Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended March 31, 2003
|_| Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number 000-28368
ATEL Cash Distribution Fund VI, L.P.
(Exact name of registrant as specified in its charter)
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 94108-2733
(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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|
The number of Limited Partnership Units outstanding as of March 31, 2003 was
12,490,076
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
2
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(Unaudited)
ASSETS
2003 2002
---- ----
Cash and cash equivalents $ 1,184,870 $ 861,707
Accounts receivable, net of allowance for doubtful accounts of $280,000
in 2003 and $861,254 in 2002 855,760 4,572,615
Investments in leases 27,709,436 29,191,076
----------------- -----------------
Total assets $ 29,750,066 $ 34,625,398
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 518,107 $ 4,853,239
Lines of credit 4,600,000 5,100,000
Accounts payable:
General Partner 163,752 29,145
Other 848,388 570,779
Accrued interest payable 3,113 395,555
Unearned operating lease income 211,801 69,132
----------------- -----------------
Total liabilities 6,345,161 11,017,850
Partners' capital:
General Partner - -
Limited Partners 23,404,905 23,607,548
----------------- -----------------
Total partners' capital 23,404,905 23,607,548
----------------- -----------------
Total liabilities and partners' capital $ 29,750,066 $ 34,625,398
================= =================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002
(Unaudited)
Revenues: 2003 2002
---- ----
Leasing activities:
Operating leases $ 2,436,898 $ 3,255,804
Direct financing leases 212,663 53,906
Loss on sales of assets (71,983) (283,280)
Interest 1,066 1,948
Other 13,830 894
----------------- -----------------
2,592,474 3,029,272
Expenses:
Depreciation and amortization 996,538 1,782,960
Equipment and incentive management fees to General Partner 184,564 311,165
Interest expense 183,128 515,222
Cost reimbursements to General Partner 171,747 218,529
Professional fees 25,160 59,891
Recovery of doubtful accounts (367,099) -
Other 190,561 167,949
----------------- -----------------
1,384,599 3,055,716
----------------- -----------------
Net income (loss): $ 1,207,875 $ (26,444)
================= =================
Net income (loss):
General Partner $ 46,866 $ 33,017
Limited Partners 1,161,009 (59,461)
----------------- -----------------
$ 1,207,875 $ (26,444)
================= =================
Net income (loss) per Limited Partnership Unit $ 0.093 $ (0.005)
Weighted average number of Units outstanding 12,490,076 12,500,050
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
THREE MONTH PERIOD
ENDED MARCH 31, 2003
(Unaudited)
Limited Partners General
Units Amount Partner Total
Balance December 31, 2002 12,490,076 $ 23,607,548 $ - $ 23,607,548
Distributions to partners - (1,363,652) (46,866) (1,410,518)
Net income - 1,161,009 46,866 1,207,875
----------------- ----------------- ----------------- -----------------
Balance March 31, 2003 12,490,076 $ 23,404,905 $ - $ 23,404,905
================= ================= ================= =================
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002
(Unaudited)
Operating activities: 2003 2002
---- ----
Net income (loss): $ 1,207,875 $ (26,444)
Adjustment to reconcile net income (loss) to cash provided by
operating activities;
Depreciation and amortization 996,538 1,782,960
Loss on sales of assets 71,983 283,280
Recovery of doubtful accounts (367,099) -
Changes in operating assets and liabilities:
Accounts receivable (716,046) (262,269)
Accounts payable, General Partner 134,607 75,477
Accounts payable, other 277,609 (128,111)
Accrued interest payable 130,592 244,547
Unearned lease income 142,669 50,477
----------------- -----------------
Net cash provided by operations 1,878,728 2,019,917
----------------- -----------------
Investing activities:
Proceeds from sales of assets 102,124 362,449
Reduction of net investment in direct financing leases 310,995 55,841
----------------- -----------------
Net cash provided by investing activities 413,119 418,290
----------------- -----------------
Financing activities:
Distributions to partners (1,410,518) (3,314,186)
Repayments of non-recourse debt (58,166) (843,222)
Repayments of borrowings under line of credit (500,000) -
Borrowings under line of credit - 2,000,000
----------------- -----------------
Net cash used in financing activities (1,968,684) (2,157,408)
----------------- -----------------
Net increase (decrease) in cash and cash equivalents 323,163 (280,799)
Cash and cash equivalents at beginning of period 861,707 701,012
----------------- -----------------
Cash and cash equivalents at end of period $ 1,184,870 $ 981,811
================= =================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 52,536 $ 270,675
================= =================
Supplemental disclosure of non-cash transactions:
Offset of accounts receivable and debt service per lease and debt agreement:
Accrued interest payable $ (523,034) $ (989,075)
Non-recourse debt (4,276,966) (3,810,925)
----------------- -----------------
Accounts receivable $(4,800,000) $(4,800,000)
================= =================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
1. Summary of significant accounting policies:
Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with instructions to Form 10-Q and Article 10 of Regulation S-X. The
unaudited interim financial statements reflect all adjustments which are, in the
opinion of the General Partners, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. These unaudited interim financial
statements should be read in conjunction with the financial statements and notes
thereto contained in the report on Form 10-K for the year ended December 31,
2002, filed with the Securities and Exchange Commission.
2. 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.
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 Partnership does not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their individual tax
returns.
ATEL Financial Services, LLC, an affiliated entity, acts as the General Partner
of the Partnership.
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation
Balance Expense and Reclassi- Balance
December 31, Amortization fications and March 31,
2002 of Leases Dispositions 2003
---- --------- - ------------- ----
Net investment in operating leases $ 26,371,335 $ (985,046) $(3,126,107) $ 22,260,182
Net investment in direct financing leases 4,108,968 (310,995) (4,650) 3,793,323
Assets held for sale or lease 3,406,389 - (1,868,282) 1,538,107
Residual interests 34,159 - - 34,159
Reserve for losses (4,824,932) - 4,824,932 -
Initial direct costs, net of accumulated amortization
of $694,219 in 2003 and $798,164 in 2002 95,157 (11,492) - 83,665
----------------- ----------------- ----------------- -----------------
$ 29,191,076 $(1,307,533) $ (174,107) $ 27,709,436
================= ================= ================= =================
6
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
3. Investment in leases (continued):
Property on operating leases consists of the following:
Balance Reclassi- Balance
December 31, Depreciation fications and March 31,
2002 Expense Dispositions 2003
---- ------- - ------------- ----
Transportation $ 49,393,031 $ - $ 164,326 $ 49,557,357
Construction 11,727,006 - - 11,727,006
Materials handling 8,317,703 - (1,014,540) 7,303,163
Office automation 1,298,837 - (469,923) 828,914
Other 759,867 - (397,251) 362,616
Manufacturing 78,484 - - 78,484
----------------- ----------------- ----------------- -----------------
71,574,928 - (1,717,388) 69,857,540
Less accumulated depreciation (45,203,593) (985,046) (1,408,719) (47,597,358)
----------------- ----------------- ----------------- -----------------
$ 26,371,335 $ (985,046) $(3,126,107) $ 22,260,182
================= ================= ================= =================
All of the property on leases was acquired in 1995, 1996 and 1997.
At March 31, 2003, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Operating Financing
Leases Leases Total
Nine months ending December 31, 2003 $ 2,143,637 $ 609,569 $ 2,753,206
Year ending December 31, 2004 1,928,336 3,919,823 5,848,159
2005 1,507,444 98,760 1,606,204
2006 353,853 98,760 452,613
2007 - 98,760 98,760
----------------- ----------------- -----------------
$ 5,933,270 $ 4,825,672 $ 10,758,942
================= ================= =================
Direct financing leases:
As of March 31, 2003, investment in direct financing leases consists of railroad
locomotives and ground support equipment. The following lists the components of
the Company's investment in direct financing leases as of March 31, 2003:
Total minimum lease payments receivable $ 4,825,672
Estimated residual values of leased equipment (unguaranteed) 179,132
-----------------
Investment in direct financing leases 5,004,804
Less unearned income (1,211,481)
-----------------
Net investment in direct financing leases $ 3,793,323
=================
7
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying monthly, quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments of lease payments and pledges of the assets which were purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
6.37% to 12.22%.
Future minimum principal payments of non-recourse debt are as follows:
Principal Interest Total
Nine months ending December 31, 2003 $ 147,844 $ 26,594 $ 174,438
Year ending December 31, 2004 109,054 26,870 135,924
2005 79,916 18,844 98,760
2006 86,868 11,892 98,760
2007 94,425 4,336 98,761
----------------- ----------------- -----------------
$ 518,107 $ 88,536 $ 606,643
================= ================= =================
5. Related party transactions:
The terms of the Limited Partnership Agreement provide that the General Partner
and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Partnership.
The Limited Partnership Agreement allows for the reimbursement of costs incurred
by the General Partner in providing services to the Partnership. Services
provided include Partnership accounting, investor relations, legal counsel and
lease and equipment documentation. The General Partner is not reimbursed for
services where it is entitled to receive a separate fee as compensation for such
services, such as acquisition and management of equipment. Reimbursable costs
incurred by the General Partner are allocated to the Partnership based upon
actual time incurred by employees working on Partnership business and an
allocation of rent and other costs based on utilization studies.
Substantially all employees of the General Partner record time incurred in
performing services on behalf of all of the Partnerships serviced by the General
Partner. The General Partner believes that the costs reimbursed are the lower of
(i) actual costs incurred on behalf of the Partnership or (ii) the amount the
Partnership would be required to pay independent parties for comparable services
in the same geographic location and are reimbursable in accordance with the
Limited Partnership Agreement.
8
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
5. Related party transactions (continued):
During the three month periods ended March 31, 2003 and 2002, the General
Partner and/or Affiliates earned fees, commissions and reimbursements, pursuant
to the Limited Partnership Agreement, as follows:
2003 2002
---- ----
Incentive management fees (computed as 4% of distributions of cash from
operations, as defined in the Limited Partnership Agreement) and equipment
management fees (computed as 5% of gross revenues from operating leases, as
defined in the Limited Partnership Agreement plus 2% of gross revenues from full
payout leases, as defined in the Limited Partnership Agreement) $ 184,564 $ 311,165
Costs reimbursed to General Partner 171,747 218,529
----------------- -----------------
$ 356,311 $ 529,694
================= =================
6. Line of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $56,191,292 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 March 31, 2003, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ 4,600,000
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 12,600,000
-----------------
Total borrowings under the acquisition facility 17,200,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
-----------------
Total outstanding balance $ 17,200,000
=================
Total available under the line of credit $ 56,191,292
Total outstanding balance (17,200,000)
-----------------
Remaining availability $ 38,991,292
=================
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 March 31,
2003.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements contained in this Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Form 10-Q,
which are not historical facts, may be forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Investors are cautioned not
to attribute undue certainty to these forward-looking statements, which speak
only as of the date of this Form 10-Q. We undertake no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this Form 10-Q or to reflect the occurrence of
unanticipated events, other than as required by law.
Capital Resources and Liquidity
During the first quarter of 2003 and 2002, the Partnership's primary activity
was engaging in equipment leasing activities. During those same periods in 2003
and 2002, the Partnership's primary source of liquidity was rents from operating
leases.
The liquidity of the Partnership will vary in the future, increasing to the
extent cash flows from leases exceed expenses, and decreasing as lease assets
are acquired, as distributions are made to the limited partners and to the
extent expenses exceed cash flows from leases.
As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire, the Partnership will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on the General Partner's success in re-leasing or selling the equipment
as it comes off lease.
The Partnership participates with the General Partner and certain of its
affiliates in a $56,191,292 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
March 31, 2003, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ 4,600,000
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 12,600,000
-----------------
Total borrowings under the acquisition facility 17,200,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
-----------------
Total outstanding balance $ 17,200,000
=================
Total available under the line of credit $ 56,191,292
Total outstanding balance (17,200,000)
-----------------
Remaining availability $ 38,991,292
=================
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 Partnership anticipates reinvesting a portion of lease payments from assets
owned in new leasing transactions. Such reinvestment will occur only after the
payment of all obligations, including debt service (both principal and
interest), the payment of management and acquisition fees to the General Partner
and providing for cash distributions to the Limited Partners.
The Partnership currently has available adequate reserves to meet contingencies,
but in the event those reserves were found to be inadequate, the Partnership
would likely be in a position to borrow against its current portfolio to meet
such requirements. The General Partner envisions no such requirements for
operating purposes.
Through March 31, 2003, the Partnership had borrowed $100,521,405 on a
non-recourse basis. As of that date, $518,107 remained outstanding. The General
Partner expects that aggregate borrowings in the future will not exceed 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.
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.
10
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
During the first quarters of 2003 and 2002, the Partnership's primary source of
cash from operating activities was rents from operating leases. Cash from
operating activities was almost entirely from operating lease rents in both
quarters.
Proceeds from the sales of assets and direct financing lease rents accounted for
as reductions of the Partnership's net investment in direct financing leases
were the only investing sources of cash during the three months ended March 31,
2003 and 2002. Proceeds from sales of lease assets decreased from $362,449
during the three months ended March 31, 2002 to $102,123 during the three months
ended March 31, 2003. Proceeds from sales of lease assets are not expected to be
consistent from one year to another. Revenues from direct finance leases
increased by $158,757 to $212,663 from $53,906 during the three months ended
March 31, 2003 and 2002, respectively. This was due to the reclassification of
assets to a direct finance lease.
During the three months ended March 31, 2003 and 2002, the single largest
financing use of cash was distributions to limited partners. The amount of such
distributions decreased from $3,314,186 during the three months ended March 31,
2002 to $1,377,370 during the three months ended March 31, 2003 because of the
change in frequency of our distributions. Effective January 1, 2003,
distributions are now on an annual basis as opposed to a monthly or quarterly
basis. As a result of scheduled debt payments, certain notes have been paid off.
This decrease in overall indebtedness has led to an overall reduction in the
amounts of cash used to repay debt during the three months ended March 31, 2002
compared to the three months ended March 31, 2003.
Under the terms of a wrap lease and the related non-recourse debt agreement the
annual lease payments are offset against the annual debt service payment. The
agreement is structured so that the amounts of the two payments are equal to
each other in each year of the agreement. A right of offset was established as a
part of the agreement.
In addition, $2,000,000 was borrowed under the Partnership's line of credit
during the three months ended March 31, 2002 which was used to meet short-term
cash requirements. There were no comparable borrowings during the three months
ended March 31, 2003. The annual lease and debt payments (due in the first
quarter of each year) were $4,800,000.
Results of operations
Operations resulted in net income of $1,207,875 during the three months ended
March 31, 2003 compared to a net loss of $26,444 during the three months ended
March 31, 2002. The Partnership's primary source of revenues was from operating
leases in both years. Operating lease revenues declined as a result of lease
maturities and sales of the underlying lease assets over the last year.
During the quarter ended March 31, 2003, a portion of the accounts receivable
which had been reserved as of December 31, 2002, were collected. As a result, a
portion of the amounts previously recorded as an allowance for doubtful accounts
was recorded as a recovery of provisions for doubtful accounts.
Sales of lease assets during the three months ended March 31, 2003 resulted in
losses of $71,983, a decrease of $211,297 compared to the comparable period in
2002. The amounts of such gains and losses is not expected to be consistent from
one year to another.
Interest expense has been reduced from $515,222 during the three months ended
March 31, 2002 to $183,128 during the three months ended March 31, 2003 due to
scheduled payments on the Partnership's non-recourse debt and due to reductions
of the amounts borrowed under the line of credit.
Depreciation expense has decreased from $1,740,319 in 2002 to $985,046 in 2003.
Depreciation is related to operating lease assets. The amount of such assets has
decreased from $115,776,249 at January 1, 2002 to $69,857,541 at March 31, 2003.
As operating leases mature and the assets are sold, operating lease revenues and
depreciation expense will continue to decrease.
Item 3. Quantitative and Qualitative Disclosures of 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 March 31, 2003, there was
$4,600,000 outstanding on the floating rate line of credit.
11
To hedge its interest rate risk related to this variable rate debt, the
Partnership may enter into interest rate swaps. As of March 31, 2003, 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 4. Controls and procedures.
Internal Controls
As of March 31, 2003, 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 March 31, 2003. There have been no significant changes in the
Partnership's internal controls or in other factors that could significantly
affect internal controls subsequent to March 31, 2003.
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.
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including
the CEO and CFO, 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
quarterly report. Based upon this evaluation, the CEO and CFO of the General
Partner 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.
PART II. OTHER INFORMATION
Item 1. 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 Debtor through June 1998,
and as a result, the General Partner declared the lease in default.
Subsequently, the Debtor 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 Debtor for its contractual damages in
the U.S. District Court of Northern California (the "Court"). The amounts of
these damages have not been included in the financial statements included in
Part I, Item 1 of this report. On June 16, 2000, the Debtor filed for protection
under Chapter 11 of the U.S. Bankruptcy Code.
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 in 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.
12
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 Partnership 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 was 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
Partnership's consent.
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
Debtor 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 of the Partnership, which
was 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" (IMT), 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,
received 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
Partnership's claim due to duplication and an improper liquidated damages
provision. The Partnership disputed this and, as of July 26, 2002, agreement had
been reached between the Partnership and Debtor as to the amount of the
Partnership's claim, and the Debtor's objection to the Partnership's claim was
withdrawn.
On April 28, 2003, the Partnership received 82,689 shares of IMT stock. The
Partnership anticipates additional amounts may be recoverable through its'
equity interest 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.
Item 2. Changes In Securities.
Inapplicable.
Item 3. Defaults Upon Senior Securities.
Inapplicable.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Inapplicable.
Item 5. Other Information.
Inapplicable.
13
Item 6. Exhibits And Reports On Form 8-K.
(a) Documents filed as a part of this report
1. Financial Statements
Included in Part I of this report:
Balance Sheets, March 31, 2003 and December 31, 2002.
Statement of Changes in Partners' Capital for the three months ended
March 31, 2003.
Statements of Operations for the three month periods ended March 31,
2003 and 2002.
Statements of Cash Flows for the three month periods ended March 31,
2003 and 2002.
Notes to the Financial Statements
2. Financial Statement Schedules
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
(b) Report on Form 8-K
None
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
May 13, 2003
ATEL CASH DISTRIBUTION FUND VI, L.P.
(Registrant)
By: ATEL Financial Corporation
General Partner of Registrant
By: /s/ Dean L. Cash
------------------------------------
Dean L. Cash
President and Chief Executive Officer
of General Partner
By: /s/ Paritosh K. Choksi
------------------------------------
Paritosh K. Choksi
Principal Financial Officer
of Registrant
By: /s/ Donald E. Carpenter
------------------------------------
Donald E. Carpenter
Principal Accounting
Officer of Registrant
15
CERTIFICATIONS
I, Paritosh K. Choksi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Cash Distribution
Fund VI, LP;
2. Based on my knowledge, this quarterly 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:
May 13, 2003
/s/ Paritosh K. Choksi
- ------------------------------
Paritosh K. Choksi
Principal Financial Officer of Registrant, Executive
Vice President of General Partner
16
CERTIFICATIONS
I, Dean L. Cash, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Cash Distribution
Fund VI, LP;
2. Based on my knowledge, this quarterly 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:
May 13, 2003
/s/ Dean L. Cash
- ------------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
17
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10-Q of ATEL Cash Distribution
Fund VI, LP, (the "Partnership") for the period ended March 31, 2003 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:
May 13, 2003
/s/ Dean L. 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 Quarterly report on Form 10-Q of ATEL Cash Distribution
Fund VI, LP, (the "Partnership") for the period ended March 31, 2003 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:
May 13, 2003
/s/ Paritosh K. Choksi
- ------------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal Financial Officer of Registrant
18