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, 2002
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 000-28368
ATEL Cash Distribution Fund VI, L.P.
California 94-3207229
---------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
600 California Street, 6th Floor, San Francisco, California 94108
-----------------------------------------------------------------
(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 |_|
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|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|
State the aggregate market value of voting stock held by non-affiliates of
the registrant. Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE
Prospectus dated November 23, 1994, filed pursuant to Rule 424(b)
(Commission File No. 33-81952) is hereby incorporated by reference into Part IV
hereof.
1
PART I
Item 1: BUSINESS
General Development of Business
ATEL Cash Distribution Fund VI, L.P. (the Partnership) was formed under the
laws of the state of California in June 1994. The Partnership was formed for the
purpose of acquiring equipment to engage in equipment leasing and sales
activities. 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 conducted a public offering of 12,500,000 units of Limited
Partnership Interest (Units) at a price of $10 per Unit. On January 3, 1995, the
Partnership commenced operations in its primary business (leasing activities).
As of November 23, 1996, the Partnership had received subscriptions for
12,500,000 ($125,000,000) Limited Partnership Units in addition to the Initial
Limited Partners' Units and terminated its offering.
The Partnership's principal objectives are to invest in a diversified
portfolio of equipment that 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,
2002 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, whereby "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 ATEL that no more than 50% 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 purchases equipment for which a lease exists or for
which a lease will be entered into at the time of the purchase. During early
1997, the Partnership completed its initial acquisition stage with the
investment of the net proceeds from the public offering of Units. As noted
above, however, it intended to continue to invest any cash flow in excess of
certain amounts required to be distributed to the Limited Partners in additional
items of leased equipment through December 31, 2002.
As of December 31, 2002, the Partnership had purchased equipment with a
total acquisition price of $208,275,158.
The Partnership's objective is to lease a minimum of 75% of the equipment
acquired with the net proceeds of the offering to lessees that (i) have an
aggregate credit rating by Moody's Investor Service, Inc. of Baa or better, or
the credit equivalent as determined by ATEL, 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 ATEL, 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.
ATEL will seek 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 2002, 2001 and 2000, certain lessees generated significant portions
of the Partnership's total lease revenues as follows:
2002 2001 2000
---- ---- ----
Lessee Type of Equipment
Consolidated Rail Corporation Locomotives & intermodal
containers 19% 13% *
Burlington Northern Santa Fe Locomotives & intermodal 13% * *
containers
National Steel Corporation Steel manufacturing 11% 12% *
Daimler Chrysler Corporation Automobile manufacturing * 11% *
Tarmac America Construction * 10% *
NEC Electronics Semiconductor manufacturing * * 18%
* Less than 10%
2
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 that 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 ATEL 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, 2002, 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 *
- --------- ---------------- ----------- ----------
Manufacturing $33,114,703 $ 7,932,410 $27,787,808
Office automation 14,183,796 1,684,934 13,987,245
Railcars and locomotives 29,384,533 25,033,594 11,499,911
Transportation 12,850,836 4,955,590 11,726,144
Mining 7,830,671 2,061,091 7,766,029
Materials handling 8,218,959 1,169,558 8,760,453
Construction 10,570,013 3,791,076 10,469,071
Other 2,151,474 404,813 1,746,679
Containers 1,455,852 462,728 1,268,352
---------------- ---------------- ----------------
$119,760,837 $47,495,794 $95,011,692
================ ================ ================
* Includes only those expenses directly related to the production of the related
rents.
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, 2002 and the industries to which the assets have been leased.
Purchase Price Excluding Percentage of Total
Asset Types Acquisition Fees Acquisitions
- ----------- ---------------- ------------
Transportation, rail cars $39,275,195 18.86%
Manufacturing 30,469,834 14.63%
Transportation, other 24,476,511 11.75%
Materials handling 24,043,881 11.54%
Railroad locomotives 22,353,332 10.73%
Transportation, intermodal containers 21,694,688 10.42%
Mining equipment 18,557,225 8.91%
Office automation 13,824,024 6.64%
Construction 9,259,221 4.45%
Other 4,321,247 2.07%
---------------- ----------------
$208,275,158 100.00%
================ ================
Purchase Price Excluding Percentage of Total
Industry of Lessee Acquisition Fees Acquisitions
- ------------------ ---------------- ------------
Transportation, rail $55,950,904 26.86%
Electronics manufacturing 29,030,626 13.94%
Business services 28,360,969 13.62%
Mining 24,793,242 11.90%
Transportation, other 23,217,066 11.15%
Manufacturing, other 18,922,229 9.09%
Oil and gas 16,535,633 7.94%
Communications 5,282,291 2.54%
Other 6,182,198 2.96%
---------------- ----------------
$208,275,158 100.00%
================ ================
For further information regarding the Partnership's equipment lease
portfolio as of December 31, 2002, see Note 3 to the financial statements,
Investments in equipment and leases, as set forth in Part II, Item 8, Financial
Statements and Supplementary Data.
3
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.
Item 3. LEGAL PROCEEDINGS
No material legal proceedings are currently pending against the Partnership
or against any of its assets. The following is a discussion of legal matters
involving the Partnership, but which do not represent claims against the
Partnership or its assets.
Quaker Coal Company:
On December 31, 1997, Quaker Coal Company (the Debtor), 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 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. 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. (See
discussion below).
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
creditor's (i.e. American Electric Power's ("AEP")) Plan of Reorganization ("AEP
Plan") was successful. Under the AEP Plan, the claim of the Partnership has been
assigned to a liquidating trustee for resolution and satisfaction from the
Debtor's estate.
In January 2002, the Partnership attended an appellate settlement
conference seeking to resolve the outstanding disputed claim. A reserve has been
set aside by the Debtor's liquidating trustee in the amount of $1.2 million in
partial satisfaction of the Partnership's claim, although this claim amount
remains in dispute. In January 2003, the Federal Appellate Court in San
Francisco heard an appeal of the lower Court's decision. The results of that
appellate decision was handed down in March of 2003 and was adverse to the
Partnership's position. The Partnership is currently considering requesting a
rehearing of that decision. 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.
Elkay Mining Company:
On December 17, 1999, Elkay Mining Company, a subsidiary of The Pittston
Company (the Guarantor), filed a suit for declaratory relief in response to a
notice of event of default sent by the Partnership. The dispute surrounds the
treatment by the lessee of a defect in the leased equipment, and the lessee's
failure to notify the lessor of the defect in the equipment. All lease payments
under that lease were made in a timely manner, and the equipment was returned
and liquidated by the Partnership for $112,501, which is approximately 6% of the
original equipment cost. The Partnership believes that it has suffered damages
and loss as a result of actions of the lessee, in the amount of $773,402, which
represents the difference in the proceeds netted from the sale of the equipment
and the liquidated damages due under the lease.
This matter has been litigated and the decision from the Court was adverse
to the Partnership as to the very narrow issue of whether an Event of Default
existed as declared by the Partnership (for the failure of the lessee to notify
the Partnership of the material defect of in the equipment). Notwithstanding the
adverse ruling, the Partnership has two additional bases for default: (i) the
failure by the lessee to satisfy the maintenance and return conditions of the
lease, and (ii) the relocation by the lessee of the equipment without the
lessor's consent..
4
The General Partner has filed a suit and for arbitration against the
Guarantor in San Francisco, California, as mandated by the lease. The General
Partner believes that it has a reasonable basis for prevailing with respect to
this matter, and will aggressively assert its claims.
Applied Magnetics Corporation:
In January 2000, Applied Magnetics Corporation (the Debtor) filed for
protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. The
Partnership had assets with a total net book value of $5,113,290 leased to
Applied Magnetics Corporation at the bankruptcy filing date. On January 31,
2000, the General Partner was appointed to the Official Committee of Unsecured
Creditors and served as the Chairperson of the Committee. Procedures were
quickly undertaken for the liquidation of the Partnership's leased equipment,
which proceeds resulted in the satisfaction of a portion of the non-recourse
debt secured by the equipment. As of November 1, 2000, liquidation of the assets
was completed.
The Debtor filed a Plan of Reorganization (the "Plan"), which was approved
by a vote of the creditors of the Debtor in October 2001. The Plan provided that
the Debtor change its name to "Integrated Micro-Technology," and enter into a
new line of business, the manufacture and production of "micro-machines." As
part of the Plan, the Partnership, along with the other unsecured creditors,
receives a proportionate share of their unsecured claims, in the form of
ownership shares and warrants in the newly formed business.
On February 13, 2002, the reorganized Debtor filed a notice of objection to
the the Partnership's claim due to duplication and an improper liquidated
damages provision. The Partnership disputed this and, as of July 26, 2002,
agreement has been reached between the Partnership and Debtor as to the amount
of the Partnerships claim, and the Debtor's objection to the Partnership's claim
was withdrawn.
The Partnership anticipates additional amounts may be recoverable through
its equity interests in the reorganized Debtor's business, however, any
recoveries above the amounts received upon liquidation of the Partnership's
equipment are highly uncertain and speculative as the sucess of the Debtor's new
business plan is highly uncertain.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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 that 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. As a result, there is no currently ascertainable market
value for the Units.
Holders
As of December 31, 2002, a total of 6,469 investors were record holders of
Units in the Partnership.
ERISA Valuation
In order to permit ERISA fiduciaries who hold Units to satisfy their annual
reporting requirements, the General Partner estimated the value per Unit of the
Partnership's assets as of September 30, 2002. The General Partner calculated
the estimated liquidation proceeds that would be realized by the Partnership,
assuming an orderly disposition of all of the Partnership's assets as of January
1, 2003. The estimates were based on the amount of remaining lease payments on
existing Partnership leases, and the estimated residual values of the equipment
held by the Partnership upon the termination of those leases. This valuation was
based solely on the General Partner's perception of market conditions and the
types and amounts of the Partnership's assets. No independent valuation was
sought.
After calculating the aggregate estimated disposition proceeds, the General
Partner then calculated the portion of the aggregate estimated value of the
Partnership assets that would be distributed to Unit holders on liquidation of
the Partnership, and divided the total so distributable by the number of
outstanding Units. As of September 30, 2002, the value of the Partnership's
assets, calculated on this basis, was approximately $3.91 per Unit. The
foregoing valuation was performed solely for the ERISA purposes described above.
There is no market for the Units, and, accordingly, this value does not
represent an estimate of the amount a Unit holder would receive if he were to
seek to sell his Units. Furthermore, there can be no assurance as to the amount
the Partnership may actually receive if and when it seeks to liquidate its
assets, or the amount of lease payments and equipment disposition proceeds it
will actually receive over the remaining term of the Partnership.
5
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 rate for monthly distributions from 2002 operations was $0.0875 per
Unit. The distributions were paid in February 2002 through December 2002 and in
January 2003. For each quarterly distribution (paid in April, July and October
2002 and in January 2003) the rate was $0.2625 per Unit. Distributions were from
2002 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 2001 operations was $0.0875 per
Unit. The distributions were paid in February 2001 through December 2001 and in
January 2002. For each quarterly distribution (paid in April, July and October
2001 and in January 2002) the rate was $0.2625 per Unit. 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 $0.0875 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 $0.2625 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.
ATEL 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: $1.00 in
1997 and 1998; $1.05 in 1999 and 2000; and $1.10 in 2001 and 2002.
Holders of Units may make the election without charge to receive
distributions on a monthly basis rather than on a quarterly basis.
The following table presents summarized information regarding distributions to
Limited Partners:
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Distributions of net income (loss) $ (0.10) $ 0.17 $ 0.76 $ (0.07) $ 0.06
Return of investment 1.15 0.88 0.30 1.11 0.94
---------------- ---------------- ---------------- ----------------- ---------------
Distributions per unit 1.05 1.05 1.06 1.04 1.00
Differences due to timing of
distributions - - (0.01) 0.01 -
---------------- ---------------- ---------------- ----------------- ---------------
Nominal distribution rates from above $ 1.05 $ 1.05 $ 1.05 $ 1.05 $ 1.00
================ ================ ================ ================= ===============
Item 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Partnership at
December 31, 2002, 2001, 2000, 1999 and 1998 and for the years then ended. This
financial data should be read in conjunction with the financial statements and
related notes included under Part II Item 8.
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Gross revenues $13,735,916 $16,549,229 $27,796,597 $34,400,228 $36,149,061
Net income (loss) $ (1,148,403) $ 2,838,363 $ 9,533,716 $ (906,676) $ 710,923
Weighted average Units 12,495,063 12,500,050 12,500,050 12,500,050 12,500,050
Net income (loss) allocated to
Limited Partners $ (1,280,043) $ 2,123,116 $ 9,438,379 $ (897,609) $ 703,814
Net income (loss) per Unit, based on
weighted average Units
outstanding $ (0.10) $ 0.17 $ 0.76 $ (0.07) $ 0.06
Distributions per Unit, based on
weighted average Units
outstanding $ 1.05 $ 1.05 $ 1.06 $ 1.04 $ 1.00
Total Assets $34,625,398 $65,841,842 $79,350,099 $110,704,998 $140,096,180
Non-recourse Debt $ 4,853,239 $21,712,993 $28,971,912 $46,490,585 $65,164,309
Total Partners' Capital $23,607,548 $38,008,680 $48,537,398 $52,207,752 $66,322,437
6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Statements contained in this Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and elsewhere in this Form
10-K, which are not historical facts, may be forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Investors are cautioned not
to attribute undue certainty to these forward-looking statements, which speak
only as of the date of this Form 10-K. We undertake no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this Form 10-K or to reflect the occurrence of
unanticipated events, other than as required by law.
Capital Resources and Liquidity
The Partnership's public offering provided for a total maximum
capitalization of $125,000,000 and was completed as of November 23, 1996. As of
that date, subscriptions had been received and accepted for $125,000,000.
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases and proceeds of asset sales 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 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 ATEL'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 $55,645,837 revolving line of credit (comprised of an
acquisition facility and a warehouse facility) with a financial institution that
includes certain financial covenants. The line of credit expires on June 28,
2004. As of December 31, 2002, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition facility $ 5,100,000
Amounts borrowed by affiliated partnerships and limited liability companies under the
acquisition facility 23,900,000
-----------------
Total borrowings under the acquisition facility 29,000,000
Amounts borrowed by the General Partner and its sister corporation under the warehouse facility -
-----------------
Total outstanding balance $ 29,000,000
=================
Total available under the line of credit $ 55,645,837
Total outstanding balance (29,000,000)
-----------------
Remaining availability $ 26,645,837
=================
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.
As of December 31, 2002, cash balances consisted of working capital and
amounts reserved for distributions in January 2003, generated from operations in
2002.
The Partnership currently has available adequate reserves to meet its immediate
cash requirements and those of the next twelve months, but in the event those
reserves were found to be inadequate, the Partnership would likely be in a
position to borrow against its current portfolio to meet such requirements. ATEL
envisions no such requirements for operating purposes.
During the term of the Partnership, the Partnership had borrowed
$100,521,405 of non-recourse debt. As of December 31, 2002, the remaining unpaid
balance as of that date was $4,853,239.
The Partnership's long-term borrowings are generally 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. ATEL expects that
aggregate
borrowings in the future will be approximately 40%-50% of aggregate equipment
cost. In any event, the Agreement of Limited Partnership limits such borrowings
to 50% of the total cost of equipment, in aggregate. 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 50% 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.
7
See Note 4 to the financial statements, Non-recourse debt, as set forth in
Part II, Item 8, Financial Statements and Supplementary Data, for additional
information regarding non-recourse debt.
The Partnership commenced regular distributions, based on cash flows from
operations, beginning with the month of January 1995. See Items 5 and 6 of this
report 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.
Cash Flows
2002 vs. 2001:
In 2002, the Partnership's primary source of cash was proceeds from the
sales of lease assets. In 2001, the Partnership's primary source of cash was the
rents from operating leases. Cash flows from operations decreased from
$8,719,200 in 2001 to $7,228,660 in 2002, a decrease of $1,490,540. The decrease
resulted from decreased operating lease rents.
In 2002 and 2001, sources of cash from investing activities consisted of
proceeds from sales of lease assets and cash flows from direct financing leases.
Proceeds from asset sales increased from $2,511,046 in 2001 to $18,588,007 in
2002. Proceeds from sales of lease assets are not expected to be consistent from
one year to another. The cash flows from direct financing leases decreased from
$259,277 in 2001 to $45,586 in 2002.
In 2002 and 2001, the only source of cash from financing activities was
borrowings under the line of credit. Repayments of non-recourse debt increased
from $3,863,254 in 2001 to $13,048,829 in 2002 as a result of scheduled debt
payments. Scheduled repayments in 2002 were $5,743,147. An additional $7,305,683
was repaid with a portion of the proceeds from the sales of leased assets. The
notes repaid ahead of time had been used to finance a portion of the assets that
were sold in 2002.
2001 vs. 2000:
In 2001 and 2000, the Partnership's primary source of cash was the rents
from operating leases. Cash flows from operations decreased from $15,929,861 in
2000 to $8,719,200 in 2001, a decrease of $7,210,661. The decrease resulted from
decreased operating lease rents.
In 2001 and 2000, sources of cash from investing activities consisted of
proceeds from sales of lease assets and cash flows from direct financing leases.
The cash flows from direct financing leases decreased slightly from $269,437 in
2000 to $259,277 in 2001. Proceeds from asset sales decreased from $18,083,829
in 2000 to $2,709,345 in 2001. Proceeds from sales of lease assets are not
expected to be consistent from one year to another.
In 2001, the only source of cash from financing activities was funds
borrowed
under the line of credit. In 2000, there were no financing sources of cash. In
1999, the only source of cash from financing activities was borrowings under the
line of credit. Repayments of non-recourse debt decreased (from $11,172,244 in
2000 to $3,863,254 in 2001) as a result of scheduled debt payments.
Results of Operations
As of January 3, 1995, 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).
2002 vs. 2001:
Revenues in 2002 decreased to $13,735,916 compared to $16,549,229 in 2001.
Most of the Partnership's revenues are generated from operating leases. These
rents have decreased as a result of 2001 and 2002 asset sales and lower lease
rates on lease renewals.
Depreciation and interest are the most significant ongoing Partnership
expenses. Depreciation expense is directly related to the Partnership's
investment in operating leases and is, therefore, also directly related to the
revenues generated by those assets. The 2001 and 2002 sales that led to 2002
revenue decreases also gave rise to the decrease in depreciation expense from
$8,401,319 in 2001 to $6,422,385 in 2002.
Interest expense has decreased as a result of lower average debt balances
in 2002 compared to 2001.
8
Equipment management fees are related to lease revenues. In 2002, revenues
decreased as noted above and, as a result, the management fees also decreased
from $771,498 in 2001 to $695,721 in 2002, a decrease of $75,777.
Management periodically reviews the carrying values of its assets on leases
and assets held for lease or sale. As a result of that review, management
determined that the value of a fleets of jumbo covered hopper cars had declined
in value to the extent that the carrying values had become impaired. This
decline is the result of decreased long-term demand for these types of assets
and a corresponding reduction in the amounts of rental payments that these
assets command currently. Management have recorded a provision for the decline
in value of those assets in the amount of $4,636,923 for the year ended December
31, 2002.
2001 vs. 2000:
Revenues in 2001 decreased to $16,549,229 compared to $27,796,597 in 2000.
Most of the Partnership's revenues are generated from operating leases. These
rents have decreased as a result of 2000 and 2001 asset sales.
Depreciation and interest are the most significant ongoing Partnership
expenses. Depreciation expense is directly related to the Partnership's
investment in operating leases and is, therefore, also directly related to the
revenues generated by those assets. The 2000 and 2001 sales that led to 2001
revenue decreases also gave rise to the decrease in depreciation expense from
$15,540,231 in 2000 to $8,401,319 in 2001.
Interest expense has decreased as a result of scheduled debt payments.
Equipment management fees are related to lease revenues. In 2001, revenues
decreased as noted above and, as a result, the management fees also decreased
from $569,141 in 2000 to $371,281 in 2001, a decrease of $197,860.
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.
Recent Accounting Pronouncement
In August 2001, the Financial Accounting Standards Board issued SFAS 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 adopted SFAS 144 as of January 1, 2002.
The adoption of the Statement did not have a significant impact on the
Partnership's financial position and results of operations.
Internal Controls
As of December 31, 2002, an evaluation was performed under the supervision
and with the participation of the Partnership's management, including the CEO
and CFO of the General Partner, of the effectiveness of the design and operation
of the Partnership's disclosure controls and procedures. Based on that
evaluation, the Partnership's management, including the CEO and CFO of the
General Partner, concluded that the Partnership's disclosure controls and
procedures were effective as of December 31, 2002. There have been no
significant changes in the Partnership's internal controls or in other factors
that could significantly affect internal controls subsequent to December 31,
2002.
Critical Accounting Policies
The policies discussed below are considered by management of the
Partnership to be critical to an understanding of the Partnership's financial
statements because their application requires significant complex or subjective
judgments, decisions, or assessments, with financial reporting results relying
on estimation about the effect of matters that are inherently uncertain.
Specific risks for these critical accounting policies are described in the
following paragraphs. The Partnership also states these accounting policies in
the notes to the financial statements and in relevant sections in this
discussion and analysis. For all of these policies, management cautions that
future events rarely develop exactly as forecast, and the best estimates
routinely require adjustment.
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.
9
Asset Valuation:
Recorded values of the Company's asset portfolio are periodically reviewed
for impairment in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
An impairment loss is measured and recognized only if the estimated undiscounted
future cash flows of the asset are less than their net book value. The estimated
undiscounted future cash flows are the sum of the estimated residual value of
the asset at the end of the asset's expected holding period and estimates of
undiscounted future rents. The residual value assumes, among other things, that
the asset is utilized normally in an open, unrestricted and stable market.
Short-term fluctuations in the market place are disregarded and it is assumed
that there is no necessity either to dispose of a significant number of the
assets, if held in quantity, simultaneously or to dispose of the asset quickly.
Impairment is measured as the difference between the fair value (as determined
by the discounted estimated future cash flows) of the assets and its carrying
value on the measurement date.
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, 2002, there was
$5,100,000 outstanding on the floating rate line of credit and the effective
interest rates of the borrowings ranged from 3.29% to 4.25%.
To hedge its interest rate risk related to this variable rate debt, the
Partnership may enter into interest rate swaps. As of December 31, 2002, 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 10 through 25.
10
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Partners
ATEL Cash Distribution Fund VI, L.P.
We have audited the accompanying balance sheets of ATEL Cash Distribution
Fund VI, L.P. (Partnership) as of December 31, 2002 and 2001, and the related
statements of operations, changes in partners' capital, and cash flows for each
of the three years in the period ended December 31, 2002. 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
VI, L.P. at December 31, 2002 and 2001, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
2002, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
San Francisco, California
February 7, 2003
11
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
ASSETS
2002 2001
---- ----
Cash and cash equivalents $ 861,707 $ 701,012
Accounts receivable, net of allowance for
doubtful accounts of $460,000 in 2002
and $861,254 in 2001 4,572,615 7,200,988
Investments in equipment and leases 29,191,076 57,939,842
---------------- ----------------
Total assets $34,625,398 $65,841,842
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 4,853,239 $21,712,993
Line of credit 5,100,000 4,500,000
Accounts payable and accruals:
General Partner 29,145 208,687
Other 570,779 585,993
Accrued interest payable 395,555 762,476
Unearned lease income 69,132 63,013
---------------- ----------------
11,017,850 27,833,162
Partners' capital:
General Partner - -
Limited Partners 23,607,548 38,008,680
---------------- ----------------
Total partners' capital 23,607,548 38,008,680
---------------- ----------------
Total liabilities and partners' capital $34,625,398 $65,841,842
================ ================
See accompanying notes.
12
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000
---- ---- ----
Revenues:
Leasing activities:
Operating leases $11,837,377 $16,849,677 $23,443,137
Direct financing leases 383,338 197,224 86,858
Gain (loss) on sales of assets 1,439,127 (559,525) 4,039,545
Interest income 7,432 50,520 196,627
Other 68,642 11,333 30,430
---------------- ---------------- ----------------
13,735,916 16,549,229 27,796,597
Expenses:
Depreciation and amortization 6,917,377 8,641,204 16,127,857
Provision for losses and impairments 4,636,923 - -
Interest 1,364,442 2,217,411 3,151,691
Cost reimbursements to General Partner 789,052 866,915 508,653
Other 466,389 479,274 305,541
Equipment and incentive management fees to affiliates 695,721 771,498 963,332
Provision for (recovery of) doubtful accounts (401,254) 276,067 -
Railcar maintenance 296,946 337,429 444,768
Professional fees 118,723 121,068 81,813
---------------- ---------------- ----------------
14,884,319 13,710,866 21,583,655
---------------- ---------------------------------
Income (loss) before extraordinary item (1,148,403) 2,838,363 6,212,942
Extraordinary gain on early extinguishment of debt - - 3,320,774
---------------- ---------------- ----------------
Net income (loss) $ (1,148,403) $ 2,838,363 $ 9,533,716
================ ================ ================
Net income (loss):
General Partner $ 131,640 $ 715,247 $ 95,337
Limited Partners (1,280,043) 2,123,116 9,438,379
---------------- ---------------- ----------------
$ (1,148,403) $ 2,838,363 $ 9,533,716
================ ================ ================
Income (loss) before extraordinary item per Limited Partnership
unit $ (0.10) $ 0.17 $ 0.50
Extraordinary gain on early extinguishment of debt
per Limited Partnership unit - - 0.26
---------------- ---------------- ----------------
Net income (loss) per Limited Partnership unit $ (0.10) $ 0.17 $ 0.76
================ ================ ================
Weighted average number of units outstanding 12,495,063 12,500,050 12,500,050
See accompanying notes.
13
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
Limited Partners General
Units Amount Partner Total
Balance December 31, 1999 12,500,050 $52,775,696 $ (567,944) $52,207,752
Distributions to limited partners ($1.06 per Unit) (13,204,070) - (13,204,070)
Net income 9,438,379 95,337 9,533,716
---------------- ---------------- ---------------- ----------------
Balance December 31, 2000 12,500,050 49,010,005 (472,607) 48,537,398
Distributions to limited partners ($1.05 per Unit) (13,124,441) - (13,124,441)
Distributions to General Partner - (242,640) (242,640)
Net income 2,123,116 715,247 2,838,363
---------------- ---------------- ---------------- ----------------
Balance December 31, 2001 12,500,050 38,008,680 - 38,008,680
Distributions to limited partners ($1.05 per Unit) (13,117,182) - (13,117,182)
Distributions to General Partner - (131,640) (131,640)
Limited partnership units repurchased (9,974) (3,907) - (3,907)
Net income (loss) (1,280,043) 131,640 (1,148,403)
---------------- ---------------- ---------------- ----------------
Balance December 31, 2002 12,490,076 $23,607,548 $ - $23,607,548
================ ================ ================ ================
See accompanying notes.
14
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000
---- ---- ----
Operating activities:
Net income (loss) $ (1,148,403) $ 2,838,363 $ 9,533,716
Adjustment to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 6,917,377 8,641,204 16,127,857
Provision for losses and impairments 4,636,923 - -
Provision for (recovery of ) doubtful accounts (401,254) 276,067 -
(Gain) loss on sales of assets (1,439,127) 559,525 (4,039,545)
Extraordinary gain on early extinguishment of debt - - (3,320,774)
Changes in operating assets and liabilities:
Accounts receivable (1,770,373) (4,785,126) (2,329,866)
Accounts payable, General Partner (179,542) (55,708) (812,362)
Accounts payable, other (15,214) 254,608 (262,477)
Accrued interest payable 622,154 1,064,450 1,325,602
Unearned lease income 6,119 (74,183) (292,290)
---------------- ---------------- ----------------
Net cash provided by operating activities 7,228,660 8,719,200 15,929,861
---------------- ---------------- ----------------
Investing activities:
Proceeds from sales of assets 18,588,007 2,511,046 18,083,829
Reduction of net investment in direct financing leases 45,586 259,277 269,437
Purchases of equipment on operating leases - (5,452) -
---------------- ---------------- ----------------
Net cash provided by investing activities 18,633,593 2,764,871 18,353,266
---------------- ---------------- ----------------
Financing activities:
Repayments of non-recourse debt (13,048,829) (3,863,254) (11,172,244)
Distributions to Limited Partners (13,117,182) (13,124,441) (13,204,070)
Repayments of borrowings under line of credit (6,000,000) (1,000,000) (8,350,000)
Repurchase of limited partnership units (3,907) - -
Borrowings under line of credit 6,600,000 5,500,000 -
Distributions to General Partner (131,640) (242,640) -
---------------- ---------------- ----------------
Net cash used in financing activities (25,701,558) (12,730,335) (32,726,314)
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents 160,695 (1,246,264) 1,556,813
Cash and cash equivalents at beginning of year 701,012 1,947,276 390,463
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 861,707 $ 701,012 $ 1,947,276
================ ================ ================
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000
---- ---- ----
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 742,288 $ 1,152,961 $ 1,826,089
================ ================ ================
Schedule of non-cash transactions:
Offset of accounts receivable and debt service per lease and debt agreement:
Accrued interest payable $ (989,075) $ (1,404,335) $ (1,774,345)
Non-recourse debt (3,810,925) (3,395,665) (3,025,655)
---------------- ---------------- ----------------
Accounts receivable $ (4,800,000) $ (4,800,000) $ (4,800,000)
================ ================= ===============
Extraordinary gain on early extinguishment of debt $ - $ - $ 3,320,774
================ ================= ===============
See accompanying notes.
15
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
1. Organization and Partnership matters:
ATEL Cash Distribution Fund VI, L.P. (the Partnership) was formed under the
laws of the state of California on June 29, 1994 for the purpose of acquiring
equipment to engage in equipment leasing and sales activities, primarily in the
United States.
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
January 3, 1995, 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, 2002, the original terms of the leases ranged from one month
to twenty years.
Pursuant to the Limited Partnership Agreement, ATEL receives compensation
and reimbursements for services rendered on behalf of the Partnership (Note 5).
ATEL 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 estimated residual values of the equipment 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.
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.
16
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
2. Summary of significant accounting policies (continued):
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):
2002 2001
---- ----
Financial statement basis of net assets $23,607,548 $38,008,680
Tax basis of net assets 15,390,267 6,482,117
---------------- ----------------
Difference $ 8,217,281 $31,526,563
================ ================
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 impairment losses, 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):
2002 2001 2000
---- ---- ----
Net income (loss) per financial statements $ (1,148,403) $ 2,838,363 $ 9,533,716
Adjustment to depreciation expense 2,227,441 429,207 (701,135)
Other adjustments to revenues and expenses 16,402,696 811,895 6,359,698
Provision for losses 4,636,923 - -
Provision for doubtful accounts (401,254) 276,067 -
---------------- ---------------- ----------------
Net income per federal tax return $21,717,403 $ 4,355,532 $15,192,279
================ ================ ================
Per unit data:
Net income and distributions per unit are based upon the weighted average number
of units outstanding during the period.
Credit risk:
Financial instruments that potentially subject the Partnership to
concentrations of credit risk include cash and cash equivalents, direct finance
lease receivables and accounts receivable. 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, 2002, 2001 and 2000.
17
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
2. Summary of significant accounting policies (continued):
Basis of presentation:
The accompanying financial statements as of December 31, 2002 and 2001 and
for the three years ended December 31, 2002 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.
Asset valuation:
Recorded values of the Company's asset portfolio are periodically reviewed
for impairment in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
An impairment loss is measured and recognized only if the estimated undiscounted
future cash flows of the asset are less than their net book value. The estimated
undiscounted future cash flows are the sum of the estimated residual value of
the asset at the end of the asset's expected holding period and estimates of
undiscounted future rents. The residual value assumes, among other things, that
the asset is utilized normally in an open, unrestricted and stable market.
Short-term fluctuations in the market place are disregarded and it is assumed
that there is no necessity either to dispose of a significant number of the
assets, if held in quantity, simultaneously or to dispose of the asset quickly.
Impairment is measured as the difference between the fair value (as determined
by the discounted estimated future cash flows) of the assets and its carrying
value on the measurement date.
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 adopted
SFAS 144 as of January 1, 2002. The adoption of the Statement did not have a
significant impact on the Partnership's financial position and results of
operations.
Initial direct costs:
The Partnership capitalizes initial direct costs associated with the
acquisition of lease assets. The costs are amortized over a five year period
using a straight line method.
18
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
2. Summary of significant accounting policies (continued):
Accounts receivable:
Accounts receivable represent the amounts billed under lease contracts and
currently due to the Partnership. Allowances for doubtful accounts are typically
established based on historical charge offs and collection experience and are
usually determined by specifically identified lessees and invoiced amounts.
3. Investments in equipment and leases:
The Partnership's investments in equipment and leases consist of the
following:
Depreciation
Expense or Reclass-
December 31, Amortization ifications or December 31,
2001 of Leases Dispositions 2002
---- --------- ------------ ----
Net investment in operating leases $55,447,510 $ (6,422,385) $ (22,653,790) $26,371,335
Net investment in direct financing leases 921,543 (45,586) 3,233,011 4,108,968
Assets held for sale or lease 1,134,490 - 2,271,899 3,406,389
Residual value interests 34,159 - - 34,159
Reserve for losses and impairments (188,009) (4,636,923) - (4,824,932)
Initial direct costs, net of accumulated amortization
of $798,164 in 2002 and $1,535,327 in 2001 590,149 (494,992) - 95,157
---------------- ---------------- ---------------- ----------------
$57,939,842 $ (11,599,886) $ (17,148,880) $29,191,076
================ ================ ================ ================
Management periodically reviews the carrying values of its assets on leases
and assets held for lease or sale. As a result of that review, management
determined that the value of a fleets of jumbo covered hopper cars had declined
in value to the extent that the carrying values had become impaired. This
decline is the result of decreased long-term demand for these types of assets
and a corresponding reduction in the amounts of rental payments that these
assets currently command. Management have recorded a provision for the decline
in value of those assets in the amount of $4,636,923 for the year ended December
31, 2002.
19
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
3. Investments in equipment and leases (continued):
Operating leases:
Property on operating leases consists of the following:
Reclass-
December 31, ifications or December 31,
2001 Additions Dispositions 2002
---- --------- ------------ ----
Transportation $82,924,093 $ - $ (33,531,062) $49,393,031
Construction 19,955,096 - (8,228,090) 11,727,006
Materials handling 10,062,364 - (1,744,661) 8,317,703
Office automation 1,503,725 - (204,888) 1,298,837
Miscellaneous 1,042,203 - (282,336) 759,867
Manufacturing 288,768 - (210,284) 78,484
---------------- ---------------- ---------------- ----------------
115,776,249 - (44,201,321) 71,574,928
Less accumulated depreciation (60,328,739) (6,422,385) 21,547,531 (45,203,593)
---------------- ---------------- ---------------- ----------------
$55,447,510 $ (6,422,385) $ (22,653,790) $26,371,335
================ ================ ================ ================
Direct financing leases:
As of December 31, 2002 and 2001, investment in direct financing leases
consists of railroad tank cars and various office automation equipment. The
following lists the components of the Partnership's investment in direct
financing leases as of December 31, 2002 and 2001:
2002 2001
---- ----
Total minimum lease payments receivable $ 5,349,330 $ 1,015,735
Estimated residual values of leased equipment (unguaranteed) 183,782 200,683
---------------- ----------------
Investment in direct financing leases 5,533,112 1,216,418
Less unearned income (1,424,144) (294,875)
---------------- ----------------
Net investment in direct financing leases $ 4,108,968 $ 921,543
================ ================
All of the property on leases was acquired in 1997, 1996 and 1995.
At December 31, 2002, 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
------------ ------ ------ -----
2003 $ 7,510,711 $ 1,133,227 $8,643,938
2004 1,841,675 3,919,823 5,761,498
2005 1,517,116 98,760 1,615,876
2006 356,101 98,760 454,861
2007 - 98,760 98,760
---------------- ---------------- ----------------
$11,225,603 $5,349,330 $16,574,933
================ ================ ================
20
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
3. Investments in equipment and leases (continued):
Reserves for losses and impairments and allowance for doubtful accounts:
Activity in the reserve for losses and impairments and allowances for
doubtful accounts consists of the following:
Reserve for Allowance for
losses and doubtful
impairments accounts
Balance December 31,1999 $ 5,898,376 $ 282,992
Reclassifications (302,195) 302,195
Charge offs (5,304,276) -
---------------- ----------------
Balance December 31, 2000 291,905 585,187
Provision - 276,067
Charge offs (103,896) -
---------------- ----------------
Balance December 31, 2001 188,009 861,254
Recoveries - (401,254)
Provision 4,636,923 -
---------------- ----------------
Balance December 31, 2002 $ 4,824,932 $ 460,000
================ ================
4. Non-recourse debt:
At December 31, 2002, non-recourse debt 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 8.37% to
12.22%. The notes are secured by assignments of lease payments and pledges of
assets. At December 31, 2002, the carrying value of the pledged assets is
$4,044,988. The notes mature from 2003 through 2007.
Future minimum payments of non-recourse debt are as follows:
Year ending
December 31, Principal Interest Total
2003 $ 4,482,977 $ 560,641 $ 5,043,618
2004 109,054 26,870 135,924
2005 79,916 18,844 98,760
2006 86,868 11,892 98,760
2007 94,424 4,336 98,760
---------------- ---------------- ----------------
$ 4,853,239 $ 622,583 $ 5,475,822
================ ================ ================
21
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that ATEL 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 ATEL in providing administrative services to the Partnership.
Administrative services provided include Partnership accounting, investor
relations, legal counsel and lease and equipment documentation. ATEL is not
reimbursed for services whereby it is entitled to receive a separate fee as
compensation for such services, such as acquisition and disposition of
equipment. Reimbursable costs incurred by ATEL 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.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation
("AEC"), ATEL Investor Services ("AIS") and ATEL Financial Services LLC 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
ATEL Financial Services LLC.
Substantially all employees of ATEL record time incurred in performing
administrative services on behalf of all of the Partnerships serviced by ATEL.
ATEL 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.
ATEL and/or affiliates earned fees, commissions and reimbursements,
pursuant to the Limited Partnership Agreement as follows during 2002, 2001 and
2000:
2002 2001 2000
---- ---- ----
Cost reimbursements to ATEL $ 789,052 $ 866,915 $ 508,653
Incentive management fees (computed as 3.25% of
distributions of cash from operations, as defined in the
Limited Partnership Agreement) and equipment management fees
(computed as 3.5% 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) 695,721 771,498 963,332
---------------- ---------------------------------
$ 1,484,773 $ 1,638,413 $ 1,471,985
================ ================ ===============
22
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
6. Partners' capital:
As of December 31, 2002, 12,490,076 Units were issued and outstanding,
including the 50 Units issued to the Initial Limited Partners. As of December
31, 2001, 12,500,050 Units were issued and outstanding, including the 50 Units
issued to the Initial Limited Partners. The Partnership's registration statement
with the Securities and Exchange Commission became effective November 23, 1994.
The Partnership is authorized to issue up to 12,500,000 Units, in addition to
those issued to the Initial Limited Partners.
As defined in the Limited Partnership Agreement, 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. In accordance with the terms of the of
Limited Partnership Agreement, additional allocations of income were made to the
General Partner in 2002 and 2001. The amounts allocated were determined to bring
the General Partner's ending capital account balance to zero.
As defined in the Limited Partnership Agreement, available Cash from
Operations and Cash from Sales and Refinancing are to be distributed as follows:
First, 95.75% of Distributions of Cash from Operations to the Limited
Partners, 1% of Distributions of Cash from Operations to ATEL and 3.25% to an
affiliate of ATEL as an Incentive Management Fee, 99% of Distributions of Cash
from Sales or Refinancing to the Limited Partners and 1% of Cash from Sales or
Refinancing to the General Partner.
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, an affiliate of ATEL will receive as an Incentive Management Fee, 4%
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 ATEL's credit committee review. The leases provide for the
return of the equipment upon default.
As of December 31, 2002, 2001 and 2000 there were concentrations (greater
than 10%) of equipment leased to lessees in certain industries (as a percentage
of total equipment cost) as follows:
2002 2001 2000
---- ---- ----
Rail transportation 44% 33% 31%
Other manufacturing 21% 30% 33%
Municipalities 15% 13% *
Other transportation services 13% * *
* Less than 10%.
During 2002, three customer comprised 19%, 13% and 11% of the Partnership's
revenues from leases. During 2001, four customer comprised 13%, 12%, 11% and 10%
of the Partnership's revenues from leases. During 2000, one customer comprised
18% of the Partnership's revenues from leases.
23
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
8. Lines of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $55,645,837 revolving line of credit (comprised of an
acquisition facility and a warehouse facility) with a financial institution that
includes certain financial covenants. The line of credit expires on June 28,
2004. As of December 31, 2002, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition facility $ 5,100,000
Amounts borrowed by affiliated partnerships and limited liability companies under the
acquisition facility 23,900,000
-----------------
Total borrowings under the acquisition facility 29,000,000
Amounts borrowed by the General Partner and its sister corporation under the warehouse facility -
-----------------
Total outstanding balance $ 29,000,000
=================
Total available under the line of credit $ 55,645,837
Total outstanding balance (29,000,000)
-----------------
Remaining availability $ 26,645,837
=================
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.
The credit agreement includes certain financial covenants applicable to
each borrower. The Partnership was in compliance with its covenants as of
December 31, 2002. The effective interest rate on borrowings at December 31,
2002 ranged from 3.29% to 4.25%.
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, 2002 is $5,241,781.
Line of credit:
The carrying amounts of the Partnership's variable interest rate lines of
credit approximate fair value.
24
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
10. Extraordinary gain on extinguishment:
In January 2000, one of the Partnership's lessees filed for reorganization
under Chapter 11 of the United States Bankruptcy Code. The Partnership
determined that the assets under operating lease with a net book value of
$5,113,290 at December 31, 1999 leased to this particular lessee were impaired
as of December 31, 1999. The Partnership estimated that the proceeds from the
sales of the assets would not be sufficient to satisfy the non-recourse lender.
The debt balance was $3,320,774 at December 31, 1999. As a result, the
Partnership fully reserved for these assets as of December 31, 1999.
Upon foreclosure by the lender and upon sale of the financed assets in
2000, the Partnership recognized an extraordinary gain on the extinguishment of
the debt of $3,320,774 during the year ended December 31, 2000.
11. Selected quarterly data (unaudited):
March 31, June 30, September 30, December 31,
Quarter ended 2001 2001 2001 2001
---- ---- ---- ----
Total revenues $ 4,545,246 $ 4,293,732 $ 4,227,191 $ 3,483,060
Net Income (loss) $ 864,277 $ 641,303 $ 986,877 $ 345,906
Net income (loss) per limited partnership unit $ 0.07 $ 0.03 $ 0.08 $ (0.01)
March 31, June 30, September 30, December 31,
Quarter ended 2002 2002 2002 2002
---- ---- ---- ----
Total revenues $ 3,029,272 $ 3,547,202 $ 4,387,980 $ 2,771,462
Net Income (loss) $ (26,444) $ 696,381 $ 1,494,292 $ (3,312,632)
Net income (loss) per limited partnership unit $ - $ 0.05 $ 0.12 $ (0.27)
25
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 AFS.
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 52, 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.
Paritosh K. Choksi, age 49, 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 54, 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.
26
Vasco H. Morais, age 44, 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 ATEL 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 will pay selling commissions in the amount of 9.5% of Gross
Proceeds, as defined, to ATEL Securities Corporation, an affiliate of ATEL. Of
this amount, the majority is expected to be reallowed to other broker/dealers.
Through December 31, 1996, $11,875,000 of such commissions (the maximum
allowable) had been paid to ATEL or its affiliates. Of that amount, $10,163,554
was reallowed to other broker/dealers. None have been paid since 1996, nor will
any additional amounts be paid in future periods.
Acquisition Fees
Acquisition fees were paid to ATEL 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 paid to ATEL or their affiliates was not to exceed 3% of the
aggregate purchase price of equipment acquired with the net proceeds of the
offering and was not to exceed 4.5% of the Gross Proceeds of the Offering.
Through December 31, 1996, $5,625,000 of such fees (the maximum allowable
amount) had been paid to ATEL or its affiliates. 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, ATEL 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) 3.5% of the gross lease revenues from "operating" leases, as
defined, and (ii) 2% of gross lease revenues from "full payout" leases, as
defined, which contain net lease provisions.
See notes to the Financial Statements included at Part II, 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, ATEL is entitled to receive the Incentive
management fee which shall be payable for each fiscal quarter and shall be an
amount equal to 1% of cash distributions from operations, sales or refinancing
and 3.25% (4% prior to July 1, 1995) of cash distributions from operations to an
affiliate of ATEL 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 paid to the affiliate of ATEL shall be 4% of all
distributions of cash from operations, sales or refinancing.
See notes to the Financial Statements included at Part II, Item 8 of this
report for amounts paid.
27
Equipment Resale Fees
As compensation for services rendered in connection with the sale of
equipment, ATEL 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.
Equipment Re-lease Fee
As compensation for providing re-leasing services, ATEL 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) ATEL 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) ATEL or its affiliates have rendered
substantial re-leasing services in connection with such re-lease and (iv) ATEL
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 ATEL. In accordance with the terms of the of Limited
Partnership Agreement, additional allocations of income were made to the General
Partner in 2002 and 2001. The amounts allocated was determined so as to bring
the General Partner's ending capital account balance to zero at the end of each
year. See financial statements included in Part II, Item 8 of this report for
amounts allocated to ATEL in 2002, 2001 and 2000.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
At December 31, 2002 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 ATEL 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%
600 California Street, 6th Floor 25 Units ($250)
San Francisco, CA 94108 (owned by wife)
Limited Partnership Units Dean Cash Initial Limited Partner Units 0.0002%
600 California Street, 6th Floor 25 Units ($250)
San Francisco, CA 94108 (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.
ATEL 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.
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.
28
Item 14. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management (ATEL
Financial Services, LLC as General Partner of the registrant, including the
chief executive officer and chief financial officer), an evaluation of the
effectiveness of the design and operation of the Partnership's disclosure
controls and procedures [as defined in Rules 240.13a-14(c) and 15d-14(c) under
the Securities Exchange Act of 1934] was performed as of a date within ninety
days before the filing date of this annual report. Based upon this evaluation,
the chief executive officer and chief financial officer concluded that, as of
the evaluation date, our disclosure controls and procedures were effective for
the purposes of recording, processing, summarizing and timely reporting
information required to be disclosed by us in the reports that we file under the
Securities Exchange Act of 1934 and that such information is accumulated and
communicated to our management in order to allow timely decisions regarding
required disclosure.
Changes in internal controls
There have been no significant changes in our internal controls or in other
factors that could significantly affect our disclosure controls and procedures
subsequent to the evaluation date, nor were there any significant deficiencies
or material weaknesses in our internal controls.
PART IV
Item 15. 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, 2002 and 2001
Statements of Operations for the years ended December 31, 2002, 2001
and 2000 Statements of Changes in Partners' Capital for the years
ended December 31, 2002, 2001 and 2000 Statements of Cash Flows for
the years ended December 31, 2002, 2001 and 2000 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 2002
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, 1994 (File No.
33-81952).
29
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: 3/26/03
ATEL Cash Distribution Fund VI, 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)
30
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 3/26/03
- ------------------------- Executive Officer of ATEL
Dean Cash Financial Services, LLC
/s/ Paritosh K. Choksi Executive Vice President 3/26/03
- ------------------------- and director of ATEL Financial
Paritosh K. Choksi Services LLC, Principal financial
officer of registrant; principal
financial officer and director of ATEL
Financial Services, LLC
/s/ Donald E. Carpenter Principal accounting officer of 3/26/03
- ------------------------- registrant; principal accounting officer
Donald E. Carpenter 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 supplementary to the
Commission when forwarded to the security holders.
31
CERTIFICATIONS
I, Paritosh K. Choksi, certify that:
1. I have reviewed this annual report on Form 10-K of ATEL Cash Distribution
Fund VI, LP;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 3/26/03
/s/ Paritosh K. Choksi
- ---------------------------------------------------------
Paritosh K. Choksi
Principal financial officer of registrant, Executive
Vice President of General Partner
32
CERTIFICATIONS
I, Dean L. Cash, certify that:
1. I have reviewed this annual report on Form 10-K of ATEL Cash Distribution
Fund VI, LP;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 3/26/03
/s/ Dean Cash
- ---------------------------------------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
33
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 Annual report on Form 10K of ATEL Cash Distribution
Fund VI, LP, (the "Partnership") for the period ended December 31, 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 financial condition and results of operations of the Partnership.
Date: 3/26/03
/s/ Dean Cash
- ----------------------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
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 Annual report on Form 10K of ATEL Cash Distribution
Fund VI, LP, (the "Partnership") for the period ended December 31, 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 financial condition and results of operations of the Partnership.
Date: 3/26/03
/s/ Paritosh K. Choksi
- ----------------------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal financial officer of registrant
34