Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended March 31, 2018
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| o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the transition period from to
Commission File number 000-51858
ATEL Capital Equipment Fund XI, LLC
(Exact name of registrant as specified in its charter)
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| 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)
Registrant’s telephone number, including area code (415) 989-8800
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Limited Liability Company Units
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
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
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, 2018 was 5,209,307.
DOCUMENTS INCORPORATED BY REFERENCE
None.
ATEL CAPITAL EQUIPMENT FUND XI, LLC
Index
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
ATEL CAPITAL EQUIPMENT FUND XI, LLC
BALANCE SHEETS
MARCH 31, 2018 AND DECEMBER 31, 2017
(In Thousands)
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| March 31, 2018 |
December 31, 2017 |
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| ASSETS |
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| Cash and cash equivalents | $ | 947 | $ | 586 | ||||
| Accounts receivable, net | 1 | 66 | ||||||
| Investment in securities | 11 | 11 | ||||||
| Investments in equipment and leases, net | 1,505 | 1,633 | ||||||
| Prepaid expenses and other assets | 29 | 33 | ||||||
| Total assets | $ | 2,493 | $ | 2,329 | ||||
| LIABILITIES AND MEMBERS’ CAPITAL |
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| Accounts payable and accrued liabilities: |
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| Managing Member | $ | 8 | $ | 16 | ||||
| Affiliates | 40 | 36 | ||||||
| Other | 67 | 82 | ||||||
| Unearned operating lease income | 26 | 14 | ||||||
| Total liabilities | 141 | 148 | ||||||
| Commitments and contingencies |
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| Members’ capital: |
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| Managing Member | — | — | ||||||
| Other Members | 2,352 | 2,181 | ||||||
| Total Members’ capital | 2,352 | 2,181 | ||||||
| Total liabilities and Members’ capital | $ | 2,493 | $ | 2,329 | ||||
See accompanying notes.
3
ATEL CAPITAL EQUIPMENT FUND XI, LLC
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
MARCH 31, 2018 AND 2017
(In Thousands Except for Units and Per Unit Data)
(Unaudited)
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| Three Months Ended March 31, |
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| 2018 | 2017 | |||||||
| Revenues: |
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| Leasing and lending activities: |
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| Operating leases | $ | 275 | $ | 244 | ||||
| Gain on sales of lease assets | 108 | 14 | ||||||
| Other | 1 | 2 | ||||||
| Total revenues | 384 | 260 | ||||||
| Expenses: |
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| Depreciation of operating lease assets | 85 | 77 | ||||||
| Asset management fees to Managing Member | 8 | 10 | ||||||
| Cost reimbursements to Managing Member and/or affiliates | 48 | 52 | ||||||
| Reversal of provision for credit losses | (33 | ) | (1 | ) | ||||
| Amortization of initial direct costs | — | 2 | ||||||
| Professional fees | 57 | 56 | ||||||
| Outside services | 30 | 25 | ||||||
| Taxes on income and franchise fees | 7 | 7 | ||||||
| Insurance | 5 | 10 | ||||||
| Other | 7 | 5 | ||||||
| Total operating expenses | 214 | 243 | ||||||
| Other income, net | 1 | 1 | ||||||
| Net income | $ | 171 | $ | 18 | ||||
| Net income (loss): |
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| Managing Member | $ | — | $ | 106 | ||||
| Other Members | 171 | (88 | ) | |||||
| $ | 171 | $ | 18 | |||||
| Net income (loss) per Limited Liability Company Unit (Other Members) | $ | 0.03 | $ | (0.02 | ) | |||
| 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, 2017
AND FOR THE THREE MONTHS ENDED MARCH 31, 2018
(In Thousands Except for Units and Per Unit Data)
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| Units | Amount | Total | ||||||||||||||
| Other Members |
Managing Member |
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| Balance December 31, 2016 | 5,209,307 | $ | 3,979 | $ | — | $ | 3,979 | |||||||||
| Distributions to Other Members ($0.35 per Unit) | — | (1,828 | ) | — | (1,828 | ) | ||||||||||
| Distributions to Managing Member | — | — | (148 | ) | (148 | ) | ||||||||||
| Net income | — | 30 | 148 | 178 | ||||||||||||
| Balance December 31, 2017 | 5,209,307 | 2,181 | — | 2,181 | ||||||||||||
| Net income | — | 171 | — | 171 | ||||||||||||
| Balance March 31, 2018 (Unaudited) | 5,209,307 | $ | 2,352 | $ | — | $ | 2,352 | |||||||||
See accompanying notes.
5
ATEL CAPITAL EQUIPMENT FUND XI, LLC
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2018 AND 2017
(In Thousands)
(Unaudited)
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| Three Months Ended March 31, |
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| 2018 | 2017 | |||||||
| Operating activities: |
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| Net income | $ | 171 | $ | 18 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: |
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| Gain on sales of lease assets | (108 | ) | (14 | ) | ||||
| Depreciation of operating lease assets | 85 | 77 | ||||||
| Amortization of initial direct costs | — | 2 | ||||||
| Reversal of provision for credit losses | (33 | ) | (1 | ) | ||||
| Changes in operating assets and liabilities: |
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| Accounts receivable | 98 | (59 | ) | |||||
| Prepaid expenses and other assets | 4 | 4 | ||||||
| Accounts payable, Managing Member | (8 | ) | 24 | |||||
| Accounts payable, affiliates | 4 | — | ||||||
| Accounts payable, other | (15 | ) | (16 | ) | ||||
| Unearned operating lease income | 12 | 131 | ||||||
| Net cash provided by operating activities | 210 | 166 | ||||||
| Investing activities: |
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| Proceeds from sales of lease assets | 151 | 44 | ||||||
| Net cash provided by investing activities | 151 | 44 | ||||||
| Financing activities: |
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| Distributions to Other Members | — | (1,305 | ) | |||||
| Distributions to Managing Member | — | (106 | ) | |||||
| Net cash used in financing activities | — | (1,411 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 361 | (1,201 | ) | |||||
| Cash and cash equivalents at beginning of period | 586 | 1,932 | ||||||
| Cash and cash equivalents at end of period | $ | 947 | $ | 731 | ||||
| Supplemental disclosures of cash flow information: |
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| Cash paid during the period for taxes | $ | 7 | $ | 6 | ||||
See accompanying notes.
6
ATEL CAPITAL EQUIPMENT FUND XI, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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.
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, 2018 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, 2018, 5,209,307 Units were issued and outstanding.
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 4). 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, 2017, filed with the Securities and Exchange Commission.
2. Summary of significant accounting policies:
Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the Managing Member, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 2018 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, 2018 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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ATEL CAPITAL EQUIPMENT FUND XI, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of significant accounting policies: - (continued)
Use of estimates:
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes, and for determination of the allowance for doubtful accounts.
Segment reporting:
The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.
The primary geographic regions in which the Company seeks leasing opportunities are North America and Europe. Due to asset dispositions over the life of the fund, all current leases are located in the United States.
Investment in securities:
From time to time, the Company may purchase securities of its borrowers or receive warrants in connection with its lending arrangements.
Purchased securities
The Company’s investment securities whether registered or not registered for public sale are carried at fair value. The Company’s investment securities with readily determinable fair values are measured at fair value with any changes in fair value recognized in the Company’s results of operations. The Company’s investment securities that do not have readily determinable fair values are measured at fair value or at cost minus impairment, and adjusted for changes in observable prices. 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, there were no fair value adjustments recorded during either the three months ended March 31, 2018, or 2017. There were no sales or dispositions of investments in securities during the three months ended March 31, 2018 and 2017.
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. As of March 31, 2018 and December 31, 2017, the Managing Member estimated the fair value of the warrants to be $0. There were no exercises of warrants, net or otherwise, during the three months ended March 31, 2018 and 2017.
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.
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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ATEL CAPITAL EQUIPMENT FUND XI, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of significant accounting policies: - (continued)
Fair Value:
Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, generally on a national exchange.
Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.
Level 3 — Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability.
The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. The Company elected to record equity investments without readily determinable fair values at cost, less impairment, and adjusted for changes in observable prices. Any changes in the basis of these equity investments are reported in current earnings. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.
Recent accounting pronouncements:
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-15 — Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on its financial statements and disclosures.
In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the
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ATEL CAPITAL EQUIPMENT FUND XI, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of significant accounting policies: - (continued)
contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. Management is currently evaluating the standard and expects the Update may potentially result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments.
In February 2016, the 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 under 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 lesseeeffectively 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. While early adoption is permitted, the Company does not expect to elect that option. The Company expects to adopt the guidance in the first quarter 2019 using the modified retrospective method. Management is currently evaluating the impact of this standard on the financial statements and its operational and related disclosure requirements, including the impact on the Company’s current lease portfolio from a lessor perspective. Given the limited changes to lessor accounting, Management does not expect material changes to recognition or measurement, but the Company is early in the implementation process and will continue to evaluate the impact.
In January 2016, the 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. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and (v) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on its financial statements and disclosures.
The Company elected to record equity investments without readily determinable fair values at cost, less impairment, and adjusted for changes in observable prices. Any changes in the basis of these equity investments are reported in current earnings. The Company’s accounting for equity investments without readily determinable fair values is addressed in note 7.
In May 2014, the FASB issued Accounting Standards Update 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 with
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ATEL CAPITAL EQUIPMENT FUND XI, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of significant accounting policies: - (continued)
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. This guidance is effective for the Company beginning on January 1, 2018. Management’s evaluation of the impact of such adoption on the financial statements of the Fund indicated that such impact is immaterial as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Company’s revenues since leases are not included within the scope of Topic 825.
3. Investment in equipment and leases, net:
The Company’s investment in leases consists of the following (in thousands):
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| Balance December 31, 2017 |
Reclassifications, Additions/ Dispositions |
Depreciation/ Amortization Expense or Amortization of Leases |
Balance March 31, 2018 |
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| Net investment in operating leases | $ | 1,633 | $ | (43 | ) | $ | (85 | ) | $ | 1,505 | ||||||
| Assets held for sale or lease, net | — | (1 | ) | 1 | — | |||||||||||
| Total | $ | 1,633 | $ | (44 | ) | $ | (84 | ) | $ | 1,505 | ||||||
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, 2018 and 2017.
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 $85 thousand and $77 thousand for the respective three months ended March 31, 2018 and 2017.
All of the leased property was acquired during the years 2005 through 2011.
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ATEL CAPITAL EQUIPMENT FUND XI, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Investment in equipment and leases, net: - (continued)
Operating leases:
Property on operating leases consists of the following (in thousands):
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| Balance December 31, 2017 |
Additions | Reclassifications or Dispositions |
Balance March 31, 2018 |
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| Transportation, rail | $ | 8,015 | $ | — | $ | (545 | ) | $ | 7,470 | |||||||
| Aviation | 1,658 | — | — | 1,658 | ||||||||||||
| Marine vessels | 1,415 | — | — | 1,415 | ||||||||||||
| Transportation, other | 1,223 | — | — | 1,223 | ||||||||||||
| Materials handling | 27 | — | — | 27 | ||||||||||||
| Manufacturing | 10 | — | — | 10 | ||||||||||||
| 12,348 | — | (545 | ) | 11,803 | ||||||||||||
| Less accumulated depreciation | (10,716 | ) | (85 | ) | 503 | (10,298 | ) | |||||||||
| Total | $ | 1,632 | $ | (85 | ) | $ | (42 | ) | $ | 1,505 | ||||||
The average estimated residual value for assets on operating leases was 8% of the assets’ original cost at both March 31, 2018 and December 31, 2017. There were no operating lease contracts placed in non-accrual status at March 31, 2018 and December 31, 2017.
At March 31, 2018, the aggregate amounts of future minimum lease payments to be received are as follows (in thousands):
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| Operating Leases |
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| Nine months ending December 31, 2018 |
$ | 677 | ||
| Year ending December 31, 2019 |
299 | |||
| 2020 |
249 | |||
| 2021 |
74 | |||
| $ | 1,299 | |||
The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of March 31, 2018, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):
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| Equipment category | Useful Life | |||
| Transportation, rail | 35 – 40 | |||
| Marine vessels | 20 – 30 | |||
| Aviation | 15 – 20 | |||
| Manufacturing | 10 – 15 | |||
| Materials handling | 7 – 10 | |||
| Transportation, other | 7 – 10 | |||
4. 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.
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ATEL CAPITAL EQUIPMENT FUND XI, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Related party transactions: - (continued)
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, 2018, 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, 2018 and 2017 (in thousands):
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| Three Months Ended March 31, |
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| 2018 | 2017 | |||||||
| Costs reimbursed to Managing Member and/or affiliates | $ | 48 | $ | 52 | ||||
| Asset management fees to Managing Member | 8 | 10 | ||||||
| $ | 56 | $ | 62 | |||||
5. Commitments:
At March 31, 2018, the Company had no commitments to either purchase lease assets or fund loans.
6. Members’ capital:
A total of 5,209,307 Units were issued and outstanding as of March 31, 2018 and December 31, 2017. 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.
Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):
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| Three Months Ended March 31, |
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| 2018 | 2017 | |||||||
| Distributions | $ | — | $ | 1,305 | ||||
| Weighted average number of Units outstanding | 5,209,307 | 5,209,307 | ||||||
| Weighted average distributions per Unit | $ | — | $ | 0.25 | ||||
The regular 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.
13
ATEL CAPITAL EQUIPMENT FUND XI, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. Fair value measurements:
Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
At March 31, 2018 and December 31, 2017, the Company’s warrants were measured on a recurring basis.
Such fair value adjustments utilized the following methodology:
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.
Contingencies
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, 2018 and December 31, 2017 (in thousands):
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| Fair Value Measurements at March 31, 2018 | ||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Financial assets: |
||||||||||||||||||||
| Cash and cash equivalents | $ | 947 | $ | 947 | $ | — | $ | — | $ | 947 | ||||||||||
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| Fair Value Measurements at December 31, 2017 | ||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Financial assets: |
||||||||||||||||||||
| Cash and cash equivalents | $ | 586 | $ | 586 | $ | — | $ | — | $ | 586 | ||||||||||
| Investment in securities | 11 | — | — | 11 | 11 | |||||||||||||||
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Statements contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic conditions, including, fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Company’s performance is subject to risks relating to lessee and borrower defaults and the creditworthiness of its lessees and borrowers. The Company’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the 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.
Overview
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 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.
Results of Operations
The three months ended March 31, 2018 versus the three months ended March 31, 2017
The Company had net income of $171 thousand and $18 thousand for the respective three month periods ended March 31, 2018 and 2017. The results for the first quarter of 2018 reflect an increase in total revenues and a decrease in total operating expenses when compared to the prior year period.
Revenues
Total revenues for the first quarter of 2018 increased by $124 thousand, or 48%, as compared to the prior year period. This was largely attributable to an increase in gains recognized on the sale of lease assets of $94 thousand, or 7 times, due to a higher volume and a change in the mix of assets sold; and an increase in operating lease revenue of $31 thousand, or 13%, the result of an extension of a lease contract.
Expenses
Total operating expenses for the first quarter of 2018 reflected a net decrease of $29 thousand, or 12%, when compared to the prior year period. This decrease was primarily due to a reversal of a provision for credit losses totaling $33 thousand, which was the result of customers fully paying their accounts receivable balances during the current quarter.
Capital Resources and Liquidity
At March 31, 2018 and December 31, 2017, the Company’s cash and cash equivalents totaled $947 thousand and $586 thousand, 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 AFS’s success in remarketing or selling the equipment as it comes off rental.
15
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.
Cash Flows
The following table sets forth summary cash flow data (in thousands):
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| Three Months Ended March 31, |
||||||||
| 2018 | 2017 | |||||||
| Net cash provided by (used in): |
||||||||
| Operating activities | $ | 210 | $ | 166 | ||||
| Investing activities | 151 | 44 | ||||||
| Financing activities | — | (1,411 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | $ | 361 | $ | (1,201 | ) | |||
The three months ended March 31, 2018 versus the three months ended March 31, 2017
During the respective three month periods ended March 31, 2018 and 2017, the Company’s primary source of liquidity was cash flow from its portfolio of operating lease contracts. In addition, the Company realized $151 thousand and $44 thousand from the sale or disposition of equipment during the respective three months ended March 31, 2018 and 2017.
During the period ended March 31, 2017, the Company made $1.4 million of cash distributions to the Other and Managing Members. The Company has not made distributions in 2018 to the Other and Managing Members.
Commitments and Contingencies and Off-Balance Sheet Transactions
Commitments and Contingencies
At March 31, 2018, the Company had no commitments to purchase lease assets or fund loans.
Off-Balance Sheet Transactions
None.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, see Note 2 Summary of Significant Accounting Policies.
Significant Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.
The Company’s significant accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes to the Company’s significant accounting policies since December 31, 2017.
16
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
The Company’s Managing Member’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Company’s disclosure controls and procedures, Management concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.
The Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, who is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Member’s disclosure controls and procedures, as they are applicable to the Company, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control
There were no changes in the Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Managing Member’s internal control over financial reporting, as it is applicable to the Company.
17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Company. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Company’s financial position or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
Documents filed as a part of this report:
| 1. | Financial Statement Schedules |
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and therefore have been omitted.
| 2. | Other Exhibits |
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| 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 |
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 14, 2018
ATEL CAPITAL EQUIPMENT FUND XI, LLC
(Registrant)
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By: ATEL Financial Services, LLC |
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By: /s/ Dean L. Cash | ||
By: /s/ Paritosh K. Choksi | ||
By: /s/ Samuel Schussler |
19
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
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 registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting. |
Date: May 14, 2018
/s/ Dean L. Cash
Dean L. Cash
President and Chief Executive Officer of
ATEL Financial Services, LLC (Managing Member)
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
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 registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting. |
Date: May 14, 2018
/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
CERTIFICATION PURSUANT TO 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
§906 OF THE SARBANES-OXLEY ACT OF 2002
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, 2018 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 14, 2018
/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
CERTIFICATION PURSUANT TO 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
§906 OF THE SARBANES-OXLEY ACT OF 2002
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, 2018 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 14, 2018
/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 | |
|---|---|---|
Mar. 31, 2018 |
Apr. 30, 2018 |
|
| Document and Entity Information [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Mar. 31, 2018 | |
| Document Fiscal Year Focus | 2018 | |
| 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, 2018 |
Dec. 31, 2017 |
|---|---|---|
| ASSETS | ||
| Cash and cash equivalents | $ 947 | $ 586 |
| Accounts receivable, net | 1 | 66 |
| Investment in securities | 11 | 11 |
| Investments in equipment and leases, net | 1,505 | 1,633 |
| Prepaid expenses and other assets | 29 | 33 |
| Total assets | 2,493 | 2,329 |
| Accounts payable and accrued liabilities: | ||
| Managing Member | 8 | 16 |
| Affiliates | 40 | 36 |
| Other | 67 | 82 |
| Unearned operating lease income | 26 | 14 |
| Total liabilities | 141 | 148 |
| Commitments and contingencies | ||
| Members' capital: | ||
| Managing Member | ||
| Other Members | 2,352 | 2,181 |
| Total Members' capital | 2,352 | 2,181 |
| Total liabilities and Members' capital | $ 2,493 | $ 2,329 |
Statements of Income - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Leasing and lending activities: | ||
| Operating leases | $ 275 | $ 244 |
| Gain on sales of lease assets | 108 | 14 |
| Other | 1 | 2 |
| Total revenues | 384 | 260 |
| Expenses: | ||
| Depreciation of operating lease assets | 85 | 77 |
| Asset management fees to Managing Member | 8 | 10 |
| Cost reimbursements to Managing Member and/or affiliates | 48 | 52 |
| Reversal of provision for credit losses | (33) | (1) |
| Amortization of initial direct costs | 2 | |
| Professional fees | 57 | 56 |
| Outside services | 30 | 25 |
| Taxes on income and franchise fees | 7 | 7 |
| Insurance | 5 | 10 |
| Other | 7 | 5 |
| Total operating expenses | 214 | 243 |
| Other (loss) income, net | 1 | 1 |
| Net income | 171 | 18 |
| Net income (loss): | ||
| Managing Member | 106 | |
| Other Members | 171 | (88) |
| Net income | $ 171 | $ 18 |
| Net income (loss) per Limited Liability Company Unit (Other Members) | $ 0.03 | $ (0.02) |
| Weighted average number of Units outstanding | 5,209,307 | 5,209,307 |
Statements of Changes in Members' Capital - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
| Beginning Balance | $ 2,181 | $ 3,979 | $ 3,979 |
| Distributions to Other Members | (1,305) | (1,828) | |
| Distributions to Managing Member | (148) | ||
| Net (loss) income | 171 | $ 18 | 178 |
| Ending Balance | $ 2,352 | $ 2,181 | |
| Other Members [Member] | |||
| Beginning Balance (in Units) | 5,209,307 | 5,209,307 | 5,209,307 |
| Beginning Balance | $ 2,181 | $ 3,979 | $ 3,979 |
| Distributions to Other Members | (1,828) | ||
| Net (loss) income | $ 171 | $ 30 | |
| Ending Balance (in Units) | 5,209,307 | 5,209,307 | |
| Ending Balance | $ 2,352 | $ 2,181 | |
| Managing Member [Member] | |||
| Distributions to Managing Member | (148) | ||
| Net (loss) income | $ 148 | ||
Statements of Changes in Members' Capital (Parenthetical) - $ / shares |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2017 |
Dec. 31, 2017 |
|
| Statements of Changes in Members' Capital [Abstract] | ||
| Weighted average distributions per Unit | $ 0.25 | $ 0.35 |
Organization and Limited Liability Company Matters |
3 Months Ended |
|---|---|
Mar. 31, 2018 | |
| 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. 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, 2018 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, 2018, 5,209,307 Units were issued and outstanding. 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 4). 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, 2017, filed with the Securities and Exchange Commission.
|
Summary of Significant Accounting Policies |
3 Months Ended |
|---|---|
Mar. 31, 2018 | |
| 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, 2018 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, 2018 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. 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. Due to asset dispositions over the life of the fund, all current leases are located in the United States. Investment in securities: From time to time, the Company may purchase securities of its borrowers or receive warrants in connection with its lending arrangements. Purchased securities The Company’s investment securities whether registered or not registered for public sale are carried at fair value. The Company’s investment securities with readily determinable fair values are measured at fair value with any changes in fair value recognized in the Company’s results of operations. The Company’s investment securities that do not have readily determinable fair values are measured at fair value or at cost minus impairment, and adjusted for changes in observable prices. 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, there were no fair value adjustments recorded during either the three months ended March 31, 2018 or 2017. There were no sales or dispositions of investments in securities during the three months ended March 31, 2018 and 2017. 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. As of March 31, 2018 and December 31, 2017, the Managing Member estimated the fair value of the warrants to be $0. There were no exercises of warrants, net or otherwise, during the three months ended March 31, 2018 and 2017. 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. 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. Fair Value: Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, generally on a national exchange. Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market. Level 3 – Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company's own estimates of assumptions that market participants would use in pricing the asset or liability. The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. The Company elected to record equity investments without readily determinable fair values at cost, less impairment, and adjusted for changes in observable prices. Any changes in the basis of these equity investments are reported in current earnings. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources. Recent accounting pronouncements: In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-15 —Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on its financial statements and disclosures. In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. Management is currently evaluating the standard and expects the Update may potentially result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments. In February 2016, the 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 under 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 lesseeeffectively 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. While early adoption is permitted, the Company does not expect to elect that option. The Company expects to adopt the guidance in the first quarter 2019 using the modified retrospective method. Management is currently evaluating the impact of this standard on the financial statements and its operational and related disclosure requirements, including the impact on the Company’s current lease portfolio from a lessor perspective. Given the limited changes to lessor accounting, Management does not expect material changes to recognition or measurement, but the Company is early in the implementation process and will continue to evaluate the impact. In January 2016, the 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. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and (v) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on its financial statements and disclosures. The Company elected to record equity investments without readily determinable fair values at cost, less impairment, and adjusted for changes in observable prices. Any changes in the basis of these equity investments are reported in current earnings. The Company’s accounting for equity investments without readily determinable fair values is addressed in note 7. In May 2014, the FASB issued Accounting Standards Update 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 with 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. This guidance is effective for the Company beginning on January 1, 2018. Management’s evaluation of the impact of such adoption on the financial statements of the Fund indicated that such impact is immaterial as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Company’s revenues since leases are not included within the scope of Topic 825.
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Investment in Equipment and Leases, Net |
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| Investment in Equipment and Leases, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment in Equipment and Leases, Net | 3. 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, 2018 and 2017. 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 $85 thousand and $77 thousand for the respective three months ended March 31, 2018 and 2017. 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, 2018 and December 31, 2017. There were no operating lease contracts placed in non-accrual status at March 31, 2018 and December 31, 2017. At March 31, 2018, 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, 2018, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):
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Related Party Transactions |
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| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions | 4. 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, 2018, 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, 2018 and 2017 (in thousands):
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Commitments |
3 Months Ended |
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Mar. 31, 2018 | |
| Commitments [Abstract] | |
| Commitments | 5. Commitments: At March 31, 2018, the Company had no commitments to either purchase lease assets or fund loans.
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Members' Capital |
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| Members' Capital [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Members' Capital | 6. Members’ capital: A total of 5,209,307 Units were issued and outstanding as of March 31, 2018 and December 31, 2017. 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. Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):
The regular 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.
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Fair Value Measurements |
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| Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | 7. Fair value measurements: Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. At March 31, 2018 and December 31, 2017, the Company’s warrants were measured on a recurring basis. Such fair value adjustments utilized the following methodology: 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. Contingencies 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, 2018 and December 31, 2017 (in thousands):
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Summary of Significant Accounting Policies (Policy) |
3 Months Ended |
|---|---|
Mar. 31, 2018 | |
| 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, 2018 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, 2018 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.
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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. Due to asset dispositions over the life of the fund, all current leases are located in the United States.
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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 in connection with its lending arrangements. Purchased securities The Company’s investment securities whether registered or not registered for public sale are carried at fair value. The Company’s investment securities with readily determinable fair values are measured at fair value with any changes in fair value recognized in the Company’s results of operations. The Company’s investment securities that do not have readily determinable fair values are measured at fair value or at cost minus impairment, and adjusted for changes in observable prices. 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, there were no fair value adjustments recorded during either the three months ended March 31, 2018 or 2017. There were no sales or dispositions of investments in securities during the three months ended March 31, 2018 and 2017. 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. As of March 31, 2018 and December 31, 2017, the Managing Member estimated the fair value of the warrants to be $0. There were no exercises of warrants, net or otherwise, during the three months ended March 31, 2018 and 2017.
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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.
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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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| Fair Value | Fair Value: Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, generally on a national exchange. Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market. Level 3 – Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company's own estimates of assumptions that market participants would use in pricing the asset or liability. The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. The Company elected to record equity investments without readily determinable fair values at cost, less impairment, and adjusted for changes in observable prices. Any changes in the basis of these equity investments are reported in current earnings. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.
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| Recent Accounting Pronouncements | Recent accounting pronouncements: In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-15 —Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on its financial statements and disclosures. In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. Management is currently evaluating the standard and expects the Update may potentially result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments. In February 2016, the 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 under 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 lesseeeffectively 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. While early adoption is permitted, the Company does not expect to elect that option. The Company expects to adopt the guidance in the first quarter 2019 using the modified retrospective method. Management is currently evaluating the impact of this standard on the financial statements and its operational and related disclosure requirements, including the impact on the Company’s current lease portfolio from a lessor perspective. Given the limited changes to lessor accounting, Management does not expect material changes to recognition or measurement, but the Company is early in the implementation process and will continue to evaluate the impact. In January 2016, the 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. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and (v) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on its financial statements and disclosures. The Company elected to record equity investments without readily determinable fair values at cost, less impairment, and adjusted for changes in observable prices. Any changes in the basis of these equity investments are reported in current earnings. The Company’s accounting for equity investments without readily determinable fair values is addressed in note 7. In May 2014, the FASB issued Accounting Standards Update 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 with 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. This guidance is effective for the Company beginning on January 1, 2018. Management’s evaluation of the impact of such adoption on the financial statements of the Fund indicated that such impact is immaterial as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Company’s revenues since leases are not included within the scope of Topic 825.
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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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| Future Minimum Lease Payments Receivable | At March 31, 2018, 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 | As of March 31, 2018, 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) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||
| 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, 2018 and 2017 (in thousands):
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Members' Capital (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||
| Members' Capital [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Distributions to Other Members | Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):
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Fair Value Measurements (Tables) |
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| Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, 2018 and December 31, 2017 (in thousands):
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Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
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Mar. 31, 2018
USD ($)
segment
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Mar. 31, 2017
USD ($)
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Dec. 31, 2017
USD ($)
|
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| Summary of Significant Accounting Policies [Abstract] | |||
| Number of operating segments | segment | 1 | ||
| Number of reportable segments | segment | 1 | ||
| Gain (loss) on exercise of warrants | $ 0 | $ 0 | |
| Securities sold or disposed of | 0 | $ 0 | |
| Warrants, fair value | $ 0 | $ 0 | |
Investment in Equipment and Leases, Net (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
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| Investment in Equipment and Leases, Net [Abstract] | |||
| Lease equipment, depreciation method | straight line | ||
| Depreciation of operating lease assets | $ 85 | $ 77 | |
| Average estimated residual value of assets on operating leases | 8.00% | 8.00% | |
Investment in Equipment and Leases, Net (Investment in Leases) (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2018
USD ($)
| |
| Leases Disclosure [Line Items] | |
| Balance December 31, 2017 | $ 1,633 |
| Reclassifications, Additions/Dispositions | (44) |
| Depreciation/Amortization Expense or Amortization of Leases | (84) |
| Balance March 31, 2018 | 1,505 |
| Operating Leases [Member] | |
| Leases Disclosure [Line Items] | |
| Balance December 31, 2017 | 1,633 |
| Reclassifications, Additions/Dispositions | (43) |
| Depreciation/Amortization Expense or Amortization of Leases | (85) |
| Balance March 31, 2018 | 1,505 |
| Assets Held-for-sale or Lease [Member] | |
| Leases Disclosure [Line Items] | |
| Reclassifications, Additions/Dispositions | (1) |
| Depreciation/Amortization Expense or Amortization of Leases | $ 1 |
Investment in Equipment and Leases, Net (Future Minimum Lease Payments Receivable) (Details) $ in Thousands |
Mar. 31, 2018
USD ($)
|
|---|---|
| Operating Leases | |
| Nine months ending December 31, 2018 | $ 677 |
| Year ending December 31, 2019 | 299 |
| 2020 | 249 |
| 2021 | 74 |
| Operating leases, future minimum payments receivable, total | $ 1,299 |
Related Party Transactions (Affiliates Earned Commissions and Billed for Reimbursements Pursuant to Operating Agreement (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Related Party Transactions [Abstract] | ||
| Cost reimbursements to Managing Member and/or affiliates | $ 48 | $ 52 |
| Asset management fees to Managing Member | 8 | 10 |
| Related party transaction, total | $ 56 | $ 62 |
Commitments (Narrative) (Details) $ in Thousands |
Mar. 31, 2018
USD ($)
|
|---|---|
| Commitments [Abstract] | |
| Commitments to purchase lease assets or fund loans | $ 0 |
Members' Capital (Narrative) (Details) - shares |
Mar. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|---|---|---|---|
| Other Members [Member] | |||
| Other Members Capital Account [Line Items] | |||
| Units issued | 5,209,307 | 5,209,307 | |
| Units outstanding | 5,209,307 | 5,209,307 | 5,209,307 |
| Other Members capital account, Units authorized | 15,000,000 | 15,000,000 | |
| Initial Member [Member] | |||
| Other Members Capital Account [Line Items] | |||
| Units issued | 50 | 50 |
Members' Capital (Distributions to Other Members) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
| Members' Capital [Abstract] | |||
| Distributions | $ 1,305 | $ 1,828 | |
| Weighted average number of Units outstanding | 5,209,307 | 5,209,307 | |
| Weighted average distributions per Unit | $ 0.25 | $ 0.35 | |
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Fair Value Measurements [Abstract] | ||
| Estimated fair value of warrants | $ 0 | $ 0 |
Fair Value Measurements (Estimated Fair Values of Financial Instruments) (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Carrying Amount [Member] | ||
| Financial assets: | ||
| Cash and cash equivalents | $ 947 | $ 586 |
| Investment in securities | 11 | |
| Estimated Fair Value [Member] | ||
| Financial assets: | ||
| Cash and cash equivalents | 947 | 586 |
| Investment in securities | 11 | |
| Estimated Fair Value [Member] | Level 1 Estimated Fair Value [Member] | ||
| Financial assets: | ||
| Cash and cash equivalents | 947 | 586 |
| Estimated Fair Value [Member] | Level 2 Estimated Fair Value [Member] | ||
| Financial assets: | ||
| Cash and cash equivalents | ||
| Estimated Fair Value [Member] | Level 3 Estimated Fair Value [Member] | ||
| Financial assets: | ||
| Investment in securities | $ 11 |