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 September 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
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 September 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
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(Unaudited)
ASSETS
September 30, December 31,
2003 2002
---- ----
(Unaudited)
Cash and cash equivalents $ 353,379 $ 861,707
Accounts receivable, net of allowance
for doubtful accounts of $290,000
in 2003 and $460,000 in 2002 717,629 4,572,615
Investments in leases 24,164,068 29,191,076
---------------- ----------------
Total assets $25,235,076 $34,625,398
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Non-recourse debt $ 1,149,308 $ 4,853,239
Lines of credit - 5,100,000
Accounts payable:
General Partner 19,510 29,145
Other 368,555 570,779
Accrued interest payable 4,968 395,555
Unearned operating lease income 71,267 69,132
---------------- ----------------
Total liabilities 1,613,608 11,017,850
Partners' capital:
General Partner - -
Limited Partners 23,621,468 23,607,548
---------------- ----------------
Total partners' capital 23,621,468 23,607,548
---------------- ----------------
Total liabilities and partners' capital $25,235,076 $34,625,398
================ ================
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF OPERATIONS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND 2002
(Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
Revenues: 2003 2002 2003 2002
---- ---- ---- ----
Leasing activities:
Operating leases $ 5,129,917 $ 9,167,662 $ 1,183,771 $ 2,358,251
Direct financing leases 615,619 108,728 200,534 19,095
Gain (loss) on sales of assets 179,398 1,627,349 (377,301) 1,985,088
Interest 3,767 5,238 1,677 2,246
Other 34,983 55,477 12,232 23,300
------------------ ----------------- ---------------- ----------------
5,963,684 10,964,454 1,020,913 4,387,980
Expenses:
Depreciation and amortization 2,796,485 5,659,155 869,370 2,082,102
Cost reimbursements to General Partner 510,921 609,801 124,251 212,115
(Recovery of) provision for doubtful accounts (357,099) 20,000 60,000 -
Railcar maintenance 339,499 245,688 148,744 34,605
Equipment and incentive management
fees to General Partner 291,961 606,950 29,631 192,360
Income tax and franchise fees 258,961 94,135 - -
Interest 252,353 1,165,528 25,645 239,831
Professional fees 76,156 98,681 17,464 6,214
Other 370,408 299,987 153,513 126,161
------------------ ----------------- ---------------- ----------------
4,539,645 8,799,925 1,428,618 2,893,388
------------------ ----------------- ---------------- ----------------
Net income (loss): $ 1,424,039 $ 2,164,529 $ (407,705) $ 1,494,592
================== ================= ================ ================
Net income (loss):
General Partner $ 46,866 $ 98,626 $ - $ 32,785
Limited Partners 1,377,173 2,065,903 (407,705) 1,461,807
------------------ ----------------- ---------------- ----------------
$ 1,424,039 $ 2,164,529 $ (407,705) $ 1,494,592
================== ================= ================ ================
Net income (loss) per Limited Partnership Unit $ 0.11 $ 0.17 $ (0.03) $ 0.12
Weighted average number of Units outstanding 12,490,076 12,493,401 12,490,076 12,490,076
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2002
AND FOR THE
NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2003
(Unaudited)
Limited Partners General
Units Amount Partner Total
Balance December 31, 2001 12,500,050 $ 38,008,680 $ - $38,008,680
Distributions to General Partner (131,640) (131,640)
Distributions to Limited Partners (13,117,182) (13,117,182)
Other 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
Distributions to General Partner - - (46,866) (46,866)
Distributions to Limited Partners (1,363,253) - (1,363,253)
Net income - 1,377,173 46,866 1,424,039
------------------ ----------------- ---------------- ----------------
Balance September 30, 2003 12,490,076 $ 23,621,468 $ - $23,621,468
================== ================= ================ ================
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND 2002
(Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
Operating activities:
Net income (loss): $ 1,424,039 $ 2,164,529 $ (407,705) $ 1,494,592
Adjustment to reconcile net income (loss) to
cash provided by operating activities;
Depreciation and amortization 2,796,485 5,659,155 869,370 2,082,102
(Gain) Loss on sales of assets (179,398) (1,627,349) 377,301 (1,985,088)
(Recovery of) provision for doubtful accounts (357,099) 20,000 60,001 -
Changes in operating assets and liabilities:
Accounts receivable (587,915) (1,933,621) 34,254 (378,125)
Accounts payable, General Partner (9,635) (127,096) (64,211) (315,561)
Accounts payable, Other (202,224) 43,066 (28,269) 177,505
Accrued interest payable 132,447 491,562 2,028 116,398
Unearned lease income 2,135 10,591 (141,511) 24,810
------------------ ----------------- ---------------- ----------------
Net cash provided by operations 3,018,835 4,700,837 701,258 1,216,633
------------------ ----------------- ---------------- ----------------
Investing activities:
Proceeds from sales of assets 1,924,184 18,180,818 837,384 17,710,782
Reduction of net investment in direct
financing leases 485,737 234,344 328,006 60,813
------------------ ----------------- ---------------- ----------------
Net cash provided by investing activities 2,409,921 18,415,162 1,165,390 17,771,595
------------------ ----------------- ---------------- ----------------
Financing activities:
Repayments of borrowings under line of credit (5,100,000) (6,000,000) (4,000,000) (5,000,000)
Distributions to partners (1,410,119) (9,937,121) - (3,311,384)
Repayments of non-recourse debt (133,020) (12,966,888) (25,338) (11,773,451)
Borrowings of non-recourse debt 706,055 - 706,055 -
Borrowings under line of credit - 6,000,000 - 1,500,000
Repurchase of limited partnership units - (3,907) - -
------------------ ----------------- ---------------- ----------------
Net cash used in financing activities (5,937,084) (22,907,916) (3,319,283) (18,584,835)
------------------ ----------------- ---------------- ----------------
Net (decrease) increase in cash and
cash equivalents (508,328) 208,083 (1,452,635) 403,393
Cash and cash equivalents at beginning
of period 861,707 701,012 1,806,014 505,702
------------------ ----------------- ---------------- ----------------
Cash and cash equivalents at end of period $ 353,379 $ 909,095 $ 353,379 $ 909,095
================== ================= ================ ================
6
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
(Continued)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND 2002
(Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
Supplemental disclosures of cash
flow information
Cash paid during the period for interest $ 119,906 $ 1,663,041 $ 23,617 $ 1,112,508
================== ================= ================ ================
Supplemental disclosure of
non-cash transaction:
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) - -
------------------ ----------------- ---------------- ----------------
(4,800,000) (4,800,000) - -
================== ================= ================ ================
Accounts receivable $ 4,800,000 $ 4,800,000 $ - $ -
================== ================= ================ ================
See accompanying notes.
7
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
1. Summary of significant accounting policies:
Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (GAAP) 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 Partner, 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. The
preparation of financial statements in accordance with GAAP requires management
to make estimates and assumptions that effect reported amounts in the financial
statements and accompanying notes. Therefore, actual results could differ from
those estimates. Operating results for the three and nine months ended September
30, 2003 are not necessarily indicative of the results for the year ending
December 31, 2003.
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.
Certain prior year balances have been reclassified to conform to the current
year presentation.
8
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
3. Investment in leases (continued):
3. Investment in leases:
The Partnership's investment in leases consists of the following:
Depreciation /
Amortization
Expense or
Balance Amortization of Reclassi- Balance
December 31, Direct Financing fications and September 30,
2002 Leases Dispositions 2003
---- ------ -------------- ----
Net investment in operating leases $ 21,546,403 $(2,768,795) $ 828,382 $19,605,990
Net investment in direct financing leases 4,108,968 (485,737) (4,650) 3,618,581
Assets held for sale or lease 3,406,389 - (2,568,518) 837,871
Residual interests 34,159 - - 34,159
Initial direct costs, net of accumulated amortization
of $504,345 in 2003 and $798,164 in 2002 95,157 (27,690) - 67,467
------------------ ----------------- ---------------- ----------------
$ 29,191,076 $(3,282,222) $(1,744,786) $24,164,068
================== ================= ================ ================
Operating leases:
Property on operating leases consists of the following:
Balance Reclassi- Balance
December 31, Depreciation fications or September 30,
2002 Expense Dispositions 2003
---- -------- ------------ ----
Transportation $ 49,393,031 $ - $(5,756,032) $43,636,999
Construction 11,727,006 - - 11,727,006
Materials handling 8,317,703 - (1,464,480) 6,853,223
Office automation 1,298,837 - (469,923) 828,914
Other 759,867 - (397,251) 362,616
Manufacturing 78,484 - (78,484) -
------------------ ----------------- ---------------- ----------------
71,574,928 - (8,166,170) 63,408,758
Less accumulated depreciation (50,028,525) (2,768,795) 8,994,552 (43,802,768)
------------------ ----------------- ---------------- ----------------
$ 21,546,403 $(2,768,795) $ 828,382 $19,605,990
================== ================= ================ ================
All of the property on leases was acquired in 1995, 1996 and 1997.
9
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
At September 30, 2003, the aggregate amounts of future minimum lease payments
are as follows:
Operating Financing
Leases Leases Total
Three months ending December 31, 2003 $ 850,469 $ 31,873 $ 882,342
Year ending December 31, 2004 2,360,680 3,919,823 6,280,503
2005 1,477,694 98,760 1,576,454
2006 346,415 98,760 445,175
2007 - 98,760 98,760
----------------- ---------------- ----------------
$ 5,035,258 $ 4,247,976 $ 9,283,234
================= ================ ================
Direct financing leases:
As of September 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:
September 30, December 31,
2003 2002
---- ----
Total minimum lease payments receivable $ 4,247,976 $ 5,349,330
Estimated residual values of leased equipment (unguaranteed) 179,130 183,782
---------------- ----------------
Investment in direct financing leases 4,427,106 5,533,112
Less unearned income (808,525) (1,424,144)
---------------- ----------------
Net investment in direct financing leases $ 3,618,581 $ 4,108,968
================ ================
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
5.5% to 8.37%.
During the nine month period ended September 30, 2002, proceeds from sales of
assets were $18,180,818, as a result $12,966,888 of non-recourse debt was paid
off using these proceeds. In the nine month period ended September 30, 2003,
there was a net borrowing of $573,035 and only $1,924,185 of proceeds from sale
of assets.
10
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
4. Non-recourse debt (continued):
Future minimum principal payments of non-recourse debt are as follows:
Principal Interest Total
Three months ending December 31, 2003 $ 337,171 $ 15,085 $ 352,256
Year ending December 31, 2004 550,929 32,964 583,893
2005 79,916 18,844 98,760
2006 86,868 11,892 98,760
2007 94,424 4,337 98,761
----------------- ---------------- ----------------
$ 1,149,308 $ 83,122 $ 1,232,430
================= ================ ================
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
estimated 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.
During the nine and three month periods ended September 30, 2003 and 2002, the
General Partner and/or Affiliates earned fees, commissions and reimbursements,
pursuant to the Limited Partnership Agreement, as follows:
Nine Months Three Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
Cost reimbursements to General Partner $ 510,921 $ 609,801 $ 124,251 $ 212,115
Equipment and incentive management
fees to General Partner 291,961 606,950 29,631 192,360
------------------ ----------------- ---------------- ----------------
$ 802,882 $ 1,216,751 $ 153,882 $ 404,475
================== ================= ================ ================
11
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
6. Partners' Capital:
As of September 30, 2003, 12,500,050 Units ($125,000,500) were issued and
12,490,076 outstanding (including the 50 Units issued to the Initial Limited
Members).
The Company's Net Income, Net Losses, and Distributions, as defined, are to be
allocated 99% to the Limited Partners and 1% to the General Partner.
Distributions to the Limited Partners were as follows in 2003 and 2002:
Nine Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
2003 2002 2003 2002
---- ---- ---- ----
Distributions $ 46,866 $ 9,937,121 $ - $ 3,311,384
Weighted average number of Units outstanding 12,490,076 12,493,401 12,490,076 12,490,076
Weighted average distributions per Unit $ 0.00 $ 0.80 $ - $ 0.27
7. Line of credit:
The Partnership participates with the General Partner and certain of its
affiliates in a $56,282,201 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 September 30, 2003, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ -
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 24,300,000
--------------
Total borrowings under the acquisition facility 24,300,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
--------------
Total outstanding balance $24,300,000
==============
Total available under the line of credit $56,282,201
Total outstanding balance (24,300,000)
--------------
Remaining availability $31,982,201
==============
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
September 30, 2003.
12
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 nine months of 2003 and 2002, the Partnership's primary activity was
engaging in equipment leasing activities. In 2003, the Partnership's primary
source of liquidity was rents from operating leases, as opposed to proceeds from
assets sales for the same period in 2002.
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 $56,282,201 revolving line of credit (comprised of an
acquisition facility and a warehouse facility) with a financial institution that
includes certain financial covenants which the Partnership is in compliance with
as of September 30, 3003. The line of credit expires on June 28, 2004. As of
September 30, 2003, borrowings under the facility were as follows:
Amount borrowed by the Partnership under the acquisition
facility $ -
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 24,300,000
--------------
Total borrowings under the acquisition facility 24,300,000
Amounts borrowed by the General Partner and its sister
corporation under the warehouse facility -
--------------
Total outstanding balance $24,300,000
==============
Total available under the line of credit $56,282,201
Total outstanding balance (24,300,000)
--------------
Remaining availability $31,982,201
==============
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
September 30, 2003.
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 September 30, 2003, the Partnership had borrowed $101,227,460 on a
non-recourse basis. As of that date, $1,149,308 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.
13
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 nine and three months ending September 30, 2003 and 2003, 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 nine and three month periods
ended September 30, 2003 and 2002. Proceeds from sales of lease assets decreased
from $18,180,818 for the nine months ending September 30, 2002 to $1,924,184 for
the comparable period ending September 30, 2003 and from $17,710,782 for the
three months ended September 30, 2002 to $837,385 during the three months ended
September 30, 2003. Although proceeds from sales of lease assets are not
expected to be consistent from one year to another, during the nine month period
ended September 30, 2002, there was significant increase in the sale of assets,
these proceeds were used to reduce non-recourse debt and increase distributions
to partners.
In 2002, the Partnership sold a large lease to a third party. The acquisition of
the lease was financed primarily with non-recourse debt. The assets under the
lease were sold subject to the existing debt. Upon the sale of the assets, the
Partnership was relieved of its obligation under the non-recourse debt
agreement. There were no similar sales in 2003. As a result of this, the amounts
of asset sales proceeds and the amounts of debt repayments were much reduced in
2003, compared to 2002.
During the nine and three months ended September 30, 2003 and 2003, the single
largest financing use of cash was repayments of borrowing under line of credit,
$5,100,000 for the nine months ended September 30, 2003 and $4,000,000 for the
three months ended September 30, 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.
Results of operations
Operations resulted in net loss of $407,705 during the three months ended
September 30, 2003 compared to net income of $1,494,592 during the three months
ended September 30, 2002. Net income for the nine months ended September 30,
2003 was $1,424,039 compared with $2,164,529 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 September 30, 2003 resulted
in a gain of $179,398, a decrease of $1,447,951 compared to the comparable
period in 2002. For the nine months ended September 30, 2003 there was a loss of
$377,301 on asset sales compared to a gain of $1,985,088 for the same period in
2002, a change of $2,362,389. Although sales of lease assets are not expected to
be consistent from one year to another, during the nine month period ended
September 30, 2002, there was significant increase in the sale of assets, these
proceeds were used to reduce non-recourse debt (as noted above) and to increase
distributions to members.
Depreciation and amortization expense has decreased from $2,082,102 for the
three months ended September 30, 2002 to $869,370 in 2003 and from $5,659,155
for the nine months ended September 30, 2002 to $2,796,485 for the comparable
period in 2003. Depreciation is related to operating lease assets. 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 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 September 30, 2003, there was no
outstanding balance on the floating rate line of credit.
14
To hedge its interest rate risk related to this variable rate debt, the
Partnership may enter into interest rate swaps. As of September 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.
Item 4. Controls and procedures.
Internal Controls
As of September 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 September 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 September 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.
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 was litigated and the decision from the Court was adverse to the
Partnership as to the 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 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 of the lease agreement, as mandated by the
lease.
Applied Magnetics Corporation:
In January 2000, Applied Magnetics Corporation ("Debtor"), a lessee of the
Partnership, filed for protection from creditors under Chapter 11 of the U.S.
Bankruptcy Code. 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 recoveries of
$1,773,798 or 21.7% of original equipment cost for the Partnership. As of
November 1, 2000, liquidation of the assets was completed.
15
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 April 28, 2003, the Partnership received 221,822 shares of IMT stock. At this
time, the Partnership anticipates any recoveries, 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.
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, September 30, 2003 and December 31, 2002.
Statements of Operations for the nine and three month periods
ended September 30, 2003 and 2002.
Statements of changes in partners' capital for the year ended
December 31, 2002 and for the nine month period ended September
30, 2003.
Statements of Cash Flows for the nine and three month periods
ended September 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.
3. Other Exhibits
99.1 Certification of Paritosh K. Choksi
99.2 Certification of Dean L. Cash
99.3 Certification Pursuant to 18 U.S.C. section 1350 of Dean L.
Cash
99.4 Certification Pursuant to 18 U.S.C. section 1350 of Paritosh
K. Choksi
(b) Report on Form 8-K
None
16
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:
November 12, 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
17
Exhibit 99.1
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:
November 12, 2003
/s/ PARITOSH K. CHOKSI
- ----------------------------
Paritosh K. Choksi
Principal Financial Officer of Registrant, Executive
Vice President of General Partner
18
Exhibit 99.2
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:
November 12, 2003
/s/ DEAN L. CASH
- ----------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
19
Exhibit 99.3
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 September 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:
November 12, 2003
/s/ DEAN L. CASH
- ----------------------
Dean L. Cash
President and Chief Executive
Officer of General Partner
20
Exhibit 99.4
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 September 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:
November 12, 2003
/s/ PARITOSH K. CHOKSI
- ----------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal Financial Officer of Registrant
21