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, 2002
|_| 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 333-62477
ATEL Capital Equipment Fund VIII, LLC
(Exact name of registrant as specified in its charter)
California 94-3307404
- ---------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
235 Pine Street, 6th Floor, San Francisco, California 94104
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 989-8800
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 |_|
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
2
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
BALANCE SHEETS
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
(Unaudited)
ASSETS
2002 2001
---- ----
Cash and cash equivalents $ 1,481,169 $ 2,269,137
Accounts receivable, net of allowance for
doubtful accounts of $516,365 in 2002
and $41,365 in 2001 2,446,146 3,256,527
Other assets 62,500 85,000
Investments in leases 157,938,251 178,999,739
------------------ ------------------
Total assets $161,928,066 $184,610,403
================== ==================
LIABILITIES AND MEMBERS' CAPITAL
Long-term debt $ 68,961,000 $ 85,369,000
Non-recourse debt 5,862,716 6,014,964
Line of credit 7,100,000 2,500,000
Accounts payable 512,650 838,267
Accrued interest payable 140,628 76,980
Interest rate swap contracts 3,593,630 4,700,622
Unearned operating lease income 2,269,005 1,748,618
------------------ ------------------
Total liabilities 88,439,629 101,248,451
------------------ ------------------
Members' capital 73,488,437 83,361,952
------------------ ------------------
Total liabilities and members' capital $161,928,066 $184,610,403
================== ==================
See accompanying notes.
3
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
INCOME STATEMENTS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2002 AND 2001
(Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Leasing activities:
Operating leases $23,862,863 $32,328,224 $ 7,493,350 $ 9,304,558
Direct financing leases 625,944 693,523 212,708 185,381
Gain (loss) on sales of assets 230,089 1,788,113 (26,782) -
Interest 12,495 124,378 3,460 14,554
Other 185,097 26,921 1,947 1,012
------------------ ------------------ ------------------ ------------------
24,916,488 34,961,159 7,684,683 9,505,505
Expenses:
Depreciation and amortization 17,635,864 25,203,081 5,711,172 10,421,957
Interest expense 4,719,523 7,245,633 1,461,310 1,670,772
Asset management fees to Managing Member 1,152,763 1,445,643 382,140 435,665
Cost reimbursements to Managing Member 793,772 741,886 35,893 215,621
Provision for doubtful accounts 475,000 - - -
Provision for losses on lease assets 400,000 - 400,000 -
Professional fees 116,922 193,582 6,367 8,152
Other 591,388 224,010 211,538 60,288
------------------ ------------------ ------------------ ------------------
25,885,232 35,053,835 8,208,420 12,812,455
------------------ ------------------ ------------------ ------------------
Net loss $ (968,744) $ (92,676) $ (523,737) $(3,306,950)
================== ================== ================== ==================
Net income (loss):
Managing member $ 750,882 $ 754,604 $ 250,290 $ 251,156
Other members (1,719,626) (847,280) (774,027) (3,558,106)
------------------ ------------------ ------------------ ------------------
$ (968,744) $ (92,676) $ (523,737) $(3,306,950)
================== ================== ================== ==================
Net loss per Limited Liability Company
Unit $ (0.13) $ (0.06) $ (0.06) $ (0.26)
Weighted average number of Units outstanding 13,570,188 13,570,188 13,570,188 13,570,188
4
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
STATEMENT OF CHANGES IN MEMBERS' CAPITAL
NINE MONTH PERIOD ENDED
SEPTEMBER 30, 2002
(Unaudited)
Accumulated
Other
Other Members Managing Comprehensive
-------------
Units Amount Member Income Total
----- ------ ------ ------ -----
Balance December 31, 2001 13,570,188 $88,062,574 $ - $(4,700,622) $ 83,361,952
Unrealized decrease in value of
interest rate swap contracts - - 1,106,992 1,106,992
Distributions to members (9,260,881) (750,882) - (10,011,763)
Net loss (1,719,626) 750,882 - (968,744)
----------------- ------------------ ------------------ ------------------ ------------------
Balance September 30, 2002 13,570,188 $77,082,067 $ - $(3,593,630) $ 73,488,437
================= ================== ================== ================== ==================
See accompanying notes.
5
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
STATEMENTS OF CASH FLOWS
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2002 AND 2001
(Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
2002 2001 2002 2001
---- ---- ---- ----
Operating activities:
Net loss $ (968,744) $ (92,676) $ (523,737) $(3,306,950)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation 17,635,864 25,203,081 5,711,172 10,421,957
(Gain) loss on sales of assets (230,089) (1,788,113) 26,782 -
Provision for doubtful accounts 475,000 - - -
Provision for losses on lease assets 400,000 - 400,000 -
Changes in operating assets and liabilities:
Accounts receivable 335,381 (92,191) (552,136) (1,063,310)
Other assets 22,500 22,500 7,500 7,500
Accounts payable, Managing Member - (695,548) (263,652) (509,889)
Accounts payable, other (325,617) 277,384 19,747 384,584
Accrued interest payable 63,648 (108,380) 40,460 (49,338)
Unearned lease income 520,387 555,270 594,889 960,303
------------------ ------------------ ------------------ ------------------
Net cash provided by operations 17,928,330 23,281,327 5,461,025 6,844,857
------------------ ------------------ ------------------ ------------------
Investing activities:
Reduction of net investment in direct financing
leases 2,294,372 1,930,535 256,905 533,700
Proceeds from sales of assets 1,292,530 8,601,318 147,204 -
Purchases of equipment on direct financing leases (293,750) (810,271) (293,750) -
Payment of initial direct costs (37,439) (145,831) (37,439) -
Purchases of equipment on operating leases - (27,938,716) - -
------------------ ------------------ ------------------ ------------------
Net cash provided by (used in) investing
activities 3,255,713 (18,362,965) 72,920 533,700
------------------ ------------------ ------------------ ------------------
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
STATEMENTS OF CASH FLOWS
(Continued)
NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2002 AND 2001
(Unaudited)
Nine Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
2002 2001 2002 2001
---- ---- ---- ----
Financing activities:
Borrowings under line of credit 8,900,000 20,756,335 3,100,000 4,000,000
Repayments of line of credit (4,300,000) (19,756,335) - (12,223,497)
Proceeds of long-term debt 3,900,000 19,000,000 - 9,000,000
Repayments of long-term debt (20,308,000) (14,325,000) (5,602,000) (5,177,000)
Distributions to members (9,260,881) (9,316,505) (3,086,911) (3,097,588)
Repayments of non-recourse debt (152,248) (1,165,781) - -
Distributions to managing member (750,882) (754,604) (250,290) (251,156)
------------------ ------------------ ------------------ ------------------
Net cash used in financing activities (21,972,011) (5,561,890) (5,839,201) (7,749,241)
------------------ ------------------ ------------------ ------------------
Net decrease in cash and cash equivalents (787,968) (643,528) (305,256) (370,684)
Cash and cash equivalents at beginning of
period 2,269,137 2,484,785 1,786,425 2,211,941
------------------ ------------------ ------------------ ------------------
Cash and cash equivalents at end of period $ 1,481,169 $ 1,841,257 $ 1,481,169 $ 1,841,257
================== ================== ================== ==================
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $ 4,719,523 $ 7,245,633 $ 1,484,498 $ 1,611,730
================== ================== ================== ==================
See accompanying notes.
6
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
1. Summary of significant accounting policies:
Interim financial statements:
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the managing member, 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 most recent report on Form
10K.
2. Organization and Company matters:
ATEL Capital Equipment Fund VIII, LLC. (the Company), was formed under the laws
of the State of California on July 31 , 1998, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. Contributions in
the amount of $600 were received as of October 7, 1998, $100 of which
represented the Managing Member's (ATEL Financial Corporation's) continuing
interest, and $500 of which represented the Initial Members' capital investment.
Upon the sale of the minimum amount of Units of Limited Liability Company
interest (Units) of $1,200,000 and the receipt of the proceeds thereof on
January 13, 1999, the Company commenced operations.
The Company 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.
3. Investment in leases:
The Company's investment in leases consists of the following:
Depreciation
Balance Expense or Reclassi- Balance
December 31, Amortization fications or September 30,
2001 Additions of Leases Dispositions 2002
---- --------- --------- ------------ ----
Net investment in operating leases $157,746,886 $ - $ (17,351,456) $(15,559,069) $124,836,361
Assets held for sale or lease 6,055,819 - - 14,713,970 20,769,789
Net investment in direct financing
leases 14,181,674 293,750 (2,294,372) (217,342) 11,963,710
Initial direct costs, net of
accumulated amortization 1,015,360 37,439 (284,408) - 768,391
Reserve for losses - (400,000) - - (400,000)
----------------- ------------------ ------------------ ------------------ ------------------
$178,999,739 $ (68,811) $ (19,930,236) $ (1,062,441) $157,938,251
================= ================== ================== ================== ==================
7
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
3. Investment in leases (continued):
Operating leases:
Property on operating leases consists of the following:
Balance Balance
December 31, Acquisitions, Dispositions & Reclassifications September 30,
----------------------------------------------
2001 1st Quarter 2nd Quarter 3rd Quarter 2002
---- ----------- ----------- ----------- ----
Manufacturing $ 49,700,638 $ - $ - $ (3) $ 49,700,635
Aircraft 38,535,439 - (5,725,300) - 32,810,139
Transportation, other 23,438,156 - - - 23,438,156
Containers 21,228,750 - - (21,250) 21,207,500
Transportation, rail 37,626,277 - - (16,523,854) 21,102,423
Natural gas compressors 14,051,601 - - - 14,051,601
Materials handling 7,710,415 - - (13,349) 7,697,066
Marine vessel 3,952,500 - - - 3,952,500
Other 12,731,780 (178,918) - (489,372) 12,063,490
----------------- ------------------ ------------------ ------------------ ------------------
208,975,556 (178,918) (5,725,300) (17,047,828) 186,023,510
Less accumulated depreciation (51,228,670) (5,852,683) (4,384,556) 278,760 (61,187,149)
----------------- ------------------ ------------------ ------------------ ------------------
$ 157,746,886 $ (6,031,601) $ (10,109,856) $ (16,769,068) $124,836,361
================= ================== ================== ================== ==================
Direct financing leases:
As of September 30, 2002, investment in direct financing leases consists office
automation equipment. The following lists the components of the Company's
investment in direct financing leases as of September 30, 2002:
Total minimum lease payments receivable $ 9,504,882
Estimated residual values of leased equipment (unguaranteed) 4,545,187
------------------
Investment in direct financing leases 14,050,069
Less unearned income (2,086,359)
------------------
Net investment in direct financing leases $ 11,963,710
==================
All of the property on leases was acquired in 1999, 2000, 2001 and 2002.
8
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
3. Investment in leases (continued):
At September 30, 2002, the aggregate amounts of future minimum lease payments
are as follows:
Direct
Operating Financing
Leases Leases Total
Three months ending December 31, 2002 $ 7,054,625 $ 885,134 $ 7,939,759
Year ending December 31, 2003 25,173,965 2,509,590 27,683,555
2004 15,715,021 2,063,877 17,778,898
2005 11,386,580 1,976,473 13,363,053
2006 7,219,524 1,727,378 8,946,902
Thereafter 9,202,923 342,430 9,545,353
------------------ ------------------ ------------------
$ 75,752,638 $ 9,504,882 $ 85,257,520
================== ================== ==================
4. Non-recourse debt:
At September 30, 2002, non-recourse debt consists of notes payable to financial
institutions. The notes are due in varying quarterly and semi-annual payments.
Interest on the notes is at rates from 7.98% to 14.0%. The notes are secured by
assignments of lease payments and pledges of assets. The notes mature from 2002
through 2006.
Future minimum payments of non-recourse debt are as follows:
Principal Interest Total
Three months ending December 31, 2002 $ 159,861 $ 170,840 $ 330,701
Year ending December 31, 2003 397,915 483,617 881,532
2004 4,425,556 170,437 4,595,993
2005 418,256 71,737 489,993
2006 461,128 34,866 495,994
------------------ ------------------ ------------------
$ 5,862,716 $ 931,497 $ 6,794,213
================== ================== ==================
9
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
5. Other long-term debt:
In 1999, the Company entered into a $70 million receivables funding program (the
Program) (which has been increased to $125 million) with a receivables financing
company that issues commercial paper rated A1 by Standard and Poors and P1 by
Moody's Investor Services. Under the Program, the receivables financing company
receives a general lien against all of the otherwise unencumbered assets of the
Company. The Program provides for borrowing at a variable interest rate (1.8105%
at September 30, 2002).
The Program requires the Managing Member to enter into various interest rate
swaps with a financial institution (also rated A1/P1) to manage interest rate
exposure associated with variable rate obligations under the Program by
effectively converting the variable rate debt to fixed rates. As of September
30, 2002, the Company receives or pays interest on a notional principal of
$68,961,000, based on the difference between nominal rates ranging from 3.60% to
7.72% and the variable rate under the Program. No actual borrowing or lending is
involved. The last of the swaps terminates in 2009. The differential to be paid
or received is accrued as interest rates change and is recognized currently as
an adjustment to interest expense related to the debt.
Borrowings under the Program are as follows:
Original Balance Rate on
Amount September 30, Interest Swap
Date Borrowed Borrowed 2002 Agreement
------------- -------- ---- ---------
11/11/99 $20,000,000 $ 6,861,000 6.84%
12/21/99 20,000,000 15,268,000 7.41%
12/24/99 25,000,000 10,198,000 7.44%
4/17/00 6,500,000 4,064,000 7.45%
4/28/00 1,900,000 739,000 7.72%
8/3/00 19,000,000 12,869,000 7.50%
10/31/00 7,500,000 4,825,000 7.13%
1/29/01 8,000,000 5,391,000 5.91%
6/1/01 2,000,000 982,000 5.04%
9/1/01 9,000,000 4,401,000 4.35%
1/31/02 3,900,000 3,363,000 3.60%
------------------ ------------------
$122,800,000 $68,961,000
================== ==================
10
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
5. Other long-term debt (continued):
Other long-term debt borrowings mature from 2002 through 2009. Future minimum
principal payments of long-term debt are as follows:
Rates on
Interest Swap
Principal Interest Total Agreements*
--------- -------- ----- -----------
Three months ending December 31, 2002 $ 6,079,000 $ 1,142,574 $ 7,221,574 6.854%-6.860%
Year ending December 31, 2003 21,043,000 3,636,621 24,679,621 6.865%-6.901%
2004 15,092,000 2,394,241 17,486,241 6.896%-6.962%
2005 11,351,000 1,507,894 12,858,894 6.985%-7.137%
2006 6,950,000 884,435 7,834,435 7.172%-7.203%
2007 4,701,000 439,685 5,140,685 6.896%-7.028%
2008 3,025,000 169,486 3,194,486 6.214%-6.887%
2009 720,000 9,149 729,149 5.042%-5.068%
------------------ ------------------ ------------------
$68,961,000 $10,184,085 $ 79,145,085
================== ================== ==================
* Represents the range of monthly weighted average fixed interest rates paid for
amounts maturing in the particular year. The receive-variable rate portion of
the swap represents commercial paper rates (1.8105% at September 30, 2002).
6. Related party transactions:
The terms of the Limited Company Operating Agreement provide that the Managing
Member and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Company.
The Limited Liability Company Operating Agreement allows for the reimbursement
of costs incurred by the Managing Member in providing administrative services to
the Company. Administrative services provided include Company accounting,
investor relations, legal counsel and lease and equipment documentation. The
Managing Member 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 Managing Member are
allocated to the Company based upon actual time incurred by employees working on
Company business and an allocation of rent and other costs based on utilization
studies.
Substantially all employees of the Managing Member record time incurred in
performing administrative services on behalf of all of the Companies serviced by
the Managing Member. The Managing Member believes that the costs reimbursed are
the lower of actual costs incurred on behalf of the Company or the amount the
Company would be required to pay independent parties for comparable
administrative services in the same geographic location and are reimbursable in
accordance with the Limited Liability Company Operating Agreement.
11
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
6. Related party transactions (continued):
The Managing Member and/or Affiliates earned fees, commissions and
reimbursements, pursuant to the Limited Liability Company Agreement as follows:
2002 2001
---- ----
Asset management fees to Managing Member $ 1,152,763 $ 1,445,643
Cost reimbursements to Managing Member 793,772 741,886
Selling commissions (equal to 9.5% of the selling price of the Limited Liability
Company units, deducted from Other Members' capital) - 5,716,800
Reimbursement of other syndication costs to Managing Member - 2,788,098
------------------ ------------------
$ 1,946,535 $ 10,692,427
================== ==================
7. Member's capital:
As of September 30, 2002, 13,570,188 Units ($135,701,880) were issued and
outstanding. The Company's registration statement with the Securities and
Exchange Commission became effective December 7, 1998. The Company is authorized
to issue up to 15,000,050 Units, including the 50 Units issued to the initial
members.
The Company's Net Income, Net Losses, and Distributions are to be allocated
92.5% to the Members and 7.5% to the Managing Member.
12
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
8. Line of credit:
The Company participates with the Managing Member and certain of its affiliates
in a $43,654,928 revolving line of credit with a financial institution that
includes certain financial covenants. The line of credit expires on June 28,
2004. As of September 30, 2002, borrowings under the facility were as follows:
Amount borrowed by the fund under the acquisition facility $ 7,100,000
Amounts borrowed by affiliated partnerships and limited liability
companies under the acquisition facility 14,800,000
--------------
Total borrowings under the acquisition facility 21,900,000
Amounts borrowed by the Managing Member and its sister
corporation under the warehouse facility -
--------------
Total outstanding balance $ 21,900,000
==============
Total available under the line of credit $ 43,654,928
Total outstanding balance (21,900,000)
--------------
Remaining availability $ 21,754,928
==============
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 fund and the Managing Member.
The credit agreement includes certain financial covenants applicable to each
borrower. The fund was in compliance with its covenants as of September 30,
2002.
13
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
During the first nine months of 2002and 2001, the our primary activity was
engaging in equipment leasing activities.
Our liquidity 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 members and to the extent expenses exceed cash
flows from leases.
As another source of liquidity, we have contractual obligations with a
diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire we will re-lease or sell the equipment. Our
future liquidity beyond the contractual minimum rentals will depend on our
success in re-leasing or selling the equipment as it comes off lease.
The Company participates with the Managing Member and certain of its affiliates
in a $43,654,928 revolving line of credit with a financial institution that
includes certain financial covenants. The line of credit expires on June 28,
2004. As of September 30, 2002, borrowings under the facility were as follows:
Amount borrowed by the fund under the acquisition facility $ 7,100,000
Amounts borrowed by affiliated partnerships and limited liability
companies under the acquisition facility 14,800,000
--------------
Total borrowings under the acquisition facility 21,900,000
Amounts borrowed by the Managing Member and its sister
corporation under the warehouse facility -
--------------
Total outstanding balance $ 21,900,000
==============
Total available under the line of credit $ 43,654,928
Total outstanding balance (21,900,000)
--------------
Remaining availability $ 21,754,928
==============
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 fund and the Managing Member.
We anticipate reinvesting a portion of lease payments from assets owned in new
leasing transactions. We will reinvest only after the payment of all
obligations, including debt service (both principal and interest), the payment
of management and acquisition fees to the Managing Member and providing for cash
distributions to the Other Members.
We currently have available adequate reserves to meet contingencies, but in the
event those reserves were found to be inadequate, we would likely be in a
position to borrow against our current portfolio to meet such requirements. We
envision no such requirements for operating purposes.
We have not made any commitments of capital, nor do we expect to make any
commitments, except for the acquisition of additional equipment. We had made no
such commitments as of September 30, 2002.
If inflation in the general economy becomes significant, it may affect us in
that the residual (resale) values and rates on re-leases of our leased assets
may increase as the costs of similar assets increase. However, our revenues from
existing leases would not increase, as such rates are generally fixed for the
terms of the leases without adjustment for inflation.
If interest rates increase significantly, the lease rates that we 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. Our leases already in
place, for the most part, would not be affected by changes in interest rates.
Cash Flows
During the first nine months of 2002 and 2001, our primary source of liquidity
was operating lease rents.
Our primary source of cash flows from operating activities was operating lease
revenues in both 2002 and on 2001.
In 2001, our most significant source of cash flows from investing was the
proceeds that we received from the sales of lease assets. In the third quarter
of 2001, our only significant source of cash from investing activities was rents
from direct financing leases. In 2002, rents from direct financing leases were
the most significant source of cash from investing activities. We received a
smaller amount as proceeds from the sales of lease assets than in 2001. In both
years, we used of cash in investing activities to purchase lease assets and to
pay initial direct costs related to the asset purchases.
14
In 2001, our only sources of cash from financing activities was proceeds of
long-term debt and borrowings on the line of credit. In 2002, our only financing
sources of cash were borrowings under the line of credit and proceeds of
long-term debt. Our repayments of debt have increased due to borrowings in 2001
and 2002.
Results of operations
In 2002, our operations resulted in a net loss of $968,744 for the nine month
period and $523,737 for the three month period. In 2001, our operations resulted
in a net loss of $92,676 for the nine month period and $3,306,950 for the three
month period. Our primary source of revenues is from operating leases. In future
periods, we also expect that operating leases will be our most significant
source of revenues. Depreciation is related to operating lease assets and thus,
to operating lease revenues. We expect it to decrease in future periods as
leases mature and as we sell the related lease assets. Our lease rents and
depreciation have decreased compared to 2001 as a result of sales over the last
year.
Asset management fees are based on our gross lease rents plus the proceeds we
receive from the sales of lease assets. They are limited to certain percentages
of lease rents, distributions to members and certain other items. As assets are
sold, lease rents are collected and distributions are made to the members, we
expect these fees to decrease. These factors gave rise to the decrease in fees
compared to 2001.
At September 30, 2001, we had total outstanding interest bearing debt of
$98,502,963. As a result of scheduled debt payments, we have reduced that
balance to $81,923,716 at September 30, 2002. This reduction in debt has caused
our interest expense to decrease compared to 2001.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No material legal proceedings are currently pending against the Partnership or
against any of its assets.
Emery Worldwide Airways, Inc.:
On January 25, 2002, the Company filed a complaint against its lessee, Emery
Worldwide Airways, Inc., for failure by the lessee to properly maintain the
condition and airworthiness of the aircraft on lease to the lessee, and for
certain other breaches and defaults by the lessee as alleged in the complaint.
The Company has claimed stipulated loss value damages in the amount of
$5,648,173 as a result of the breaches and defaults under the lease by the
lessee. A motion for summary judgment on the Company's claims has been filed. A
ruling on the motion is expected in the 4th quarter of 2002. A trial date for
this matter has been set for May 2003. As this matter is in its early stages,
the outcome of the Company's claim is uncertain, although the Managing Member
believes that currently there is a substantial likelihood of some recoveries in
this matter.
Burlington Northern Santa Fe Corporation:
This complaint was filed for the recovery of $300,000 in damages for the "Agreed
Value" of a destroyed locomotive, where THE CIT Group/Equipment Financing, Inc.,
acting as agent for the Company, agreed to "swap" the locomotive unit with
Burlington Northern Santa Fe Corporation, without first obtaining the Company's
consent to do so, as required by the agreement. A trial date has been set for
May 2003. The Company feels that it has a reasonable basis for success in this
matter.
Solectron:
This is a matter where the Company has declared Solectron Company, the lessee in
default for failure to pay rent in a timely manner. A claim was filed on August
29, 2002, by the Managing Member on behalf of the Company in the amount of
$13,332,328.10. The Company feels that it has a reasonable basis for success of
some, if not all, of its claims in this matter. In response to the Company's
claim, Solectron has filed a denial and counterclaim of unfair business conduct.
The Company denies the counterclaim as spurious.
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.
15
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, 2002 and December 31, 2001.
Income statements for the nine and three month periods ended
September 30, 2002 and 2001.
Statement of changes in partners' capital for the nine month
period ended September 30, 2002.
Statements of cash flows for the nine and three month periods
ended September 30, 2002 and 2001.
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
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 7, 2002
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
(Registrant)
By: ATEL Financial Corporation
Managing Member of Registrant
By: /s/ DEAN L. CASH
-------------------------------------
Dean Cash
President and Chief Executive Officer
of Managing Member
By: /s/ PARITOSH K. CHOKSI
-------------------------------------
Paritosh K. Choksi
Executive Vice President of
Managing Member and Principal
financial officer of registrant
By: /s/ DONALD E. CARPENTER
-------------------------------------
Donald E. Carpenter
Principal accounting
officer of registrant
17
CERTIFICATIONS
I, Paritosh K. Choksi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Capital Equipment
Fund VIII, LLC;
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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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 quarterly 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
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly 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
quarterly 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 7, 2002
/s/ PARITOSH K. CHOKSI
- -----------------------------
Paritosh K. Choksi
Principal financial officer of registrant, Executive Vice President of
Managing Member
18
CERTIFICATIONS
I, Dean L. Cash, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Capital Equipment
Fund VIII, LLC;
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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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 quarterly 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
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly 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
quarterly 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 7, 2002
/s/ DEAN L. CASH
- -----------------------------
Dean L. Cash
President and Chief Executive Officer of
Managing Member
19
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 10Q of ATEL Capital Equipment
Fund VIII, LLC, (the "Company") for the period ended September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, I, Dean L. Cash, Chief Executive Officer of ATEL
Financial Services, LLC, managing member of the Company, 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 Company.
Date: November 7, 2002
/s/ DEAN L. CASH
- -----------------------------
Dean L. Cash
President and Chief Executive
Officer of Managing Member
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 10Q of ATEL Capital Equipment
Fund VIII, LLC, (the "Company") for the period ended September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
and pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, I, Paritosh K. Choksi, Chief Financial Officer of
ATEL Financial Services, LLC, managing member of the Company, 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 Company.
Date: November 7, 2002
/s/ PARITOSH K. CHOKSI
- -----------------------------
Paritosh K. Choksi
Executive Vice President of Managing
Member, Principal financial officer of registrant
20