10QSB 1 fund410q2q2002.txt REPORT FOR THE SIX MONTHS ENDED JUNE 30, 2002 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, 2002 |_| 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 0-21552 ATEL Cash Distribution Fund IV, L.P. (Exact name of registrant as specified in its charter) California 94-3145429 ---------- ---------- (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 1 Part I FINANCIAL INFORMATION Item 1. Financial Statements. 2 ATEL CASH DISTRIBUTION FUND IV, L.P. BALANCE SHEET JUNE 30, 2002 (Unaudited) ASSETS Cash and cash equivalents $ 1,140,574 Accounts receivable, net of allowance for doubtful accounts of $24,383 131,258 Investments in leases 1,933,738 ---------------- $ 3,205,570 ================ LIABILITIES AND PARTNERS' CAPITAL Non-recourse debt $ 202,463 Accounts payable 104,807 Accrued interest payable 1,460 ---------------- Total liabilities 308,730 Partners' capital: General partners 231,743 Limited partners 2,665,097 ---------------- Total partners' capital 2,896,840 ---------------- $ 3,205,570 ================ See accompanying notes. 3 ATEL CASH DISTRIBUTION FUND IV, L.P. INCOME STATEMENTS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 2002 2001 2002 2001 ---- ---- ---- ---- Revenues: Lease revenues: Operating leases $ 303,151 $ 315,013 $ 165,289 $ 166,121 Direct financing leases 425,427 288,615 222,654 143,005 (Loss) gain on sale of assets 10,131 (1,916) 2,737 (9,279) Interest income 6,953 13,599 2,692 5,368 Other income 293 1,182 256 144 --------------- ---------------- ---------------- ---------------- 745,955 616,493 393,628 305,359 Expenses: Depreciation and amortization 243,024 249,378 118,466 114,167 Cost reimbursements to General Partner 135,666 251,284 83,916 150,813 Other 54,996 61,268 30,408 24,974 Professional fees 29,640 26,075 18,505 20,455 Interest 10,431 23,851 4,717 10,005 Equipment and incentive management fees - - - (30,928) --------------- ---------------- ---------------- ---------------- 473,757 611,856 256,012 289,486 --------------- ---------------- ---------------- ---------------- Net income $ 272,198 $ 4,637 $ 137,616 $ 15,873 =============== ================ ================ ================ Net income: General partners $ 2,722 $ 46 $ 1,376 $ 159 Limited partners 269,476 4,591 136,240 15,714 --------------- ---------------- ---------------- ---------------- $ 272,198 $ 4,637 $ 137,616 $ 15,873 =============== ================ ================ ================ Net income per limited partnership unit $0.04 $0.00 $0.02 $0.00 Weighted average number of units outstanding 7,487,350 7,487,350 7,487,350 7,487,350
STATEMENT OF CHANGES IN PARTNERS' CAPITAL SIX MONTH PERIOD ENDED JUNE 30, 2002 (Unaudited)
Limited Partners General Units Amount Partners Total Balance December 31, 2001 7,487,350 $ 3,331,557 $ 229,021 $ 3,560,578 Distributions to limited partners (935,936) - (935,936) Net income 269,476 2,722 272,198 --------------- ---------------- ---------------- ---------------- Balance June 30, 2002 7,487,350 $ 2,665,097 $ 231,743 $ 2,896,840 =============== ================ ================ ================
See accompanying notes. 4 ATEL CASH DISTRIBUTION FUND IV, L.P. STATEMENTS OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 2002 2001 2002 2001 ---- ---- ---- ---- Operating activities: Net income $ 272,198 $ 4,637 $ 137,616 $ 15,873 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 243,024 249,378 118,466 114,167 Loss (gain) on sale of assets (10,131) 1,916 (2,737) 9,279 Changes in operating assets and liabilities: Accounts receivable 61,995 1,985,623 69,723 88,081 Bank overdrafts - (230,243) - - Accounts payable, general partner (48,454) (32,722) - (30,928) Accounts payable, other (4,432) 27,426 (158) 82,129 Accrued interest payable (663) (2,552) (335) (1,288) Unearned operating lease income (43,219) 27,617 (41,204) 77,197 --------------- ---------------- ---------------- ---------------- Net cash from operations 470,318 2,031,080 281,371 354,510 --------------- ---------------- ---------------- ---------------- Investing activities: Proceeds from sales of assets 401,040 180,790 31,903 45,146 Reduction in investment in direct financing leases 27,573 241,222 3,846 157,059 --------------- ---------------- ---------------- ---------------- Net cash provided by investing activities 428,613 422,012 35,749 202,205 --------------- ---------------- ---------------- ---------------- Financing activities: Payments of non-recourse debt (91,933) (407,149) (46,462) (205,482) Distributions to limited partners (935,936) (1,331,182) - 2,853 --------------- ---------------- ---------------- ---------------- Net cash used in financing activities (1,027,869) (1,738,331) (46,462) (202,629) --------------- ---------------- ---------------- ---------------- Net increase (decrease) in cash and cash equivalents (128,938) 714,761 270,658 354,086 Cash at beginning of period 1,269,512 55,445 869,916 416,120 --------------- ---------------- ---------------- ---------------- Cash at end of period $ 1,140,574 $ 770,206 $ 1,140,574 $ 770,206 =============== ================ ================ ================ Supplemental disclosures of cash flow information: Cash paid during period for interest $ 11,094 $ 26,403 $ 5,052 $ 11,293 =============== ================ ================ ================
See accompanying notes. 5 ATEL CASH DISTRIBUTION FUND IV, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 (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 IV, L.P. (the Partnership), was formed under the laws of the State of California on September 19, 1991, for the purpose of acquiring equipment to engage in equipment leasing and sales activities. The Partnership's business consists of leasing various types of equipment. As of June 30, 2002, the original terms of the leases were from six months to eight years. 3. Investment in leases: The Partnership's investment in leases consists of the following:
Depreciation Expense or Reclass- December 31, Amortization ifications & June 30, 2001 of Leases Dispositions 2002 ---- --------- -------------- ---- Net investment in operating leases $ 1,835,915 $ (237,770) $ (390,909) $ 1,207,236 Net investment in direct financing leases 1,325,813 (27,573) - 1,298,240 Initial direct costs, net of accumulated amortization of $111,629 in 2001 and $116,882 in 2002 18,387 (5,254) - 13,133 Equipment held for lease - - - Reserve for losses (584,871) - - (584,871) ----------------- ---------------- ---------------- ---------------- $ 2,595,244 $ (270,597) $ (390,909) $ 1,933,738 ================= ================ ================ ================
6 ATEL CASH DISTRIBUTION FUND IV, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 (Unaudited) 3. Investments in leases (continued): The Partnership's investment in property on operating leases consists of the following:
Reclassifications & December 31, Dispositions June 30, 2001 1st Quarter 2nd Quarter 2002 ---- ----------- ----------- ---- Transportation $ 2,810,685 $ (615,914) $ (109,859) $ 2,084,912 Construction 1,756,195 - - 1,756,195 Manufacturing 457,670 - - 457,670 Materials handling 318,012 - - 318,012 --------------- ---------------- ---------------- ---------------- 5,342,562 (615,914) (109,859) 4,616,789 Less accumulated depreciation (3,506,647) 132,240 (35,146) (3,409,553) --------------- ---------------- ---------------- ---------------- $ 1,835,915 $ (483,674) $ (145,005) $ 1,207,236 =============== ================ ================ ================
All of the property on operating leases was acquired from 1992 through 1997. At June 30, 2002, the aggregate amounts of future minimum lease payments are as follows:
Direct Financing Operating Total Six months ending December 31, 2002 $ 453,000 $ 293,247 $ 746,247 Year ending December 31, 2003 906,000 553,206 1,459,206 2004 595,199 - 595,199 --------------- ---------------- ---------------- $ 1,954,199 $ 846,453 $ 2,800,652 =============== ================ ================
7 ATEL CASH DISTRIBUTION FUND IV, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 (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 7.1% to 9.1%. Future minimum principal payments of long-term non-recourse debt as of June 30, 2002 are as follows:
Principal Interest Total Six months ending December 31, 2002 $395,983 $ 7,044 $ 103,027 Year ending December 31, 2002 106,480 2,861 109,341 --------------- ---------------- ---------------- $ 202,463 $ 9,905 $ 212,368 =============== ================ ================
5. Related party transactions: 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 during the six month periods ended June 30, 2002 and 2001 as follows : 2002 2001 ---- ---- Reimbursement of administrative costs $ 135,666 $ 251,284 Incentive and equipment management fees - - ---------------- ---------------- $ 135,666 $ 251,284 ================ ================ Effective January 1, 2001, the General Partners have ceased charging the Partnership any further fees. 8 ATEL CASH DISTRIBUTION FUND IV, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 (Unaudited) 6. Partner's capital: The Fund is authorized to issue up to 7,500,000 Units of Limited Partnership interest in addition to the Initial Limited Partners. The Fund's Net Profits, Net Losses and Tax Credits are to be allocated 99% to the Limited Partners and 1% to the General Partners. As more fully described in the Agreement of Limited Partnership, available Cash from Operations and Cash from Sales or Refinancing shall be distributed as follows: First, 5% of Distributions of Cash from Operations to the General Partner as Incentive Management Fees. Second, the balance to the Limited Partners until the Limited Partners have received aggregate Distributions, as defined, in an amount equal to their Original Invested Capital, as defined, plus a 10% per annum cumulative (compounded daily) return on their Adjusted Invested Capital, as defined. Third, the General Partner will receive as Incentive Management Fees, the following: (A) 10% of remaining Cash from Operations, as defined, (B) 15% of remaining Cash from Sales or Refinancing, as defined. Fourth, the balance to the Limited Partners. 7. Subsequent event: In July 2002, the Partnership sold a significant portion of its lease assets prior to the maturity of the initial lease terms. The assets had been on lease to Tarmac America, Inc. The information below summarizes the sales transactions. Original cost of equipment $ 1,730,181 Net book value of assets at date of sale $ 540,785 Sales price $ 665,542 Non-recouse debt repaid at time of sale $ 186,752 Net cash received from sale $ 478,791 Gain realized on sale $ 124,757 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity Funds which have been received, but which have not yet been invested in leased equipment, are invested in interest-bearing accounts or high-quality/short-term commercial paper. The Partnership's primary source of liquidity during 2002 were lease revenues and proceeds from the sales of lease assets. 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 partner envisions no such requirements for operating purposes. As of June 30, 2002, the Partnership had borrowed approximately $38,342,000, with a remaining unpaid balance of $202,463. Borrowings are to be non-recourse to the Partnership, that is, the only recourse of the lender will be to the equipment or corresponding lease acquired or secured with the loan proceeds. The general partner expects that aggregate borrowings in the future will be approximately 40% of aggregate 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. As of June 30, 2002, there were no such commitments. 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 significantly, the lease rates that the Partnership can obtain on future leases will be expected to increase 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, 2002 vs. 2001: Six months: During the first six months of 2002 and 2001, lease rents were the primary source of cash flows. Cash flows from operations decreased by $1,560,761, from $2,031,080 in 2001 to $470,319 in 2002. Most of this decrease relates to the collection of accounts receivable balances, existing as of December 31, 2000, during the first half of 2001. The large accounts receivable balance at December 31, 2000 related to the sale of lease assets that occurred on that date. The cash was received in January 2001. There were no similar balances collected in 2002. Sources of cash from investing activities consisted of proceeds from the sales of lease assets and from direct financing lease rents accounted for as reductions of the net investment in such leases. Proceeds from sales of assets increased from $180,790 in 2001 to $401,040 in 2002. 10 In 2002 and 2001, there were no sources of cash from financing activities. As scheduled debt payments have been made over the last year, debt balances have been reduced. As a result, the amounts of cash used to make such debt payments has also decreased. The Partnership has made no distributions from 2002 operations. The only distributions in 2002 were from 2001 operations (in January 2002). The fund is currently making distributions only once a year based on the amount of cash available. The amount that was available at the end of 2001, was less than in the prior year. Because of this, the General Partner decreased the amount of the distribution compared to the previous year. Three months: Lease rents were the primary source of cash flows in the second quarter of 2002 and 2001. Cash flows from operations have decreased by $73,138 ($354,510 in 2001 and $281,372 in 2002). Most of the decrease has come about because of decreased collections of lease rents in advance of the actual due dates for the payments (unearned lease revenues). This results from the timing of the cash collections rather than from decreases in revenues. In 2002, proceeds from lease assets sales were the most significant source of cash from investing activities. Proceeds from asset sales has decreased as most of the Partnership's remaining lease assets have been sold over the last eighteen months. Rents from direct financing leases also provided cash flows from investing activities but has decreased as a result of asset sales. Such rents were the primary source of cash from investing activities in 2001. During the second quarter of 2002 and 2001, there were no financing sources of cash. Payments of non-recourse debt and distributions to the Limited Partners decreased for the same reasons as noted above for the six month period. Results of Operations Operations in the 2002 resulted in net income of $272,199 for the six month period and $137,617 for the three month period. Operations in 2001, operations resulted in net income of $4,367 for the six month period and $15,873 for the three month period. Operating lease revenues decreased by $11,862 for the six month period and by $832 for the three month period. Revenues have declined as leases have matured and as the underlying assets have been sold. The Partnership's investment in lease assets has decreased from $3,720,468 at December 31, 2000 to $1,933,738 at June 30, 2002. Most of the decrease has been as a result of sales of assets. As leases mature and the related assets are sold, lease revenues are expected to continue to decline. Gains and losses from the sales of those assets are not expected to be consistent from one period to another. The Partnership's operating expenses decreased by $138,100 for the six month period and by $33,475 for the three month period. Most of the decrease resulted from decreased cost reimbursements paid to the General Partner. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. No material legal proceedings are currently pending against the Partnership or against any of its assets. 11 Quaker Coal Company On December 31, 1997, Quaker Coal Company, one of the Partnership's lessees, (the Debtor) requested a moratorium on lease payments from January through March 1998. No lease payments were made by the lessee through June 1998, and as a result, the General Partner declared the lease in default. Subsequently, the lessee cured the outstanding payments and eventually satisfied substantially all lease payments due under the lease; however, the General Partner refused to waive the default and insisted on contractual damages. The General Partner filed a suit against the lessee for its contractual damages in the U.S. District Court of Northern California (the "Court"). On June 16, 2000, the lessee filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The amounts of these damages have not been included in the financial statements included in Part I, Item 1 of this report. The Partnership obtained a stipulation for relief from the automatic bankruptcy stay to allow the Court to issue its ruling, and filed a request to participate on the Official Committee of Unsecured Creditors in the bankruptcy proceedings. The Partnership succeeded upon securing the return of its equipment, which has been liquidated. The Court issued a ruling on March 4, 2001, denying the Partnership's claim for damages. The Debtor subsequently filed a claim against the Partnership, for reimbursement of its legal expenses. The General Partner believes the Court's decision is erroneous as a matter law, and has filed an appeal of the decision in the U.S. District Court of Appeals. The Debtor filed a plan of reorganization, which was objected to by several large creditors, including the General Partner. These creditors were also seeking a formal role on the creditors committee or formation of their own committee. Upon the termination of the Debtor's exclusivity period, competing plans were filed by other creditors to the plan, and voting on the competing plans occurred October 8, 2001. The results of the vote were that, another of the creditors, American Electric Power's ("AEP") Plan of Reorganization ("AEP Plan") was successful. Under the AEP Plan, the claim of the Partnerships has been assigned to a liquidating trustee for resolution and satisfaction from the Debtor's estate. In January 2002, ATEL attended an appellate settlement conference seeking to resolve the outstanding disputed claim. A reserve has been set aside by the liquidating trustee in the amount of $1.2 million in partial satisfaction of the Company's claim, although this claim amount remains in dispute. Currently, the likelihood of recovery of amounts above the payment of the lease rent and the liquidation of the equipment already received remains speculative and highly uncertain. 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. 12 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, 2002 Income statements for the six and three month periods ended June 30, 2002 and 2001. Statement of changes in partners' equity for the six months ended June 30, 2002. Statements of cash flows for the six and three month periods ended June 30, 2002 and 2001. 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 13 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly report on Form 10QSB of ATEL Cash Distribution Fund IV, LP, (the "Partnership") for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, I, Dean L. Cash, Chief Executive Officer of ATEL Financial Services, LLC, general partner of the Partnership, hereby certify 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 finanancial condition and results of operations of the Partnership. /s/ DEAN L. CASH ---------------------------------------------------- Dean L. Cash President and Chief Executive Officer of General Partner August 14, 2002 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly report on Form 10QSB of ATEL Cash Distribution Fund IV, LP, (the "Partnership") for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, I, Paritosh K. Choksi, Chief Financial Officer of ATEL Financial Services, LLC, general partner of the Partnership, hereby certify 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 finanancial condition and results of operations of the Partnership. /s/ PARITOSH K. CHOKSI ------------------------------------------------------------------- Paritosh K. Choksi Executive Vice President of General Partner, Principal financial officer of registrant August 14, 2002 14 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 14, 2002 ATEL CASH DISTRIBUTION FUND IV, L.P. (Registrant) By: ATEL Financial Services, LLC General Partner of Registrant By: /s/ DEAN L. CASH -------------------------------- Dean L. Cash President and Chief Executive Officer of General Partner By: /s/ PARITOSH K. CHOKSI ----------------------------------- Paritosh K. Choksi Executive Vice President of General Partner, Principal financial officer of registrant By: /s/ DONALD E. CARPENTER ------------------------------------ Donald E. Carpenter, Principal accounting officer of registrant 15