Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required) For the
Year Ended December 31, 2001
OR
|_| Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required) For the
transition period from ____ to ____
Commission File number 0-23842
ATEL Cash Distribution Fund V, L.P.
California 94-3165807
(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
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Limited Partnership
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 |_|
State the aggregate market value of voting stock held by non-affiliates of the
registrant. Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE
Prospectus dated February 22, 1993, filed pursuant to Rule 424(b) (Commission
File No. 33-53162) is hereby incorporated by reference into Part IV hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |X|
1
PART I
Item 1: BUSINESS
General Development of Business
ATEL Cash Distribution Fund V, L.P. (the Partnership) was formed under the laws
of the state of California in September 1992. The Partnership was formed for the
purpose of acquiring equipment to engage in equipment leasing and sales
activities.
The Partnership conducted a public offering of 12,500,000 units of Limited
Partnership interest (Units) at a price of $10 per Unit. As of November 15,
1994, the Partnership had received and accepted subscriptions for 12,500,000
($125,000,000) Limited Partnership Units in addition to the Initial Limited
Partners' Units and the offering was terminated. Of those Units, 12,497,000 were
issued and outstanding as of December 31, 2001. Of the proceeds received,
$11,875,000 was paid to ATEL Securities Corporation, a wholly-owned subsidiary
of ATEL Financial Services LLC (ATEL) (the General Partner), as sales
commissions, $5,738,415 was paid to the General Partner as reimbursements of
organization and other syndication costs, $1,875,000 was reserved for
repurchases of Units and working capital and $105,511,585 has been used to
acquire leased equipment, including acquisition fees paid or to be paid to the
General Partner. Prior to converting to a limited liability company structure,
the General Partner was formerly known as ATEL Financial Corporation.
The Partnership's principal objectives are to invest in a diversified portfolio
of equipment which will (i) preserve, protect and return the Partnership's
invested capital; (ii) generate substantial distributions to the partners of
cash from operations and cash from sales or refinancing, with any balance
remaining after certain minimum distributions to be used to purchase additional
equipment during the reinvestment period, which ended December 31, 2000 and
(iii) provide significant distributions following the reinvestment period and
until all equipment has been sold. The Partnership is governed by its Limited
Partnership Agreement.
Narrative Description of Business
The Partnership has acquired and intends to acquire various types of equipment
and to lease such equipment pursuant to "Operating" leases and "Full Payout"
leases, where "Operating" leases are defined as being leases in which the
minimum lease payments during the initial lease term do not recover the full
cost of the equipment and "Full Payout" leases recover such cost. It is the
intention of the General Partner that no more than 25% of the aggregate purchase
price of equipment will be subject to "Operating" leases upon final investment
of the Net Proceeds of the Offering and that no more than 20% of the aggregate
purchase price of equipment will be invested in equipment acquired from a single
manufacturer.
The Partnership only purchased equipment for which a lease existed or for which
a lease would be entered into at the time of the purchase. The Partnership has
completed its initial acquisition stage with the investment of the net proceeds
from the public offering of Units.
As of December 31, 2001, the Partnership had purchased equipment with a total
acquisition price of $186,995,157.
The Partnership's objective is to lease a minimum of 75% of the equipment
acquired with the net proceeds of the offering to lessees which (i) have an
aggregate credit rating by Moody's Investor Service, Inc. of Baa or better, or
the credit equivalent as determined by the General Partner, with the aggregate
rating weighted to account for the original equipment cost for each item leased
or (ii) are established hospitals with histories of profitability or
municipalities. The balance of the original equipment portfolio may include
equipment leased to lessees which, although deemed creditworthy by the General
Partner, would not satisfy the general credit rating criteria for the portfolio.
In excess of 75% of the equipment acquired with the net proceeds of the offering
(based on original purchase cost) had been leased to lessees with an aggregate
credit rating of Baa or better or to such hospitals or municipalities.
2
The General Partner sought to limit the amount invested in equipment to any
single lessee to not more than 20% of the aggregate purchase price of equipment
owned at any time during the reinvestment period.
During 2001, 2000 and 1999, certain lessees generated significant portions of
the Partnership's total lease revenues as follows:
Percentage of Total
Lease Revenues
Lessee Type of Equipment 2001 2000 1999
Tarmac America Construction 16% * *
Burlington Northern Railroad Locomotives 13% 11% *
Florida Canyon Mining Mining 13% 11% *
* Less than 10%
These percentages are not expected to be comparable in future periods.
The equipment leasing industry is highly competitive. Equipment manufacturers,
corporations, partnerships and others offer users an alternative to the purchase
of most types of equipment with payment terms which vary widely depending on the
lease term and type of equipment. The ability of the Partnership to keep the
equipment leased and/or operating and the terms of the acquisitions, leases and
dispositions of equipment depends on various factors (many of which are not in
the control of the General Partner or the Partnership), such as general economic
conditions, including the effects of inflation or recession, and fluctuations in
supply and demand for various types of equipment resulting from, among other
things, technological and economic obsolescence.
The business of the Partnership is not seasonal.
The Partnership has no full time employees.
Equipment Leasing Activities
Through December 31, 2001, the Partnership has disposed of certain leased assets
as set forth below:
Original
Equipment Cost, Excess of
Type of Excluding Rents Over
Equipment Acquisition Fees Sales Price Expenses *
Transportation $40,033,043 $20,081,755 $ 33,096,353
Furniture, fixtures and office
equipment 22,209,670 8,314,618 18,925,245
Mining equipment 19,398,685 7,638,224 15,137,215
Materials handling 12,911,811 2,553,910 13,589,562
Office automation 4,593,822 970,163 4,813,683
Other 8,778,899 3,777,346 8,813,000
---------------- ---------------- ----------------
$107,925,930 $43,336,016 $ 94,375,058
================ ================ ================
* Includes only those expenses directly related to the production of the related
rents.
3
The Partnership has acquired a diversified portfolio of equipment. The equipment
has been leased to lessees in various industries. The following tables set forth
the types of equipment acquired by the Partnership through December 31, 2001 and
the industries to which the assets have been leased.
Purchase Price Excluding Percentage of Total
Asset Types Acquisition Fees Acquisitions
Transportation, over-the-road tractors and trailers $34,546,518 18.47%
Furniture and fixtures 24,145,180 12.91%
Transportation, other 18,454,853 9.87%
Mining 15,986,308 8.55%
Transportation, intermodal containers 15,484,688 8.28%
Construction 15,335,327 8.20%
Materials handling 14,469,358 7.74%
Railroad locomotives 12,350,000 6.60%
Earth moving 11,943,745 6.39%
Transportation, rail cars 7,180,000 3.84%
Printing 4,707,508 2.52%
Other * 12,391,672 6.63%
---------------- ----------------
$186,995,157 100.00%
================ ================
Purchase Price Excluding Percentage of Total
Industry of Lessee Acquisition Fees Acquisitions
Transportation, rail $45,670,556 24.42%
Mining 29,823,055 15.95%
Oil & gas 21,301,523 11.39%
Retail, foods 11,215,586 6.00%
Food processing 9,828,623 5.26%
Construction 9,410,789 5.03%
Chemicals 9,075,487 4.85%
Retail, restaurant 8,528,067 4.56%
Transportation, other 8,311,346 4.44%
Primary metals 7,526,037 4.02%
Manufacturing, other 6,815,862 3.64%
Manufacturing, auto/truck 6,690,185 3.58%
Printing 4,707,508 2.52%
Other * 8,090,533 4.34%
---------------- ----------------
$186,995,157 100.00%
================ ================
* Individual amounts included in "Other" represent less than 2.5% of the total.
For further information regarding the Partnership's equipment lease portfolio as
of December 31, 2001, see Note 3 to the financial statements, Investments in
equipment and leases, set forth in Item 8, Financial Statements and
Supplementary Data.
Item 2. PROPERTIES
The Partnership does not own or lease any real property, plant or material
physical properties other than the equipment held for lease as set forth in Item
1.
4
Item 3. LEGAL PROCEEDINGS
The following is a discussion of legal matters involving the Partnership but
which do not represent claims against the Partnership or its assets, except for
the claim by Republic Financial Corporation described below. No other material
legal proceedings are currently pending against the Partnership or against any
of its assets.
Schwegmann's Giant Supermarkets:
In October 1997, Schwegmann's Giant Supermarkets defaulted on the timely
performance of lease payments, and certain other obligations under its lease
with the Partnerhship, with respect to two of five locations of retail grocery
store fixtures and equipment, with a receivable balance currently totaling
approximately $1.7 million. The remaining portion of the lease payments with
respect to three of five stores was assumed by SGSM Acquisition Company (a
subsidiary of Kohlberg and Co.) ("SGSM"). Payments with respect to these leases
remained current until February 1999; however, on March 26, 1999, SGSM filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. On February 22, 2000,
and then on September 20, 2000, two of the obligors under the original lease,
Schwegmann Westside Expressway Inc. and Schwegmann Giant Supermarkets
Partnership, filed for protection under Chapter 11 of the U.S. Bankruptcy Code,
respectively.
The Partnership has liquidated all equipment leased under their lease, resulting
in net proceeds of $384,353, which represent 9.26% of original equipment cost.
The Partnership obtained and recorded a judgment against the lessee and
guarantors in the approximate amount of $2.8 million, and pursued recovery of
these liquidated damages, plus expenses, due under the lease. The lessee claimed
sufficient assets to satisfy the claims of all secured creditors of the lessee;
however, the lessee's assets are primarily relatively illiquid real property
investments. During 2001, the lessee received $15,000,000 in proceeds from a
parcel of real property sold to a large home improvement retail chain, which
amount was sufficient to pay off substantially all of the creditors, including
the Partnership's claim of $2.8 million. As of this date, the Partnership has
received in excess of $2.6 million in satisfaction of its claim, and the General
Partner believes that it has a reasonable basis for assuming recovery of its
remaining liquidated damages balance, in the approximate amount of $800,000 plus
legal fees, in full satisfaction of its claim.
Pegasus Gold Corporation
On January 16, 1998, Pegasus Gold Corporation filed for protection under Chapter
11 of the U.S. Bankruptcy Code. The initial meeting of creditors established by
the U.S. Trustee's Office was held on March 9, 1998. The lessee's lease with the
Partnership had previously been leveraged on a non-recourse basis with The CIT
Group/Equipment Financing, Inc. ("CIT"), and all lease receivables (currently
estimated at $2,211,902 as of February 14, 2001) were assigned to the lender.
Consequently, the Partnership's exposure is no greater than the fair market
residual value of the equipment under lease, currently estimated at $1,101,803.
The reorganized lessee/debtor has assumed the Partnership's lease in the
Bankruptcy Court and cured all past due payments which are now current. The
Partnership has entered into an Escrow Agreement with CIT, wherein CIT has
agreed not to foreclose on the Partnership's interest so long as the lessee
continues to perform under the lease.
At this time, the reorganized lessee is current in its lease obligations. The
ultimate recovery under this lease is dependent on the price of gold remaining
at a level sufficient to make the lessee's operations profitable, and,
consequently, any assessment of the impact of an adverse outcome of this matter
remains uncertain. The original seven-year lease term expires on December 31,
2003.
5
Quaker Coal Company:
On December 31, 1997, Quaker Coal Company, one of the Partnership's lessees,
requested a moratorium on lease payments from January through March 1998. No
lease payments were made by the lessee through June of 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 II,
Item 8 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, netting approximately 17% of the original equipment cost. The
Court issued a ruling on March 4, 2001, denying the Partnership's claim for
damages. The lessee 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 lessee filed a plan of reorganization, which has been objected to by several
large creditors, including the General Partner.
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 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 satisfaction of the
Partnership's claims and those of its affiliates, 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.
Republic Transportation Finance, Inc.:
On September 11, 2000, Republic Transportation Finance, Inc. and its parent,
Republic Financial Corporation (collectively, "Republic"), filed suit against
the Partnership, claiming relief in the amount of $1,110,770, representing
Republic's interpretation of their proceeds to a residual sharing arrangement.
The Partnership does not dispute that sums are owed to Republic, merely the
amount. The Partnership believes that Republic is only entitled to $587,317
(which amount is included in accounts payable in the Partnership's financial
statements at December 31, 2000), based upon the Partnership's interpretation of
the underlying contract. Although the Partnership believed it had a reasonable
basis for prevailing, it settled this matter for a total of $750,000 in 2001.
The additional $162,683 is included in other expenses in 2001.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
6
PART II
Item 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED
MATTERS
Market Information
The Units are transferable subject to restrictions on transfers which have been
imposed under the securities laws of certain states. However, as a result of
such restrictions, the size of the Partnership and its investment objectives, to
the General Partner's knowledge, no established public secondary trading market
has developed and it is unlikely that a public trading market will develop in
the future.
Holders
As of December 31, 2001, a total of 7,254 investors were record holders of Units
in the Partnership.
Dividends
The Partnership does not make dividend distributions. However, the Limited
Partners of the Partnership are entitled to certain distributions as provided
under the Limited Partnership Agreement.
The General Partner has sole discretion in determining the amount of
distributions; provided, however, that the General Partner will not reinvest in
equipment, but will distribute, subject to payment of any obligations of the
Partnership, such available cash from operations and cash from sales or
refinancing as may be necessary to cause total distributions to the Limited
Partners for each year during the reinvestment period to equal the following
amounts per unit: $1.05 in 1995 and 1996; $1.10 in 1997 and 1998; and $1.20 in
1999 and 2000.
The rate for monthly distributions from 2001 operations was $0.10 per Unit for
distributions paid in February through July 2001 and $0.0667 for distributions
paid in August through December 2001 and in January 2002. For quarterly
distributions, the rate was $0.30 per Unit for distributions paid in April and
July 2001 and $0.20 per Unit for distributions paid in October 2001 and in
January 2002. Distributions were from 2001 cash flows from operations. The
amounts paid to holders of Units were adjusted based on the length of time
within the previous calendar month or quarter that the Units were outstanding.
The rate for monthly distributions from 2000 operations was $0.10 per Unit. The
distributions were paid in February 2000 through December 2000 and in January
2001. For each quarterly distribution (paid in April, July and October 2000 and
in January 2001) the rate was $0.30 per Unit. Distributions were from 2000 cash
flows from operations. The amounts paid to holders of Units were adjusted based
on the length of time within the previous calendar month or quarter that the
Units were outstanding.
The rate for monthly distributions from 1999 operations was $0.10 per Unit. The
distributions were paid in February 1999 through December 1999 and in January
2000. For each quarterly distribution (paid in April, July and October 1999 and
in January 2000) the rate was $0.30 per Unit. Distributions were from 1999 cash
flows from operations. The amounts paid to holders of Units were adjusted based
on the length of time within the previous calendar month or quarter that the
Units were outstanding.
7
The following table presents summarized information regarding distributions to
Limited Partners:
2001 2000 1999 1998 1997
Distributions of net income $ 0.01 $ 0.13 $ 0.41 $ 0.39 $ 0.14
Return of investment 1.03 1.08 0.79 0.80 0.96
---------------- --------------- -------------------------------- ----------------
Distributions per unit 1.04 1.21 1.20 1.19 1.10
Differences due to timing of
distributions (0.04) (0.01) - 0.01 -
---------------- --------------- -------------------------------- ----------------
Nominal distribution rates from
above $ 1.00 $ 1.20 $ 1.20 $ 1.20 $ 1.10
================ =============== ================================ ================
Owners of 1,000 or more units may make the election without charge to receive
distributions on a monthly basis. Owners of less than 1,000 units may make the
election upon payment of a $20.00 annual fee.
Item 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Partnership for the
years ended December 31, 2001, 2000, 1999, 1998 and 1997. This financial data
should be read in conjunction with the financial statements and related notes
included under Item 8.
2001 2000 1999 1998 1997
Gross Revenues $ 7,939,473 $11,138,639 $17,064,600 $22,011,168 $ 23,437,655
Net income $ 170,758 $ 1,682,730 $ 5,198,570 $ 4,861,233 $ 1,813,431
Weighted average Units 12,497,000 12,497,000 12,497,000 12,497,000 12,497,000
Net income per Unit, based on
weighted average Units outstanding $ 0.01 $ 0.13 $ 0.41 $ 0.39 $ 0.14
Distributions per Unit, based on
weighted average Units outstanding $ 1.04 $ 1.21 $ 1.20 $ 1.19 $ 1.10
Total Assets $37,160,843 $50,000,894 $67,961,144 $86,671,855 $ 106,707,576
Non-recourse Debt $11,663,273 $16,389,312 $22,138,639 $29,331,123 $ 40,138,400
Total Partners' Capital $18,546,425 $31,416,576 $44,820,397 $54,621,053 $ 64,614,239
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
The Partnership's public offering provided for a total maximum capitalization of
$125,000,000.
8
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases and proceeds from asset sales exceed expenses, and
decreasing as distributions are made to the limited partners and to the extent
expenses exceed cash flows from leases and proceeds from asset sales.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire, the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $62,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on April 12, 2002. The General Partner is currently negotiating a new
line of credit and anticipates that the current line of credit will either be
replaced upon its expiration or that the current line of credit will be extended
until the new one is finalized. As of December 31, 2001, borrowings under the
facility were as follows:
Amount borrowed by the Partnership under the acquisition facility $ 6,500,000
Amounts borrowed by affiliated partnerships and limited liability companies under the
acquisition facility 11,100,000
----------------
Total borrowings under the acquisition facility 17,600,000
Amounts borrowed by the General Partner and its sister corporation under the warehouse facility * 10,999,501
----------------
Total outstanding balance $ 28,599,501
================
Total available under the line of credit $ 62,000,000
Total outstanding balance (28,599,501)
----------------
Remaining availability $ 33,400,499
================
* (Unaudited) The carrying value of the assets pledged as collateral and
financed at December 31, 2001 was $17,955,014.
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Partnership and the General
Partner.
Through December 31, 2000, the Partnership anticipated reinvesting a portion of
lease payments from assets owned in new leasing transactions. Such reinvestment
would occur only after the payment of all obligations, including debt service
(both principal and interest), the payment of management and acquisition fees to
the General Partner and providing for cash distributions to the Limited
Partners.
As of December 31, 2001, cash balances consisted of working capital and amounts
reserved for distributions in January 2002, generated from operations in 2001.
The Partnership currently has available adequate reserves to meet its immediate
cash requirements, 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.
9
As of December 31, 2001, the Partnership had borrowed $58,317,911 of
non-recourse debt. The remaining unpaid balance as of that date was $11,663,273.
The Partnership's long-term borrowings are non-recourse to the Partnership, that
is, the only recourse of the lender is to the equipment or corresponding lease
acquired with the loan proceeds. The Partnership may only incur additional debt
to the extent that the then outstanding balance of all such debt, including the
additional debt, does not exceed 40% of the original cost of the lease assets
then owned by the Partnership, including any such assets purchased with the
proceeds of such additional debt.
See Note 4 to the financial statements for additional information regarding
non-recourse debt.
The Partnership commenced regular distributions, based on cash flows from
operations, beginning with the second quarter of 1993. See Items 5 and 6 for
additional information regarding the distributions.
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.
In future periods, cash flows from operating leases are expected to be the
Partnership's primary source of cash flows from operations.
Cash Flows
2001 vs. 2000:
In 2001 and 2000, operating lease rents were the Partnership's primary source of
cash flows from operating activities. Cash flows from operations decreased from
$8,302,775 in 2000 to $5,779,190 in 2001, a decrease of $2,523,585. This
decrease was a direct consequence of decreases in operating lease revenues from
$9,296,456 in 2000 to $5,850,367 in 2001, a decrease of $3,446,089.
Sources of cash from investing activities consisted of rents from direct
financing leases and proceeds from sales of lease assets. Financing lease rents
decreased from $2,243,051 in 2000 to $1,625,595 in 2001, a decrease of $617,456.
Proceeds from sales of lease assets are not expected to be consistent from one
year to another and decreased from $7,531,930 in 2000 to $3,733,992 in 2001, a
decrease of $3,797,938.
In 2001 and 2000, the only source of cash flows from financing activities was
the amounts borrowed on the line of credit. Repayments of debt decreased as a
result of scheduled debt payments.
2000 vs. 1999:
In 2000 and 1999, operating lease rents were the Partnership's primary source of
cash flows from operating activities. Cash flows from operations decreased from
$10,478,968 in 1999 to $8,302,775 in 2000, a decrease of $2,176,193. This
decrease was a direct consequence of decreases in operating lease revenues from
$13,469,113 in 1999 to $9,296,456 in 2000, a decrease of $4,172,657.
Sources of cash from investing activities consisted of rents from direct
financing leases and proceeds from sales of lease assets. Financing lease rents
increased from $2,160,238 in 1999 to $2,243,051 in 2000, an increase of $82,813.
Proceeds from sales of lease assets are not expected to be consistent from one
year to another and increased from $5,186,472 in 1999 to $7,531,930 in 2000, an
increase of $2,345,458.
10
In 2000, the only source of cash flows from financing activities was the
$1,000,000 borrowed on the line of credit. There were no financing sources of
cash in 1999. Repayments of debt decreased as a result of scheduled debt
payments.
Results of Operations
As of March 19, 1993, subscriptions for the minimum amount of the offering
($1,200,000) had been received and accepted by the Partnership. As of that date,
the Partnership commenced operations in its primary business (leasing
activities).
As of December 31, 2001, 2000 and 1999, significant amounts of the Partnership's
assets were leased to lessees in certain industries.
2001 2000 1999
Rail transportation 41% 35% 26%
Manufacturing, other 26% 29% *
Construction 13% 11% *
Mining 10% * 13%
Petroleum and coal products * * 14%
* Less than 10%.
2001 vs. 2000:
Operations in 2001 resulted in net income of $170,758 compared to $1,682,730 in
2000. The decrease is primarily due to the maturing of operating leases and the
subsequent sales of the related lease assets. This resulted in decreased
operating lease rents in 2001 compared to 2000. Such rents decreased from
$9,296,456 in 2000 to $5,850,367 in 2001. Assets sales also resulted in
decreased depreciation expense in 2001. Depreciation decreased by $1,852,011
compared to 2000.
Gains and losses recognized on the sales of lease assets are not expected to be
consistent from one year to another, however, such gains increased by $59,302
compared to 2000.
Interest expense has decreased as a result of scheduled debt payments and the
consequent reductions of the outstanding balances.
Equipment management fees are based on the revenues of the Partnership. As those
revenues have declined, the management fees have decreased as well.
Cost reimbursements to the General Partner increased as a result of a revised
analysis of the costs incurred by the General Partners and allocated to the
Partnership.
2000 vs. 1999:
Operations in 2000 resulted in net income of $1,682,730 compared to $5,198,570
in 1999. The decrease is primarily due to the maturing of operating leases and
the subsequent sales of the related lease assets. This resulted in decreased
operating lease rents in 2000 compared to 1999. Such rents decreased from
$13,469,113 in 1999 to $9,296,456 in 2000. Assets sales also resulted in
decreased depreciation expense in 2000. Depreciation decreased by $1,410,273
compared to 1999.
Gains and losses recognized on the sales of lease assets are not expected to be
consistent from one year to another, however, such gains decreased by $962,710
compared to 1999. This also contributed to the decrease in net income.
Interest expense has decreased as a result of scheduled debt payments and the
consequent reductions of the outstanding balances.
11
Equipment management fees are based on the revenues of the Partnership. As those
revenues have declined, the management fees have decreased as well.
Recent accounting pronouncement:
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a
segment of a business. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, with earlier application encouraged. The Partnership expects
to adopt SFAS 144 as of January 1, 2002 and it does not expect that the adoption
of the Statement will have a significant impact on the Partnership's financial
position and results of operations.
Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership, like most other companies, is exposed to certain market risks,
including primarily changes in interest rates. The Partnership believes its
exposure to other market risks including foreign currency exchange rate risk,
commodity risk and equity price risk are insignificant to both its financial
position and results of operations.
In general, the Partnership manages its exposure to interest rate risk by
obtaining fixed rate debt. The fixed rate debt is structured so as to match the
cash flows required to service the debt to the payment streams under fixed rate
lease receivables. The payments under the leases are assigned to the lenders in
satisfaction of the debt. Furthermore, the Partnership has historically been
able to maintain a stable spread between its cost of funds and lease yields in
both periods of rising and falling rates. Nevertheless, the Partnership
frequently funds leases with its floating rate line of credit and is therefore
exposed to interest rate risk until fixed rate financing is arranged, or the
floating rate line of credit is repaid. As of December 31, 2001, the outstanding
balance on the floating rate line of credit was $6,500,000 and the effective
interest rates of the borrowings ranged from 3.92% to 3.93%.
To hedge its interest rate risk related to this variable rate debt, the
Partnership may enter into interest rate swaps. As of December 31, 2001, no
swaps or other derivative financial instruments were held by the Partnership.
The Partnership does not hold or issue derivative financial instruments for
speculative purposes.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Report of Independent Auditors, Financial Statements and Notes to
Financial Statements attached hereto at pages 13 through 27.
12
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Partners
ATEL Cash Distribution Fund V, L.P.
We have audited the accompanying balance sheets of ATEL Cash Distribution Fund
V, L.P. (Partnership) as of December 31, 2001 and 2000, and the related
statements of income, changes in partners' capital, and cash flows for each of
the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ATEL Cash Distribution Fund V,
L.P. at December 31, 2001 and 2000, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
San Francisco, California
February 1, 2002
13
ATEL CASH DISTRIBUTION FUND V, L.P.
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
ASSETS
2001 2000
Cash and cash equivalents $ 443,772 $ 1,571,943
Accounts receivable, net of allowance for
doubtful accounts of $165,285 in 2001
and none in 2000 1,249,403 2,299,308
Other receivables, net of allowance for
doubtful accounts of $100,605 in 2000 - 1,309,783
Investments in equipment and leases 35,467,668 44,819,860
---------------- ----------------
Total assets $37,160,843 $ 50,000,894
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $11,663,273 $ 16,389,312
Line of credit 6,500,000 1,000,000
Accounts payable:
General Partner 146,080 78,238
Other 156,408 860,649
Accrued interest payable 21,601 61,866
Unearned lease income 127,056 194,253
---------------- ----------------
Total liabilities 18,614,418 18,584,318
Partners' capital:
General Partner 188,354 186,646
Limited Partners 18,358,071 31,229,930
---------------- ----------------
Total partners' capital 18,546,425 31,416,576
---------------- ----------------
Total liabilities and partners' capital $37,160,843 $ 50,000,894
================ ================
See accompanying notes.
14
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
Revenues:
Leasing activities:
Operating leases $ 5,850,367 $ 9,296,456 $ 13,469,113
Direct financing leases 384,516 1,276,509 1,905,218
Leveraged leases 51,029 78,575 99,758
Gain on sales of assets 388,512 329,210 1,291,920
Interest income 23,678 128,713 274,904
Other 1,241,371 29,176 23,687
---------------- --------------- ----------------
7,939,473 11,138,639 17,064,600
Expenses:
Depreciation and amortization 4,432,146 6,361,613 7,935,060
Interest expense 1,144,360 1,393,719 2,055,475
Cost reimbursements to General Partner 845,318 476,128 355,881
Other 600,919 560,175 442,298
Equipment and incentive management fees to General Partner 485,965 605,066 1,022,381
Professional fees 260,007 59,208 54,935
---------------- --------------- ----------------
7,768,715 9,455,909 11,866,030
---------------- --------------- ----------------
Net income $ 170,758 $ 1,682,730 $ 5,198,570
================ =============== ================
Net income:
General Partner $ 1,708 $ 16,827 $ 51,986
Limited Partners 169,050 1,665,903 5,146,584
---------------- --------------- ----------------
$ 170,758 $ 1,682,730 $ 5,198,570
================ =============== ================
Net income per Limited Partnership unit $ 0.01 $ 0.13 $ 0.41
Weighted average number of units outstanding 12,497,000 12,497,000 12,497,000
See accompanying notes.
15
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Limited Partners General
Units Amount Partner Total
Balance December 31, 1998 12,497,000 $54,503,220 $ 117,833 $ 54,621,053
Distributions to Limited Partners ($1.20 per Unit) (14,999,226) - (14,999,226)
Net income 5,146,584 51,986 5,198,570
---------------- -------------------------------- ----------------
Balance December 31, 1999 12,497,000 44,650,578 169,819 44,820,397
Distributions to Limited Partners ($1.21 per Unit) (15,086,551) - (15,086,551)
Net income 1,665,903 16,827 1,682,730
---------------- -------------------------------- ----------------
Balance December 31, 2000 12,497,000 31,229,930 186,646 31,416,576
Distributions to Limited Partners ($1.04 per Unit) (13,040,909) - (13,040,909)
Net income 169,050 1,708 170,758
---------------- -------------------------------- ----------------
Balance December 31, 2001 12,497,000 $18,358,071 $ 188,354 $ 18,546,425
================ ================================ ================
See accompanying notes.
16
ATEL CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Operating activities: 2001 2000 1999
Net income $ 170,758 $ 1,682,730 $ 5,198,570
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 4,432,146 6,361,613 7,935,060
Leveraged lease income (51,029) (78,575) (99,758)
Gain on sales of assets (388,512) (329,210) (1,291,920)
Provision for doubtful accounts 64,680 - -
Changes in operating assets and liabilities:
Accounts receivable 985,225 473,319 (722,261)
Other receivables 1,309,783 - -
Accounts payable, General Partner 67,842 (40,203) (100,296)
Accounts payable, other (704,241) 500,818 11,062
Accrued interest payable (40,265) (45,316) 3,003
Unearned lease income (67,197) (222,401) (454,492)
---------------- --------------- ----------------
Net cash provided by operating activities 5,779,190 8,302,775 10,478,968
Investing activities:
Proceeds from sales of assets 3,733,992 7,531,930 5,186,472
Reduction of net investment in direct financing leases 1,625,595 2,243,051 2,160,238
Purchases of equipment on operating leases - - (176,848)
---------------- --------------- ----------------
Net cash provided by investing activities 5,359,587 9,774,981 7,169,862
Financing activities:
Distributions to Limited Partners (13,040,909) (15,086,551) (14,999,226)
Repayments of non-recourse debt (4,726,039) (5,749,327) (7,192,484)
Repayments of borrowings under line of credit (2,700,000) - (1,000,000)
Borrowings under line of credit 8,200,000 1,000,000 -
---------------- --------------- ----------------
Net cash used in financing activities (12,266,948) (19,835,878) (23,191,710)
---------------- --------------- ----------------
Net decrease in cash and cash equivalents (1,128,171) (1,758,122) (5,542,880)
Cash and cash equivalents at beginning of year 1,571,943 3,330,065 8,872,945
---------------- --------------- ----------------
Cash and cash equivalents at end of year $ 443,772 $ 1,571,943 $ 3,330,065
================ =============== ================
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 1,184,625 $ 1,439,035 $ 2,052,472
================ =============== ================
Schedule of non-cash transactions:
Direct financing lease assets reclassified to other receivables $ - $ - $ 314,608
================ =============== ================
See accompanying notes.
17
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. Organization and Partnership matters:
ATEL Cash Distribution Fund V, L.P. (the Partnership) was formed under the laws
of the state of California in September 1992 for the purpose of acquiring
equipment to engage in equipment leasing and sales activities.
Upon the sale of the minimum amount of Units of Limited Partnership interest
(Units) of $1,200,000 and the receipt of the proceeds thereof on March 19, 1993,
the Partnership commenced operations.
The General Partner of the Partnership is ATEL Financial Services LLC (ATEL).
Prior to converting to a limited liability company structure, the General
Partner was formerly known as ATEL Financial Corporation.
The Partnership's business consists of leasing various types of equipment. As of
December 31, 2001, the original terms of the leases ranged from two months to
twenty years.
Pursuant to the Limited Partnership Agreement, the General Partner receives
compensation and reimbursements for services rendered on behalf of the
Partnership (Note 5). The General Partner is required to maintain in the
Partnership reasonable cash reserves for working capital, the repurchase of
Units and contingencies.
2. Summary of significant accounting policies:
Equipment on operating leases:
Equipment on operating leases is stated at cost. Depreciation is being provided
by use of the straight-line method over the terms of the related leases to the
equipment's estimated residual values at the end of the leases.
Revenues from operating leases are recognized evenly over the lives of the
related leases.
Direct financing leases:
Income from direct financing lease transactions is reported using the financing
method of accounting, in which the Partnership's investment in the leased
property is reported as a receivable from the lessee to be recovered through
future rentals. The income portion of each rental payment is calculated so as to
generate a constant rate of return on the net receivable outstanding.
Investment in leveraged leases:
Leases which are financed principally with non-recourse debt at lease inception
and which meet certain other criteria are accounted for as leveraged leases.
Leveraged lease contracts receivable are stated net of the related non-recourse
debt service (which includes unpaid principal and aggregate interest on such
debt) plus estimated residual values. Unearned income represents the excess of
anticipated cash flows (after taking into account the related debt service and
residual values) over the investment in the lease and is amortized using a
constant rate of return applied to the net investment when such investment is
positive.
18
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
2. Summary of significant accounting policies (continued):
Reserve for losses and impairments:
The Partnership maintains a reserve on its investments in equipment and leases
for losses and impairments which are inherent in the portfolio as of the balance
sheet dates. The General Partner's evaluation of the adequacy of the allowance
is a judgmental estimate that is based on a review of individual leases, past
loss experience and other factors. While the General Partner believes the
allowance is adequate to cover known losses, it is reasonably possible that the
allowance may change in the near term. However, such change is not expected to
have a material effect on the financial position or future operating results of
the Partnership. It is the Partnership's policy to charge off amounts which, in
the opinion of the General Partner, are not recoverable from lessees or the
disposition of the collateral.
Statements of cash flows:
For purposes of the Statements of Cash Flows, cash and cash equivalents include
cash in banks and cash equivalent investments with original maturities of ninety
days or less.
Income taxes:
The Partnership does not provide for income taxes since all income and losses
are the liability of the individual partners and are allocated to the partners
for inclusion in their individual tax returns.
The tax basis of the Partnership's net assets and liabilities varies from the
amounts presented in these financial statements (unaudited):
2001 2000
Financial statement basis of net assets $18,546,425 $ 31,416,576
Tax basis of net assets 16,617,377 24,839,479
---------------- ----------------
Difference $ 1,929,048 $ 6,577,097
================ ================
The primary differences between the tax basis of net assets and the amounts
recorded in the financial statements are the result of differences in accounting
for syndication costs and differences between the depreciation methods used in
the financial statements and the Partnership's tax returns.
The following reconciles the net income reported in these financial statements
to the loss reported on the Partnership's federal tax return (unaudited):
2001 2000 1999
Net income per financial statements $ 170,758 $ 1,682,730 $ 5,198,570
Adjustment to depreciation expense (379,786) (491,694) (2,790,702)
Adjustments to revenues 5,027,836 8,201,164 5,065,619
---------------- --------------- ----------------
Net income per federal tax return $ 4,818,808 $ 9,392,200 $ 7,473,487
================ =============== ================
19
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
2. Summary of significant accounting policies (continued):
Credit risk:
Financial instruments which potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents, accounts
receivable and other receivables. The Partnership places its cash deposits and
temporary cash investments with creditworthy, high quality financial
institutions. The concentration of such deposits and temporary cash investments
is not deemed to create a significant risk to the Partnership. Accounts
receivable represent amounts due from lessees in various industries, related to
equipment on operating and direct financing leases. See Note 7 for a description
of lessees by industry as of December 31, 2001.
Basis of presentation:
The accompanying financial statements as of December 31, 2001 and 2000 and for
the three years ended December 31, 2001 have been prepared in accordance with
accounting principles generally accepted in the United States. Certain prior
year amounts have been reclassified to conform to the current year presentation.
Use of estimates:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
Per unit data:
Net income and distributions per unit are based upon the weighted average number
of units outstanding during the period.
Derivative financial instruments:
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, which established new accounting and
reporting standards for derivative instruments. SFAS No. 133 has been amended by
SFAS No. 137, issued in June 1999, and by SFAS No. 138, issued in June 2000.
SFAS No. 133, as amended, requires the Partnership to recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value. It further provides criteria for derivative
instruments to be designated as fair value, cash flow, or foreign currency
hedges, and establishes accounting standards for reporting changes in the fair
value of the derivative instruments.
The Partnership does not utilize derivative financial instruments.
20
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
2. Summary of significant accounting policies (continued):
Recent accounting pronouncement:
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a
segment of a business. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, with earlier application encouraged. The Partnership expects
to adopt SFAS 144 as of January 1, 2002 and it does not expect that the adoption
of the Statement will have a significant impact on the Partnership's financial
position and results of operations.
3. Investments in equipment and leases:
As of December 31, 2001, the Partnership's investments in equipment and leases
consist of the following:
Depreciation
Expense or Reclass-
December 31, Amortization ifications or December 31,
2000 of Leases Dispositions 2001
Net investment in operating leases $32,786,220 $(4,228,238) $(2,024,141) $26,533,841
Net investment in direct financing leases 10,806,430 (1,625,595) (1,086,396) 8,094,439
Net investment in leveraged leases 1,567,840 51,029 (545,819) 1,073,050
Assets held for sale or lease 414,733 - 310,876 725,609
Residual value interests 835,759 - - 835,759
Reserve for losses and impairments (2,224,816) - - (2,224,816)
Initial direct costs, net of accumulated amortization
of $1,115,605 in 2001 and $1,396,983 in 2000 633,694 (203,908) - 429,786
---------------- ---------------- --------------- ----------------
$44,819,860 $(6,006,712) $(3,345,480) $35,467,668
================ ================ =============== ================
Operating leases:
Property on operating leases consists of the following:
Reclass-
December 31, ifications or December 31,
2000 Additions Dispositions 2001
Transportation $39,986,135 $ - $(3,380,044) $ 36,606,091
Construction 11,811,563 - (386,556) 11,425,007
Materials handling 4,258,309 - (4,009,560) 248,749
Manufacturing 3,128,154 - (461,800) 2,666,354
---------------- ---------------- --------------- ----------------
59,184,161 - (8,237,960) 50,946,201
Less accumulated depreciation (26,397,941) (4,228,238) 6,213,819 (24,412,360)
---------------- ----------------- -------------- ----------------
$32,786,220 $(4,228,238) $(2,024,141) $ 26,533,841
================ ================= ============== ================
21
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
3. Investments in equipment and leases (continued):
Direct financing leases:
As of December 31, 2001, investment in direct financing leases consists of
railroad auto racks, railroad tank cars and retail store fixtures. The following
lists the components of the Partnership's investment in direct financing leases
as of December 31, 2001 and 2000:
2001 2000
Total minimum lease payments receivable $ 7,918,584 $10,691,588
Estimated residual values of leased equipment (unguaranteed) 2,857,964 3,420,759
---------------- ---------------
Investment in direct financing leases 10,776,548 14,112,347
Less unearned income (2,682,109) (3,305,917)
---------------- ---------------
Net investment in direct financing leases $ 8,094,439 $10,806,430
================ ===============
All of the property on leases was acquired in the years 1993 through 1997.
At December 31, 2001, the aggregate amounts of future minimum lease payments
under operating and direct financing leases are as follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
2002 $ 4,517,301 $ 1,859,072 $ 6,376,373
2003 1,824,057 428,734 2,252,791
2004 821,289 622,852 1,444,141
2005 821,534 496,654 1,318,188
2006 523,314 496,654 1,019,968
Thereafter 4,115,964 4,014,618 8,130,582
---------------- --------------- ----------------
$12,623,459 $ 7,918,584 $20,542,043
================ =============== ================
Leveraged leases:
As of December 31, 2001, investment in leveraged leases consists of materials
handling equipment. The following lists the components of the Partnership's
investment in leveraged leases as of December 31, 2001 and 2000:
2001 2000
Aggregate rentals receivable $ 252,721 $ 1,021,711
Less aggregate principal and interest payable on non-recourse loans (45,097) (414,893)
Estimated residual value of leased assets 880,781 1,027,406
Less unearned income (15,355) (66,384)
---------------- ---------------
Net investment in leveraged leases $ 1,073,050 $ 1,567,840
================ ===============
22
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
3. Investments in equipment and leases (continued):
Reserve for losses and impairments and allowances for doubtful accounts:
Allowance for Allowance for
doubtful doubtful
Reserve for accounts - accounts -
losses and Other Accounts
impairments Receivables Receivables
Balance December 31, 1998 $ 2,254,809 $ 100,605 $ -
Provision - - -
---------------- ---------------- ---------------
Balance December 31, 1999 2,254,809 100,605 -
Charge offs (29,993)
Provision - - -
---------------- ---------------- ---------------
Balance December 31, 2000 2,224,816 100,605 -
Reclassification - (100,605) 100,605
Provision - - 64,680
---------------- ---------------- ---------------
Balance December 31, 2001 $ 2,224,816 $ - $ 165,285
================ ================ ===============
4. Non-recourse debt:
At December 31, 2001, non-recourse debt, other than that related to leveraged
leases which is accounted for as a part of the net investment in leveraged
leases, consists of notes payable to financial institutions. The notes are due
in varying monthly, quarterly and semi-annual payments. Interest on the notes is
at fixed rates from 6.5% to 10.5%. The notes are secured by assignments of lease
payments and pledges of assets. At December 31, 2001, the carrying value of the
pledged assets is approximately $19,256,475. The notes mature from 2002 through
2015.
Future minimum payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
2002 $ 2,725,049 $ 694,127 $ 3,419,176
2003 709,048 553,831 1,262,879
2004 453,006 513,642 966,648
2005 481,214 485,263 966,477
2006 544,469 442,613 987,082
Thereafter 6,750,487 1,989,480 8,739,967
---------------- --------------- ----------------
$11,663,273 $ 4,678,956 $16,342,229
================ =============== ================
23
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
The Limited Partnership Agreement allows for the reimbursement of costs incurred
by the General Partner in providing administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. The General
Partner is not reimbursed for services where it is entitled to receive a
separate fee as compensation for such services, such as acquisition and
disposition of equipment. Reimbursable costs incurred by the General Partner are
allocated to the Partnership based upon actual time incurred by employees
working on Partnership business and an allocation of rent and other costs based
on utilization studies.
Substantially all employees of the General Partner record time incurred in
performing administrative services on behalf of all of the Partnerships serviced
by the General Partner. The General Partner believes that the costs reimbursed
are the lower of (i) actual costs incurred on behalf of the Partnership or (ii)
the amount the Partnership would be required to pay independent parties for
comparable administrative services in the same geographic location and are
reimbursable in accordance with the Limited Partnership Agreement.
The General Partner and/or affiliates earned fees, commissions and
reimbursements pursuant to the Limited Partnership Agreement as follows during
2001, 2000 and 1999:
2001 2000 1999
Administrative costs reimbursed to General Partner $ 845,318 $ 476,128 $ 355,881
Incentive management fees (computed as 5% of distributions of cash from
operations, as defined in the Limited Partnership Agreement) and equipment
management fees (computed as 5% of gross revenues from operating leases, as
defined in the Limited Partnership Agreement plus 2% of gross revenues from full
payout leases, as defined in the Limited Partnership Agreement) 485,965 605,066 1,022,381
---------------- --------------- ----------------
$ 1,331,283 $ 1,081,194 $ 1,378,262
================ =============== ================
24
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
6. Partners' capital:
As of December 31, 2001 and 2000, 12,497,000 Units were issued and outstanding
(in addition to the Units issued to the Initial Limited Partners). The
Partnership is authorized to issue up to 12,500,000 Units of Limited Partnership
interest in addition to those issued to the initial Limited Partners.
The Partnership's Net Profits, Net Losses, and Tax Credits are to be allocated
99% to the Limited Partners and 1% to the General Partner.
Available Cash from Operations and Cash from Sales and Refinancing, as defined
in the Limited Partnership Agreement, are to be distributed as follows:
First, 5% of Distributions of Cash from Operations to the General Partner as
Incentive Management Fee.
Second, the balance to the Limited Partners until the Limited Partners have
received Aggregate Distributions 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.
Third, the General Partner will receive as Incentive Management Compensation,
the following:
(A) 10% of remaining Cash from Operations and
(B) 15% of remaining Cash from Sales or Refinancing.
Fourth, the balance to the Limited Partners.
7. Concentration of credit risk and major customers:
The Partnership leases equipment to lessees in diversified industries. Leases
are subject to the General Partner's credit committee review. The leases provide
for the return of the equipment upon default.
As of December 31, 2001, 2000 and 1999, there were concentrations (greater than
10%) of equipment leased to lessees in certain industries (as a percentage of
total equipment cost) as follows:
2001 2000 1999
Rail transportation 41% 35% 26%
Manufacturing, other 26% 29% *
Construction 13% 11% *
Mining 10% * 13%
Petroleum and coal products * * 14%
* Less than 10%.
25
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
7. Concentration of credit risk and major customers (continued):
During 2001, three customers each comprised 16%, 13% and 13% of the
Partnership's revenues from leases. During 2000, two customers each comprised
11% of the Partnership's revenues from leases. During 1999, no customers
comprised in excess of 10% of the Partnership's revenues from leases.
8. Line of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $62,000,000 revolving line of credit with a financial
institution that includes certain financial covenants. The line of credit
expires on April 12, 2002. The General Partner is currently negotiating a new
line of credit and anticipates that the current line of credit will either be
replaced upon its expiration or that the current line of credit will be extended
until the new one is finalized. As of December 31, 2001, borrowings under the
facility were as follows:
Amount borrowed by the Partnership under the acquisition facility $ 6,500,000
Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition
facility 11,100,000
----------------
Total borrowings under the acquisition facility 17,600,000
Amounts borrowed by the General Partner and its sister corporation under the warehouse facility * 10,999,501
----------------
Total outstanding balance $ 28,599,501
================
Total available under the line of credit $ 62,000,000
Total outstanding balance (28,599,501)
----------------
Remaining availability $ 33,400,499
================
* (Unaudited) The carrying value of the assets pledged as collateral and
financed at December 31, 2001 was $17,955,014.
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Partnership and the General
Partner.
During 2001 and 2000, the Partnership borrowed $8,200,000 and $1,000,000,
respectively, under the line of credit. No amounts were borrowed in 1999. There
were no repayments on the line of credit during 2000. The Partnership repaid
$2,700,000 and $1,000,000 under the line of credit in 2001 and 1999,
respectively. Interest on the line of credit is based on either the thirty day
LIBOR rate or the bank's prime rate. The effective interest rates of the
borrowings ranged from 3.92% to 3.93%.
The credit agreement includes certain financial covenants applicable to each
borrower. The Partnership was in compliance with its covenants as of December
31, 2001.
26
ATEL CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
9. Fair value of financial instruments:
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value.
Cash and cash equivalents:
The carrying amount of cash and cash equivalents approximates fair value because
of the short-term maturity of these instruments.
Non-recourse debt:
The fair value of the Partnership's non-recourse debt is estimated using
discounted cash flow analyses, based on the Partnership's current incremental
borrowing rates for similar types of borrowing arrangements. The estimated fair
value of the Partnership's non-recourse debt at December 31, 2001 is
$11,366,419.
Line of credit:
The carrying amount of the Partnership's variable rate line of credit
approximates fair value.
10. Contingencies:
On September 11, 2000, Republic Transportation Finance, Inc. and its parent,
Republic Financial Corporation (collectively, "Republic"), filed suit against
the Partnership, claiming relief in the amount of $1,110,770, representing
Republic's interpretation of their share of the proceeds to a residual sharing
arrangement. The Partnership did not dispute that sums were owed to Republic,
merely the amount. The Partnership believed that Republic was only entitled to
$587,317 (which amount was included in accounts payable in the Partnership's
financial statements at December 31, 2000), based upon the Partnership's
interpretation of the underlying contract. Although the Partnership believed it
had a reasonable basis for prevailing, it settled this matter for a total of
$750,000 in 2001. The additional $162,683 is included in other expenses in 2001.
27
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The registrant is a Limited Partnership and, therefore, has no officers or
directors.
All of the outstanding capital stock of ATEL Financial Services LLC (the General
Partner) is held by ATEL Capital Group ("ACG"), a holding company formed to
control ATEL and affiliated companies. The outstanding voting capital stock of
ATEL Capital Group is owned 5% by A. J. Batt and 95% by Dean Cash.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"),
ATEL Investor Services ("AIS") and ATEL Financial Services LLC ("AFS") is a
wholly-owned subsidiary of ATEL Capital Group and performs services for the
Partnership. Acquisition services are performed for the Partnership by ALC,
equipment management, lease administration and asset disposition services are
performed by AEC, investor relations and communications services are performed
by AIS and general administrative services for the Partnership are performed by
AFS. ATEL Securities Corporation ("ASC") is a wholly-owned subsidiary of ATEL
Financial Services LLC.
The officers and directors of ATEL Capital Group and its affiliates are as
follows:
Dean L. Cash Chairman of the Board of Directors of ACG, AFS, ALC,
AEC, AIS and ASC; President and Chief Executive
Officer of ACG, AFS and AEC
Paritosh K. Choksi Director, Executive Vice President, Chief Operating
Officer and Chief Financial Officer of ACG, AFS,
ALC, AEC and AIS
Donald E. Carpenter Vice President and Controller of ACG, AFS, ALC, AEC
and AIS; Chief Financial Officer of ASC
Vasco H. Morais Senior Vice President, Secretary and General Counsel
for ACG, AFS, ALC, AIS and AEC
Dean L. Cash, age 51, joined ATEL as director of marketing in 1980 and has been
a vice president since 1981, executive vice president since 1983 and a director
since 1984. He has been President and CEO since April 2001. Prior to joining
ATEL, Mr. Cash was a senior marketing representative for Martin Marietta
Corporation, data systems division, from 1979 to 1980. From 1977 to 1979, he was
employed by General Electric Corporation, where he was an applications
specialist in the medical systems division and a marketing representative in the
information services division. Mr. Cash was a systems engineer with Electronic
Data Systems from 1975 to 1977, and was involved in maintaining and developing
software for commercial applications. Mr. Cash received a B.S. degree in
psychology and mathematics in 1972 and an M.B.A. degree with a concentration in
finance in 1975 from Florida State University. Mr. Cash is an arbitrator with
the American Arbitration Association.
28
Paritosh K. Choksi, age 48, joined ATEL in 1999 as a director, senior vice
president and its chief financial officer. He became its executive vice
president and COO in April 2001. Prior to joining ATEL, Mr. Choksi was chief
financial officer at Wink Communications, Inc. from 1997 to 1999. From 1977 to
1997, Mr. Choksi was with Phoenix American Incorporated, a financial services
and management company, where he held various positions during his tenure, and
was senior vice president, chief financial officer and director when he left the
company. Mr. Choksi was involved in all corporate matters at Phoenix and was
responsible for Phoenix's capital market needs. He also served on the credit
committee overseeing all corporate investments, including its venture lease
portfolio. Mr. Choksi was a part of the executive management team which caused
Phoenix's portfolio to increase from $50 million in assets to over $2 billion.
Mr. Choksi received a bachelor of technology degree in mechanical engineering
from the Indian Institute of Technology, Bombay; and an M.B.A. degree from the
University of California, Berkeley.
Donald E. Carpenter, age 53, joined ATEL in 1986 as controller. Prior to joining
ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath, certified
public accountants in San Francisco, California, from 1983 to 1986. From 1979 to
1983, Mr. Carpenter was an audit senior with Deloitte, Haskins & Sells,
certified public accountants, in San Jose, California. From 1971 to 1975, Mr.
Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter received a
B.S. degree in mathematics (magna cum laude) from California State University,
Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter
has been a California certified public accountant since 1981.
Vasco H. Morais, age 43, joined ATEL in 1989 as general counsel to provide legal
support in the drafting and reviewing of lease documentation, advising on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of
America's equipment leasing subsidiaries, providing in-house legal support on
the documentation of tax-oriented and non-tax oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital
Companies in the corporate and securities legal department involved in drafting
and reviewing contracts, advising on corporate law matters and securities law
issues. Mr. Morais received a B.A. degree in 1982 from the University of
California in Berkeley, a J.D. degree in 1986 from Golden Gate University Law
School and an M.B.A. (Finance) in 1997 from Golden Gate University. Mr. Morais
has been an active member of the State Bar of California since 1986.
Item 11. EXECUTIVE COMPENSATION
The registrant is a Limited Partnership and, therefore, has no officers or
directors.
Set forth hereinafter is a description of the nature of remuneration paid and to
be paid to the General Partner and its Affiliates. The amount of such
remuneration paid for the years ended December 31, 2001, 2000 and 1999 is set
forth in Item 8 of this report under the caption "Financial Statements and
Supplementary Data - Notes to the Financial Statements - Related party
transactions," at Note 5 thereof, which information is hereby incorporated by
reference.
Selling Commissions
The Partnership paid selling commissions in the amount of 9.5% of Gross
Proceeds, as defined, ($11,875,000) to ATEL Securities Corporation, an affiliate
of the General Partner. Of this amount, $10,170,534 was reallowed to other
broker/dealers. None have been paid since 1994, nor will any additional amounts
be paid in future periods.
29
Acquisition Fees
Acquisition fees are to be paid to the General Partner for services rendered in
finding, reviewing and evaluating equipment to be purchased by the Partnership
and rejecting equipment not to be purchased by the Partnership. The total amount
of acquisition fees to be paid to the General Partner or their Affiliates is not
to exceed 3.5% of the aggregate purchase piece of equipment acquired, not to
exceed approximately 4.75% of the Gross Proceeds of the Offering.
The maximum amount of such fees to be paid is $5,929,583, all of which had been
paid as of December 31, 1996. No such fees have been paid subsequent to that
date.
Equipment Management Fees
As compensation for its services rendered generally in managing or supervising
the management of the Partnership's equipment and in supervising other ongoing
services and activities including, among others, arranging for necessary
maintenance and repair of equipment, collecting revenue, paying operating
expenses, determining the equipment is being used in accordance with all
operative contractual arrangements, property and sales tax monitoring and
preparation of financial data, the General Partner or its affiliates are
entitled to receive management fees which are payable for each fiscal quarter
and are to be in an amount equal to (i) 5% of the gross lease revenues from
"operating" leases and (ii) 2% of gross lease revenues from "full payout" leases
which contain net lease provisions. See Note 5 to the financial statements
included at Item 8 of this report for amounts paid.
Incentive Management Fees
As compensation for its services rendered in establishing and maintaining the
composition of the Partnership's equipment portfolio and its acquisition and
debt strategies and supervising fund administration including supervising the
preparation of reports and maintenance of financial and operating data of the
Partnership, Securities and Exchange Commission and Internal Revenue Service
filings, returns and reports, the General Partner is entitled to receive the
Partnership management fee which shall be payable for each fiscal quarter and
shall be an amount equal to 5% of distributions of cash from operations until
such time as the Limited Partners have received aggregate distributions of cash
from operations in an amount equal to their original invested capital plus a 10%
per annum return on their average adjusted invested capital (as defined in the
Limited Partnership Agreement). Thereafter, the incentive management fee shall
be 15% of all distributions of cash from operations, sales or refinancing. See
Note 5 to the financial statements included at Item 8 of this report for amounts
paid.
Equipment Resale Fees
As compensation for services rendered in connection with the sale of equipment,
the General Partner is entitled to receive an amount equal to the lesser of (i)
3% of the sales price of the equipment, or (ii) one-half the normal competitive
equipment sales commission charged by unaffiliated parties for such services.
Such fee is payable only after the Limited Partners have received a return of
their adjusted invested capital (as defined in the Limited Partnership
Agreement) plus 10% of their adjusted invested capital per annum calculated on a
cumulative basis, compounded daily, commencing the last day of the quarter in
which the limited partner was admitted to the Partnership. To date, none have
been accrued or paid.
30
Equipment Re-lease Fee
As compensation for providing re-leasing services, the General Partner is
entitled to receive fees equal to 2% of the gross rentals or the comparable
competitive rate for such services relating to comparable equipment, whichever
is less, derived from the re-lease provided that (i) the General Partner or
their affiliates have and will maintain adequate staff to render such services
to the Partnership, (ii) no such re-lease fee is payable in connection with the
re-lease of equipment to a previous lessee or its affiliates, (iii) the General
Partner or its affiliates have rendered substantial re-leasing services in
connection with such re-lease and (iv) the General Partner or its affiliates are
compensated for rendering equipment management services. To date, none have been
accrued or paid.
General Partner's Interest in Operating Proceeds
Net income, net loss and investment tax credits are allocated 99% to the Limited
Partners and 1% to the General Partner. See the statements of income included in
Item 8 of this report for the amounts allocated to the General and Limited
Partners in 2001, 2000 and 1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
At December 31, 2001, no investor is known to the Partnership to hold
beneficially more than 5% of the issued and outstanding Units.
Security Ownership of Management
The shareholders of the General Partner are beneficial owners of Limited
Partnership Units as follows:
(1) (2) (3) (4)
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
Limited Partnership Units A. J. Batt Initial Limited Partner Units 0.0002%
235 Pine Street, 6th Floor 25 Units ($250)
San Francisco, CA 94104 (owned by wife)
Limited Partnership Units Dean Cash Initial Limited Partner Units 0.0002%
235 Pine Street, 6th Floor 25 Units ($250)
San Francisco, CA 94104 (owned by wife)
Changes in Control
The Limited Partners have the right, by vote of the Limited Partners owning more
than 50% of the outstanding limited Partnership units, to remove a General
Partner.
The General Partner may at any time call a meeting of the Limited Partners or a
vote of the Limited Partners without a meeting, on matters on which they are
entitled to vote, and shall call such meeting or for vote without a meeting
following receipt of a written request therefore of Limited Partners holding 10%
or more of the total outstanding Limited Partnership units.
31
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to Item 1 of this report under the caption "Equipment Leasing
Activities," Item 8 of this report under the caption "Financial Statements and
Supplemental Data - Notes to the Financial Statements - Related party
transactions" at Note 5 thereof, and Item 11 of this report under the caption
"Executive Compensation," are hereby incorporated by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) Financial Statements and Schedules
1. Financial Statements
Included in Part II of this report:
Report of Independent Auditors
Balance Sheets at December 31, 2001 and 2000
Statements of Income for the years ended December 31,
2001, 2000 and 1999 Statements of Changes in Partners'
Capital for the years ended December 31, 2001, 2000
and 1999
Statements of Cash Flows for the years ended December
31, 2001, 2000 and 1999 Notes to Financial Statements
2. Financial Statement Schedules
All 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) Reports on Form 8-K for the fourth quarter of 2001
None
(c) Exhibits (3) and (4) Agreement of Limited Partnership,
included as Exhibit B to Prospectus (Exhibit 28.1),
is incorporated herein by reference to the Report on
Form 10K for the period ended December 31, 1993
(File No. 33-53162)
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: 3/25/2002
ATEL Cash Distribution Fund V, L.P.
(Registrant)
By: ATEL Financial Services, LLC
General Partner of Registrant
By: /s/ Dean Cash
---------------------------------------
Dean Cash,
President and Chief Executive Officer
of ATEL Financial Services, LLC
(General Partner)
By: /s/ Paritosh K. Choksi
---------------------------------------
Paritosh K. Choksi,
Executive Vice President of ATEL
Financial Services, LLC (General
Partner)
33
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the persons in the capacities and on the dates
indicated.
SIGNATURE CAPACITIES DATE
/s/ Dean Cash President, Chairman and Chief 3/25/2002
- --------------------------------- Executive Officer of ATEL
Dean Cash Financial Services, LLC
/s/ Paritosh K. Choksi Executive Vice President and 3/25/2002
- --------------------------------- director of ATEL Financial Services,
Paritosh K. Choksi LLC, Principal financial officer of
registrant; principal financial
officer and director of ATEL
Financial Services, LLC
/s/ Donald E. Carpenter Principal accounting officer of 3/25/2002
- --------------------------------- registrant; principal accounting
Donald E. Carpenter officer of ATEL Financial Services,
LLC
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act:
No proxy materials have been or will be sent to security holders. An annual
report will be furnished to security holders subsequent to the filing of this
report on Form 10-K, and copies thereof will be furnished supplementally to the
Commission when forwarded to the security holders.
34