-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L5BTemCqu9K84QnKoCnkJ3APWb7niZZmgLx3ULi1lCAS4H4cvsVDnSlErIKVVD3b 7xMUK4GSNoafc0iSiOiEAA== 0000823065-98-000003.txt : 19980814 0000823065-98-000003.hdr.sgml : 19980814 ACCESSION NUMBER: 0000823065-98-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATEL CASH DISTRIBUTION FUND II CENTRAL INDEX KEY: 0000823065 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943051991 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-17631 FILM NUMBER: 98685506 BUSINESS ADDRESS: STREET 1: 235 PINE ST, 6TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159898800 10QSB 1 REPORT FOR THE 2ND QUARTER OF 1998 Form 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 1998 |_| 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 0-17631 ATEL Cash Distribution Fund II, a California Limited Partnership (Exact name of registrant as specified in its charter) California 94-3051991 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 235 Pine Street, 6th Floor, San Francisco, California 94104 (Address of principal executive offices) Registrant's telephone number, including area code (415) 989-8800 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 |_| DOCUMENTS INCORPORATED BY REFERENCE None Part I FINANCIAL INFORMATION Item 1. Financial Statements. ATEL CASH DISTRIBUTION FUND II (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEET JUNE 30, 1998 (Unaudited) ASSETS
Cash and cash equivalents $766,718 Accounts receivables, net of allowance for doubtful accounts of $32,623 34,442 Investment in equipment and leases 2,370,652 ---------------- $3,171,812 ================ LIABILITIES AND PARTNERS' CAPITAL Non-recourse debt $533,981 Accrued interest 5,006 Accounts payable: General partners 1,974 Other 63,971 Unearned operating lease income 84,031 ---------------- Total liabilities 688,963 Partners' capital: General partners 88,928 Limited partners 2,393,921 ---------------- Total partners' capital 2,482,849 ---------------- $3,171,812 ================
See notes to financial statements ATEL CASH DISTRIBUTION FUND II (A CALIFORNIA LIMITED PARTNERSHIP) INCOME STATEMENTS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, Revenues: 1998 1997 1998 1997 ---- ---- ---- ---- Lease income: Operating $283,221 $517,582 $141,338 $243,145 Direct financing 124,000 87,003 60,208 40,381 Leveraged leases 30,550 12,138 - 6,069 Gain on sales of assets 256,886 150,117 1,201 68,045 Other income 1,732 63,752 345 62,933 Interest income 12,576 12,965 6,495 6,738 ---------------- ----------------- ---------------- ---------------- 708,965 843,557 209,587 427,311 ---------------- ----------------- ---------------- ---------------- Expenses: Depreciation and amortization 140,293 217,793 71,064 104,619 Administrative cost reimbursements 56,196 64,868 19,800 27,619 Equipment and partnership management fees 37,754 49,915 10,896 23,947 Interest expense 32,450 71,318 15,504 31,942 Taxes 18,806 20,641 18,806 20,641 Other 18,340 26,071 5,319 18,676 Professional fees 9,045 8,450 9,045 6,959 Provision for losses 4,995 4,162 - - ---------------- ----------------- ---------------- ---------------- 317,879 463,218 150,434 234,403 ---------------- ----------------- ---------------- ---------------- Net Income $391,086 $380,339 $59,153 $192,908 ================ ================= ================ ================ Net income: General partners $3,911 $2,886 $592 $1,483 Limited partners 387,175 285,714 58,561 146,816 ---------------- ----------------- ---------------- ---------------- $391,086 $288,600 $59,153 $148,299 ================ ================= ================ ================ Net income per limited partnership unit $5.53 $4.08 $0.84 $2.10 Weighted average number of units outstanding 69,979 69,979 69,979 69,979
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL SIX MONTHS ENDED JUNE 30, 1998
Limited Partners General Units Amount Partners Total Balance December 31, 1997 69,979 $2,825,061 $85,017 $2,910,078 Net income 387,175 3,911 391,086 Distributions (818,315) - (818,315) ---------------- ----------------- ---------------- ---------------- Balance June 30, 1998 69,979 $2,393,921 $88,928 $2,482,849 ================ ================= ================ ================
See notes to financial statements ATEL CASH DISTRIBUTION FUND II (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, 1998 1997 1998 1997 Operating activities: Net income $391,086 $380,339 $59,153 $192,908 Adjustment to reconcile net income to net cash provided by operations: Depreciation and amortization 140,293 217,793 71,064 104,619 Revenues from leveraged leases (30,550) (12,138) - (6,069) Gain on sales of assets (256,886) (150,117) (1,201) (68,045) Provision for losses 4,995 4,162 - - Changes in operating assets and liabilities: Decrease (increase) in accounts Accounts receivable 1,269 (63,077) (3,692) (46,737) Accounts payable, general partner (8,918) (19,741) (63,515) (16,371) Accounts payable, other (10,315) 5,297 33,492 (2,442) Accrued interest (1,611) (11,822) (482) (5,912) Customer deposits - (60,000) - - Unearned operating lease income 74,319 (5,818) 66,025 (12,023) ---------------- ----------------- ---------------- ---------------- Net cash from operations 303,682 284,878 160,844 139,928 ---------------- ----------------- ---------------- ---------------- Investing activities: Proceeds from sales of assets 435,440 563,964 4,199 100,553 Reductions of net investment in direct financing leases 76,485 422,809 29,072 213,279 ---------------- ----------------- ---------------- ---------------- Net cash provided by investing activities 511,925 986,773 33,271 313,832 ---------------- ----------------- ---------------- ----------------
ATEL CASH DISTRIBUTION FUND II (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 (Unaudited) (Continued)
Six Months Three Months Ended June 30, Ended June 30, 1998 1997 1998 1997 Financing activities: Repayment of non-recourse debt (122,731) (585,274) (51,447) (296,354) Distributions to limited partners (818,315) (745,576) (545,543) (272,771) ---------------- ----------------- ---------------- ---------------- Net cash used in financing activities (941,046) (1,330,850) (596,990) (569,125) ---------------- ----------------- ---------------- ---------------- Net (decrease) increase in cash and cash equivalents (125,439) (59,199) (402,875) (115,365) Cash and cash equivalents at beginning of period 892,157 989,337 1,169,593 1,045,503 ---------------- ----------------- ---------------- ---------------- Cash and cash equivalents at end of period $766,718 $930,138 $766,718 $930,138 ================ ================= ================ ================ Supplemental disclosures of cash flow information: Cash paid for interest during the period $32,450 $71,318 $15,504 $31,942 ================ ================= ================ ================ Operating lease assets reclassified to assets held or sale or lease $1,046,154 $1,046,154 Less accumulated depreciation (802,625) (802,625) ----------------- ---------------- $243,529 $243,529 ================= ================
See notes to financial statements ATEL CASH DISTRIBUTION FUND II (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) 1. Summary of significant accounting policies: Interim financial statements: The unaudited interim financial statements reflect all adjustments which are, in the opinion of the general partners, necessary to a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim financial statements should be read in conjunction with the most recent report on Form 10K. 2. Organization and partnership matters: ATEL Cash Distribution Fund II, a California Limited Partnership (the Partnership), was formed under the laws of the State of California on September 30, 1987, for the purpose of acquiring equipment to engage in equipment leasing and sales activities. Contributions in the amount of $600 were received as of September 30, 1987, $100 of which represented the General Partners' continuing interest, and $500 of which represented the Initial Limited Partner's capital investment. 3. Investment in leases: The Partnership's investment in leases consists of the following:
Depreciation Expense or Reclass- December 31, Amortization ifications & June 30, 1997 Additions of Leases Dispositions 1998 ---- --------- --------- -------------- ---- Net investment in operating leases $1,749,575 ($140,293) ($32,415) $1,576,867 Net investment in direct financing leases 944,264 (76,485) (269,098) 598,681 Net investment in leveraged leases 118,208 30,550 (148,758) - Equipment held for sale 388 - 271,717 272,105 Reserve for losses (72,006) ($4,995) - - (77,001) ------------------ ---------------- ----------------- ---------------- ---------------- $2,740,429 ($4,995) ($186,228) ($178,554) $2,370,652 ================== ================ ================= ================ ================
ATEL CASH DISTRIBUTION FUND II (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) 3. Investment in leases (continued): Operating leases: The following schedule provides an analysis of the Partnership's investment in equipment on operating leases by major classifications as of December 31, 1997, additions and dispositions during the three month periods ended March 31, 1998 and June 30, 1998 and as of June 30, 1998:
Reclassifications & December 31, Dispositions June 30, Equipment type 1997 1st Quarter 2nd Quarter 1998 -------------- ---- ----------- ----------- ---- Aircraft $2,354,533 $2,354,533 Mining 1,546,341 ($186,232) ($21,866) 1,338,243 Communications 445,877 - - 445,877 Materials handling 432,139 (54,592) 377,547 Other 183,599 - - 183,599 ---------------- ----------------- ---------------- ---------------- 4,962,489 (240,824) (21,866) 4,699,799 Less accumulated depreciation (3,212,914) 142,180 (52,198) (3,122,932) ---------------- ----------------- ---------------- ---------------- $1,749,575 ($98,644) ($74,064) $1,576,867 ================ ================= ================ ================
Equipment on operating leases was acquired in 1988, 1989, 1990, 1991 and 1994. At June 30, 1998, the aggregate amounts of future minimum lease payments are as follows: Year ending Direct December 31, Financing Operating Total 1998 $148,339 $271,578 $419,917 1999 228,248 415,968 644,216 2000 224,000 239,499 463,499 2001 224,000 37,200 261,200 2002 224,000 18,600 242,600 ---------------- ----------------- ---------------- $1,048,587 $982,845 $2,031,432 ================ ================= ================ ATEL CASH DISTRIBUTION FUND II (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) 4. Non-recourse debt: Notes payable to financial institutions are due in varying monthly, quarterly and semi-annual installments of principal and interest. The notes are secured by assignments of lease payments and pledges of the assets which were purchased with the proceeds of the particular notes. Interest rates on the notes vary from 7.69% to 12.86%. Future minimum principal and interest payments of debt as of June 30, 1998 are as follows: Year ending December 31, Principal Interest Total 1998 $107,317 $27,548 $134,865 1999 233,531 36,202 269,733 2000 193,133 9,166 202,299 ---------------- ----------------- ---------------- $533,981 $72,916 $606,897 ================ ================= ================ 5. Commitments, management and report of fees: The terms of the Agreement of Limited Partnership provide that the General Partners and/or Affiliates are entitled to receive certain fees for equipment acquisition, management and resale and for management of the Partnership. The General Partners and/or Affiliates earned the following fees, commissions and reimbursements, pursuant to the Limited Partnership Agreement as follows: 1998 1997 ---- ---- Reimbursement of administrative costs $56,196 $64,868 Incentive and equipment management fees 37,754 49,915 ---------------- ---------------- $93,950 $114,783 ================ ================ Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity Partnership cash which has been received, but which has not yet been invested in leased equipment or distributed to partners, is invested in interest-bearing accounts or high-quality/short-term commercial paper. The partnership's primary source of liquidity is cash received from lease rentals. The liquidity of the partnership will vary in the future, increasing to the extent cash flows from leases exceed expenses and decreasing as lease assets are acquired, as distributions are made to the limited partners and to the extent expenses exceed cash flows from leases. The partnership currently has available adequate reserves to meet contingencies, but in the event those reserves were found to be inadequate, the partnership would likely be in a position to borrow against its current portfolio to meet such requirements. The general partners envision no such requirements for operating purposes, nor have they explored with lenders the possibility of obtaining loans. There can be no assurance as to the terms of any such financing or that the partnership will be able to obtain such loans. All of the Partnership's non-recourse debt is paid by lease payments assigned to the lenders. The assigned lease payments match the required payments on the debt and such payments fully amortize the debt. As of June 30, 1998, the partnership had borrowed approximately $21,700,000. The remaining unpaid balance on those borrowings was $533,981. The borrowings are non-recourse to the partnership, that is, the only recourse of the lender will be to the equipment or corresponding lease acquired with the loan proceeds. The general partners expect that aggregate borrowings in the future will decrease as a percentage of equipment cost. In any event, the Agreement of Limited Partnership limits such borrowings to 40% of the total cost of equipment, in aggregate. No commitments of capital have been or are expected to be made. The Partnership made distributions of cash from 1998 first and second quarter operations in April and July 1998, respectively. The amounts of these distributions were each $7.50 per Unit. These distributions represent an annualized distribution rate of 6.0%. If inflation in the general economy becomes significant, it may affect the partnership inasmuch as the residual (resale) values and rates on re-leases of the Partnership's leased assets may increase as the costs of similar assets increase. However, the partnership's revenues from existing leases would not increase, as such rates are generally fixed for the terms of the leases without adjustment for inflation. If interest rates increase or decrease significantly, the lease rates that the partnership can obtain on future leases will be expected to increase or decrease in parallel as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates. Cash flows, six months, 1998 vs. 1997 In the first six months of 1998, the Partnership's primary source of cash flows from operations was lease rents, particularly operating lease rents. Cash flows from operations Increased by $18,804. The Partnership's operating lease revenues declined by $234,361 compared to 1997. Direct financing lease revenues increased by $36,997. Operating lease rents declined as a result of lease terminations over the preceding year. Some of the assets coming off of operating leases were re-leased under new direct financing lease arrangements. These new leases gave rise to the increase in direct financing lease revenues. Cash flows from investing activities decreased by $474,828 compared to 1997. Most of the decrease was due to sales of direct financing lease assets in 1998 and 1997, resulting in decreased cash flows from such leases. There were no financing sources of cash in the 1998 or 1997 periods. Debt principal payments have decreased as a result of scheduled debt payments. Distributions increased due to higher per Unit rate of distributions in 1998 compared to 1997. Cash flows, three months, 1998 vs. 1997 Lease revenues decreased by $88,049. Lease rentals were the largest source of cash in the second quarter of 1998. The decrease in lease rents for the three month period was due to asset sales as noted above for the six month period. Sources of cash flows from investing activities decreased compared to 197. Proceeds from the sales of assets decreased by $96,334 compared to 1997. There were no financing sources of cash in the 1998 or 1997 periods. Cash flows used in financing activities changed in the three month period due to the same causes as noted above for the six month period. Results of Operations The results of operations in future periods may vary significantly from those of the first six months of 1998 as the partnership's lease portfolio of capital equipment matures. Revenues from leases are expected to decline over the long term as leased assets come off lease and are sold or re-leased at lower lease rates. The effect on net income is not determinable as it will depend to a large degree on the amounts received from the sales of assets or from re-leases to either the same or new lessees once the initial lease terms expire. 1998 vs. 1997 Operating lease revenues declined by $234,361 (six months) and $101,807 (three months). Direct financing lease revenues increased by $36,997 (six months) and $19,827 (three months) compared to 1997. Depreciation expense decreased by $77,500 (six months) and $33,555 (three months) compare to 1997. Operating lease revenues and depreciation have declined as leases have reached their scheduled terminations and the underlying assets have been sold or re-leased on direct financing leases. Management fees are related to lease revenues and to distributions. Both of these factors declined in 1998 compared to 1997, resulting in lower management fees. Interest expense decreased for both the six and three month periods due to lower average debt balances than in 1997 resulting from scheduled debt payments. Other Year 2000 Issues The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any computer programs that have time sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculation causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in similar normal business activities. The Partnership uses primarily third party software and is communicating with key vendors to ensure that the Partnership's systems are year 2000 compliant. Based on these discussions, the Partnership does not expect that the costs related to the year 2000 issue will be significant. Ultimately, the potential impact of the year 2000 issue will depend on the way in which the year 2000 issue is addressed by businesses and other entities whose financial condition or operational capability is important to the Partnership. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. Inapplicable. Item 2. CHANGES IN SECURITIES. Inapplicable. Item 3. DEFAULTS UPON SENIOR SECURITIES. Inapplicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Inapplicable. Item 5. OTHER INFORMATION. Inapplicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Documents filed as a part of this report 1. Financial Statements Included in Part I of this report: Balance sheet, June 30, 1998. Income statements for the six and three month periods ended June 30, 1998 and 1997. Statement of changes in partners' equity for the six month period ended June 30, 1998. Statements of cash flows for the six and three month periods ended June 30, 1998 and 1997. Notes to the financial statements. 2. Financial Statement Schedules All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. (b) Report on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 12, 1998 ATEL Cash Distribution Fund II, a California limited partnership (Registrant) By: /s/ A. J. BATT ----------------------------------------------- A. J. Batt, General Partner of registrant By: /s/ DEAN L. CASH ----------------------------------------------- Dean Cash, General Partner of registrant By: /s/ F. RANDALL BIGONY ----------------------------------------------- F. Randall Bigony Principal financial officer of registrant By: /s/ DONALD E. CARPENTER ----------------------------------------------- Donald E. Carpenter, Principal accounting officer of registrant EX-27 2 FDS --
5 6-MOS DEC-31-1998 DEC-31-1998 766,718 0 67,065 32,623 0 0 0 0 2,370,652 0 0 0 0 0 2,482,849 2,370,652 0 708,965 0 0 280,434 4,995 32,450 391,086 0 391,086 0 0 0 391,086 0 0
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