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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒          Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2019

☐          Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from        to

Commission File number 000‑50210

ATEL Capital Equipment Fund IX, LLC

(Exact name of registrant as specified in its charter)

California	94‑3375584
(State or other jurisdiction of Incorporation or organization)	(I. R. S. Employer Identification No.)

The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111

(Address of principal executive offices)

Registrant’s telephone number, including area code (415) 989‑8800

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Limited Liability Company Units

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol	Name of each exchange on which registered:
N/A	N/A	N/A

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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒

The number of Limited Liability Company Units outstanding as of July 31, 2019 was 12,055,016.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL CAPITAL EQUIPMENT FUND IX, LLC

INDEX

Part I.	Financial Information	3
Item 1.	Financial Statements (Unaudited)	3
	Balance Sheets, June 30, 2019 and December 31, 2018	3
	Statements of Operations for the three and six months ended June 30, 2019 and 2018	4
	Statements of Changes in Members’ Capital for the three and six months ended June 30, 2019 and 2018	5
	Statements of Cash Flows for the three and six months ended June 30, 2019 and 2018	6
	Notes to the Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 4.	Controls and Procedures	20
Part II.	Other Information	21
Item 1.	Legal Proceedings	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL CAPITAL EQUIPMENT FUND IX, LLC

BALANCE SHEETS

JUNE 30, 2019 AND DECEMBER 31, 2018

(in thousands)

	June 30,		December 31,
	2019		2018
	(Unaudited)
ASSETS
Cash and cash equivalents	$	908	$	1,283
Accounts receivable, net		310		276
Due from Managing Member		34		21
Investment in securities		5		5
Equipment under operating leases, net		2,781		3,198
Prepaid expenses and other assets		63		77
Total assets	$	4,101	$	4,860
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Other	$	324	$	143
Deposits due lessees		1		1
Unearned operating lease income		51		44
Total liabilities		376		188
Commitments and contingencies
Members’ capital:
Managing Member		—		—
Other Members		3,725		4,672
Total Members’ capital		3,725		4,672
Total liabilities and Members’ capital	$	4,101	$	4,860

See accompanying notes.

3

ATEL CAPITAL EQUIPMENT FUND IX, LLC

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2019 AND 2018

(in thousands, except for units and per unit data)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Revenues:
Leasing activities:
Operating leases	$	556	$	490	$	1,076	$	962
Direct financing leases		8		—		15		—
Gain on sales of equipment under operating leases		12		14		32		97
Other revenue		1		15		1		17
Total revenues		577		519		1,124		1,076
Expenses:
Depreciation of operating lease assets		85		87		160		170
Asset management fees to Managing Member and/or affiliates		22		14		44		28
Cost reimbursements to Managing Member and/or affiliates		44		108		95		219
Provision for credit losses		62		66		62		66
Impairment losses on equipment		238		—		238		—
Amortization of initial direct costs		—		—		1		1
Other management fees		16		7		18		12
Professional fees		32		18		93		73
Outside services		17		21		45		60
Insurance		13		11		24		23
Marine vessel maintenance and other operating costs		41		15		164		15
Railcar and equipment maintenance		26		50		62		72
Income taxes and franchise fees		19		(14)		37		(13)
Storage fees		4		9		11		20
Postage		—		1		4		4
Printing and photocopying		1		1		9		7
Other		3		8		28		19
Total operating expenses		623		402		1,095		776
Other income, net		—		—		1		2
Net (loss) income	$	(46)	$	117	$	30	$	302
Net (loss) income:
Managing Member	$	—	$	—	$	73	$	—
Other Members		(46)		117		(43)		302
	$	(46)	$	117	$	30	$	302
Net income per Limited Liability Company Unit (Other Members)	$	—	$	0.01	$	—	$	0.03
Weighted average number of Units outstanding		12,055,016		12,055,016		12,055,016		12,055,016

See accompanying notes.

4

ATEL CAPITAL EQUIPMENT FUND IX, LLC

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2019 AND 2018

(in thousands, except for units and per unit data)

(Unaudited)

	Three Months Ended June 30, 2019
	Other Members			Managing
	Units	Amount		Member		Total
Balance March 31, 2019	12,055,016	$	3,771	$	—	$	3,771
Net loss	—		(46)		—		(46)
Balance at end of June 30, 2019	12,055,016	$	3,725	$	—	$	3,725
	Six Months Ended June 30, 2019
	Other Members			Managing
	Units	Amount		Member		Total
Balance December 31, 2018	12,055,016	$	4,672	$	—	$	4,672
Distributions to Other Members ($0.07 per Unit)	—		(904)		—		(904)
Distributions to Managing Member	—		—		(73)		(73)
Net (loss) income	—		(43)		73		30
Balance at end of June 30, 2019	12,055,016	$	3,725	$	—	$	3,725
	Three Months Ended June 30, 2018
	Other Members			Managing
	Units	Amount		Member		Total
Balance March 31, 2018	12,055,016		4,265	$	—	$	4,265
Net income	—		117		—		117
Balance at end of June 30, 2018	12,055,016	$	4,382	$	—	$	4,382
	Six Months Ended June 30, 2018
	Other Members			Managing
	Units	Amount		Member		Total
Balance December 31, 2017	12,055,016	$	4,080	$	—	$	4,080
Net income	—		302		—		302
Balance at end of June 30, 2018	12,055,016	$	4,382	$	—	$	4,382

See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND IX, LLC

STATEMENTS OF CASH FLOWS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2019 AND 2018

(in thousands)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Operating activities:
Net (loss) income	$	(46)	$	117	$	30	$	302
Adjustment to reconcile net (loss) income to cash provided by operating activities:
Gain on sales of equipment under operating leases		(12)		(14)		(32)		(97)
Depreciation of operating lease assets		85		87		160		170
Amortization of initial direct costs		—		—		1		1
Provision for credit losses		62		66		62		66
Impairment losses on equipment		238		—		238		—
Changes in operating assets and liabilities:
Accounts receivable		(150)		(30)		(96)		(60)
Due from Managing Member and affiliates		(14)		—		(13)		—
Prepaid expenses and other assets		9		(2)		14		5
Accounts payable, Managing Member and affiliates		(66)		(49)		—		(42)
Accounts payable, other		167		(35)		181		(25)
Unearned operating lease income		(17)		(4)		7		15
Net cash provided by operating activities		256		136		552		335
Investing activities:
Proceeds from sales of equipment under operating leases		13		21		44		244
Principal payments received on direct financing leases		6		—		6		—
Net cash provided by investing activities		19		21		50		244
Financing activities:
Distributions to Other Members		—		—		(904)		—
Distributions to Managing Member		—		—		(73)		—
Net cash used in financing activities		—		—		(977)		—
Net increase (decrease) in cash and cash equivalents		275		157		(375)		579
Cash and cash equivalents at beginning of period		633		863		1,283		441
Cash and cash equivalents at end of period	$	908	$	1,020	$	908	$	1,020
Supplemental disclosures of cash flow information:
Cash paid during the period for taxes	$	47	$	14	$	51	$	17

See accompanying notes.

6

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on September 27, 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to engage in equipment leasing, lending and sales activities, primarily in the United States. The Managing Member or Manager of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company. The Company may continue until December 31, 2020. Contributions in the amount of $600 were received as of December 31, 2000, $100 of which represented AFS’s continuing interest, and $500 of which represented the initial Member’s capital investment.

As of January 15, 2003, the offering was terminated. As of that date, the Company had received subscriptions for 12,065,266 Units ($120.7 million). Subsequent to January 15, 2003, Units totaling 10,250 were rescinded or repurchased and funds returned to investors (net of distributions paid and allocated syndication costs, as applicable). As of June 30, 2019,  12,055,016 Units remain issued and outstanding.

The Company is governed by the Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2010, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement. Pursuant to the terms of the Operating Agreement, AFS receives 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, for the repurchase of Units and for contingencies. The repurchase of Units is solely at the discretion of AFS.

These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10‑K for the year ended December 31, 2018, filed with the Securities and Exchange Commission.

2. Summary of significant accounting policies:

Basis of presentation:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10‑Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the Managing Member, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year. 

Certain prior period amounts may have been reclassified to conform to the current period presentation. These reclassifications had no significant impact on the reported financial position or results of operations.

Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.

In preparing the accompanying unaudited financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after June 30, 2019 up until the issuance of the financial statements. No events were noted which would require additional disclosure in the footnotes to the financial statements, or adjustments thereto.

7

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Use of estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and for determination of the allowance for doubtful accounts.

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 primary geographic regions in which the Company seeks leasing opportunities are North America and Europe. The table below summarizes geographic information relating to the sources, by nation, of the Company’s total revenues for the three and six months ended June 30, 2019 and 2018, and long-lived tangible assets as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	Six Months Ended June 30,
	2019		% of Total		2018		% of Total
Revenue
United States	$	1,097	98	%	$	1,037	96	%
Canada		27	2	%		39	4	%
Total	$	1,124	100	%	$	1,076	100	%
	Three Months Ended June 30,
	2019		% of Total		2018		% of Total
Revenue
United States	$	568	98	%	$	499	96	%
Canada		9	2	%		20	4	%
Total	$	577	100	%	$	519	100	%

		As of June 30,				As of December 31,
	2019		% of Total		2018		% of Total
Long-lived assets
United States	$	2,690	97	%	$	3,107	97	%
Canada		91	3	%		91	3	%
Total	$	2,781	100	%	$	3,198	100	%

Investment in securities:

Purchased securities

The Company`s investment securities not registered for public sale that do not have readily determinable fair values are measured at cost minus impairment, and adjusted for changes in observable prices. There were no impaired securities or observable price changes at June 30, 2019 and December 31, 2018.  There were no investment securities sold or disposed of during the three and six months ended June 30, 2019 and 2018.

8

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Other income, net:

Other income, net consisted solely of net gains and losses on foreign exchange transactions.

Per Unit data:

The Company issues only one class of Units, none of which are considered dilutive. Net (loss) income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the period.

Equipment under operating leases, net 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 360‑20‑35‑3, 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 will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally on terms from 36 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.

9

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Initial direct costs:

With the adoption of ASU No. 2016-02 certain costs associated with the execution of the Company’s leases, which were previously capitalized and amortized over the life of their respective leases, are expensed as incurred. In 2018 and prior, the Company capitalized initial direct costs (“IDC”) associated with the origination of lease assets. IDC includes both internal costs (e.g., the costs of employees’ activities in connection with successful lease originations) and external broker fees incurred with such originations. The costs are amortized on a lease by lease basis based on actual contract term using a straight-line method for operating leases. Upon disposal of the underlying lease assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases that are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

Fair value:

Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, generally on a national exchange.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

Level 3 – Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company`s own estimates of assumptions that market participants would use in pricing the asset or liability.

The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.

Recent accounting pronouncements:

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements.  In December 2018, the FASB issued ASU No. 2018-20, Leases (Topic 842), Narrow-Scope Improvements for Lessors. In March 2019, the FASB issued ASU No. 2019-01, Leases: Codification Improvements. Collectively referred to hereafter as ASU No. 2016-02, these standards set out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract to control an asset (i.e., lessees and lessors). The Company does not have any non-cancelable leases where it is a lessee.

10

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

ASU No. 2016-02 requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. These standards were effective as of January 1, 2019. Upon adoption, the Company applied the package of practical expedients that has allowed the Company to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired or existing leases. Furthermore, the Company applied the optional transition method in ASU No. 2018-11, which has allowed the Company to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the adoption period, although the Company did not have an adjustment. Additionally, the Company’s leases met the criteria in ASU No. 2018-11 to not separate non-lease components from the related lease component; therefore, the accounting for these leases remained largely unchanged from the previous standard. 

The adoption of ASU No. 2016-02 and the related improvements did not have a material impact in our financial statements. Upon adoption, (i) amounts previously recognized as lessee reimbursements and other income, for the three and six months ended June 30, 2019, have been classified as lease or financing income, (ii) allowances for bad debts are now recognized as a direct reduction of operating lease income, and (iii) certain costs associated with the execution of the Company’s leases, which were previously capitalized and amortized over the life of their respective leases, are expensed as incurred. Subsequent to January 1, 2019, provisions for credit losses relating to operating leases are now included in lease income in the Company’s financial statements.  Provisions for credit losses prior to January 1, 2019 were previously included in operating expenses in the Company’s financial statements and prior periods are not reclassified to conform to the current presentation.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. Management is currently evaluating the standard and expects the Update may potentially result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments.

In November 2018, the FASB issued Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses (“ASU 2018-19”). The new standard clarifies certain aspects of the new current expected credit losses (CECL) impairment model in ASU 2016-13. The amendment clarifies that receivables arising from operating leases are within the scope of ASC 842, rather than ASC 326; however, it will be applicable to the Company’s note receivables and direct financing leases, if any. The effective date and transition requirements in this Update are the same as the effective dates and transition requirements in Update 2016-13, as amended by this Update, which is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is currently evaluating the impact of the standard on the financial statements and related disclosure requirements.

11

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (“ASU 2018-13”), which amends the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. This ASU modifies disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. Management is currently evaluating the impact of this standard on the financial statements and related disclosure requirements.

3. Allowance for credit losses:

The Company’s allowance for credit losses are as follows (in thousands):

	Accounts Receivable
	Allowance
	for Doubtful Accounts
	Operating
	Leases
Balance December 31, 2017	$	12
Provision		59
Balance December 31, 2018		71
Provision		62
Balance June 30, 2019	$	133

4. Equipment under operating leases, net:

The Company’s equipment under operating leases, net consists of the following (in thousands):

					Depreciation/
					Amortization
	Balance		Reclassifications,		Expenses or		Balance
	December 31,		Dispositions and		Amortization		June 30,
	2018		Impairment losses		of Leases		2019
Equipment under operating leases, net	$	2,909	$	(474)	$	(160)	$	2,275
Net investment in direct financing leases		3		(3)		—		—
Assets held for sale or lease, net		276		224		—		500
Initial direct costs, net of accumulated amortization    of $3 at June 30, 2019 and December 31, 2018		10		(4)		—		6
Total	$	3,198	$	(257)	$	(160)	$	2,781

12

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Impairment of equipment under operating leases, net 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, if any. 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 simultaneously, if held in quantity, 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 impairment losses existed; The Company recorded $238 thousand of impairment losses to reduce the fair value of certain equipment for both the three and six months ended June 30, 2019.  No impairment losses were recorded for the three and six months ended June 30, 2018.

The Company utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of operating lease transactions. Depreciation expense on the Company’s equipment was $85 thousand and $87 thousand for the respective three months ended June 30, 2019 and 2018, and was $160 thousand and $170  thousand for the respective six months ended June 30, 2019 and 2018.  Initial direct costs amortization expense related to the Company's operating leases was zero for the three months ended June 30, 2019 and 2018.  The Company recorded $1 thousand of initial direct cost amortization for the six months ended June 30, 2019 and 2018.

All of the leased property was acquired beginning in 2001 through 2010.

Operating leases:

Property on operating leases consists of the following (in thousands):

	Balance						Balance
	December 31,				Reclassification		June 30,
	2018		Additions		/Dispositions		2019
Transportation, rail	$	11,961	$	—	$	(141)	$	11,820
Marine vessels		11,362		—		—		11,362
Transportation, other		1,371		—		(473)		898
Materials handling		331		—		—		331
		25,025		—		(614)		24,411
Less accumulated depreciation		(22,116)		(160)		140		(22,136)
Total	$	2,909	$	(160)	$	(474)	$	2,275

The average estimated residual value for assets on operating leases was 8% of the assets’ original cost at June 30, 2019 and 9% at December 31, 2018. There were no operating leases placed in nonaccrual status as of the same dates.

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ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Company may earn revenues from its containers, marine vessel and certain other assets based on utilization of such assets on a fixed-term lease. Variable 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 556 thousand and $490 thousand for the three months ended June 30, 2019 and 2018 respectively, and $1.1 million and $962  thousand for the respective six months ended June 30, 2019 and 2018.

At June 30, 2019, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

	Operating
	Leases
Six months ending December 31, 2019	$	486
Year ending December 31, 2020		646
2021		193
2022		60
2023		12
	$	1,397

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of June 30, 2019, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):

Equipment category	Useful Life
Transportation, rail	35 - 50
Marine vessels	20 - 30
Manufacturing	10 - 15
Construction	7 - 10
Materials handling	7 - 10
Transportation, other	7 - 10

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 for 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. The Company would be liable for certain future costs to be incurred by AFS to manage the administrative services provided to the Company.

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 and general administrative services for the Company are performed by AFS.

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ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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 managed 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 recovered in future years to the extent of the cumulative limit. As of June 30, 2019, the Company has not exceeded the annual and/or cumulative limitations discussed above.

During the three and six months ended June 30, 2019 and 2018, AFS and/or affiliates earned fees and billed for reimbursements of costs and expenses pursuant to the Operating Agreement as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Costs reimbursed to Managing Member and/or affiliates	$	44	$	108	$	95	$	219
Asset management fees to Managing Member and/or affiliates		22		14		44		28
	$	66	$	122	$	139	$	247

6. Commitments and Contingencies:

At June 30, 2019, the Company had no commitments to purchase lease assets or fund investments in notes receivable.

7. Members’ capital:

As of June 30, 2019 and December 31, 2018,  12,055,016 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).

Distributions to the Other Members were as follows (in thousands, except for Units and per Unit data):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Distributions declared	$	—	$	—	$	904	$	—
Weighted average number of Units outstanding		12,055,016		12,055,016		12,055,016		12,055,016
Weighted average distributions per Unit	$	—	$	—	$	0.07	$	—

8. Fair value measurements:

Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The following disclosure of the estimated fair value of financial instruments is made in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification. Fair value estimates, methods and assumptions, set forth below for the Company’s financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic.

15

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Company has determined the estimated fair value amounts by using market information and valuation methodologies that it considers appropriate and consistent with the fair value accounting guidance. Considerable judgment is required to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. 

The measurement methodologies are as follows:

Cash and cash equivalents

The recorded amounts of the Company’s cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.

Commitments and Contingencies

Management has determined that the fair value of contingent liabilities (or guarantees) is not considered material because management believes there has been no event that has occurred wherein a guarantee liability has been incurred or will likely be incurred.

16

ATEL CAPITAL EQUIPMENT FUND IX, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The following tables present estimated fair values of the Company’s financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at June 30, 2019 and December 31, 2018 (in thousands):

	Fair Value Measurements at June 30, 2019
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	908	$	908	$	—	$	—	$	908

	Fair Value Measurements at December 31, 2018
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,283	$	1,283	$	—	$	—	$	1,283

Impaired Lease and / or off-Lease equipment (non-recurring)

The following table presents the fair value measurements of impaired assets at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at June 30, 2019.  There was no non-recurring impaired lease and/or off-lease equipment at December 31, 2018.

			Level 1 Estimated		Level 2 Estimated		Level 3 Estimated
	June 30, 2019		Fair Value		Fair Value		Fair Value
Assets measured at fair value on a non-recurring basis:
Impaired lease and off-lease equipment	$	224	$	-	$	-	$	224

The following table summarizes the valuation techniques and significant unobservable imputes used for the Company’s non-recurring fair value adjustments categorized as Level 3 in the fair value hierarchy at June 30, 2019.

June 30, 2019
Name	Valuation Frequency	Valuation Technique	Unobservable Inputs	Range of Input Values
Impaired off-Lease Equipment	Non-recurring	Market Approach	Third Party Agents' Pricing	$0 - $8,000
			Quotes – per equipment	(total of $224,000)
			Equipment Condition	Poor to Average

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Statements contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic conditions, including fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Company’s performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Company’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other than as required by law.

 Overview

ATEL Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) is a California limited liability company that was formed in September 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to generate revenues from equipment leasing, lending and sales activities, primarily in the United States. The Managing Member of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company.

Results of Operations

The Fund had a  net loss of $46 thousand and net income of $30 thousand for the respective three and six month periods ended June 30, 2019.  

Total revenues were $577 thousand for the quarter and $1.1 million for the year to date.  The main drivers of such revenues were from operating lease rents and gains on sales of lease assets.  Operating lease rents for the quarter were $556 thousand and $1.1 million for the year to date period.  This trend is somewhat indicative of a Fund in its liquidating stage where lease assets are sold as lease commitments end.  In this regard, gain on sales of lease assets were $12 thousand and $32 thousand for the respective three and six month periods ended June 30, 2019.

Total operating expenses were $623 thousand for the quarter and $1.1 million for the year to date, net increase of $319 thousand compared to the prior year to date period.   The main drivers of such net operating expense increases were from increases of Marine vessel maintenance fees, impairment losses on equipment and depreciation of operating lease assets; offset, in part, by a $124 thousand decrease in Cost reimbursements to Managing Member and affiliates.

Total marine vessel maintenance fee for the respective three and six months ended June 30, 2019 was $41 thousand and $164 thousand; this year to date maintenance cost increased by $149 thousand as compared to the prior year to date period.  Such net increase was the result of dry dock costs incurred to prepare the vessel for revenue generating charter. 

Depreciation of operating lease assets for the quarter was $85 thousand and $160 thousand for the year to date period, which was a decrease of $2 thousand and $10 thousand compared to the three and six months ended at June 30, 2018. This declining trend of depreciation is consistent with a fund in its liquidating stage where lease assets are sold as lease commitments end. 

There were $238 thousand in impairment losses on equipment during the three and six months ended June 30, 2019.

Cost reimbursements to managing member and / or affiliates of $44 thousand and $95 thousand for the respective three and six month periods ended June 30, 2019.  The year to date cost reimbursements decreased by $124 thousand which reflecting the adjustments’ of baseline allocations of common costs among the fund and its affiliates. 

18

The provision for credit losses was $62 thousand for the respective three and six months ended in June 30, 2019, this amount represents past due invoices greater than ninety day at June 30, 2019. 

Expense amounts reflected as professional fees of $32 thousand and $93 thousand, and outside services of $17 thousand and $45 thousand for the respective quarter end and year to date periods for direct Fund specific core costs of preparation, printing, filing and distribution of annual Form 1065 tax and shareholder reports on Form K-1.  In addition, such costs include costs attributable to its annual / quarterly tax preparation, valuation reports and mandated periodic regulatory filings with the SEC.

Cash balances increased during the respective quarter by $275 thousand and decreased by $375 thousand for year to date period.  This was mainly the result of the annual distribution to the other members, aforementioned items of net income, depreciation of operating lease assets and gain on sales of lease assets augmented by the proceeds from sales of lease assets of $13 thousand and $44 thousand during the respective quarter and year to date periods.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At June 30, 2019, the Company had no commitments to purchase lease assets or fund investments in notes receivable.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

For detailed information on recent accounting pronouncements, see Note 2, Summary of significant accounting policies.

Significant Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.

The Company’s significant accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2018.  

There have been no material changes to the Company’s significant accounting policies since December 31, 2018.

19

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

The Company’s Managing Member’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Company’s 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 Member’s 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 Commission’s 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 issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control

There were no changes in the Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Managing Member’s internal control over financial reporting, as it is applicable to the Company.

20

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Company. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Company’s financial position or results of operations. No material legal proceedings are currently pending against the Company or against any of its assets.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Documents filed as a part of this report:

1.       Financial Statement Schedules

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

2.       Other Exhibits

31.1	Certification of Dean L. Cash
31.2	Certification of Paritosh K. Choksi
32.1	Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash
32.2	Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 13, 2019

ATEL CAPITAL EQUIPMENT FUND IX, LLC

(Registrant)

		By:	ATEL Financial Services, LLC
			Managing Member of Registrant
By:	/s/ Dean L. Cash
	Dean L. Cash
	President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member)
By:	/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)
By:	/s/ Samuel Schussler
	Samuel Schussler
	Senior Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (Managing Member)

22