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 June 30, 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 June 30, 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
JUNE 30, 2003 AND DECEMBER 31, 2002
(Unaudited)
ASSETS
2003 2002
Cash and cash equivalents $ 1,806,014 $ 861,707
Accounts receivable, net of allowance for
doubtful accounts of $230,000
in 2003 and $861,254 in 2002 811,884 4,572,615
Investments in leases 26,576,129 29,191,076
---------------- ----------------
Total assets $29,194,027 $34,625,398
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Lines of credit 4,000,000 5,100,000
Non-recourse debt $ 468,591 $ 4,853,239
Accounts payable:
General Partner 83,721 29,145
Other 396,824 570,779
Accrued interest payable 2,940 395,555
Unearned operating lease income 212,778 69,132
---------------- ----------------
Total liabilities 5,164,854 11,017,850
Partners' capital:
General Partner - -
Limited Partners 24,029,173 23,607,548
---------------- ----------------
Total partners' capital 24,029,173 23,607,548
---------------- ----------------
Total liabilities and partners' capital $29,194,027 $34,625,398
================ ================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2003 AND 2002
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
Revenues: 2003 2002 2003 2002
Leasing activities:
Operating leases $ 3,946,146 $ 6,809,411 $ 1,509,248 $ 3,553,607
Direct financing leases 415,085 89,633 202,422 35,727
Gain (loss) on sales of assets 556,699 (357,739) 628,682 (74,459)
Interest 2,090 2,992 1,024 1,044
Other 22,751 32,177 8,921 31,283
----------------- ------------------ ---------------- ----------------
4,942,771 6,576,474 2,350,297 3,547,202
Expenses:
Depreciation and amortization 1,927,115 3,577,053 930,577 1,794,093
Cost reimbursements to General Partner 386,670 397,686 214,923 179,157
Equipment and incentive management
fees to General partner 262,330 414,590 77,766 103,425
Interest expense 226,708 925,697 43,580 410,475
Railcar maintenance 190,755 211,083 128,164 113,737
Professional fees 58,692 92,467 33,532 32,576
(Recovery of) provision for doubtful accounts (417,099) 20,000 (50,000) 20,000
Other 475,856 267,961 347,886 197,358
----------------- ------------------ ---------------- ----------------
3,111,027 5,906,537 1,726,428 2,850,821
----------------- ------------------ ---------------- ----------------
Net income: $ 1,831,744 $ 669,937 $ 623,869 $ 696,381
================= ================== ================ ================
Net income:
General Partner $ 46,866 $ 65,841 $ - $ 32,824
Limited Partners 1,784,878 604,096 623,869 663,557
----------------- ------------------ ---------------- ----------------
$ 1,831,744 $ 669,937 $ 623,869 $ 696,381
================= ================== ================ ================
Net income per Limited Partnership Unit $ 0.14 $ 0.05 $ 0.05 $ 0.05
Weighted average number of Units outstanding 12,490,076 12,495,063 12,490,076 12,490,076
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SIX MONTH PERIOD
ENDED JUNE 30, 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 - (1,363,253) (46,866) (1,410,119)
Net income - 1,784,878 46,866 1,831,744
----------------- ------------------ ---------------- ----------------
Balance June 30, 2003 12,490,076 $ 24,029,173 $ - $24,029,173
================= ================== ================ ================
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 2003 AND 2002
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
Operating activities:
Net income: $ 1,831,744 $ 669,937 $ 623,869 $ 696,381
Adjustment to reconcile net income to
cash provided by operating activities;
Depreciation and amortization 1,927,115 3,577,053 930,577 1,794,093
(Gain) loss on sales of assets (556,699) 357,739 (628,682) 74,459
(Recovery of) provision for doubtful accounts (417,100) 20,000 (50,001) 20,000
Changes in operating assets and liabilities:
Accounts receivable (622,169) (1,555,496) 93,877 (1,293,227)
Accounts payable, General Partner 54,576 188,465 (80,031) 112,988
Accounts payable, other (173,951) (134,439) (451,560) (6,328)
Accrued interest payable 130,419 375,164 (173) 130,617
Unearned lease income 143,646 (14,219) 977 (64,696)
----------------- ------------------ ---------------- ----------------
Net cash provided by operations 2,317,581 3,484,204 438,853 1,464,287
----------------- ------------------ ---------------- ----------------
Investing activities:
Proceeds from sales of assets 1,086,800 470,036 984,676 107,587
Reduction of net investment in direct
financing leases 157,731 173,531 (153,264) 117,690
----------------- ------------------ ---------------- ----------------
Net cash provided by investing activities 1,244,531 643,567 831,412 225,277
----------------- ------------------ ---------------- ----------------
Financing activities:
Distributions to partners (1,410,119) (6,625,737) 399 (3,311,551)
Repayments of non-recourse debt (107,682) (1,193,437) (49,516) (350,215)
Repayments of borrowings under line of credit (1,100,000) (1,000,000) (600,000) (1,000,000)
Borrowings under line of credit - 4,500,000 - 2,500,000
Repurchase of limited partnership units - (3,907) - (3,907)
----------------- ------------------ ---------------- ----------------
Net cash used in financing activities (2,617,801) (4,323,081) (649,117) (2,165,673)
----------------- ------------------ ---------------- ----------------
Net increase (decrease) in cash and
cash equivalents 944,311 (195,310) 621,148 (476,109)
Cash and cash equivalents at beginning
of period 861,707 701,012 1,184,870 981,811
----------------- ------------------ ---------------- ----------------
Cash and cash equivalents at end of period $ 1,806,018 $ 505,702 $ 1,806,018 $ 505,702
================= ================== ================ ================
Supplemental disclosures of cash
flow information
Cash paid during the period for interest $ 96,289 $ 550,533 $ 43,753 $ 279,858
================= ================== ================ ================
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
JUNE 30, 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 the 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 June 30,
2002 of Leases Dispositions 2003
Net investment in operating leases $ 26,371,335 $(1,907,182) $(3,729,130) $20,735,023
Net investment in direct financing leases 4,108,968 (157,731) (4,650) 3,946,587
Assets held for sale or lease 3,406,389 - (1,621,253) 1,785,136
Residual interests 34,159 - - 34,159
Reserve for losses (4,824,932) - 4,824,932 -
Initial direct costs, net of accumulated amortization
of $566,231 in 2003 and $1,369,552 in 2002 95,157 (19,933) - 75,224
----------------- ------------------ ---------------- ----------------
$ 29,191,076 $(2,084,846) $ (530,101) $26,576,129
================= ================== ================ ================
6
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003
(Unaudited)
3. Investment in leases (continued):
Operating leases:
Property on operating leases consists of the following:
Balance Reclassifications & Balance
December 31, Dispositions June 30,
2002 1st Quarter 2nd Quarter 2003
Transportation $ 49,393,031 $ 164,326 $(4,988,060) $44,569,297
Construction 11,727,006 - - 11,727,006
Materials handling 8,317,703 (1,014,540) (369,179) 6,933,984
Office automation 1,298,837 (469,923) - 828,914
Manufacturing 78,484 - - 78,484
Other 759,867 (397,251) - 362,616
----------------- ------------------ ---------------- ----------------
71,574,928 (1,717,388) (5,357,239) 64,500,301
Less accumulated depreciation (45,203,593) (2,393,765) 3,832,080 (43,765,278)
----------------- ------------------ ---------------- ----------------
$ 26,371,335 $(4,111,153) $(1,525,159) $20,735,023
================= ================== ================ ================
All of the property on leases was acquired in 1995, 1996 and 1997.
Direct financing leases:
As of June 30, 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 June 30, 2003:
Total minimum lease payments receivable $ 4,776,514
Estimated residual values of leased equipment (unguaranteed) 179,132
----------------
Investment in direct financing leases 4,955,646
Less unearned income (1,009,059)
----------------
Net investment in direct financing leases $ 3,946,587
================
At June 30, 2003, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Operating Financing
Leases Leases Total
Six months ending December 31, 2003 $ 1,786,805 $ 560,411 $ 2,347,216
Year ending December 31, 2004 2,370,872 3,919,823 6,290,695
2005 1,502,179 98,760 1,600,939
2006 352,537 98,760 451,297
2007 - 98,760 98,760
------------------ ---------------- ----------------
$ 6,012,393 $ 4,776,514 $10,788,907
================== ================ ================
7
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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
Six months ending December 31, 2003 $ 98,328 $ 16,823 $ 115,151
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
------------------ ---------------- ----------------
$ 468,591 $ 78,765 $ 547,356
================== ================ ================
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
JUNE 30, 2003
(Unaudited)
5. Related party transactions (continued):
During the six month periods ended June 30, 2003 and 2002, the General Partner
and/or affiliates earned fees, commissions and reimbursements, pursuant to the
Limited Partnership Agreement, as follows:
Six Months Three Months
Ended June 30, Ended June 30,
2003 2002 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) $ 262,330 $ 414,590 $ 77,766 $ 103,425
Costs reimbursed to General Partner 386,670 397,686 214,923 179,157
----------------- ------------------ ---------------- ----------------
$ 649,000 $ 812,276 $ 649,000 $ 812,276
================= ================== ================ ================
6. Line of credit:
The Partnership participates with the General Partner and certain of its
affiliated partnerships and limited liability companies in a $56,736,746
revolving line of credit (comprised of an acquisition facility and a warehouse
facility) with a financial institution that includes certain financial
covenants. The line of credit expires on June 28, 2004. As of June 30, 2003,
borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition facility$ 4,000,000
Amounts borrowed by affiliated partnerships and limited liability
companies under the acquisition facility 22,500,000
--------------
Total borrowings under the acquisition facility 26,500,000
Amounts borrowed by the General Partner and its sister corporation
under the warehouse facility -
--------------
Total outstanding balance $ 26,500,000
==============
Total available under the line of credit $ 56,736,746
Total outstanding balance (26,500,000)
--------------
Remaining availability $ 30,236,746
==============
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 June 30,
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 half of 2003 and 2002, the Partnership's primary activity was
engaging in equipment leasing activities. During this same period 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
affiliated partnerships and limited liability companies in a $56,736,746
revolving line of credit comprised of an acquisition facility and a warehouse
facility) with a financial institution that includes certain financial
covenants. The line of credit expires on June 28, 2004. As of June 30, 2003,
borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition facility$ 4,000,000
Amounts borrowed by affiliated partnerships and limited liability
companies under the acquisition facility 22,500,000
--------------
Total borrowings under the acquisition facility 26,500,000
Amounts borrowed by the General Partner and its sister corporation
under the warehouse facility -
--------------
Total outstanding balance $ 26,500,000
==============
Total available under the line of credit $ 56,736,746
Total outstanding balance (26,500,000)
--------------
Remaining availability $ 30,236,746
==============
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 June 30, 2003, the Partnership had borrowed $100,521,405 on a
non-recourse basis. As of that date, $468,591 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 six and three months ending June 30 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 periods in both years.
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 and six month periods
ended June 30, 2003 and 2002. Proceeds from sales of lease assets increased from
$107,587 for the three months ended June 30, 2002 to $984,676 during the three
months ended June 30, 2003, and from $470,036 for the six months ending June 30,
2002 to $1,086,800 for the comparable period ending June 30, 2003. Proceeds from
sales of lease assets are not expected to be consistent from one year to
another.
During the three and six months ended June 30, 2003 and 2002, the single largest
financing use of cash was distributions to limited partners. The amount of such
distributions decreased during the three months ended June 30, 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.
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.
During the three months ended June 30, 2003, $2,500,000 was borrowed under the
Partnership's line of credit and a total of $4,500,000 for the six month period
ended June 30, 2002 which was used to meet short-term cash requirements. There
were no comparable borrowings during the three and six months ended June 30,
2003.
Results of operations
Operations resulted in net income of $623,869 during the three months ended June
30, 2003 compared to net income of $696,381 during the three months ended June
30, 2002. Net income for the six months ended June 30, 2003 was $1,831,744
compared with $669,937 for the comparable period in 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.
Sales of lease assets during the three months ended June 30, 2003 resulted in
gains of $628,682, an increase of $703,141 compared to the comparable period in
2002 and for the six months ended June 30, 2003 an increase of $914,438 over the
same period for 2002. The amounts of such gains and losses is not expected to be
consistent from one year to another.
Depreciation expense has decreased from $1,794,093 for the three months ended
June 30, 2002 to $930,577 in 2003 and from $3,577,053 for the six months ended
June 30, 2002 to $1,927,115 for the comparable period in 2003. Depreciation is
related to operating lease assets, which as they mature and assets are sold,
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 June 30, 2003, there was
$4,000,000 outstanding on the floating rate line of credit.
To hedge its interest rate risk related to this variable rate debt, the
Partnership may enter into interest rate swaps. As of June 30, 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.
11
Item 4. Controls and procedures.
Internal Controls
As of June 30, 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 June 30, 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 June 30, 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:
This matter involves litigation over the enforceability of a liquidated damages
clause in a lease, and a combined claim of the Partnership and some affiliates
of the Partnership, of approximately $4,000,000. The General Partner has brought
a suit in San Francisco Superior Court on behalf of the Partnership. The suit
was removed to Federal District Court in San Francisco. The lessee, Quaker Coal
Company, leases mining equipment from the above-referenced Funds. On December
31, 1997, the lessee requested a forbearance and relief on lease payments for a
period of three months. By May 1998, the lessee was past due for five months.
On or about May 12, 1998, the General Partner declared the lessee to be in
default of the lease and demanded the acceleration of all lease receivables, or
alternatively, a modification of the lease obligation. On or about June 1998,
the Lessee made itself current on substantially all outstanding amounts. The
Partnership 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 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 equipment has been since liquidated.
The Court issued a ruling on March 4, 2001, denying the Partnership's claim for
damages. The lessee subsequently filed a claim against the Partnership, for
reimbursement of its legal expenses. The Partnership believed the Court's
decision is erroneous as a matter law, and filed an appeal of the decision in
the U.S. District Court of Appeals.
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 ("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.
The lessee filed a plan of reorganization in the Bankruptcy Court, which plan
was objected to by several large creditors, including the Partnership. These
creditors were also seeking a formal role on the creditors committee or
formation of their own committee.
12
In January 2002, the General Partner attended an appellate settlement conference
seeking to resolve the outstanding disputed claim. A reserve had 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 appellate decision, handed down in
March of 2003, was adverse to the Partnership's position. Currently, the
Partnership is not expected to recover any amounts above the payment of the
lease rent and the proceeds of the liquidation of the equipment already
received.
Elkay Mining Company:
On December 17, 1999, Elkay Mining Company, a subsidiary of The Pittston
Company, filed a suit for declaratory relief in response to a notice of event of
default sent by the Partnership to Elkay Mining Company (the "lessee"). 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 that defect. 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 feels 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 was litigated and the decision from the Court was adverse to the
Partnership as to the issue 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 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.
The Partnership was not successful in prosecuting its appeal of the adverse
ruling, and is continuing to investigate its options, including filing for
arbitration against the Guarantor in San Francisco, as mandated by the lease.
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, June 30, 2003 and December 31, 2002.
Statements of Operations for the six and three month periods
ended June 30, 2003 and 2002.
Statement of Changes in Partners' Capital for the six month
period ended June 30, 2003.
Statements of Cash Flows for the six and three month periods
ended June 30, 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
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:
August 12, 2003
/s/ Paritosh K. Choksi
- ----------------------------------------
Paritosh K. Choksi
Principal Financial Officer of Registrant, Executive
Vice President of General Partner
15
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:
August 12, 2003
/s/ Dean L. Cash
- ----------------------------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
16
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 June 30, 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:
August 12, 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 June 30, 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:
August 12, 2003
/s/ Paritosh K. Choksi
- ----------------------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal Financial Officer of Registrant
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
August 12, 2003
ATEL CASH DISTRIBUTION FUND VI, L.P.
(Registrant)
ATEL Financial Corporation By:
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
18