 2015 increased by $503 thousand, or 12%, as compared to prior year. The net increase in total revenues was largely due to increases in gains recognized on sales of assets and in operating lease revenues.
The increase in gains recognized on sales of assets totaled $449 thousand and was largely a result of the change in the mix of assets sold. Operating lease revenues increased by $56 thousand primarily due to incremental revenues from certain off-lease equipment that were re-leased during the second quarter of 2014 partially offset by the impact of continued run-off and sales of lease assets.
7
Total expenses for 2015 decreased by $149 thousand, or 8%, as compared to prior year. The net decrease in total operating expenses was primarily due to reductions in depreciation expense, railcar maintenance costs, railcar storage fees, and freight and shipping costs partially offset by an increase in cost reimbursements paid to AFS.
The decrease in depreciation expense totaled $138 thousand and was attributable to continued run-off and sales of lease assets. Similarly, railcar maintenance costs declined by $38 thousand due, in part, to continued sales and dispositions of the Funds railcars. Moreover, railcar storage fees decreased by $33 thousand primarily due to the reduction in off-lease railcars since December 31, 2014; and, freight and shipping costs declined by $31 thousand as the prior year period amount included shipping costs to move re-leased railcars from inventory.
Partially offsetting the aforementioned decreases in expenses was a $53 thousand increase in costs reimbursed to AFS. The higher amounts of costs reimbursed to AFS was largely due to an increase in allocated investor servicing costs.
At December 31, 2015 and 2014, the Companys cash and cash equivalents totaled $11 thousand and $928 thousand, respectively. The liquidity of the Company varies, increasing to the extent that cash flows from leases and proceeds of asset sales exceed expenses and decreasing as distributions are made to the Other Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.
The primary source of liquidity for the Company is its cash flow from leasing activities. As initial lease terms expire, the Company re-leases or sells the equipment. The future liquidity beyond the contractual minimum rentals will depend on the Companys success in remarketing or selling the equipment as it comes off-rental.
The Company 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 Company 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):
2015 | 2014 | |||||||
Net cash provided by (used in): |
||||||||
Operating activities | $ | 2,443 | $ | 1,836 | ||||
Investing activities | 1,038 | 1,116 | ||||||
Financing activities | (4,398 | ) | (3,665 | ) | ||||
Net decrease in cash and cash equivalents | $ | (917 | ) | $ | (713 | ) |
During 2015 and 2014, the Companys primary source of liquidity has been cash flows from its portfolio of operating lease contracts. In addition, the Company realized proceeds from sales or dispositions of equipment totaling $1.3 million and $1.1 million for the years ended December 31, 2015 and 2014, respectively.
During the same respective years, cash was primarily used to pay $4.4 million and $3.7 million of distributions to both the Other Members and the Managing Member, respectively. Cash was also used to pay invoices related to management fees and expenses during both years. As the Fund is in its liquidation phase, any future financing activity is anticipated to only include distributions to Members.
The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of January 1999. During its liquidation phase, the rates and frequency of periodic distributions paid by the Fund are solely at the discretion of the Managing Member. See Item 5 and Note 7 to the financial statements, Members capital, as set forth in Part II, Item 8, Financial Statements and Supplementary Data for additional information regarding distributions.
8
At December 31, 2015, the Company had no commitments to purchase lease assets. Pursuant to the Operating Agreement, the Company will no longer purchase any new lease assets.
None.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year and in August 2015, issued Revenue from Contracts from Customers (Topic 606): Deferral of the Effective Date (ASU 2015-14). ASU 2015-14 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company evaluated the impact of the new standard on its financial statements and has determined that such impact is virtually non-existent as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Companys revenues.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (ASU-2014-15). The new standard provides guidance relative to managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on the Companys financial statements or related disclosures.
The policies discussed below are considered by management of the Company to be critical to an understanding of the Companys financial statements because their application requires significantly complex or subjective judgments, decisions, or assessments, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. The Company also states these accounting policies in the notes to the financial statements and in relevant sections in this discussion and analysis. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (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 relate primarily to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.
Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipments estimated residual values. Off-lease equipment is generally not subject to depreciation. The Company depreciates all lease assets, in accordance with guidelines consistent with ASC 840-20-35-3, over the periods of the lease terms contained in each assets respective lease contract to the
9
estimated residual value at the end of the lease contract. All lease assets are purchased only concurrent with the execution of a lease commitment by the lessee. Thus, the original depreciation period corresponds with the term of the original lease. Once the term of an original lease contract is completed, the subject property is typically sold to the existing user, re-leased to the existing user, or, when off-lease, is held for sale. Assets which are re-leased continue to be depreciated using the terms of the new lease agreements and the estimated residual values at the end of the new lease terms, adjusted downward as necessary. Assets classified as held-for-sale are carried at the lower of carrying amount, or the fair value less cost to sell (ASC 360-10-35-43).
The Company does not use the equipment held in its portfolio, but holds it solely for lease and ultimate sale. In the course of marketing equipment that has come off-lease, management may determine at some point that re-leasing the assets may provide a superior return for investors and would then execute another lease. Upon entering into a new lease contract, management will estimate the residual value once again and resume depreciation. If, and when, the Company, at any time, determines that depreciation in value may have occurred with respect to an asset held-for-sale, the Company would review the value to determine whether a material reduction in value had occurred and recognize any appropriate impairment. All lease assets, including off-lease assets, are subject to the Companys quarterly impairment analysis, as described below. Maintenance costs associated with the Funds portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.
Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms vary as to the type of equipment subject to the leases; the needs of the lessees and the terms to be negotiated, but initial leases were generally from 24 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.
Operating leases 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 considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon managements judgment, the related operating leases may be placed on 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 lease payments is probable. Until such time, revenues are recognized on a cash basis.
Recorded values of the Companys leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the assets lease contract and undiscounted future rents from the existing lease contract. 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 marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.
The Company earns revenues from its containers, marine vessel and certain other assets based on utilization of such assets or through fixed term leases. Contingent rentals and the associated expenses are recorded when earned and/or incurred. From time to time, the Company incurs drydocking costs on its vessel. Drydocking costs include labor and material costs related to refurbishing, overhauling and/or replacing engine and other major mechanical components of the vessel, hull maintenance and other repairs that bring the vessel into seaworthy compliance with U.S. marine codes in order to have it certified as available for charter. Such drydocking costs are capitalized and depreciated over the period between scheduled drydockings, which generally occur every 24 to 30 months.
Income from direct financing lease transactions is reported using the financing method of accounting, in which the Companys investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding.
10
Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged off to the allowance as they are deemed uncollectible.
Direct financing leases are generally placed in a non-accrual status (i.e., no revenue is recognized) and deemed impaired when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon managements judgment, the related direct financing leases may be placed on 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 lease payments is probable. Until such time, all payments received are applied only against outstanding principal balances.
Recorded values of the Companys asset portfolio are periodically reviewed for impairment. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the 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. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the assets and its carrying value on the measurement date.
See the Report of Independent Registered Public Accounting Firm, Financial Statements and Notes to Financial Statements attached hereto at pages 12 through 25.
11
The Members
ATEL Capital Equipment Fund VIII, LLC
We have audited the accompanying balance sheets of ATEL Capital Equipment Fund VIII, LLC (the Company) as of December 31, 2015 and 2014, and the related statements of income, changes in members capital, and cash flows for the years then ended. These financial statements are the responsibility of the Companys Managing Member. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ATEL Capital Equipment Fund VIII, LLC as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Moss Adams LLP | ||
San Francisco, California March 29, 2016 |
12
(In Thousands)
2015 | 2014 | |||||||
ASSETS |
||||||||
Cash and cash equivalents | $ | 11 | $ | 928 | ||||
Accounts receivable, net | 476 | 558 | ||||||
Prepaid expenses and other assets | 31 | 21 | ||||||
Investments in equipment and leases, net of accumulated depreciation of $25,276 as of December 31, 2015 and $28,229 as of December 31, 2014 | 3,924 | 4,500 | ||||||
Total assets | $ | 4,442 | $ | 6,007 | ||||
LIABILITIES AND MEMBERS CAPITAL |
||||||||
Accounts payable and accrued liabilities: |
||||||||
Managing Member | $ | 125 | $ | 150 | ||||
Other | 135 | 105 | ||||||
Unearned operating lease income | 68 | 48 | ||||||
Total liabilities | 328 | 303 | ||||||
Commitments and contingencies |
||||||||
Members capital: |
||||||||
Managing Member | | | ||||||
Other Members | 4,114 | 5,704 | ||||||
Total Members capital | 4,114 | 5,704 | ||||||
Total liabilities and Members capital | $ | 4,442 | $ | 6,007 |
See accompanying notes.
13
(In Thousands Except for Units and Per Unit Data)
2015 | 2014 | |||||||
Revenues: |
||||||||
Leasing activities: |
||||||||
Operating leases | $ | 3,627 | $ | 3,571 | ||||
Direct financing leases | 16 | 15 | ||||||
Gain on sales of assets | 889 | 440 | ||||||
Interest | | 1 | ||||||
Other revenue | 2 | 4 | ||||||
Total revenues | 4,534 | 4,031 | ||||||
Expenses: |
||||||||
Depreciation of operating lease assets | 317 | 455 | ||||||
Asset management fees to Managing Member | 222 | 206 | ||||||
Railcar maintenance | 332 | 370 | ||||||
Cost reimbursements to Managing Member | 308 | 255 | ||||||
Other management fees | 95 | 101 | ||||||
Railcar storage fees | 62 | 95 | ||||||
Professional fees | 185 | 179 | ||||||
Insurance | 38 | 42 | ||||||
Reversal of provision for credit losses | | (3 | ) | |||||
Taxes on income and franchise fees | | 3 | ||||||
Postage | 11 | 8 | ||||||
Printing and photocopying | 24 | 17 | ||||||
Freight and shipping | 24 | 55 | ||||||
Other | 108 | 92 | ||||||
Total expenses | 1,726 | 1,875 | ||||||
Net income | $ | 2,808 | $ | 2,156 | ||||
Net income: |
||||||||
Managing Member | $ | 330 | $ | 275 | ||||
Other Members | 2,478 | 1,881 | ||||||
$ | 2,808 | $ | 2,156 | |||||
Net income per Limited Liability Company Unit (Other Members) | $ | 0.18 | $ | 0.14 | ||||
Weighted average number of Units outstanding | 13,560,188 | 13,560,188 |
See accompanying notes.
14
(In Thousands Except for Units and Per Unit Data)
Other Members | Managing Member | |||||||||||||||
Units | Amount | Total | ||||||||||||||
Balance December 31, 2013 | 13,560,188 | $ | 7,213 | $ | | $ | 7,213 | |||||||||
Distributions to Other Members ($0.25 per Unit) | | (3,390 | ) | | (3,390 | ) | ||||||||||
Distributions to Managing Member | | | (275 | ) | (275 | ) | ||||||||||
Net income | | 1,881 | 275 | 2,156 | ||||||||||||
Balance December 31, 2014 | 13,560,188 | 5,704 | | 5,704 | ||||||||||||
Distributions to Other Members ($0.30 per Unit) | | (4,068 | ) | | (4,068 | ) | ||||||||||
Distributions to Managing Member | | | (330 | ) | (330 | ) | ||||||||||
Net income | | 2,478 | 330 | 2,808 | ||||||||||||
Balance December 31, 2015 | 13,560,188 | $ | 4,114 | $ | | $ | 4,114 |
See accompanying notes.
15
(In Thousands)
2015 | 2014 | |||||||
Operating activities: |
||||||||
Net income | $ | 2,808 | $ | 2,156 | ||||
Adjustment to reconcile net income to cash provided by operating activities: |
||||||||
Gain on sales of assets | (889 | ) | (440 | ) | ||||
Depreciation of operating lease assets | 317 | 455 | ||||||
Reversal of provision for credit losses | | (3 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable | 82 | 19 | ||||||
Prepaid expenses and other assets | (10 | ) | (2 | ) | ||||
Accounts payable, Managing Member | (25 | ) | (219 | ) | ||||
Accounts payable, other | 140 | (104 | ) | |||||
Unearned operating lease income | 20 | (26 | ) | |||||
Net cash provided by operating activities | 2,443 | 1,836 | ||||||
Investing activities: |
||||||||
Improvements to equipment on operating leases | (253 | ) | | |||||
Proceeds from sales of assets | 1,285 | 1,114 | ||||||
Principal payments received on direct financing leases | 6 | 2 | ||||||
Net cash provided by investing activities | 1,038 | 1,116 | ||||||
Financing activities: |
||||||||
Distributions to Other Members | (4,068 | ) | (3,390 | ) | ||||
Distributions to Managing Member | (330 | ) | (275 | ) | ||||
Net cash used in financing activities | (4,398 | ) | (3,665 | ) | ||||
Net decrease in cash and cash equivalents | (917 | ) | (713 | ) | ||||
Cash and cash equivalents at beginning of year | 928 | 1,641 | ||||||
Cash and cash equivalents at end of year | $ | 11 | $ | 928 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the year for taxes | $ | 7 | $ | 15 | ||||
Improvements to equipment on operating leases | $ | | $ | 110 |
See accompanying notes.
16
ATEL Capital Equipment Fund VIII, LLC (the Company or the Fund) was formed under the laws of the State of California on July 31, 1998. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. The Managing Member of the Company is ATEL Financial Services, LLC (AFS), a California limited liability company. The Company may continue until December 31, 2019. Each Members personal liability for obligations of the Company generally will be limited to the amount of their respective contributions and rights to undistributed profits and assets of the Company.
The Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. On January 13, 1999, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities). Gross contributions in the amount of $135.7 million (13,570,188 units) were received as of November 30, 2000, inclusive of $500 of initial Members capital investment and $100 of AFS capital investment. The offering was terminated on November 30, 2000. As of December 31, 2015, 13,560,188 Units were issued and outstanding.
The Companys principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Companys invested capital; (ii) generates regular distributions to the Members 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, 2006, and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by its Limited Liability Company Operating Agreement (Operating Agreement), as amended.
Pursuant to the Operating Agreement, AFS and/or its affiliates receive compensation and reimbursements for services rendered on behalf of the Company (see Note 5). The Company 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 December 31, 2015, the Company continues in the liquidation phase of its life cycle as defined in the Operating Agreement.
The accompanying balance sheets as of December 31, 2015 and 2014, and the related statements of income, changes in members capital, and cash flows for the years then ended, have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and the rules and regulations of the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to the current year 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.
In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after December 31, 2015, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (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
17
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates relate primarily to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.
Cash and cash equivalents include cash in banks and cash equivalent investments such as U.S. Treasury instruments with original and/or purchased maturities of ninety days or less.
Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, operating and direct financing lease receivables and accounts receivable. The Company places the majority of its cash deposits in noninterest-bearing accounts with financial institutions that have no less than $10 billion in assets. Such deposits are insured up to $250 thousand. The remainder of the Funds cash is temporarily invested in U.S. Treasury denominated instruments. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Company. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating and direct financing leases.
Accounts receivable represent the amounts billed under operating and direct financing lease contracts which are currently due to the Company. Allowances for doubtful accounts are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and invoiced amounts. Accounts receivable deemed uncollectible are charged off to the allowance on a specific identification basis. Amounts recovered that were previously written-off are recorded as other income in the period received.
Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipments estimated residual values. Off-lease equipment is generally not subject to depreciation. The Company depreciates all lease assets, in accordance with guidelines consistent with ASC 840-20-35-3, over the periods of the lease terms contained in each assets respective lease contract to the estimated residual value at the end of the lease contract. All lease assets are purchased only concurrent with the execution of a lease commitment by the lessee. Thus, the original depreciation period corresponds with the term of the original lease. Once the term of an original lease contract is completed, the subject property is typically sold to the existing user, re-leased to the existing user, or, when off-lease, is held for sale. Assets which are re-leased continue to be depreciated using the terms of the new lease agreements and the estimated residual values at the end of the new lease terms, adjusted downward as necessary. Assets classified as held-for-sale are carried at the lower of carrying amount, or the fair value less cost to sell (ASC 360-10-35-43).
The Company does not use the equipment held in its portfolio, but holds it solely for lease and ultimate sale. In the course of marketing equipment that has come off-lease, management may determine at some point that re-leasing the assets may provide a superior return for investors and would then execute another lease. Upon entering into a new lease contract, management will estimate the residual value once again and resume depreciation. If, and when, the Company, at any time, determines that depreciation in value may have occurred with respect to an asset held-for-sale, the Company would review the value to determine whether a material reduction in value had occurred and recognize any appropriate impairment. All lease assets, including off-lease assets, are subject to the Companys quarterly impairment analysis, as described below. Maintenance costs associated with the Funds portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.
Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms vary as to the type of equipment subject to the leases; the needs of the lessees and the terms to be negotiated, but initial leases were generally from 24 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.
18
Operating leases 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 considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon managements judgment, the related operating leases may be placed on 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 lease payments is probable. Until such time, revenues are recognized on a cash basis.
Recorded values of the Companys leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the assets lease contract and undiscounted future rents from the existing lease contract. 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 marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.
The Company earns revenues from its containers, marine vessel and certain other assets based on utilization of such assets or through fixed term leases. Contingent rentals and the associated expenses are recorded when earned and/or incurred. From time to time, the Company incurs drydocking costs on its vessel. Drydocking costs include labor and material costs related to refurbishing, overhauling and/or replacing engine and other major mechanical components of the vessel, hull maintenance and other repairs that bring the vessel into seaworthy compliance with U.S. marine codes in order to have it certified as available for charter. Such drydocking costs are capitalized and depreciated over the period between scheduled drydockings, which generally occur every 24 to 30 months.
Income from direct financing lease transactions is reported using the financing method of accounting, in which the Companys investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding.
Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged off to the allowance as they are deemed uncollectible.
Direct financing leases are generally placed in a non-accrual status (i.e., no revenue is recognized) and deemed impaired when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon managements judgment, the related direct financing leases may be placed on 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 lease payments is probable. Until such time, all payments received are applied only against outstanding principal balances.
19
Recorded values of the Companys asset portfolio are periodically reviewed for impairment. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the 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. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date.
The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.
The Companys principal decision makers are the Managing Members Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer. The Company believes that its equipment leasing business operates as one reportable segment because: a) the Company measures profit and loss at the equipment portfolio level as a whole; b) the principal decision makers do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Company does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business around geographic areas.
Certain of the Companys lessee customers have international operations. In these instances, the Company 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 Company to track, on an asset-by-asset, day-by-day basis, where these assets are deployed.
The primary geographic region in which the Company sought leasing opportunities was North America. For the years ended December 31, 2015 and 2014, and as of December 31, 2015 and 2014, 100% of the Companys operating revenues and long-lived assets relate to customers domiciled in North America.
The Company records prepayments on operating leases as a liability under the caption of unearned operating lease income. The liability is recorded when prepayments are received and recognized as operating lease revenue over the period to which the prepayments relate using a straight-line method.
The Company is treated as a partnership for federal income tax purposes. Pursuant to the provisions of Section 701 of the Internal Revenue Code, a partnership is not subject to federal income taxes. Accordingly, the Company has provided current income taxes for only those states, which levy income taxes on partnerships. For the year ended December 31, 2015, the Company did not record a provision for state income taxes. Such provision totaled $3 thousand for the prior year.
The Company does not have any entity level uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions and is generally subject to examination by U.S. federal (or state and local) income tax authorities for three years from the filing of a tax return.
20
The tax bases of the Companys net assets and liabilities vary from the amounts presented in these financial statements at December 31, 2015 and 2014 as follows (in thousands):
2015 | 2014 | |||||||
Financial statement basis of net assets | $ | 4,114 | $ | 5,704 | ||||
Tax basis of net assets (unaudited) | 7,492 | 8,433 | ||||||
Difference | $ | (3,378 | ) | $ | (2,729 | ) |
The primary differences between the tax bases of net assets and the amounts recorded in the financial statements are the result of differences in accounting for syndication costs and differences between the depreciation methods used in the financial statements and the Companys tax returns.
The following reconciles the net income reported in these financial statements to the income reported on the Companys federal tax returns (unaudited) for the years ended December 31, 2015 and 2014 (in thousands):
2015 | 2014 | |||||||
Net income per financial statements | $ | 2,808 | $ | 2,156 | ||||
Tax adjustments (unaudited): |
||||||||
Adjustment to depreciation expense | 227 | 395 | ||||||
Provision for losses and doubtful accounts | | (3 | ) | |||||
Adjustments to revenues/other expenses | 25 | (24 | ) | |||||
Adjustments to gain on sales of assets | 396 | 673 | ||||||
Income per federal tax return (unaudited) | $ | 3,456 | $ | 3,197 |
Net income and distributions per Unit are based upon the weighted average number of Other Members Units outstanding during the year.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year and in August 2015, issued Revenue from Contracts from Customers (Topic 606): Deferral of the Effective Date (ASU 2015-14). ASU 2015-14 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company evaluated the impact of the new standard on its financial statements and has determined that such impact is virtually non-existent as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Companys revenues.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (ASU-2014-15). The new standard provides guidance relative to managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on the Companys financial statements or related disclosures.
21
The Company leases equipment to lessees in diversified industries. Leases are subject to AFSs credit committee review. The leases provide for the return of the equipment to the Company upon default.
As of December 31, 2015 and 2014, there were concentrations (defined as greater than or equal to 10%) of equipment leased to lessees in certain industries (as a percentage of total equipment cost) as follows:
2015 | 2014 | |||||||
Transportation, rail | 58 | % | 45 | % | ||||
Transportation, containers | 38 | % | 35 | % |
During 2015 and 2014, certain lessees generated significant portions (defined as greater than or equal to 10%) of the Companys total lease revenues, excluding gains or losses from disposition of assets, as follows:
Percentage of Total Lease Revenues | ||||||||||||
Lessee | Type of Equipment | 2015 | 2014 | |||||||||
Exsif Worldwide Inc. | Transportation, other | 26 | % | 33 | % | |||||||
Interstate Commodities, Inc. | Transportation, rail | 20 | % | 16 | % |
The Companys investment in leases consists of the following (in thousands):
Balance December 31, 2014 | Reclassifications & Additions/ Dispositions |
Depreciation/ Amortization Expense or Amortization of Leases |
Balance December 31, 2015 | |||||||||||||
Net investment in operating leases | $ | 3,697 | $ | (188 | ) | $ | (317 | ) | $ | 3,192 | ||||||
Net investment in direct financing leases | 18 | | (6 | ) | 12 | |||||||||||
Assets held for sale or lease, net | 785 | (65 | ) | | 720 | |||||||||||
Total | $ | 4,500 | $ | (253 | ) | $ | (323 | ) | $ | 3,924 |
Recorded values of the Companys leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the assets lease contract and undiscounted future rents from the existing lease contract. 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 marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.
As a result of these reviews, management determined that no impairment losses existed during 2015 and 2014.
22
The Company 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 Companys equipment totaled $317 thousand and $455 thousand for the respective years ended December 31, 2015 and 2014.
All of the remaining property on lease, including capitalized improvements, were acquired during the years 1999 through 2015.
Property on operating leases consists of the following (in thousands):
Balance December 31, 2014 | Additions | Reclassifications or Dispositions | Balance December 31, 2015 | |||||||||||||
Transportation, rail | $ | 14,263 | $ | 143 | $ | 308 | $ | 14,714 | ||||||||
Containers | 11,603 | | (2,635 | ) | 8,968 | |||||||||||
Other | 350 | | (350 | ) | | |||||||||||
26,216 | 143 | (2,677 | ) | 23,682 | ||||||||||||
Less accumulated depreciation | (22,519 | ) | (317 | ) | 2,346 | (20,490 | ) | |||||||||
Total | $ | 3,697 | $ | (174 | ) | $ | (331 | ) | $ | 3,192 |
The average estimated residual value for assets on operating leases was 11% of the assets original cost at both December 31, 2015 and 2014.
The Company earns revenues from its containers, marine vessel and certain other 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, and totaled $1.3 million and $1.5 million for the years ended December 31, 2015 and 2014, respectively.
As of December 31, 2015 and 2014, the Company had no operating leases in non-accrual status.
During December 2014, aviation equipment formerly leased under an operating lease contract was re-leased as a direct financing lease. Such equipment comprised the Funds total investment in direct financing leases as of December 31, 2015 and 2014. The following lists the components of the Companys investment in direct financing leases as of December 31, 2015 and 2014 (in thousands):
2015 | 2014 | |||||||
Total minimum lease payments receivable | $ | 6 | $ | 28 | ||||
Estimated residual values of leased equipment (unguaranteed) | 10 | 10 | ||||||
Investment in direct financing leases | 16 | 38 | ||||||
Less unearned income | (4 | ) | (20 | ) | ||||
Net investment in direct financing leases | $ | 12 | $ | 18 |
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At December 31, 2015, the aggregate amount of future minimum lease payments receivable is as follows (in thousands):
Operating Leases | Direct Financing Leases | Total | ||||||||||
Year ending December 31, 2016 | $ | 2,062 | $ | 6 | $ | 2,068 | ||||||
2017 | 1,644 | | 1,644 | |||||||||
2018 | 1,285 | | 1,285 | |||||||||
2019 | 1,016 | | 1,016 | |||||||||
2020 | 283 | | 283 | |||||||||
$ | 6,290 | $ | 6 | $ | 6,296 |
The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of December 31, 2015 and 2014, the respective useful lives of each category of lease assets in the Companys portfolio are as follows (in years):
Equipment category | Useful Life | |||
Transportation, rail | 35 40 | |||
Containers | 20 30 | |||
Aviation equipment | 15 20 |
The terms of the Operating Agreement provide that AFS and/or affiliates are entitled to receive certain fees for equipment management and resale and for management of the Company.
The Operating Agreement allows for the reimbursement of costs incurred by AFS in providing administrative services to the Company. Administrative services provided include Company accounting, finance/treasury, 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 management of equipment.
Each of ATEL Leasing Corporation (ALC) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Company. 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 Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.
AFS and/or affiliates earned fees and billed for reimbursements, pursuant to the Operating Agreement as follows during each of the years ended December 31, 2015 and 2014 (in thousands):
2015 | 2014 | |||||||
Asset management fees to Managing Member | $ | 222 | $ | 206 | ||||
Cost reimbursements to Managing Member | 308 | 255 | ||||||
$ | 530 | $ | 461 |
The Funds Operating 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
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AFS and its affiliates through the end of its term, and will therefore continue to incur reimbursable administrative expenses in each year. The Fund has determined that payment of any amounts in excess of the annual and cumulative limits is not probable, and the date any portion of such amount may be paid, if ever, is uncertain. When the Fund completes its liquidation stage and terminates, any unpaid amount will expire unpaid, with no claim by AFS or its affiliates against any liquidation proceeds or any party for the unpaid balance. For the year ended December 31, 2015, the amount of reimbursable expense billed to the fund did not exceed either the annual or the cumulative limitations. It is not anticipated that any further billings to the Fund will equal or exceed the annual or cumulative reimbursable expense limitation. Such is reflective of the continued diminishing Fund asset base over which reimbursements are calculated.
The Company enters into contracts that contain a variety of indemnifications. The Companys maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
The Managing Member knows of no facts or circumstances that would make the Companys contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Company 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 Companys similar commitments is remote. Should any such indemnification obligation become payable, the Company would separately record and/or disclose such liability in accordance with GAAP.
As of December 31, 2015 and 2014, 13,560,188 Units were issued and outstanding. The Company was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial members (50 Units).
The Company has the right, exercisable at the Managing Members 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 Company 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 Liability Company. The repurchase would be at the discretion of the Managing Member on terms it determines to be appropriate under given circumstances, in the event that the Managing Member deems such repurchase to be in the best interest of the Company; provided, the Company 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 Operating Agreement, the Companys Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Other Members and 7.5% to AFS. In accordance with the terms of the Operating Agreement, additional allocations of income were made to AFS in 2015 and 2014. The amounts allocated were determined so as to bring AFSs ending capital account balance to zero at the end of the year.
Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):
2015 | 2014 | |||||||
Distributions declared | $ | 4,068 | $ | 3,390 | ||||
Weighted average number of Units outstanding | 13,560,188 | 13,560,188 | ||||||
Weighted average distributions per Unit | $ | 0.30 | $ | 0.25 |
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Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
None.
Item 9A. | CONTROLS AND PROCEDURES |
The Companys Managing Members President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (Management), evaluated the effectiveness of the Companys 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 Companys 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.
The Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, who is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Members disclosure controls and procedures, as they are applicable to the Company, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuers management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
The Management of the Managing Member is responsible for establishing and maintaining adequate internal control over financial reporting as that term is defined in Exchange Act Rule 13a-15(f) for the Company, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2015. The internal control process of the Managing Member, as it is applicable to the Company, was designed to provide reasonable assurance to Management regarding the preparation and fair presentation of published financial statements, and includes those policies and procedures that:
(1) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that the Companys receipts and expenditures are being made only in accordance with authorization of the Management of the Managing Member; and |
(2) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements. |
All internal control processes, no matter how well designed, have inherent limitations. Therefore, even those processes determined to be effective can provide only reasonable assurance with respect to the reliability of financial statement preparation and presentation. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management of the Managing Member assessed the effectiveness of its internal control over financial reporting, as it is applicable to the Company, as of December 31, 2015. In making this assessment, it used the criteria set forth in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, Management of the Managing Member concluded that the Managing Members internal control over financial reporting, as it is applicable to the Company, was effective as of December 31, 2015.
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This annual report does not include an attestation report of the Companys independent registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys independent registered public accounting firm pursuant to Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which exempts non-accelerated filers from Section 404(b) of the Sarbanes-Oxley Act of 2002.
There were no changes in the Managing Members internal control over financial reporting, as it is applicable to the Company, during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Managing Members internal control over financial reporting, as it is applicable to the Company.
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Item 10. | DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT |
The registrant is a Limited Liability Company and has no officers or directors.
ATEL Financial Services, LLC (AFS) is the Companys Managing Member or Manager. AFS is controlled by ATEL Capital Group (ACG or ATEL), a holding company formed to control AFS and affiliated companies. The outstanding voting capital stock of ACG is owned 100% by Dean L. Cash.
Each of ATEL Leasing Corporation (ALC) and AFS is a subsidiary under the control of ACG and performs services for the Company. 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.
The officers and directors of ATEL and its affiliates are as follows:
Dean L. Cash | President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member) |
|
Paritosh K. Choksi | Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member) |
|
Vasco H. Morais | Executive Vice President, Secretary and General Counsel of ATEL Financial Services, LLC (Managing Member) |
Dean L. Cash, age 65, became chairman, president and chief executive officer of ATEL in April 2001. Mr. Cash joined ATEL as director of marketing in 1980 and served as a vice president since 1981, executive vice president since 1983 and a director since 1984. Prior to joining ATEL, Mr. Cash was a senior marketing representative for Martin Marietta Corporation, data systems division, from 1979 to 1980. From 1977 to 1979, he was employed by General Electric Corporation, where he was an applications specialist in the medical systems division and a marketing representative in the information services division. Mr. Cash was a systems engineer with Electronic Data Systems from 1975 to 1977, and was involved in maintaining and developing software for commercial applications. Mr. Cash received a B.S. degree in psychology and mathematics in 1972 and an M.B.A. degree with a concentration in finance in 1975 from Florida State University. Mr. Cash is an arbitrator with the American Arbitration Association and is qualified as a registered principal with the Financial Industry Regulatory Authority.
Paritosh K. Choksi, age 62, joined ATEL in 1999 as a director, senior vice president and its chief financial officer. He became its executive vice president and CFO/COO in April 2001. Prior to joining ATEL, Mr. Choksi was chief financial officer at Wink Communications, Inc. from 1997 to 1999. From 1977 to 1997, Mr. Choksi was with Phoenix American Incorporated, a financial services and management company, where he held various positions during his tenure, and was senior vice president, chief financial officer and director when he left the company. Mr. Choksi was involved in all corporate matters at Phoenix and was responsible for Phoenixs capital market needs. He also served on the credit committee overseeing all corporate investments, including its venture lease portfolio. Mr. Choksi was a part of the executive management team which caused Phoenixs portfolio to increase from $50 million in assets to over $2 billion. Mr. Choksi is a member of the board of directors of Syntel, Inc. Mr. Choksi received a bachelor of technology degree in mechanical engineering from the Indian Institute of Technology, Bombay; and an M.B.A. degree from the University of California, Berkeley.
Vasco H. Morais, age 57, joined ATEL in 1989 as general counsel. Mr. Morais manages ATELs legal department, which provides legal and contractual support in the negotiating, documenting, drafting, reviewing and funding of lease transactions. In addition, Mr. Morais advises on general corporate law matters, and assists on securities law issues. From 1986 to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of Americas equipment leasing subsidiaries, providing in-house legal support on the documentation of tax-oriented and non-tax oriented direct and leveraged lease transactions, vendor leasing programs and general corporate matters. Prior to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital Companies in the Corporate and Securities Legal Department involved in drafting and reviewing contracts, advising on corporate law matters and securities law issues. Mr. Morais received a B.A. degree in 1982 from the University of California in Berkeley, a J.D. degree in 1986 from
28
Golden Gate University Law School; and an M.B.A. (Finance) degree from Golden Gate University in 1997. Mr. Morais, an active member of the State Bar of California since 1986, served as co-chair of the Uniform Business Law Section of the State Bar of California and was inducted as a fellow of the American College of Commercial Finance Lawyers in 2010.
The board of directors of the Managing Member acts as the audit committee of the Company. Dean L. Cash and Paritosh K. Choksi are members of the board of directors of the Managing Member and are deemed to be financial experts. They are not independent of the Company.
Based solely on a review of Forms 3, 4, and 5, the Company is not aware of any failures to file reports of beneficial ownership required to be filed during or for the year ended December 31, 2015.
A Code of Ethics that is applicable to the Company, including the Chief Executive Officer and Chief Financial Officer and Chief Operating Officer of its Managing Member, AFS, or persons acting in such capacity on behalf of the Company, is included as Exhibit 14.1 to this report.
The registrant has no officers or directors.
Set forth hereinafter is a description of the nature of remuneration paid and to be paid to ATEL and its Affiliates. The amount of such remuneration paid in 2015 and 2014 is set forth in Item 8 of this report under the caption Financial Statements and Supplementary Data Notes to Financial Statements Related party transactions, at Note 5 thereof, which information is hereby incorporated by reference.
The Company pays AFS an Asset Management Fee in an amount equal to 4.5% of Operating Revenues, which includes Gross Lease Revenues and Cash From Sales or Refinancing. The Asset Management Fee is paid on a monthly basis. The amount of the Asset Management Fee payable in any year is reduced for that year to the extent it would otherwise exceed the Asset Management Fee Limit, as described below. The Asset Management Fee is paid for services rendered by AFS and its affiliates in determining portfolio and investment strategies (i.e., establishing and maintaining the composition of the Equipment portfolio as a whole and the Companys overall debt structure) and generally managing or supervising the management of the Equipment.
AFS supervises performance of among others activities, collection of lease revenues, monitoring compliance by lessees with the lease terms, assuring that Equipment is being used in accordance with all operative contractual arrangements, paying operating expenses and arranging for necessary maintenance and repair of Equipment in the event a lessee fails to do so, monitoring property, sales and use tax compliance and preparation of operating financial data. AFS intends to delegate all or a portion of its duties and the Asset Management Fee to one or more of its affiliates who are in the business of providing such services.
The Asset Management Fee is subject to the Asset Management Fee Limit. The Asset Management Fee Limit is calculated each year during the Companys term by calculating the total fees that would be paid to AFS if AFS were to be compensated on the basis of an alternative fee schedule, to include an Equipment Management Fee, Incentive Management Fee, and Equipment Resale/Re-Leasing Fee, plus AFSs Carried Interest, as described below. To the extent that the amount paid to AFS as the Asset Management Fee plus its Carried Interest for any year would exceed the aggregate amount of fees calculated under this alternative fee schedule for the year, the Asset Management Fee and/or Carried Interest for that year is reduced to equal the maximum aggregate fees under the alternative fee schedule.
29
To the extent any such fees are reduced, the amount of such reduction will be accrued and deferred, and such accrued and deferred compensation would be paid to AFS in a subsequent period, but only if and to the extent that such deferred compensation would be payable within the Asset Management Fee Limit for the subsequent period. Any deferred fees which cannot be paid under the applicable limitations in any subsequent period through the date of liquidation would be forfeited by AFS upon liquidation.
For purposes of the Asset Management Fee Limit, the Company will calculate an alternative schedule of fees, including a hypothetical Equipment Management Fee, Incentive Management Fee, Equipment Resale/Re-Leasing Fee, and Carried Interest as follows:
An Equipment Management Fee will be calculated to equal the lesser of (i) 3.5% of annual Gross Revenues from Operating Leases and 2% of annual Gross Revenues from Full Payout Leases which contain Net Lease Provisions), or (ii) the fees customarily charged by others rendering similar services as an ongoing public activity in the same geographic location and for similar types of equipment. If services with respect to certain Operating Leases are performed by nonaffiliated persons under the active supervision of AFS or its Affiliate, then the amount so calculated shall be 1% of Gross Revenues from such Operating Leases.
An Incentive Management Fee will be calculated to equal 4% of Distributions of Cash from Operations until Holders have received a return of their Original Invested Capital plus a Priority Distribution, and, thereafter, to equal a total of 7.5% of Distributions from all sources, including Sale or Refinancing Proceeds. In subordinating the increase in the Incentive Management Fee to a cumulative return of a Holders Original Invested Capital plus a Priority Distribution, a Holder would be deemed to have received Distributions of Original Invested Capital only to the extent that Distributions to the Holder exceed the amount of the Priority Distribution.
An Equipment Resale Fee will be calculated in an amount equal to the lesser of (i) 3% of the sale price of the Equipment, or (ii) one-half the normal competitive equipment sale commission charged by unaffiliated parties for resale services. Such fee would apply only after the Holders have received a return of their Original Invested Capital plus a Priority Distribution.
An Equipment Re-Leasing Fee, in connection with the releasing of Equipment to lessees other than previous lessees or their affiliates, will be calculated in an amount equal to the lesser of (i) the competitive rate for comparable services for similar equipment, or (ii) 2% of the gross rental payments derived from the re-lease of such Equipment, payable out of each rental payment received by the Company from such re-lease.
As defined in the Operating Agreement, the Companys Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Members and 7.5% to AFS. In accordance with the terms of the Operating Agreement, additional allocations of income were made to AFS in 2015 and 2014. The amounts allocated were determined to bring AFSs ending capital account balance to zero at the end of each year. See financial statements as set forth in Part II, Item 8, Financial Statements and Supplementary Data, of this report for amounts allocated to AFS in 2015 and 2014.
Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
At December 31, 2015, no investor is known to hold beneficially more than 5% of the issued and outstanding Units.
The parent of AFS is the beneficial owner of Limited Liability Company Units as follows:
(1) Title of Class |
(2) Name and Address of Beneficial Owner |
(3) Amount and Nature of Beneficial Ownership |
(4) Percent of Class |
|||
Limited Liability Company Units | ATEL Capital Group The Transamercia Pyramid 600 Montgomery Street, 9th Floor San Francisco, CA 94111 |
Initial Limited Liability Company Units 25 Units ($250) (owned by wife) |
0.0002% |
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The Members have the right, by vote of the Members owning more than 50% of the outstanding Limited Liability Company Units, to remove the Managing Member.
AFS may at any time call a meeting of the Members or a vote of the Members without a meeting, on matters on which they are entitled to vote, and shall call such meeting or for vote without a meeting following receipt of a written request therefore of Members holding 10% or more of the total outstanding Limited Liability Company Units.
The responses to Item 1 of this report under the caption Equipment Leasing Activities, Item 8 of this report under the caption Financial Statements and Supplementary Data Notes to Financial Statements Related party transactions at Note 5 thereof, and Item 11 of this report under the caption Executive Compensation, are hereby incorporated by reference.
During the years ended December 31, 2015 and 2014, the Company incurred audit fees with its principal auditors totaling $72 thousand and $67 thousand, respectively.
Audit fees consist of the aggregate fees and expenses billed in connection with the audit of the Companys annual financial statements and the review of the financial statements included in the Companys quarterly reports on Form 10-Q.
The board of directors of the Managing Member acts as the audit committee of the Company. Engagements for audit services, audit related services and tax services are approved in advance by the Chief Financial Officer of the Managing Member acting on behalf of the board of directors of the Managing Member in its role as the audit committee of the Company.
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(a) | Financial Statements and Schedules |
1. | Financial Statements |
2. | Financial Statement Schedules |
All 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) | Exhibits |
(3) and (4) Amended and Restated Limited Liability Company Operating Agreement, included as exhibit B to the Prospectus filed as exhibit 28.1 to the Registrants Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-62477), is hereby incorporated herein by reference
(14.1) | Code of Ethics |
(31.1) | Certification of Dean L. Cash pursuant to Rules 13a-14(a)/15d-14(a) |
(31.2) | Certification of Paritosh K. Choksi pursuant to Rules 13a-14(a)/15d-14(a) |
(32.1) | Certification of Dean L. Cash pursuant to 18 U.S.C. section 1350 |
(32.2) | Certification of Paritosh K. Choksi pursuant to 18 U.S.C. section 1350 |
(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 |
32
Pursuant to the requirements of Section 13 or 15(d) 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: March 29, 2016
ATEL Capital Equipment Fund VIII, LLC
(Registrant)
By: ATEL Financial Services, LLC, |
By: /s/ Dean L. Cash |
By: /s/ Paritosh K. Choksi |
By: /s/ Samuel Schussler |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the persons in the capacities and on the dates indicated.
SIGNATURE | CAPACITIES | DATE | ||
/s/ Dean L. Cash Dean L. Cash |
President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member) |
March 29, 2016 | ||
/s/ Paritosh K. Choksi Paritosh K. Choksi |
Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member) |
March 29, 2016 | ||
/s/ Samuel Schussler Samuel Schussler |
Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (Managing Member) |
March 29, 2016 |
No proxy materials have been or will be sent to security holders. An annual report will be furnished to security holders subsequent to the filing of this report on Form 10-K, and copies thereof will be furnished supplementally to the Commission when forwarded to the security holders.
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Exhibit 14.1
This Code of Ethics is applicable to ATEL Capital Equipment Fund VIII, LLC (Fund VIII), including the Chief Executive Officer and Chief Financial and Operating Officer of its Manager, ATEL Financial Services, LLC (AFS), or persons acting in such capacity (collectively the Covered Officers) on behalf of Fund VIII, referred to herein as the Company.
Accordingly, under the Securities and Exchange Commissions interpretation of its disclosure rules, the Board of Directors of AFS functions as the de facto audit committee for the Company with respect to all procedural and disclosure requirements applicable to audit committees under Securities and Exchange Commission rules. The Board of Directors shall have oversight responsibility over the activities of the Company for purposes of this Code of Ethics.
The Company is proud of the values with which it conducts business. It has and will continue to uphold the highest levels of business ethics and personal integrity in all types of transactions and interactions. To this end, this Code of Ethics serves to (1) emphasize the Companys commitment to ethics and compliance with the law; (2) set forth basic standards of ethical and legal behavior; (3) provide reporting mechanisms for known or suspected ethical or legal violations; and (4) help prevent and detect wrongdoing. This Code of Ethics is intended to augment and supplement the standard of ethics and business conduct expected of all Company employees, and its limitation to Covered Officers is not intended to limit the obligation of all Company employees to adhere to the highest standards of business ethics and integrity in all transactions and interactions conducted while in the Companys employ.
Given the variety and complexity of ethical questions that may arise in the course of business of the Company, this Code of Ethics serves only as a rough guide. Confronted with ethically ambiguous situations, the Covered Officers should remember the Companys commitment to the highest ethical standards and seek independent advice, where necessary, to ensure that all actions they take on behalf of the Company honor this commitment.
The Covered Officers shall behave honestly and ethically at all times and with all people. They shall act in good faith, with due care, and shall engage only in fair and open competition, by treating ethically competitors, suppliers, customers, and colleagues. They shall not misrepresent facts or engage in illegal, unethical, or anti-competitive practices for personal or professional gain.
This fundamental standard of honest and ethical conduct extends to the handling of conflicts of interest. The Covered Officers shall avoid any actual, potential, or apparent conflicts of interest with the Company, and any personal activities, investments, or associations that might give rise to such conflicts. They shall not compete with or use the Company, for personal gain, self-deal, or take advantage of any corporate opportunities. They shall act on behalf of the Company free from improper influence or the appearance of improper influence on their judgment or performance of duties. A Covered Officer shall disclose any material transaction or relationship that reasonably could be expected to give rise to such a conflict to the Companys General Counsel or a member of the Companys Board of Directors. No action may be taken with respect to such transaction or party unless and until the Companys Board of Directors has approved such action.
Notwithstanding the foregoing, it is understood, as fully disclosed in the offering documents for the Company, that AFS as managing member of the Company has certain inherent conflicts of interest. The provisions of the Companys Operating Agreement have been drafted to address the obligations, restrictions and limitations on the power and authority of AFS to manage the Companys affairs, including restrictions prohibiting or limiting the terms of any transactions in which conflicts of interest may arise. Furthermore, AFS has a fiduciary duty to the Company as its
manager. It is therefore expressly understood by the Company and the Covered Officers that any and all actions by AFS and its personnel that comply with the provisions of the Companys Operating Agreement, and which are consistent with AFSs fiduciary duty to the Company, will not be considered material transactions or relationships which require disclosure or reporting under this Code of Ethics.
In reports and documents filed with or submitted to the Securities and Exchange Commission and other regulators by the Company and in other public communications made by the Company, the Covered Officers shall make disclosures that are full, fair, accurate, timely, and understandable. The Covered Officers shall provide thorough and accurate financial and accounting data for inclusion in such disclosures. The Covered Officers shall not knowingly conceal or falsify information, misrepresent material facts, or omit material facts necessary to avoid misleading the Companys independent public auditors or investors.
In conducting the business of the Company, the Covered Officers shall comply with applicable governmental laws, rules, and regulations at all levels of government in the United States and in any non-U.S. jurisdiction in which the Company does business, as well as applicable rules and regulations of self-regulatory organizations of which the Company is a member. If the Covered Officer is unsure whether a particular action would violate an applicable law, rule, or regulation, he or she should seek the advice of inside counsel (if available), and, where necessary, outside counsel before undertaking it.
The Covered Officers will promptly bring to the attention of the Companys General Counsel or the Board of Directors any information concerning a material violation of any of the laws, rules or regulations applicable to the Company and the operation of its businesses, by the Company or any agent thereof, or of violation of this Code of Ethics. The Companys General Counsel will investigate reports of violations and the findings communicated to the Companys Board of Directors.
If the Companys Board of Directors determines that this Code of Ethics has been violated, either directly, by failure to report a violation, or by withholding information related to a violation, it may discipline the offending Covered Officer for non-compliance with penalties up to and including termination of employment. Violations of this Code of Ethics may also constitute violations of law and may result in criminal penalties and civil liabilities for the offending Covered Officer and the Company.
Exhibit 31.1
I, Dean L. Cash, certify that:
1. | I have reviewed this annual report on Form 10-K of ATEL Capital Equipment Fund VIII, LLC; |
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: March 29, 2016
/s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member) |
Exhibit 31.2
I, Paritosh K. Choksi, certify that:
1. | I have reviewed this annual report on Form 10-K of ATEL Capital Equipment Fund VIII, LLC; |
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: March 29, 2016
/s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member) |
Exhibit 32.1
In connection with the Annual Report of ATEL Capital Equipment Fund VIII, LLC (the Company) on Form 10-K for the year ended December 31, 2015 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, Managing Member of the Company, 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 Company. |
Date: March 29, 2016
/s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
In connection with the Annual Report of ATEL Capital Equipment Fund VIII, LLC (the Company) on Form 10-K for the year ended December 31, 2015 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, Managing Member of the Company, 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 Company. |
Date: March 29, 2016
/s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Feb. 29, 2016 |
Jun. 30, 2015 |
|
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2015 | ||
Document Fiscal Year Focus | 2015 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | ATEL CAPITAL EQUIPMENT FUND VIII LLC | ||
Entity Central Index Key | 0001069152 | ||
Current Fiscal Year End Date | --12-31 | ||
Trading Symbol | zzhjb | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Public Float | $ 0 | ||
Entity Units Outstanding | 13,560,188 |
Balance Sheets - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
ASSETS | ||
Cash and cash equivalents | $ 11 | $ 928 |
Accounts receivable, net | 476 | 558 |
Prepaid expenses and other assets | 31 | 21 |
Investments in equipment and leases, net of accumulated depreciation of $25,276 as of December 31, 2015 and $28,229 as of December 31, 2014 | 3,924 | 4,500 |
Total assets | 4,442 | 6,007 |
Accounts payable and accrued liabilities: | ||
Managing Member | 125 | 150 |
Other | 135 | 105 |
Unearned operating lease income | 68 | 48 |
Total liabilities | $ 328 | $ 303 |
Commitments and contingencies | ||
Members' capital: | ||
Managing Member | ||
Other Members | $ 4,114 | $ 5,704 |
Total Members' capital | 4,114 | 5,704 |
Total liabilities and Members' capital | $ 4,442 | $ 6,007 |
Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Balance Sheets [Abstract] | ||
Investments in equipment and leases, accumulated depreciation | $ 25,276 | $ 28,229 |
Statements of Income - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Leasing activities: | ||
Operating leases | $ 3,627 | $ 3,571 |
Direct financing leases | 16 | 15 |
Gain on sales of assets | 889 | 440 |
Interest | 1 | |
Other revenue | 2 | 4 |
Total revenues | 4,534 | 4,031 |
Expenses: | ||
Depreciation of operating lease assets | 317 | 455 |
Asset management fees to Managing Member | 222 | 206 |
Railcar maintenance | 332 | 370 |
Cost reimbursements to Managing Member | 308 | 255 |
Other management fees | 95 | 101 |
Railcar storage fees | 62 | 95 |
Professional fees | 185 | 179 |
Insurance | 38 | 42 |
Reversal of provision for credit losses | (3) | |
Taxes on income and franchise fees | 3 | |
Postage | 11 | 8 |
Printing and photocopying | 24 | 17 |
Freight and shipping | 24 | 55 |
Other | 108 | 92 |
Total expenses | 1,726 | 1,875 |
Net income | 2,808 | 2,156 |
Net income: | ||
Managing Member | 330 | 275 |
Other Members | 2,478 | 1,881 |
Net income | $ 2,808 | $ 2,156 |
Net income per Limited Liability Company Unit (Other Members) | $ 0.18 | $ 0.14 |
Weighted average number of Units outstanding | 13,560,188 | 13,560,188 |
Statements of Changes in Members' Capital - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Beginning Balance (in Units) | 13,560,188 | |
Beginning Balance | $ 5,704 | $ 7,213 |
Distributions to Other Members | (4,068) | (3,390) |
Distributions to Managing Member | (330) | (275) |
Net income | $ 2,808 | $ 2,156 |
Ending Balance (in Units) | 13,560,188 | 13,560,188 |
Ending Balance | $ 4,114 | $ 5,704 |
Other Members [Member] | ||
Beginning Balance (in Units) | 13,560,188 | 13,560,188 |
Beginning Balance | $ 5,704 | $ 7,213 |
Distributions to Other Members | (4,068) | (3,390) |
Net income | $ 2,478 | $ 1,881 |
Ending Balance (in Units) | 13,560,188 | 13,560,188 |
Ending Balance | $ 4,114 | $ 5,704 |
Managing Member [Member] | ||
Distributions to Managing Member | (330) | (275) |
Net income | $ 330 | $ 275 |
Statements of Changes in Members' Capital (Parenthetical) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Statements of Changes in Members' Capital [Abstract] | ||
Weighted average distributions per Unit | $ 0.30 | $ 0.25 |
Organization and Limited Liability Company Matters |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
Organization and Limited Liability Company Matters [Abstract] | |
Organization and Limited Liability Company Matters | 1. Organization and Limited Liability Company matters:
ATEL Capital Equipment Fund VIII, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on July 31, 1998. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. The Managing Member of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company. The Company may continue until December 31, 2019. Each Member’s personal liability for obligations of the Company generally will be limited to the amount of their respective contributions and rights to undistributed profits and assets of the Company.
The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. On January 13, 1999, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities). Gross contributions in the amount of $135.7 million (13,570,188 units) were received as of November 30, 2000, inclusive of $500 of initial Member’s capital investment and $100 of AFS’ capital investment. The offering was terminated on November 30, 2000. As of December 31, 2015, 13,560,188 Units were issued and outstanding.
The Company’s principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Company’s invested capital; (ii) generates regular distributions to the Members 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, 2006, and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by its Limited Liability Company Operating Agreement (“Operating Agreement”), as amended.
Pursuant to the Operating Agreement, AFS and/or its affiliates receive compensation and reimbursements for services rendered on behalf of the Company (see Note 5). The Company 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 December 31, 2015, the Company continues in the liquidation phase of its life cycle as defined in the Operating Agreement.
|
Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 2. Summary of significant accounting policies:
Basis of presentation:
The accompanying balance sheets as of December 31, 2015 and 2014, and the related statements of income, changes in members’ capital, and cash flows for the years then ended, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to the current year 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.
In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after December 31, 2015, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements.
Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 relate primarily to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.
Cash and cash equivalents:
Cash and cash equivalents include cash in banks and cash equivalent investments such as U.S. Treasury instruments with original and/or purchased maturities of ninety days or less.
Credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, operating and direct financing lease receivables and accounts receivable. The Company places the majority of its cash deposits in noninterest-bearing accounts with financial institutions that have no less than $10 billion in assets. Such deposits are insured up to $250 thousand. The remainder of the Funds’ cash is temporarily invested in U.S. Treasury denominated instruments. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Company. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating and direct financing leases.
Accounts receivable:
Accounts receivable represent the amounts billed under operating and direct financing lease contracts which are currently due to the Company. Allowances for doubtful accounts are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and invoiced amounts. Accounts receivable deemed uncollectible are charged off to the allowance on a specific identification basis. Amounts recovered that were previously written-off are recorded as other income in the period received.
Equipment on operating leases and related revenue recognition:
Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Off-lease equipment is generally not subject to depreciation. The Company depreciates all lease assets, in accordance with guidelines consistent with ASC 840-20-35-3, over the periods of the lease terms contained in each asset’s respective lease contract to the estimated residual value at the end of the lease contract. All lease assets are purchased only concurrent with the execution of a lease commitment by the lessee. Thus, the original depreciation period corresponds with the term of the original lease. Once the term of an original lease contract is completed, the subject property is typically sold to the existing user, re-leased to the existing user, or, when off-lease, is held for sale. Assets which are re-leased continue to be depreciated using the terms of the new lease agreements and the estimated residual values at the end of the new lease terms, adjusted downward as necessary. Assets classified as held-for-sale are carried at the lower of carrying amount, or the fair value less cost to sell (ASC 360-10-35-43).
The Company does not use the equipment held in its portfolio, but holds it solely for lease and ultimate sale. In the course of marketing equipment that has come off-lease, management may determine at some point that re-leasing the assets may provide a superior return for investors and would then execute another lease. Upon entering into a new lease contract, management will estimate the residual value once again and resume depreciation. If, and when, the Company, at any time, determines that depreciation in value may have occurred with respect to an asset held-for-sale, the Company would review the value to determine whether a material reduction in value had occurred and recognize any appropriate impairment. All lease assets, including off-lease assets, are subject to the Company’s quarterly impairment analysis, as described below. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.
Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms vary as to the type of equipment subject to the leases; the needs of the lessees and the terms to be negotiated, but initial leases were generally from 24 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.
Operating leases 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 considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on 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 lease payments is probable. Until such time, revenues are recognized on a cash basis.
Recorded values of the Company’s leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the asset’s lease contract and undiscounted future rents from the existing lease contract. 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 marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.
The Company earns revenues from its containers, marine vessel and certain other assets based on utilization of such assets or through fixed term leases. Contingent rentals and the associated expenses are recorded when earned and/or incurred. From time to time, the Company incurs “drydocking” costs on its vessel. Drydocking costs include labor and material costs related to refurbishing, overhauling and/or replacing engine and other major mechanical components of the vessel, hull maintenance and other repairs that bring the vessel into seaworthy compliance with U.S. marine codes in order to have it certified as available for charter. Such drydocking costs are capitalized and depreciated over the period between scheduled drydockings, which generally occur every 24 to 30 months.
Direct financing leases and related revenue recognition:
Income from direct financing lease transactions is reported using the financing method of accounting, in which the Company’s investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding.
Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged off to the allowance as they are deemed uncollectible.
Direct financing leases are generally placed in a non-accrual status (i.e., no revenue is recognized) and deemed impaired when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related direct financing leases may be placed on 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 lease payments is probable. Until such time, all payments received are applied only against outstanding principal balances.
Asset valuation:
Recorded values of the Company’s asset portfolio are periodically reviewed for impairment. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date.
Segment reporting:
The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.
The Company’s principal decision makers are the Managing Member’s Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer. The Company believes that its equipment leasing business operates as one reportable segment because: a) the Company measures profit and loss at the equipment portfolio level as a whole; b) the principal decision makers do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Company does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business around geographic areas.
Certain of the Company’s lessee customers have international operations. In these instances, the Company 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 Company to track, on an asset-by-asset, day-by-day basis, where these assets are deployed.
The primary geographic region in which the Company sought leasing opportunities was North America. For the years ended December 31, 2015 and 2014, and as of December 31, 2015 and 2014, 100% of the Company’s operating revenues and long-lived assets relate to customers domiciled in North America.
Unearned operating lease income:
The Company records prepayments on operating leases as a liability under the caption of unearned operating lease income. The liability is recorded when prepayments are received and recognized as operating lease revenue over the period to which the prepayments relate using a straight-line method.
Income taxes:
The Company is treated as a partnership for federal income tax purposes. Pursuant to the provisions of Section 701 of the Internal Revenue Code, a partnership is not subject to federal income taxes. Accordingly, the Company has provided current income taxes for only those states, which levy income taxes on partnerships. For the year ended December 31, 2015, the Company did not record a provision for state income taxes. Such provision totaled $3 thousand for the prior year.
The Company does not have any entity level uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions and is generally subject to examination by U.S. federal (or state and local) income tax authorities for three years from the filing of a tax return.
The tax bases of the Company’s net assets and liabilities vary from the amounts presented in these financial statements at December 31, 2015 and 2014 as follows (in thousands):
The primary differences between the tax bases of net assets and the amounts recorded in the financial statements are the result of differences in accounting for syndication costs and differences between the depreciation methods used in the financial statements and the Company’s tax returns.
The following reconciles the net income reported in these financial statements to the income reported on the Company’s federal tax returns (unaudited) for the years ended December 31, 2015 and 2014 (in thousands):
Per unit data:
Net income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the year.
Recent accounting pronouncements:
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year and in August 2015, issued Revenue from Contracts from Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company evaluated the impact of the new standard on its financial statements and has determined that such impact is virtually non-existent as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Company’s revenues.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements — Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU-2014-15”). The new standard provides guidance relative to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on the Company’s financial statements or related disclosures.
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Concentration of Credit Risk and Major Customers |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration of Credit Risk and Major Customers [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration of Credit Risk and Major Customers | 3. Concentration of credit risk and major customers:
The Company leases equipment to lessees in diversified industries. Leases are subject to AFS’s credit committee review. The leases provide for the return of the equipment to the Company upon default.
As of December 31, 2015 and 2014, there were concentrations (defined as greater than or equal to 10%) of equipment leased to lessees in certain industries (as a percentage of total equipment cost) as follows:
During 2015 and 2014, certain lessees generated significant portions (defined as greater than or equal to 10%) of the Company’s total lease revenues, excluding gains or losses from disposition of assets, as follows:
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Investments in Equipment and Leases, Net |
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Investments in Equipment and Leases, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Equipment and Leases, Net | 4. Investments in equipment and leases, net:
The Company’s investment in leases consists of the following (in thousands):
Impairment of investments in leases and assets held for sale or lease:
Recorded values of the Company’s leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the asset’s lease contract and undiscounted future rents from the existing lease contract. 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 marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.
As a result of these reviews, management determined that no impairment losses existed during 2015 and 2014.
The Company 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 Company’s equipment totaled $317 thousand and $455 thousand for the respective years ended December 31, 2015 and 2014.
All of the remaining property on lease, including capitalized improvements, were acquired during the years 1999 through 2015.
Operating leases:
Property on operating leases consists of the following (in thousands):
The average estimated residual value for assets on operating leases was 11% of the assets’ original cost at both December 31, 2015 and 2014.
The Company earns revenues from its containers, marine vessel and certain other 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, and totaled $1.3 million and $1.5 million for the years ended December 31, 2015 and 2014, respectively.
As of December 31, 2015 and 2014, the Company had no operating leases in non-accrual status.
Direct financing leases:
During December 2014, aviation equipment formerly leased under an operating lease contract was re-leased as a direct financing lease. Such equipment comprised the Fund’s total investment in direct financing leases as of December 31, 2015 and 2014. The following lists the components of the Company’s investment in direct financing leases as of December 31, 2015 and 2014 (in thousands):
At December 31, 2015, the aggregate amount of future minimum lease payments receivable is as follows (in thousands):
The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of December 31, 2015 and 2014, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):
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Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||
Related Party Transactions | 5. Related party transactions:
The terms of the Operating Agreement provide that AFS and/or affiliates are entitled to receive certain fees for equipment management and resale and for management of the Company.
The Operating Agreement allows for the reimbursement of costs incurred by AFS in providing administrative services to the Company. Administrative services provided include Company accounting, finance/treasury, 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 management of equipment.
Each of ATEL Leasing Corporation (“ALC”) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Company. 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 Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.
AFS and/or affiliates earned fees and billed for reimbursements, pursuant to the Operating Agreement as follows during each of the years ended December 31, 2015 and 2014 (in thousands):
The Fund’s Operating 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. The Fund has determined that payment of any amounts in excess of the annual and cumulative limits is not probable, and the date any portion of such amount may be paid, if ever, is uncertain. When the Fund completes its liquidation stage and terminates, any unpaid amount will expire unpaid, with no claim by AFS or its affiliates against any liquidation proceeds or any party for the unpaid balance. For the year ended December 31, 2015, the amount of reimbursable expense billed to the fund did not exceed either the annual or the cumulative limitations. It is not anticipated that any further billings to the Fund will equal or exceed the annual or cumulative reimbursable expense limitation. Such is reflective of the continued diminishing Fund asset base over which reimbursements are calculated.
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Guarantees |
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Dec. 31, 2015 | |
Guarantees [Abstract] | |
Guarantees | 6. Guarantees:
The Company enters into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
The Managing Member knows of no facts or circumstances that would make the Company’s contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Company 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 Company’s similar commitments is remote. Should any such indemnification obligation become payable, the Company would separately record and/or disclose such liability in accordance with GAAP.
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Members' Capital |
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Members' Capital [Abstract] | |||||||||||||||||||||||||||||||
Members' Capital | 7. Members’ capital:
As of December 31, 2015 and 2014, 13,560,188 Units were issued and outstanding. The Company was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial members (50 Units).
The Company has the right, exercisable at the Managing Member’s 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 holder’s capital account. The Company is otherwise permitted, but not required, to repurchase Units upon a holder’s request. The repurchase of Fund units is made in accordance with Section 13 of the Amended and Restated Agreement of Limited Liability Company. The repurchase would be at the discretion of the Managing Member on terms it determines to be appropriate under given circumstances, in the event that the Managing Member deems such repurchase to be in the best interest of the Company; provided, the Company 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 Operating Agreement, the Company’s Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Other Members and 7.5% to AFS. In accordance with the terms of the Operating Agreement, additional allocations of income were made to AFS in 2015 and 2014. The amounts allocated were determined so as to bring AFS’s ending capital account balance to zero at the end of the year.
Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):
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Summary of Significant Accounting Policies (Policy) |
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation |
Basis of presentation:
The accompanying balance sheets as of December 31, 2015 and 2014, and the related statements of income, changes in members’ capital, and cash flows for the years then ended, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to the current year 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.
In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after December 31, 2015, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements.
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Use of Estimates | Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 relate primarily to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.
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Cash and Cash Equivalents | Cash and cash equivalents:
Cash and cash equivalents include cash in banks and cash equivalent investments such as U.S. Treasury instruments with original and/or purchased maturities of ninety days or less.
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Credit Risk | Credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, operating and direct financing lease receivables and accounts receivable. The Company places the majority of its cash deposits in noninterest-bearing accounts with financial institutions that have no less than $10 billion in assets. Such deposits are insured up to $250 thousand. The remainder of the Funds’ cash is temporarily invested in U.S. Treasury denominated instruments. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Company. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating and direct financing leases.
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Accounts Receivable | Accounts receivable:
Accounts receivable represent the amounts billed under operating and direct financing lease contracts which are currently due to the Company. Allowances for doubtful accounts are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and invoiced amounts. Accounts receivable deemed uncollectible are charged off to the allowance on a specific identification basis. Amounts recovered that were previously written-off are recorded as other income in the period received.
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Equipment on Operating Leases and Related Revenue Recognition | Equipment on operating leases and related revenue recognition:
Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Off-lease equipment is generally not subject to depreciation. The Company depreciates all lease assets, in accordance with guidelines consistent with ASC 840-20-35-3, over the periods of the lease terms contained in each asset’s respective lease contract to the estimated residual value at the end of the lease contract. All lease assets are purchased only concurrent with the execution of a lease commitment by the lessee. Thus, the original depreciation period corresponds with the term of the original lease. Once the term of an original lease contract is completed, the subject property is typically sold to the existing user, re-leased to the existing user, or, when off-lease, is held for sale. Assets which are re-leased continue to be depreciated using the terms of the new lease agreements and the estimated residual values at the end of the new lease terms, adjusted downward as necessary. Assets classified as held-for-sale are carried at the lower of carrying amount, or the fair value less cost to sell (ASC 360-10-35-43).
The Company does not use the equipment held in its portfolio, but holds it solely for lease and ultimate sale. In the course of marketing equipment that has come off-lease, management may determine at some point that re-leasing the assets may provide a superior return for investors and would then execute another lease. Upon entering into a new lease contract, management will estimate the residual value once again and resume depreciation. If, and when, the Company, at any time, determines that depreciation in value may have occurred with respect to an asset held-for-sale, the Company would review the value to determine whether a material reduction in value had occurred and recognize any appropriate impairment. All lease assets, including off-lease assets, are subject to the Company’s quarterly impairment analysis, as described below. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.
Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms vary as to the type of equipment subject to the leases; the needs of the lessees and the terms to be negotiated, but initial leases were generally from 24 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.
Operating leases 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 considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on 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 lease payments is probable. Until such time, revenues are recognized on a cash basis.
Recorded values of the Company’s leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the asset’s lease contract and undiscounted future rents from the existing lease contract. 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 marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.
The Company earns revenues from its containers, marine vessel and certain other assets based on utilization of such assets or through fixed term leases. Contingent rentals and the associated expenses are recorded when earned and/or incurred. From time to time, the Company incurs “drydocking” costs on its vessel. Drydocking costs include labor and material costs related to refurbishing, overhauling and/or replacing engine and other major mechanical components of the vessel, hull maintenance and other repairs that bring the vessel into seaworthy compliance with U.S. marine codes in order to have it certified as available for charter. Such drydocking costs are capitalized and depreciated over the period between scheduled drydockings, which generally occur every 24 to 30 months.
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Direct Financing Leases and Related Revenue Recognition | Direct financing leases and related revenue recognition:
Income from direct financing lease transactions is reported using the financing method of accounting, in which the Company’s investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding.
Allowances for losses on direct financing leases are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged off to the allowance as they are deemed uncollectible.
Direct financing leases are generally placed in a non-accrual status (i.e., no revenue is recognized) and deemed impaired when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related direct financing leases may be placed on 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 lease payments is probable. Until such time, all payments received are applied only against outstanding principal balances.
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Asset Valuation | Asset valuation:
Recorded values of the Company’s asset portfolio are periodically reviewed for impairment. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date.
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Segment Reporting | Segment reporting:
The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.
The Company’s principal decision makers are the Managing Member’s Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer. The Company believes that its equipment leasing business operates as one reportable segment because: a) the Company measures profit and loss at the equipment portfolio level as a whole; b) the principal decision makers do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Company does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business around geographic areas.
Certain of the Company’s lessee customers have international operations. In these instances, the Company 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 Company to track, on an asset-by-asset, day-by-day basis, where these assets are deployed.
The primary geographic region in which the Company sought leasing opportunities was North America. For the years ended December 31, 2015 and 2014, and as of December 31, 2015 and 2014, 100% of the Company’s operating revenues and long-lived assets relate to customers domiciled in North America.
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Unearned Operating Lease Income | Unearned operating lease income:
The Company records prepayments on operating leases as a liability under the caption of unearned operating lease income. The liability is recorded when prepayments are received and recognized as operating lease revenue over the period to which the prepayments relate using a straight-line method.
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Income Taxes | Income taxes:
The Company is treated as a partnership for federal income tax purposes. Pursuant to the provisions of Section 701 of the Internal Revenue Code, a partnership is not subject to federal income taxes. Accordingly, the Company has provided current income taxes for only those states, which levy income taxes on partnerships. For the year ended December 31, 2015, the Company did not record a provision for state income taxes. Such provision totaled $3 thousand for the prior year.
The Company does not have any entity level uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions and is generally subject to examination by U.S. federal (or state and local) income tax authorities for three years from the filing of a tax return.
The tax bases of the Company’s net assets and liabilities vary from the amounts presented in these financial statements at December 31, 2015 and 2014 as follows (in thousands):
The primary differences between the tax bases of net assets and the amounts recorded in the financial statements are the result of differences in accounting for syndication costs and differences between the depreciation methods used in the financial statements and the Company’s tax returns.
The following reconciles the net income reported in these financial statements to the income reported on the Company’s federal tax returns (unaudited) for the years ended December 31, 2015 and 2014 (in thousands):
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Per Unit Data | Per unit data:
Net income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the year.
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Recent Accounting Pronouncements | Recent accounting pronouncements:
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year and in August 2015, issued Revenue from Contracts from Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company evaluated the impact of the new standard on its financial statements and has determined that such impact is virtually non-existent as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Company’s revenues.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements — Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU-2014-15”). The new standard provides guidance relative to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on the Company’s financial statements or related disclosures.
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Summary of Significant Accounting Policies (Tables) |
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Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Differences Between Book Value and Tax Basis of Net Assets | The tax bases of the Company’s net assets and liabilities vary from the amounts presented in these financial statements at December 31, 2015 and 2014 as follows (in thousands):
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Reconciliation of Net Income (Loss) Reported in Financial Statements and Federal Tax Return | The following reconciles the net income reported in these financial statements to the income reported on the Company’s federal tax returns (unaudited) for the years ended December 31, 2015 and 2014 (in thousands):
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Concentration of Credit Risk and Major Customers (Tables) |
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Concentration of Credit Risk and Major Customers [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Equipment Leased Credit Risk Concentration | As of December 31, 2015 and 2014, there were concentrations (defined as greater than or equal to 10%) of equipment leased to lessees in certain industries (as a percentage of total equipment cost) as follows:
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Schedule of Major Customers Credit Risk Concentration | During 2015 and 2014, certain lessees generated significant portions (defined as greater than or equal to 10%) of the Company’s total lease revenues, excluding gains or losses from disposition of assets, as follows:
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Investments in Equipment and Leases, Net (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Equipment and Leases, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in Leases | The Company’s investment in leases consists of the following (in thousands):
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Property on Operating Leases | Property on operating leases consists of the following (in thousands):
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Components of Company's Investment in Direct Financing Leases | The following lists the components of the Company’s investment in direct financing leases as of December 31, 2015 and 2014 (in thousands):
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Future Minimum Lease Payments Receivable | At December 31, 2015, the aggregate amount of future minimum lease payments receivable is as follows (in thousands):
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Schedule of Useful Lives of Assets | As of December 31, 2015 and 2014, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):
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Related Party Transactions (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||
Affiliates Earned Commissions and Billed for Reimbursements Pursuant to Operating Agreement | AFS and/or affiliates earned fees and billed for reimbursements, pursuant to the Operating Agreement as follows during each of the years ended December 31, 2015 and 2014 (in thousands):
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Members' Capital (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||
Members Capital [Abstract] | |||||||||||||||||||||||||||||||
Distributions to the Other Members | Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):
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Organization and Limited Liability Company Matters (Narrative) (Details) - USD ($) |
73 Months Ended | 209 Months Ended | ||||
---|---|---|---|---|---|---|
Nov. 30, 2000 |
Jan. 13, 1999 |
Dec. 07, 1998 |
Dec. 31, 2006 |
Dec. 31, 2015 |
Dec. 31, 2014 |
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Organization and Limited Liability Company Matters [Abstract] | ||||||
Business cessation date | Dec. 31, 2019 | |||||
Public offering of Limited Liability Company Units | 15,000,000 | |||||
Public offering of Limited Liability Company Units, price per unit | $ 10 | |||||
Sale of Limited Liability Company Units, number of units | 120,000 | |||||
Proceeds from sale of Limited Liability Company Units | $ 1,200,000 | |||||
Contributions received | $ 135,700,000 | |||||
Contributions Units received | 13,570,188 | |||||
Contributions of capital, initial member | $ 500 | |||||
Capital investment, AFS | $ 100 | |||||
Units issued | 13,560,188 | 13,560,188 | ||||
Units outstanding | 13,560,188 | 13,560,188 | ||||
Reinvestment period | 6 years |
Summary of Significant Accounting Policies (Schedule of Differences Between Book Value and Tax Basis of Net Assets) (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
---|---|---|---|
Summary of Significant Accounting Policies [Abstract] | |||
Financial statement basis of net assets | $ 4,114 | $ 5,704 | $ 7,213 |
Tax basis of net assets (unaudited) | 7,492 | 8,433 | |
Difference | $ (3,378) | $ (2,729) |
Summary of Significant Accounting Policies (Reconciliation of Net Income (Loss) Reported in Financial Statements and Federal Tax Return) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Summary of Significant Accounting Policies [Abstract] | ||
Net income per financial statements | $ 2,808 | $ 2,156 |
Adjustment to depreciation expense | 227 | 395 |
Provision for losses and doubtful accounts | (3) | |
Adjustments to revenues / other expenses | 25 | (24) |
Adjustments to gain on sales of assets | 396 | 673 |
Income per federal tax return (unaudited) | $ 3,456 | $ 3,197 |
Concentration of Credit Risk and Major Customers (Schedule of Leasing and Lending Revenues) (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Containers [Member] | ||
Concentration Risk [Line Items] | ||
Percentage of concentration risk | 38.00% | 35.00% |
Transportation, Rail [Member] | ||
Concentration Risk [Line Items] | ||
Percentage of concentration risk | 58.00% | 45.00% |
Transportation, Rail [Member] | Interstate Commodities, Inc. [Member] | ||
Concentration Risk [Line Items] | ||
Percentage of concentration risk | 20.00% | 16.00% |
Transportation, Other [Member] | Exsif Worldwide Inc. [Member] | ||
Concentration Risk [Line Items] | ||
Percentage of concentration risk | 26.00% | 33.00% |
Investments in Equipment and Leases, Net (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Investments in Equipment and Leases, Net [Abstract] | ||
Impairment losses recorded | $ 0 | $ 0 |
Depreciation of operating lease assets | $ 317 | $ 455 |
Average estimated residual value for assets on operating leases | 11.00% | 11.00% |
Contingent rental revenue | $ 1,300 | $ 1,500 |
Investments in Equipment and Leases, Net (Investment in Leases) (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2015
USD ($)
| |
Leases Disclosure [Line Items] | |
Balance December 31, 2014 | $ 4,500 |
Reclassifications, Additions/ Dispositions | (253) |
Depreciation/ Amortization Expense or Amortization of Leases | (323) |
Balance December 31, 2015 | 3,924 |
Operating Leases [Member] | |
Leases Disclosure [Line Items] | |
Balance December 31, 2014 | 3,697 |
Reclassifications, Additions/ Dispositions | (188) |
Depreciation/ Amortization Expense or Amortization of Leases | (317) |
Balance December 31, 2015 | 3,192 |
Direct Financing Leases [Member] | |
Leases Disclosure [Line Items] | |
Balance December 31, 2014 | 18 |
Depreciation/ Amortization Expense or Amortization of Leases | (6) |
Balance December 31, 2015 | 12 |
Assets Held For Sale or Lease [Member] | |
Leases Disclosure [Line Items] | |
Balance December 31, 2014 | 785 |
Reclassifications, Additions/ Dispositions | (65) |
Balance December 31, 2015 | $ 720 |
Investments in Equipment and Leases, Net (Components of Company's Investment in Direct Financing Leases) (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Investments in Equipment and Leases, Net [Abstract] | ||
Total minimum lease payments receivable | $ 6 | $ 28 |
Estimated residual values of leased equipment (unguaranteed) | 10 | 10 |
Investment in direct financing leases | 16 | 38 |
Less unearned income | (4) | (20) |
Net investment in direct financing leases | $ 12 | $ 18 |
Investments in Equipment and Leases, Net (Future Minimum Lease Payments Receivable) (Details) $ in Thousands |
Dec. 31, 2015
USD ($)
|
---|---|
Leases Disclosure [Line Items] | |
Year ending December 31, 2016 | $ 2,068 |
2017 | 1,644 |
2018 | 1,285 |
2019 | 1,016 |
2020 | 283 |
Future minimum payments receivable, total | 6,296 |
Operating Leases [Member] | |
Leases Disclosure [Line Items] | |
Year ending December 31, 2016 | 2,062 |
2017 | 1,644 |
2018 | 1,285 |
2019 | 1,016 |
2020 | 283 |
Future minimum payments receivable, total | 6,290 |
Direct Financing Leases [Member] | |
Leases Disclosure [Line Items] | |
Year ending December 31, 2016 | 6 |
Future minimum payments receivable, total | $ 6 |
Related Party Transactions (Affiliates Earned Commissions and Billed for Reimbursements Pursuant to Operating Agreement (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Related Party Transactions [Abstract] | ||
Asset management fees to Managing Member | $ 222 | $ 206 |
Cost reimbursements to Managing Member | 308 | 255 |
Related party transaction, total | $ 530 | $ 461 |
Members' Capital (Narrative) (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Other Members Capital Account [Line Items] | |||
Members capital account, units issued | 13,560,188 | 13,560,188 | |
Weighted average number of Units outstanding | 13,560,188 | 13,560,188 | |
Other Members capital account, units authorized | 15,000,000 | 15,000,000 | |
Potential repurchase price of Units as a percentage of holder's capital account | 100.00% | ||
Other Members [Member] | |||
Other Members Capital Account [Line Items] | |||
Weighted average number of Units outstanding | 13,560,188 | 13,560,188 | 13,560,188 |
Allocation of net income, net losses and distribution allocation percentage | 92.50% | ||
Managing Member [Member] | |||
Other Members Capital Account [Line Items] | |||
Members capital account, units issued | 50 | 50 | |
Allocation of net income, net losses and distribution allocation percentage | 7.50% |
Members' Capital (Distributions to Other Members) (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Members' Capital [Abstract] | ||
Distributions declared | $ 4,068 | $ 3,390 |
Weighted average number of Units outstanding | 13,560,188 | 13,560,188 |
Weighted average distributions per Unit | $ 0.30 | $ 0.25 |
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