x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
(Exact name of registrant as specified in its charter)
California (State or other jurisdiction of Incorporation or organization) |
20-1357935 (I. R. S. Employer Identification No.) |
The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111
(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 a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No x
The number of Limited Liability Company Units outstanding as of April 30, 2016 was 5,209,307.
None.
2
ATEL CAPITAL EQUIPMENT FUND XI, LLC
BALANCE SHEETS
MARCH 31, 2016 AND DECEMBER 31, 2015
(In Thousands)
March 31, 2016 |
December 31, 2015 |
|||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Cash and cash equivalents | $ | 2,340 | $ | 3,132 | ||||
Accounts receivable, net of allowance for doubtful accounts of $0 as of March 31, 2016 and $1 as of December 31, 2015 | 169 | 156 | ||||||
Investment in securities | 22 | 38 | ||||||
Fair value of warrants | 10 | 27 | ||||||
Investments in equipment and leases, net of accumulated depreciation of $13,284 as of March 31, 2016 and $13,316 as of December 31, 2015 | 2,587 | 2,712 | ||||||
Prepaid expenses and other assets | 28 | 31 | ||||||
Total assets | $ | 5,156 | $ | 6,096 | ||||
LIABILITIES AND MEMBERS CAPITAL |
||||||||
Accounts payable and accrued liabilities: |
||||||||
Managing Member | $ | 44 | $ | 106 | ||||
Accrued distributions to Other Members | | 1,303 | ||||||
Other | 86 | 80 | ||||||
Unearned operating lease income | 145 | 14 | ||||||
Total liabilities | 275 | 1,503 | ||||||
Commitments and contingencies |
||||||||
Members capital: |
||||||||
Managing Member | | | ||||||
Other Members | 4,881 | 4,593 | ||||||
Total Members capital | 4,881 | 4,593 | ||||||
Total liabilities and Members capital | $ | 5,156 | $ | 6,096 |
See accompanying notes.
3
ATEL CAPITAL EQUIPMENT FUND XI, LLC
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
MARCH 31, 2016 AND 2015
(In Thousands Except for Units and Per Unit Data)
(Unaudited)
Three Months Ended March 31, |
||||||||
2016 | 2015 | |||||||
Revenues: |
||||||||
Leasing and lending activities: |
||||||||
Operating leases | $ | 320 | $ | 543 | ||||
Direct financing leases | 1 | 4 | ||||||
Interest on notes receivable | | 6 | ||||||
Gain on sales of lease assets and early termination of notes | 270 | 139 | ||||||
Unrealized loss on fair valuation of warrants | (17 | ) | | |||||
Other | 3 | 126 | ||||||
Total revenues | 577 | 818 | ||||||
Expenses: |
||||||||
Depreciation of operating lease assets | 103 | 264 | ||||||
Asset management fees to Managing Member | 32 | 30 | ||||||
Cost reimbursements to Managing Member and/or affiliates | 33 | 49 | ||||||
Reversal of credit losses | (1 | ) | | |||||
Impairment losses on investment in securities | 16 | | ||||||
Amortization of initial direct costs | 2 | 2 | ||||||
Interest expense | | 8 | ||||||
Professional fees | 80 | 74 | ||||||
Outside services | 15 | 13 | ||||||
Taxes on income and franchise fees | | 53 | ||||||
Other | 10 | 12 | ||||||
Total operating expenses | 290 | 505 | ||||||
Other income (loss), net | 1 | (1 | ) | |||||
Net income | $ | 288 | $ | 312 | ||||
Net income: |
||||||||
Managing Member | $ | | $ | | ||||
Other Members | 288 | 312 | ||||||
$ | 288 | $ | 312 | |||||
$0.06 | $ | 0.06 | ||||||
Weighted average number of Units outstanding | 5,209,307 | 5,209,307 |
See accompanying notes.
4
ATEL CAPITAL EQUIPMENT FUND XI, LLC
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2015
AND FOR THE THREE MONTHS ENDED MARCH 31, 2016
(In Thousands Except for Units and Per Unit Data)
Other Members | Managing Member |
Total | ||||||||||||||
Units | Amount | |||||||||||||||
Balance December 31, 2014 | 5,209,307 | $ | 7,261 | $ | | $ | 7,261 | |||||||||
Distributions to Other Members ($0.70 per Unit) | | (3,647 | ) | | (3,647 | ) | ||||||||||
Distributions to Managing Member | | | (295 | ) | (295 | ) | ||||||||||
Net income | | 979 | 295 | 1,274 | ||||||||||||
Balance December 31, 2015 | 5,209,307 | 4,593 | | 4,593 | ||||||||||||
Net income | | 288 | | 288 | ||||||||||||
Balance March 31, 2016 (Unaudited) | 5,209,307 | $ | 4,881 | $ | | $ | 4,881 |
See accompanying notes.
5
ATEL CAPITAL EQUIPMENT FUND XI, LLC
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2016 AND 2015
(In Thousands)
(Unaudited)
Three Months Ended March 31, |
||||||||
2016 | 2015 | |||||||
Operating activities: |
||||||||
Net income | $ | 288 | $ | 312 | ||||
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
Gain on sales of lease assets and early termination of notes | (270 | ) | (139 | ) | ||||
Depreciation of operating lease assets | 103 | 264 | ||||||
Amortization of initial direct costs | 2 | 2 | ||||||
Reversal of credit losses | (1 | ) | | |||||
Provision for losses on investment in securities | 16 | | ||||||
Unrealized loss on fair valuation of warrants | 17 | | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable | (12 | ) | (71 | ) | ||||
Prepaid expenses and other assets | 3 | 4 | ||||||
Accounts payable, Managing Member | 43 | 41 | ||||||
Accounts payable, other | 6 | (140 | ) | |||||
Unearned operating lease income | 131 | 72 | ||||||
Net cash provided by operating activities | 326 | 345 | ||||||
Investing activities: |
||||||||
Purchase of securities | | (3 | ) | |||||
Proceeds from sales of lease assets and early termination of notes | 287 | 221 | ||||||
Principal payments received on direct financing leases | 3 | 13 | ||||||
Principal payments received on notes receivable | | 35 | ||||||
Net cash provided by investing activities | 290 | 266 | ||||||
Financing activities: |
||||||||
Repayments under non-recourse debt | | (202 | ) | |||||
Distributions to Other Members | (1,303 | ) | (781 | ) | ||||
Distributions to Managing Member | (105 | ) | (64 | ) | ||||
Net cash used in financing activities | (1,408 | ) | (1,047 | ) | ||||
(792) | (436 | ) | ||||||
Cash and cash equivalents at beginning of period | 3,132 | 4,794 | ||||||
Cash and cash equivalents at end of period | $ | 2,340 | $ | 4,358 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the period for interest | $ | | $ | 9 |
See accompanying notes.
6
ATEL Capital Equipment Fund XI, LLC (the Company or the Fund) was formed under the laws of the State of California on June 25, 2004. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. Also, from time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements. 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, 2025. 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 May 31, 2005, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received 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). As of July 13, 2005, the Company had received subscriptions for 958,274 Units ($9.6 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be released to the Company. The Company terminated sales of Units effective April 30, 2006. Life-to-date net contributions through March 31, 2016 totaled $52.2 million, consisting of approximately $52.8 million in gross contributions from Other Members purchasing Units under the public offering less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable) of $636 thousand. As of March 31, 2016, 5,209,307 Units were issued and outstanding.
The Companys principal objectives are 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, 2012, 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. On January 1, 2013, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement.
Pursuant to the terms of the Operating Agreement, AFS and its affiliates receives compensation for services rendered and reimbursements for costs incurred 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.
The Companys 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, 2015, filed with the Securities and Exchange Commission.
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the 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 months ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year.
7
Certain prior period amounts may have been reclassified to conform to the current period presentation. These reclassifications had no significant effect 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 March 31, 2016 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.
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 and reserve for credit losses on notes receivable.
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 Companys total revenues for the three months ended March 31, 2016 and 2015 and long-lived assets as of March 31, 2016 and December 31, 2015 (dollars in thousands):
For The Three Months Ended March 31, | ||||||||||||||||
2016 | % of Total | 2015 | % of Total | |||||||||||||
Revenue |
||||||||||||||||
United States | $ | 570 | 99 | % | $ | 811 | 99 | % | ||||||||
United Kingdom | 7 | 1 | % | 7 | 1 | % | ||||||||||
Total International | 7 | 1 | % | 7 | 1 | % | ||||||||||
Total | $ | 577 | 100 | % | $ | 818 | 100 | % |
As of March 31, | As of December 31, | |||||||||||||||
2016 | % of Total | 2015 | % of Total | |||||||||||||
Long-lived assets |
||||||||||||||||
United States | $ | 2,584 | 100 | % | $ | 2,709 | 100 | % | ||||||||
United Kingdom | 3 | 0 | % | 3 | 0 | % | ||||||||||
Total International | 3 | 0 | % | 3 | 0 | % | ||||||||||
Total | $ | 2,587 | 100 | % | $ | 2,712 | 100 | % |
8
From time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements.
Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuers ability to meet its current obligations and indications of the issuers subsequent ability to raise capital. Based upon the Companys review of its portfolio, a fair value adjustment of $16 thousand was recorded for the three months ended March 31, 2016 to reduce the cost basis of an impaired investment security to zero. No such fair value adjustment was deemed necessary for the three months ended March 31, 2015. There were no sales or dispositions of securities during the three months ended March 31, 2016 and 2015.
Warrants owned by the Company are not registered for public sale, but are considered derivatives and are reflected at an estimated fair value on the balance sheet as determined by the Managing Member. During the three months ended March 31, 2016, the Company recorded unrealized losses of $17 thousand on fair valuation of its warrants. There were no unrealized gains or losses recorded during the prior year period. As of March 31, 2016 and December 31, 2015, the estimated fair value of the Companys portfolio of warrants amounted to $10 thousand and $27 thousand, respectively. There were no exercises of warrants, net or otherwise, during the three months ended March 31, 2016 and 2015.
Foreign currency transaction gains and losses are reported in the results of operations as other income or other loss in the period in which they occur. Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments as the foreign currency transactions risks to date have not been significant.
The Company issues only one class of Units, none of which are considered dilutive. Net income and distributions per Unit are based upon the weighted average number of Other Members Units outstanding during the period.
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02, Leases (Topic 842) (ASU 2016-02). The new standard will require lessees to recognize lease assets and lease liabilities arising from operating leases with lease terms greater than 12 months in the statement of financial position. Lessor accounting per ASU 2016-02 is mostly unchanged from the previous lease accounting GAAP. Certain changes were made to the lessor accounting guidance in order to align the lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Similar to the previous guidance, lessors will classify leases as operating, direct financing, or sales-type. Lessors in operating leases will continue to recognize the underlying asset and recognize income on a straight-line basis. Lessors determine whether a lease is a sale of the underlying asset based on whether the lessee effectively obtains control of the underlying assets. ASU-2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the standard and its operational and related disclosure requirements.
9
In January 2016, FASB issued Accounting Standards Update 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). The new standard provides guidance related to accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently evaluating the standard and its operational and related disclosure requirements.
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.
In May 2014, the 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.
The Company has had various notes receivable from borrowers who have financed the purchase of equipment through the Company. The notes were secured by the equipment financed. The Company had one note receivable which remained unsettled as of March 31, 2015. As of such date, the note had an outstanding balance of $297 thousand, an annual interest rate of 8.51%, and a maturity date of January 1, 2016. Interest income on the note amounted to $6 thousand during the first three months of 2015. Such note was fully settled in December 2015.
10
The Companys investment in leases consists of the following (in thousands):
Balance December 31, 2015 |
Reclassifications, Additions/ Dispositions |
Depreciation/ Amortization Expense or Amortization of Leases |
Balance March 31, 2016 |
|||||||||||||
Net investment in operating leases | $ | 2,688 | $ | (17 | ) | $ | (103 | ) | $ | 2,568 | ||||||
Net investment in direct financing leases | 9 | | (3 | ) | 6 | |||||||||||
Initial direct costs, net of accumulated amortization of $29 at March 31, 2016 and $27 at December 31, 2015 | 15 | | (2 | ) | 13 | |||||||||||
Total | $ | 2,712 | $ | (17 | ) | $ | (108 | ) | $ | 2,587 |
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, 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, 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 the three months ended March 31, 2016 and 2015.
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 Companys equipment totaled $103 thousand and $264 thousand for the respective three months ended March 31, 2016 and 2015.
Initial direct costs amortization expense related to the Companys operating and direct financing leases amounted to $2 thousand for each of the three-month periods ended March 31, 2016 and 2015.
All of the leased property was acquired during the years 2005 through 2011.
11
Property on operating leases consists of the following (in thousands):
Balance December 31, 2015 |
Additions | Reclassifications or Dispositions |
Balance March 31, 2016 |
|||||||||||||
Transportation, rail | $ | 10,503 | $ | | $ | | $ | 10,503 | ||||||||
Aviation | 1,658 | | | 1,658 | ||||||||||||
Transportation, other | 1,475 | | | 1,475 | ||||||||||||
Marine vessels | 1,415 | | | 1,415 | ||||||||||||
Manufacturing | 467 | | | 467 | ||||||||||||
Materials handling | 338 | | (147 | ) | 191 | |||||||||||
Construction | 148 | | (5 | ) | 143 | |||||||||||
16,004 | | (152 | ) | 15,852 | ||||||||||||
Less accumulated depreciation | (13,316 | ) | (103 | ) | 135 | (13,284 | ) | |||||||||
Total | $ | 2,688 | $ | (103 | ) | $ | (17 | ) | $ | 2,568 |
The average estimated residual value for assets on operating leases was 8% of the assets original cost at both March 31, 2016 and December 31, 2015. There were no operating lease contracts placed in non-accrual status at March 31, 2016 and December 31, 2015.
As of March 31, 2016 and December 31, 2015, investment in direct financing leases consists of construction equipment. The components of the Companys investment in direct financing leases as of March 31, 2016 and December 31, 2015 are as follows (in thousands):
March 31, 2016 | December 31, 2015 | |||||||
Total minimum lease payments receivable | $ | 6 | $ | 11 | ||||
Estimated residual values of leased equipment (unguaranteed) | 1 | 1 | ||||||
Investment in direct financing leases | 7 | 12 | ||||||
Less unearned income | (1 | ) | (3 | ) | ||||
Net investment in direct financing leases | $ | 6 | $ | 9 |
There were no investments in direct financing lease assets in non-accrual status at March 31, 2016 and December 31, 2015.
At March 31, 2016, the aggregate amounts of future minimum lease payments to be received are as follows (in thousands):
Operating Leases | Direct Financing Leases |
Total | ||||||||||
Nine months ending December 31, 2016 | $ | 828 | $ | 6 | $ | 834 | ||||||
Year ending December 31, 2017 | 894 | | 894 | |||||||||
2018 | 429 | | 429 | |||||||||
2019 | 322 | | 322 | |||||||||
2020 | 265 | | 265 | |||||||||
2021 | 78 | | 78 | |||||||||
$ | 2,816 | $ | 6 | $ | 2,822 |
12
The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of March 31, 2016, 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 | |||
Marine vessels | 20 30 | |||
Aviation | 15 20 | |||
Manufacturing | 10 15 | |||
Construction | 7 10 | |||
Materials handling | 7 10 | |||
Transportation, other | 7 10 |
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; and 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 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 reimbursable in future years to the extent of the cumulative limit. As of March 31, 2016, the Company has not exceeded the annual and/or cumulative limitations discussed above.
AFS and/or affiliates earned fees and billed for reimbursements of costs and expenses pursuant to the Operating Agreement as follows during the three months ended March 31, 2016 and 2015 (in thousands):
Three Months Ended March 31, |
||||||||
2016 | 2015 | |||||||
Costs reimbursed to Managing Member and/or affiliates | $ | 33 | $ | 49 | ||||
Asset management fees to Managing Member | 32 | 30 | ||||||
$ | 65 | $ | 79 |
13
At March 31, 2016, the Company had no commitments to either purchase lease assets or fund loans.
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.
A total of 5,209,307 Units were issued and outstanding as of March 31, 2016 and December 31, 2015. The Fund was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial members (50 Units). The Company terminated sales of Units effective April 30, 2006.
The Company has the right, exercisable at the Managers 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 Limited Liability Company Operating Agreement. The repurchase would be at the discretion of the Manager on terms it determines to be appropriate under given circumstances, in the event that the Manager 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.
The monthly distributions were discontinued in 2013 as the Company entered its liquidation phase. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the Manager. There were no distributions declared or paid during the three months ended March 31, 2016 and 2015.
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.
14
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.
At March 31, 2016 and December 31, 2015, only the Companys warrants were measured on a recurring basis. In addition, certain investment securities deemed impaired were measured at fair value on a non-recurring basis as of March 31, 2016 and December 31, 2015.
The Companys 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 Companys 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 Companys investments in equipment, notes receivable 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.
Such fair value adjustments utilized the following methodology:
Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried on the balance sheet at an estimated fair value at the end of the period. The valuation of the warrants was determined using a Black-Scholes formulation of value based upon the stock price(s), the exercise price(s), the volatility of comparable venture companies, and a risk free interest rate for the term(s) of the warrant exercise(s). As of March 31, 2016 and December 31, 2015, the calculated fair value of the Companys warrant portfolio approximated $10 thousand and $27 thousand, respectively. Such valuations are classified within Level 3 of the valuation hierarchy.
The following table reconciles the beginning and ending balances of the Companys Level 3 recurring assets (in thousands):
Level 3 Assets | ||||
Balance at December 31, 2015 | $ | 27 | ||
Unrealized loss on warrants, net recorded during the period | (17 | ) | ||
Balance at March 31, 2016 | $ | 10 |
The Companys investment securities are not registered for public sale and are carried at cost. The investment securities are adjusted for impairment, if any, based upon factors which include, but are not limited to, available financial information, the issuers ability to meet its current obligations and indications of the issuers subsequent ability to raise capital.
During the first quarter of 2016, the Company recorded a $16 thousand fair value adjustment to reduce the cost basis of an impaired investment security to zero. The 100% reduction in value was based on a market approach technique and uses inputs that reflect qualitative and quantitative information provided by the management of the investee. Such information indicated a significantly reduced value as evidenced by the purchase price of the investee as contemplated in its acquisition terms.
15
During 2015, the Company recorded a fair value adjustment of $6 thousand to reduce the cost basis of an impaired investment security. Such adjustment was recorded subsequent to the first quarter of 2015. The reduction in value was based on a market approach technique and uses inputs that reflect qualitative and quantitative information provided by the management of the investee, which indicated reduced growth opportunity and eventual reduction in cash flows and revenues.
Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the aforementioned impaired investment securities were classified within Level 3 of the valuation hierarchy.
As previously mentioned, the fair value of the investment security impaired during the first quarter of 2016 was zero as of March 31, 2016.
The following table presents the fair value measurements of impaired investment securities measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at December 31, 2015 (in thousands):
December 31, 2015 | Level 1 Estimated Fair Value |
Level 2 Estimated Fair Value |
Level 3 Estimated Fair Value |
|||||||||||||
Assets measured at fair value on a non-recurring basis: |
||||||||||||||||
Impaired investment securities | $ | 4 | $ | | $ | | $ | 4 |
The following table summarizes the valuation techniques and significant unobservable inputs used for the Companys recurring and non-recurring fair value calculation categorized as Level 3 in the fair value hierarchy at March 31, 2016 and December 31, 2015:
March 31, 2016 | ||||||||
Name | Valuation Frequency | Valuation Technique | Unobservable Inputs | Range of Input Values | ||||
Warrants | Recurring | Black-Scholes formulation | Stock price | $0.35 $1.25 | ||||
Exercise price | $0.91 $1.25 | |||||||
Time to maturity (in years) | 2.16 2.50 | |||||||
Risk-free interest rate | 0.75% 0.80% | |||||||
Annualized volatility | 100.00% | |||||||
Investment Securities | Non-recurring | Market Approach | Qualitative and quantitative information (Investee Management) |
Not Applicable |
December 31, 2015 | ||||||||
Name | Valuation Frequency | Valuation Technique | Unobservable Inputs | Range of Input Values | ||||
Warrants | Recurring | Black-Scholes formulation | Stock price | $0.35 $1.25 | ||||
Exercise price | $0.91 $1.25 | |||||||
Time to maturity (in years) | 2.41 2.75 | |||||||
Risk-free interest rate | 1.16% 1.25% | |||||||
Annualized volatility | 100.00% | |||||||
Investment Securities | Non-recurring | Market Approach | Qualitative and quantitative information (Investee Management) |
Not Applicable |
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 Companys financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Companys financial statements and related notes.
16
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. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize or has realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The recorded amounts of the Companys cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.
The fair value of the Companys non-recourse debt is estimated using discounted cash flow analyses, based upon the current market borrowing rates for similar types of borrowing arrangements.
Management has determined that no recognition for the fair value of the Companys loan commitments is necessary because their terms are made on a market rate basis and require borrowers to be in compliance with the Companys credit requirements at the time of funding.
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.
The following tables present estimated fair values of the Companys financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at March 31, 2016 and December 31, 2015 (in thousands):
Fair Value Measurements at March 31, 2016 | ||||||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and cash equivalents | $ | 2,340 | $ | 2,340 | $ | | $ | | $ | 2,340 | ||||||||||
Investment in securities | 22 | | | 22 | 22 | |||||||||||||||
Fair value of warrants | 10 | | | 10 | 10 |
Fair Value Measurements at December 31, 2015 | ||||||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and cash equivalents | $ | 3,132 | $ | 3,132 | $ | | $ | | $ | 3,132 | ||||||||||
Investment in securities | 38 | | | 38 | 38 | |||||||||||||||
Fair value of warrants | 27 | | | 27 | 27 |
17
Statements contained in this Item 2, Managements 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 Companys performance is subject to risks relating to lessee and borrower defaults and the creditworthiness of its lessees and borrowers. 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 market for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other than as required by law.
ATEL Capital Equipment Fund XI, LLC (the Company or the Fund) is a California limited liability company that was formed in June 2004 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 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 April 2006. During 2006, the Company completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, during the reinvestment period (Reinvestment Period) (defined as six full years following the year the offering was terminated), the Company has 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, 2025. However, pursuant to the guidelines of the Limited Liability Company Operating Agreement (Operating Agreement), the Company commenced liquidation phase activities subsequent to the end of the Reinvestment Period which ended on December 31, 2012. Periodic distributions are paid at the discretion of the Managing Member.
The Company had net income of $288 thousand and $312 thousand for the three months ended March 31, 2016 and 2015, respectively. The results for the first quarter of 2016 reflect decreases in both total revenues and total operating expenses when compared to the prior year period.
Total revenues for the first quarter of 2016 decreased by $241 thousand, or 29%, as compared to the prior year period. Such decrease was largely attributable to reductions in operating lease revenues and other revenue partially offset by an increase in gains recognized on the sale of lease assets and early termination of notes.
Operating lease revenues declined by $223 thousand primarily as a result of continued run-off and sales of lease assets. Other revenue decreased by $123 thousand as the first quarter 2015 amount included an approximate $92 thousand of deferred maintenance fees billed for excess wear and tear on certain returned equipment. There were no such fees billed during the current year period.
Partially offsetting the aforementioned decreases in revenues was a $131 thousand increase in gains recognized on the sales of lease assets and early termination of notes. Such increase was largely attributable to a change in the mix of assets sold.
18
Total operating expenses for the first quarter of 2016 decreased by $215 thousand, or 43%, as compared to the prior year period. Such decrease was primarily due to reductions in depreciation expense and in taxes on income and franchise fees.
The decrease in depreciation expense totaled $161 thousand and was largely due to continued run-off and sales of lease assets. Taxes on income and franchise fees declined by $53 thousand largely due to a lower estimated tax liability based upon actual amounts paid in the prior year.
At March 31, 2016 and December 31, 2015, the Companys cash and cash equivalents totaled $2.3 million and $3.1 million, respectively. The liquidity of the Company varies, increasing to the extent cash flows from leases and proceeds of asset sales exceed expenses and decreasing as distributions are made to the 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 the lease terms expire, the Company will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on AFSs 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):
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Net cash provided by (used in): |
||||||||
Operating activities | $ | 326 | $ | 345 | ||||
Investing activities | 290 | 266 | ||||||
Financing activities | (1,408 | ) | (1,047 | ) | ||||
Net decrease in cash and cash equivalents | $ | (792 | ) | $ | (436 | ) |
During the three months ended March 31, 2016 and 2015, the Companys primary source of liquidity was cash flow from its portfolio of operating lease contracts. In addition, the Company realized $287 thousand and $221 thousand of cash flows from the sale or disposition of equipment and early termination of certain notes during the respective three months ended March 31, 2016 and 2015.
During the same respective periods, cash was primarily used to pay distributions to both the Other Members and the Managing Member, totaling a combined $1.4 million and $845 thousand. In addition, during the first quarter of 2015, cash was used to pay down debt totaling $202 thousand.
Beginning with the month of June 2005, the Company commenced periodic distributions based on cash flows from operations. The monthly distributions were discontinued in 2013 as the Company entered its liquidation phase. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the Manager. There were no distributions declared or paid during the three months ended March 31, 2016 and 2015.
19
At March 31, 2016, the Company had no commitments to purchase lease assets or fund loans.
None.
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02, Leases (Topic 842) (ASU 2016-02). The new standard will require lessees to recognize lease assets and lease liabilities arising from operating leases with lease terms greater than 12 months in the statement of financial position. Lessor accounting per ASU 2016-02 is mostly unchanged from the previous lease accounting GAAP. Certain changes were made to the lessor accounting guidance in order to align the lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Similar to the previous guidance, lessors will classify leases as operating, direct financing, or sales-type. Lessors in operating leases will continue to recognize the underlying asset and recognize income on a straight-line basis. Lessors determine whether a lease is a sale of the underlying asset based on whether the lessee effectively obtains control of the underlying assets. ASU-2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the standard and its operational and related disclosure requirements.
In January 2016, FASB issued Accounting Standards Update 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). The new standard provides guidance related to accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently evaluating the standard and its operational and related disclosure requirements.
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.
In May 2014, the 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.
20
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 Companys critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2015. There have been no material changes to the Companys critical accounting policies since December 31, 2015.
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) and 15d-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.
There were no changes in the Managing Members internal control over financial reporting, as it is applicable to the Company, during the quarter ended March 31, 2016 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.
21
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.
None.
None.
Not Applicable.
The Financial Industry Regulatory Authority (FINRA), in conjunction with the Securities and Exchange Commission (SEC) updated rules for the presentation of account statement values relative to pricing of Direct Placement Program (DPP) shares. Under FINRA Notice 15-02 (the Notice) the SEC approved amendments to NASD Rule 2340, Customer Account Statements, and FINRA rule 2310, which address a FINRA member firms participation in a public offering of a DPP. In summary, the amendments require a FINRA member firm to include in the account statements for customers holding DPP securities a per share value for the DPP. This per share value must be prepared by, or with the material assistance or confirmation of, a third-party valuation expert or service. The results of this valuation must be disclosed in the issuers reports filed under the Securities Exchange Act of 1934. A valuation in compliance with the Notice must be undertaken and published on at least an annual basis.
The effective date of the Notice was April 11, 2016.
Broker dealers are required to provide a per share estimated value on the customer account statements for each non-listed DPP security held by their customers. Such estimated value must have been developed in a manner reasonably designed to provide a reliable value. Two valuation methodologies have been defined by FINRA, which by such designation are presumed to be reliable.
The amendments to NASD Rule 2340(c)(1)(A) require net investment to be based on the amount available for investment percentage disclosed in the Estimated Use of Proceeds section of the issuers offering prospectus. In essence, such value is equal to the offering price less selling commissions, other offering and organization expenses, and capital reserves. This method may be used for up to 150 days following the second anniversary of a Fund breaking escrow.
As amended, Rule NASD 2340(c)(1)(B) requires that the per share estimated value disclosed in an issuers most recent periodic or current report be based upon an appraisal of the assets and liabilities of the program by, or with the material assistance or confirmation of, a third-party valuation expert or
22
service, in conformity with standard industry valuation practice as it relates to both the aforementioned assets and liabilities. No later than 150 days following the second anniversary of the issuers break of escrow for its minimum offering, this methodology must be used to establish the required estimated values.
The per Unit valuation estimate for ATEL CAPITAL EQUIPMENT FUND XI, LLC has been conducted, and the results disclosed herein, in compliance with the mandates of the Notice.
For ATEL CAPITAL EQUIPMENT FUND XI, LLC, its estimated value per Unit reflects the Managers estimate of current portfolio valuation of all assets and liabilities of the Fund, calculated on a per Unit basis, and as such, does not represent a market value for the Units and may not accurately reflect the value of the Fund Units to the Unit holders if held over time to Fund maturity.
In connection with any estimate of per Unit value, Unit holders and all parties are reminded that no public market for the Units exists. Additionally, in order to preserve the Funds pass-through status for federal income tax purposes, the Fund will not permit a secondary market or the substantial equivalent of a secondary market for the Units. In the absence of a public market for the Units, there is no currently ascertainable fair market value for the Units.
The estimate of per Unit value does not take into account any extraordinary potential future business activity of the Fund; rather the valuation represents a snapshot view of the Funds portfolio as of the valuation date. In addition, the Fund does not include any analysis of the distributions that have already been paid by the Fund, nor the anticipated returns to Unit holder over the full course of the Fund life cycle, which will be dependent on many factors.
The estimated value per Unit reported in this Form 10-Q has been calculated using the Appraised Value Methodology described above under Methodologies above, as of December 31, 2015.
ATEL CAPITAL EQUIPMENT FUND XI, LLC, will satisfy the disclosure requirements for providing estimated per Unit values pursuant to the Notice as follows:
1. | For the customer statements first provided after April 11, 2015, the disclosure is made in this quarterly report on Form 10-Q filed for the quarter ended March 31, 2016. |
2. | For the subsequent annual disclosures of estimated per Unit values as of December 31 of 2016 and each succeeding year through the termination of the Fund, these FINRA compliant estimated per Unit values will be accomplished and included in the Funds annual Form 10-K filing for each year. |
A. | Fund Assets and Liabilities (other than as specifically identified below): The estimated values for non-interest bearing items such as current assets and liabilities are assumed to equal their reported GAAP balances as an appropriate approximation of their fair values. Debt (interest bearing) is assumed to equal the fair values of the debt as disclosed in the footnotes of the 10-K. |
B. | Investments in Leases (net of fees and expenses): The estimated values for Investments in Leases are based on calculating the present value of the projected future cash flows. Projected future cash flows include both the remaining contractual lease payments, plus assumptions on lease renewals and sale value of the residuals. Projected future cash flows are net of projected future fees and expenses including: |
| management fees applicable for the Fund (4.00% of revenue) |
| carried interest applicable for the Fund (7.50% of distributions) |
| operating expenses which are assumed to be 2.50% of original equipment costs for the Fund |
23
Projected future cash flows have been discounted back to present value at discount rates based on like-term U.S. Treasury yields (as of the valuation date) plus a 300 basis point spread, to account for the credit risk differentials between the instrument being valued and U.S. Treasury security yields.
Residual values assumptions used in the cash flow projections are as follows:
For On-Lease and Month-to-Month Lease: Considers realized residual as a percent of book residual of 155%, based on ATELs historical track record as of December 31, 2015. In addition, an annual inflation rate of 1.50% has been assumed.
For Off-Lease: A realized residual of 100% of the book value for off-lease assets has been assumed.
Special Situation Leases: The valuation of certain leases has been performed outside of the above noted protocol based upon specific lease assumptions different than the macro assumptions above, due to the specific situations of those leases.
C. | Investments in Notes Receivable: The estimated values for Investments in Notes Receivable are assumed to approximate the reported GAAP balances. |
D. | Investments in Marketable Securities: The estimated values for Marketable Securities have been based on the estimated net book value as of the valuation date (with impairment adjustments), plus any unrealized gain on equity. The unrealized gain on equity is based on either: a) the most recent round of financing, b) the most recent 409A valuation provided by the underlying companies of the warrants, or c) the Managers estimate of the company valuations based on all available information, including company financials, company valuation reports, public press releases, and other sources. |
E. | Warrants Outstanding: The estimated values for Warrants Outstanding considers the reported GAAP balances to be an appropriate approximation of their fair values. |
F. | Accrued distributions: Accrued distributions, which are payable to the Unit holders have been removed from the balance sheet liability section because they are not a liability to a third party. |
The Managers estimated per Unit value of ATEL CAPITAL EQUIPMENT FUND XI, LLC at December 31, 2015 as determined, and derived under the guidelines of the Appraised Value Methodology, and pursuant to the above specific enumerated component valuation methodologies and calculations, equals $1.61. An independent national public accounting firm with valuation expertise was retained to examine, attest and confirm ATEL CAPITAL EQUIPMENT FUND XI, LLCs per Unit valuation and its component methodologies and calculation as it relates to compliance with the regulatory mandate defined in the Notice. In this regard, they examined the components of the valuation methodologies and determined them to be reasonable and within industry standards. Other component attributes, including the bases and related key assumptions of the calculation were tested for their completeness, underlying documentation support and mathematical accuracy. Upon completion of their efforts, their attestation report confirmed that the per unit valuation of ATEL CAPITAL EQUIPMENT FUND XI, LLC, and the related notes, in all material respects, was based upon industry practice as described in the Managers valuation approach.
The foregoing Fund per Unit valuation has been performed solely for the purpose of providing an estimated value per Unit in accordance with a regulatory mandate, in order to provide the broker dealer and custodian community with a valuation on a reasonable and attested basis for use in assigning an estimation of a Unit holders account value. Any report or disclosure of such estimated per Unit valuation is to be accompanied by statements that the value does not represent an estimate of the amount a Unit holder would receive if the Unit holder were to seek to sell the Units, and that the Fund intends to liquidate its assets in the ordinary course of its business and over the Funds term. Further, each statement of the Funds estimated per Unit valuation is to be accompanied by a disclosure that there can be no assurance as to (1) when the Fund will be fully liquidated, (2) the amount the Fund may actually receive if and when the Fund seeks to liquidate its assets,
24
(3) the amount of lease or loan payments the Fund will actually receive over the remaining term, (4) the amount of asset disposition proceeds the Fund will actually receive over the remaining term, and (5) the amounts that may actually be received in distributions by Unit holders over the course of the remaining term.
Documents filed as a part of this report:
1. | Financial Statement Schedules |
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and therefore have been omitted.
2. | Other Exhibits |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Dean L. Cash |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Paritosh K. Choksi |
32.1 | Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash |
32.2 | Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
25
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: May 16, 2016
By: ATEL Financial Services, LLC | ||
By: /s/ Dean L. Cash | ||
By: /s/ Paritosh K. Choksi | ||
By: /s/ Samuel Schussler |
26
Exhibit 31.1
I, Dean L. Cash, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of ATEL Capital Equipment Fund XI, 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 evaluationof 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: May 16, 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 quarterly report on Form 10-Q of ATEL Capital Equipment Fund XI, 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: May 16, 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 Quarterly Report of ATEL Capital Equipment Fund XI, LLC (the Company) on Form 10-Q for the period ended March 31, 2016 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: May 16, 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 Quarterly Report of ATEL Capital Equipment Fund XI, LLC (the Company) on Form 10-Q for the period ended March 31, 2016 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: May 16, 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 - shares |
3 Months Ended | |
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Mar. 31, 2016 |
Apr. 30, 2016 |
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Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | ATEL CAPITAL EQUIPMENT FUND XI, LLC | |
Entity Central Index Key | 0001297667 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Units Outstanding | 5,209,307 |
Balance Sheets - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
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ASSETS | ||
Cash and cash equivalents | $ 2,340 | $ 3,132 |
Accounts receivable, net of allowance for doubtful accounts of $0 as of March 31, 2016 and $1 as of December 31, 2015 | 169 | 156 |
Investment in securities | 22 | 38 |
Fair value of warrants | 10 | 27 |
Investments in equipment and leases, net of accumulated depreciation of $13,284 as of March 31, 2016 and $13,316 as of December 31, 2015 | 2,587 | 2,712 |
Prepaid expenses and other assets | 28 | 31 |
Total assets | 5,156 | 6,096 |
Accounts payable and accrued liabilities: | ||
Managing Member | 44 | 106 |
Accrued distributions to Other Members | 1,303 | |
Other | 86 | 80 |
Unearned operating lease income | 145 | 14 |
Total liabilities | $ 275 | $ 1,503 |
Commitments and contingencies | ||
Members' capital: | ||
Managing Member | ||
Other Members | $ 4,881 | $ 4,593 |
Total Members' capital | 4,881 | 4,593 |
Total liabilities and Members' capital | $ 5,156 | $ 6,096 |
Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
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Balance Sheets [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 0 | $ 1 |
Investments in equipment and leases, accumulated depreciation | $ 13,284 | $ 13,316 |
Statements of Changes in Members' Capital - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
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Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
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Beginning Balance (in Units) | 5,209,307 | ||
Beginning Balance | $ 4,593 | $ 7,261 | $ 7,261 |
Distributions to Other Members | (3,647) | ||
Distributions to Managing Member | (295) | ||
Net income | $ 288 | $ 312 | $ 1,274 |
Ending Balance (in Units) | 5,209,307 | 5,209,307 | |
Ending Balance | $ 4,881 | $ 4,593 | |
Other Members [Member] | |||
Beginning Balance (in Units) | 5,209,307 | 5,209,307 | 5,209,307 |
Beginning Balance | $ 4,593 | $ 7,261 | $ 7,261 |
Distributions to Other Members | (3,647) | ||
Net income | $ 288 | $ 979 | |
Ending Balance (in Units) | 5,209,307 | 5,209,307 | |
Ending Balance | $ 4,881 | $ 4,593 | |
Managing Member [Member] | |||
Distributions to Managing Member | (295) | ||
Net income | $ 295 |
Statements of Changes in Members' Capital (Parenthetical) - $ / shares |
3 Months Ended | 12 Months Ended | |
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Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
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Statements of Changes in Members' Capital [Abstract] | |||
Weighted average distributions per Unit | $ 0 | $ 0 | $ 0.70 |
Organization and Limited Liability Company Matters |
3 Months Ended |
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Mar. 31, 2016 | |
Organization and Limited Liability Company Matters [Abstract] | |
Organization and Limited Liability Company Matters | 1. Organization and Limited Liability Company matters: ATEL Capital Equipment Fund XI, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on June 25, 2004. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. Also, from time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements. 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, 2025. 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 May 31, 2005, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received 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). As of July 13, 2005, the Company had received subscriptions for 958,274 Units ($9.6 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be released to the Company. The Company terminated sales of Units effective April 30, 2006. Life-to-date net contributions through March 31, 2016 totaled $52.2 million, consisting of approximately $52.8 million in gross contributions from Other Members purchasing Units under the public offering less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable) of $636 thousand. As of March 31, 2016, 5,209,307 Units were issued and outstanding. The Company’s principal objectives are 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, 2012, 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. On January 1, 2013, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement. Pursuant to the terms of the Operating Agreement, AFS and its affiliates receives compensation for services rendered and reimbursements for costs incurred 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. The Company’s 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, 2015, filed with the Securities and Exchange Commission.
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Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 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 months ended March 31, 2016 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 effect 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 March 31, 2016 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. 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 and reserve for credit losses on notes receivable. 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 months ended March 31, 2016 and 2015 and long-lived assets as of March 31, 2016 and December 31, 2015 (dollars in thousands):
Investment in securities: From time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements. Purchased securities Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. Based upon the Company’s review of its portfolio, a fair value adjustment of $16 thousand was recorded for the three months ended March 31, 2016 to reduce the cost basis of an impaired investment security to zero. No such fair value adjustment was deemed necessary for the three months ended March 31, 2015. There were no sales or dispositions of securities during the three months ended March 31, 2016 and 2015. Warrants Warrants owned by the Company are not registered for public sale, but are considered derivatives and are reflected at an estimated fair value on the balance sheet as determined by the Managing Member. During the three months ended March 31, 2016, the Company recorded unrealized losses of $17 thousand on fair valuation of its warrants. There were no unrealized gains or losses recorded during the prior year period. As of March 31, 2016 and December 31, 2015, the estimated fair value of the Company’s portfolio of warrants amounted to $10 thousand and $27 thousand, respectively. There were no exercises of warrants, net or otherwise, during the three months ended March 31, 2016 and 2015. Foreign currency transactions: Foreign currency transaction gains and losses are reported in the results of operations as “other income” or “other loss” in the period in which they occur. Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments as the foreign currency transactions risks to date have not been significant. Per Unit data: The Company issues only one class of Units, none of which are considered dilutive. Net income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the period. Recent accounting pronouncements: In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). The new standard will require lessees to recognize lease assets and lease liabilities arising from operating leases with lease terms greater than 12 months in the statement of financial position. Lessor accounting per ASU 2016-02 is mostly unchanged from the previous lease accounting GAAP. Certain changes were made to the lessor accounting guidance in order to align the lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Similar to the previous guidance, lessors will classify leases as operating, direct financing, or sales-type. Lessors in operating leases will continue to recognize the underlying asset and recognize income on a straight-line basis. Lessors determine whether a lease is a sale of the underlying asset based on whether the lessee effectively obtains control of the underlying assets. ASU-2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the standard and its operational and related disclosure requirements. In January 2016, FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The new standard provides guidance related to accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently evaluating the standard and its operational and related disclosure requirements. 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. In May 2014, the 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.
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Notes Receivable, Net |
3 Months Ended |
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Mar. 31, 2016 | |
Notes Receivable, Net [Abstract] | |
Notes Receivable, Net | 3. Notes receivable, net: The Company has had various notes receivable from borrowers who have financed the purchase of equipment through the Company. The notes were secured by the equipment financed. The Company had one note receivable which remained unsettled as of March 31, 2015. As of such date, the note had an outstanding balance of $297 thousand, an annual interest rate of 8.51%, and a maturity date of January 1, 2016. Interest income on the note amounted to $6 thousand during the first three months of 2015. Such note was fully settled in December 2015.
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Investment in Equipment and Leases, Net |
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Investment in Equipment and Leases, Net | 4. Investment 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, 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, 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 the three months ended March 31, 2016 and 2015. 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 totaled $103 thousand and $264 thousand for the respective three months ended March 31, 2016 and 2015. Initial direct costs amortization expense related to the Company’s operating and direct financing leases amounted to $2 thousand for each of the three-month periods ended March 31, 2016 and 2015. All of the leased property was acquired during the years 2005 through 2011. Operating leases: Property on operating leases consists of the following (in thousands):
The average estimated residual value for assets on operating leases was 8% of the assets’ original cost at both March 31, 2016 and December 31, 2015. There were no operating lease contracts placed in non-accrual status at March 31, 2016 and December 31, 2015. Direct financing leases: As of March 31, 2016 and December 31, 2015, investment in direct financing leases consists of construction equipment. The components of the Company’s investment in direct financing leases as of March 31, 2016 and December 31, 2015 are as follows (in thousands):
There were no investments in direct financing lease assets in non-accrual status at March 31, 2016 and December 31, 2015. At March 31, 2016, the aggregate amounts of future minimum lease payments to be received are as follows (in thousands):
The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of March 31, 2016, 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 | 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; and 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 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 reimbursable in future years to the extent of the cumulative limit. As of March 31, 2016, the Company has not exceeded the annual and/or cumulative limitations discussed above. AFS and/or affiliates earned fees and billed for reimbursements of costs and expenses pursuant to the Operating Agreement as follows during the three months ended March 31, 2016 and 2015 (in thousands):
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Commitments |
3 Months Ended |
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Mar. 31, 2016 | |
Commitments [Abstract] | |
Commitments | 6. Commitments: At March 31, 2016, the Company had no commitments to either purchase lease assets or fund loans.
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Guarantees |
3 Months Ended |
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Mar. 31, 2016 | |
Guarantees [Abstract] | |
Guarantees | 7. 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 |
3 Months Ended |
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Mar. 31, 2016 | |
Members' Capital [Abstract] | |
Members' Capital | 8. Members’ capital: A total of 5,209,307 Units were issued and outstanding as of March 31, 2016 and December 31, 2015. The Fund was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial members (50 Units). The Company terminated sales of Units effective April 30, 2006. The Company has the right, exercisable at the Manager’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 Limited Liability Company Operating Agreement. The repurchase would be at the discretion of the Manager on terms it determines to be appropriate under given circumstances, in the event that the Manager 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. The monthly distributions were discontinued in 2013 as the Company entered its liquidation phase. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the Manager. There were no distributions declared or paid during the three months ended March 31, 2016 and 2015.
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Fair Value Measurements |
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Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 9. Fair value measurements: 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. At March 31, 2016 and December 31, 2015, only the Company’s warrants were measured on a recurring basis. In addition, certain investment securities deemed impaired were measured at fair value on a non-recurring basis as of March 31, 2016 and December 31, 2015. 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, notes receivable 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. Such fair value adjustments utilized the following methodology: Warrants (recurring) Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried on the balance sheet at an estimated fair value at the end of the period. The valuation of the warrants was determined using a Black-Scholes formulation of value based upon the stock price(s), the exercise price(s), the volatility of comparable venture companies, and a risk free interest rate for the term(s) of the warrant exercise(s). As of March 31, 2016 and December 31, 2015, the calculated fair value of the Company’s warrant portfolio approximated $10 thousand and $27 thousand, respectively. Such valuations are classified within Level 3 of the valuation hierarchy. The following table reconciles the beginning and ending balances of the Company’s Level 3 recurring assets (in thousands):
Impaired investment securities (non-recurring) The Company’s investment securities are not registered for public sale and are carried at cost. The investment securities are adjusted for impairment, if any, based upon factors which include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. During the first quarter of 2016, the Company recorded a $16 thousand fair value adjustment to reduce the cost basis of an impaired investment security to zero. The 100% reduction in value was based on a market approach technique and uses inputs that reflect qualitative and quantitative information provided by the management of the investee. Such information indicated a significantly reduced value as evidenced by the purchase price of the investee as contemplated in its acquisition terms. During 2015, the Company recorded a fair value adjustment of $6 thousand to reduce the cost basis of an impaired investment security. Such adjustment was recorded subsequent to the first quarter of 2015. The reduction in value was based on a market approach technique and uses inputs that reflect qualitative and quantitative information provided by the management of the investee, which indicated reduced growth opportunity and eventual reduction in cash flows and revenues. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the aforementioned impaired investment securities were classified within Level 3 of the valuation hierarchy. As previously mentioned, the fair value of the investment security impaired during the first quarter of 2016 was zero as of March 31, 2016. The following table presents the fair value measurements of impaired investment securities measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at December 31, 2015 (in thousands):
The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s recurring and non-recurring fair value calculation categorized as Level 3 in the fair value hierarchy at March 31, 2016 and December 31, 2015:
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 and should be read in conjunction with the Company’s financial statements and related notes. 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. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize or has realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. 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. Non-recourse debt The fair value of the Company’s non-recourse debt is estimated using discounted cash flow analyses, based upon the current market borrowing rates for similar types of borrowing arrangements. Commitments and Contingencies Management has determined that no recognition for the fair value of the Company’s loan commitments is necessary because their terms are made on a market rate basis and require borrowers to be in compliance with the Company’s credit requirements at the time of funding. 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. 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 March 31, 2016 and December 31, 2015 (in thousands):
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Summary of Significant Accounting Policies (Policy) |
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Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | 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 months ended March 31, 2016 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 effect 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 March 31, 2016 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.
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Use of Estimates | 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 and reserve for credit losses on notes receivable.
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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 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 months ended March 31, 2016 and 2015 and long-lived assets as of March 31, 2016 and December 31, 2015 (dollars in thousands):
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Investment in Securities | Investment in securities: From time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements. Purchased securities Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. Based upon the Company’s review of its portfolio, a fair value adjustment of $16 thousand was recorded for the three months ended March 31, 2016 to reduce the cost basis of an impaired investment security to zero. No such fair value adjustment was deemed necessary for the three months ended March 31, 2015. There were no sales or dispositions of securities during the three months ended March 31, 2016 and 2015. Warrants Warrants owned by the Company are not registered for public sale, but are considered derivatives and are reflected at an estimated fair value on the balance sheet as determined by the Managing Member. During the three months ended March 31, 2016, the Company recorded unrealized losses of $17 thousand on fair valuation of its warrants. There were no unrealized gains or losses recorded during the prior year period. As of March 31, 2016 and December 31, 2015, the estimated fair value of the Company’s portfolio of warrants amounted to $10 thousand and $27 thousand, respectively. There were no exercises of warrants, net or otherwise, during the three months ended March 31, 2016 and 2015.
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Foreign Currency Transactions | Foreign currency transactions: Foreign currency transaction gains and losses are reported in the results of operations as “other income” or “other loss” in the period in which they occur. Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments as the foreign currency transactions risks to date have not been significant.
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Per Unit Data | Per Unit data: The Company issues only one class of Units, none of which are considered dilutive. Net income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the period.
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Recent Accounting Pronouncements | Recent accounting pronouncements: In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). The new standard will require lessees to recognize lease assets and lease liabilities arising from operating leases with lease terms greater than 12 months in the statement of financial position. Lessor accounting per ASU 2016-02 is mostly unchanged from the previous lease accounting GAAP. Certain changes were made to the lessor accounting guidance in order to align the lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Similar to the previous guidance, lessors will classify leases as operating, direct financing, or sales-type. Lessors in operating leases will continue to recognize the underlying asset and recognize income on a straight-line basis. Lessors determine whether a lease is a sale of the underlying asset based on whether the lessee effectively obtains control of the underlying assets. ASU-2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the standard and its operational and related disclosure requirements. In January 2016, FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The new standard provides guidance related to accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently evaluating the standard and its operational and related disclosure requirements. 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. In May 2014, the 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.
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Summary of Significant Accounting Policies (Tables) |
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Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Geographic Information Relating to Sources, by Nation, of Partnership's Total Revenue and Long-Lived Assets | The table below summarizes geographic information relating to the sources, by nation, of the Company’s total revenues for the three months ended March 31, 2016 and 2015 and long-lived assets as of March 31, 2016 and December 31, 2015 (dollars in thousands):
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Investment in Equipment and Leases, Net (Tables) |
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Investment 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 | As of March 31, 2016 and December 31, 2015, investment in direct financing leases consists of construction equipment. The components of the Company’s investment in direct financing leases as of March 31, 2016 and December 31, 2015 are as follows (in thousands):
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Future Minimum Lease Payments Receivable | At March 31, 2016, the aggregate amounts of future minimum lease payments to be received are as follows (in thousands):
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Schedule of Useful Lives of Assets | The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of March 31, 2016, 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) |
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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 of costs and expenses pursuant to the Operating Agreement as follows during the three months ended March 31, 2016 and 2015 (in thousands):
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Fair Value Measurements (Tables) |
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Level 3 Assets | The following table reconciles the beginning and ending balances of the Company’s Level 3 recurring assets (in thousands):
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Fair Value Measurement of Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis | The following table presents the fair value measurements of impaired investment securities measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at December 31, 2015 (in thousands):
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Summary Valuation Techniques and Significant Unobservable Inputs Used | The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s recurring and non-recurring fair value calculation categorized as Level 3 in the fair value hierarchy at March 31, 2016 and December 31, 2015:
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Estimated Fair Values of Financial Instruments | 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 March 31, 2016 and December 31, 2015 (in thousands):
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Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016
USD ($)
segment
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Mar. 31, 2015
USD ($)
|
Dec. 31, 2015
USD ($)
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Summary of Significant Accounting Policies [Abstract] | |||
Number of operating segments | segment | 1 | ||
Number of reportable segments | segment | 1 | ||
Impairment losses on investment in securities | $ 16 | ||
Unrealized losses relative to the conversion of warrants | (17) | ||
Gain on exercise of warrants | 0 | $ 0 | |
Estimated fair value of warrants | $ 10 | $ 27 |
Notes Receivable, Net (Narrative) (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2015
USD ($)
| |
Notes Receivable, Net [Abstract] | |
Notes receivable, annual interest rate | 8.51% |
Notes maturity date | Jan. 01, 2016 |
Notes receivable, net | $ 297 |
Interest on notes receivable | $ 6 |
Investment in Equipment and Leases, Net (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
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Investment in Equipment and Leases, Net [Abstract] | |||
Depreciation of operating lease assets | $ 103 | $ 264 | |
Amortization of initial direct costs | $ 2 | $ 2 | |
Average estimated residual value of assets on operating leases | 8.00% | 8.00% |
Investment in Equipment and Leases, Net (Investment in Leases) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
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Leases Disclosure [Line Items] | ||
Balance December 31, 2015 | $ 2,712 | |
Reclassifications, Additions/Dispositions | (17) | |
Depreciation/Amortization Expense or Amortization of Leases | (108) | |
Balance March 31, 2016 | 2,587 | |
Initial direct costs, accumulated amortization | 29 | $ 27 |
Operating Leases [Member] | ||
Leases Disclosure [Line Items] | ||
Balance December 31, 2015 | 2,688 | |
Reclassifications, Additions/Dispositions | (17) | |
Depreciation/Amortization Expense or Amortization of Leases | (103) | |
Balance March 31, 2016 | 2,568 | |
Direct Financing Leases [Member] | ||
Leases Disclosure [Line Items] | ||
Balance December 31, 2015 | 9 | |
Depreciation/Amortization Expense or Amortization of Leases | (3) | |
Balance March 31, 2016 | 6 | |
Initial Direct Cost [Member] | ||
Leases Disclosure [Line Items] | ||
Balance December 31, 2015 | 15 | |
Depreciation/Amortization Expense or Amortization of Leases | (2) | |
Balance March 31, 2016 | $ 13 |
Investment in Equipment and Leases, Net (Components of Investment in Direct Financing Leases) (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Investment in Equipment and Leases, Net [Abstract] | ||
Total minimum lease payments receivable | $ 6 | $ 11 |
Estimated residual values of leased equipment (unguaranteed) | 1 | 1 |
Investment in direct financing leases | 7 | 12 |
Less unearned income | (1) | (3) |
Net investment in direct financing leases | $ 6 | $ 9 |
Investment in Equipment and Leases, Net (Future Minimum Lease Payments Receivable) (Details) $ in Thousands |
Mar. 31, 2016
USD ($)
|
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Operating Leases | |
Nine months ending December 31, 2016 | $ 828 |
Year ending December 31, 2017 | 894 |
2018 | 429 |
2019 | 322 |
2020 | 265 |
2021 | 78 |
Operating leases, future minimum payments receivable, total | 2,816 |
Direct Financing Leases | |
Nine months ending December 31, 2016 | $ 6 |
Year ending December 31, 2017 | |
2018 | |
2019 | |
2020 | |
2021 | |
Capital leases, future minimum payments receivable, total | $ 6 |
Total | |
Nine months ending December 31, 2016 | 834 |
Year ending December 31, 2017 | 894 |
2018 | 429 |
2019 | 322 |
2020 | 265 |
2021 | 78 |
Operating and capital leases, future minimum payments, Receivable, total | $ 2,822 |
Related Party Transactions (Affiliates Earned Commissions and Billed for Reimbursements Pursuant to Operating Agreement (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
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Related Party Transactions [Abstract] | ||
Cost reimbursements to Managing Member and/or affiliates | $ 33 | $ 49 |
Asset management fees to Managing Member | 32 | 30 |
Related party transaction, total | $ 65 | $ 79 |
Commitments (Narrative) (Details) $ in Thousands |
Mar. 31, 2016
USD ($)
|
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Commitments [Abstract] | |
Commitments to purchase lease assets or fund loans | $ 0 |
Members' Capital (Narrative) (Details) - $ / shares |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
Dec. 31, 2014 |
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Other Members Capital Account [Line Items] | ||||
Units issued | 5,209,307 | 5,209,307 | ||
Units outstanding | 5,209,307 | 5,209,307 | ||
Other Members capital account, Units authorized | 15,000,000 | 15,000,000 | ||
Potential repurchase price of Units as percentage of holder's capital account | 100.00% | |||
Weighted average distributions per Unit | $ 0 | $ 0 | $ 0.70 | |
Other Members [Member] | ||||
Other Members Capital Account [Line Items] | ||||
Units outstanding | 5,209,307 | 5,209,307 | 5,209,307 | |
Managing Member [Member] | ||||
Other Members Capital Account [Line Items] | ||||
Units issued | 50 | 50 | 50 |
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Fair Value Measurements [Abstract] | ||
Estimated fair value of warrants | $ 10 | $ 27 |
Fair value adjustments which reduced the cost basis of impaired loans | $ 16 | $ 6 |
Percentage of fair value adjustments | 100.00% |
Fair Value Measurements (Reconciliation of Level 3 Assets) (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2016
USD ($)
| |
Fair Value Measurements [Abstract] | |
Balance at December 31, 2015 | $ 27 |
Unrealized loss on warrants, net recorded during the period | (17) |
Balance at March 31, 2016 | $ 10 |
Fair Value Measurements (Fair Value Measurement of Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis) (Details) $ in Thousands |
Dec. 31, 2015
USD ($)
|
---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impaired investment securities | $ 4 |
Level 1 Estimated Fair Value [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impaired investment securities | |
Level 2 Estimated Fair Value [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impaired investment securities | |
Level 3 Estimated Fair Value [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impaired investment securities | $ 4 |
Fair Value Measurements (Summary Valuation Techniques and Significant Unobservable Inputs Used) (Details) - Recurring [Member] - Black-Scholes [Member] - Warrants [Member] - Level 3 Estimated Fair Value [Member] - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Annualized volatility | 100.00% | 100.00% |
Minimum [Member] | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Stock price | $ 0.35 | $ 0.35 |
Exercise price | $ 0.91 | $ 0.91 |
Time to maturity (in years) | 2 years 1 month 28 days | 2 years 4 months 28 days |
Risk-free interest rate | 0.75% | 1.16% |
Maximum [Member] | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Stock price | $ 1.25 | $ 1.25 |
Exercise price | $ 1.25 | $ 1.25 |
Time to maturity (in years) | 2 years 6 months | 2 years 9 months |
Risk-free interest rate | 0.80% | 1.25% |
Fair Value Measurements (Estimated Fair Values of Financial Instruments) (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Financial assets: | ||
Fair value of warrants | $ 10 | $ 27 |
Carrying Amount [Member] | ||
Financial assets: | ||
Cash and cash equivalents | 2,340 | 3,132 |
Investment in securities | 22 | 38 |
Fair value of warrants | 10 | 27 |
Estimated Fair Value [Member] | ||
Financial assets: | ||
Cash and cash equivalents | 2,340 | 3,132 |
Investment in securities | 22 | 38 |
Fair value of warrants | 10 | 27 |
Estimated Fair Value [Member] | Level 1 Estimated Fair Value [Member] | ||
Financial assets: | ||
Cash and cash equivalents | $ 2,340 | 3,132 |
Investment in securities | ||
Fair value of warrants | ||
Estimated Fair Value [Member] | Level 2 Estimated Fair Value [Member] | ||
Financial assets: | ||
Cash and cash equivalents | ||
Investment in securities | ||
Fair value of warrants | ||
Estimated Fair Value [Member] | Level 3 Estimated Fair Value [Member] | ||
Financial assets: | ||
Investment in securities | $ 22 | 38 |
Fair value of warrants | $ 10 | $ 27 |
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