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Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act
of 1934. For the quarterly period ended
March 31, 2005
|_| 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 000-33103
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.)
600 California Street, 6th Floor, San Francisco, California 94108
(Address of principal executive offices)
Registrant's telephone number, including area code (415) 989-8800
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Limited Liability
Company 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 Liability Company Units outstanding as of March 31, 2005
was 13,570,188.
DOCUMENTS INCORPORATED BY REFERENCE
None
1
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Balance Sheets, March 31, 2005 and December 31, 2004.
Statements of Operations for the three month periods ended March 31, 2005
and 2004.
Statements of Changes in Members' Capital for the year ended December 31,
2004 and for the three month period ended March 31, 2005.
Statements of Cash Flows for the three month periods ended March 31, 2005
and 2004.
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
BALANCE SHEETS
MARCH 31, 2005 AND DECEMBER 31, 2004
ASSETS
March 31,
2005 December 31,
----
(Unaudited) 2004
Cash and cash equivalents $ 548,521 $ 2,569,911
Accounts receivable, net of allowance for doubtful accounts of $85,615 in 2005 and
$52,115 in 2004 1,641,554 1,611,290
Other assets 3,980 378,264
Investments in equipment and leases 57,310,234 59,689,715
-------------------- -------------------
Total assets $ 59,504,289 $ 64,249,180
==================== ===================
LIABILITIES AND MEMBERS' CAPITAL
Long-term debt $ 9,508,000 $ 13,192,000
Non-recourse debt 5,736,096 6,039,946
Line of credit 2,500,000 -
Accounts payable and accruals:
Managing Member 1,141,038 613,310
Other 164,319 239,038
Accrued interest payable 65,569 105,336
Interest rate swap contracts 997,680 1,435,454
Unearned operating lease income 632,181 436,055
-------------------- -------------------
Total liabilities 20,744,883 22,061,139
Members' capital:
Accumulated other comprehensive income (673,345) (725,935)
Members' capital 39,432,751 42,913,976
-------------------- -------------------
Total Members' capital 38,759,406 42,188,041
-------------------- -------------------
Total liabilities and Members' capital $ 59,504,289 $ 64,249,180
==================== ===================
See accompanying notes.
3
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED
MARCH 31, 2005 AND 2004
(Unaudited)
Revenues: 2005 2004
---- ----
Leasing activities:
Operating leases $ 3,056,749 $ 5,944,402
Direct financing leases 56,334 340,794
Gain on sales of assets 103,414 449,642
Interest 3,952 926
Other 7,046 14,669
-------------------- -------------------
3,227,495 6,750,433
Expenses:
Depreciation of operating lease assets 2,253,670 4,816,678
Interest expense 393,539 878,434
Asset management fees to Managing Member 126,337 271,849
Equipment maintenance 53,807 130,447
Cost reimbursements to Managing Member 691,970 699,215
Amortization of initial direct costs 34,137 72,015
Professional fees 38,080 81,443
Outside services 22,883 51,956
Insurance 28,838 42,320
Provision for doubtful accounts 33,500 11,000
Fair value adjustments on interest rate swap contracts (385,184) -
Franchise fees and taxes 102 25,000
Other 80,290 89,019
-------------------- -------------------
3,371,969 7,169,376
-------------------- -------------------
Net loss $ (144,474) $ (418,943)
==================== ===================
Net income (loss):
Managing Member $ 250,256 $ 250,294
Other Members (394,730) (669,237)
-------------------- -------------------
$ (144,474) $ (418,943)
==================== ===================
Net loss per Limited Liability Company Unit (Other Members) $ (0.03) $ (0.05)
Weighted average number of Units outstanding 13,570,188 13,570,188
See accompanying notes.
4
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2004
AND FOR THE
THREE MONTH PERIOD ENDED
MARCH 31, 2005
(Unaudited)
Other Members
Accumulated Other
Comprehensive
Units Amount Managing Member Income (Loss) Total
----- ------ ------ ------------- -----
Balance December 31, 2003 13,570,188 $ 51,040,262 $ - $ (3,143,144) $ 47,897,118
Distributions to Managing - )
Member - (1,001,155 - (1,001,155)
Distributions to Other -
Members ($0.91 per Unit) (12,347,383) - - (12,347,383)
Unrealized decrease in -
interest rate swap
liability - - 1,772,141 1,772,141
Reclassification adjustment -
for portion of swap
liability charged to net
loss - - 645,068 645,068
Net income - 4,221,097 1,001,155 - 5,222,252
------------- ----------------- ---------------- ----------------- -----------------
Balance December 31, 2004 13,570,188 42,913,976 - (725,935) 42,188,041
Distributions to Managing - )
Member - (250,256 - (250,256)
Distributions to Other -
Members ($0.23 per Unit) (3,086,495) - - (3,086,495)
Reclassification adjustment -
for portion of swap
liability charged to net
loss - - 52,590 52,590
Net income (loss) - (394,730) 250,256 - (144,474)
------------- ----------------- ---------------- ----------------- -----------------
Balance March 31, 2005 13,570,188 $ 39,432,751 $ - $ (673,345) $ 38,759,406
============= ================= ================ ================= =================
See accompanying notes
5
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2005 AND 2004
(Unaudited)
Operating activities 2005 2004
---- ----
Net loss $ (144,474) $ (418,943)
Adjustment to reconcile net loss to net cash provided by operating activities:
Gain on sales of lease assets (103,414) (449,642)
Depreciation of operating lease assets 2,253,670 4,816,678
Amortization of initial direct costs 34,137 72,015
Fair value adjustment on interest rate swap contracts (385,184) (22,274)
Provision for doubtful accounts 33,500 11,000
Changes in operating assets and liabilities:
Accounts receivable (63,764) 296,861
Other assets - 7,500
Accounts payable, Managing Member 527,729 (559,132)
Accounts payable, other (74,719) (566,023)
Accrued interest payable (39,767) 11,886
Unearned lease income 196,126 (532,557)
------------------ ---------------
Net cash provided by operating activities 2,233,840 2,667,369
------------------ ---------------
Investing activities:
Proceeds from sales of lease assets 274,834 1,485,659
Reduction of net investment in direct financing leases 294,115 126,655
Purchases of equipment on operating leases 422 -
------------------ ---------------
Net cash provided by investing activities 569,371 1,612,314
------------------ ---------------
Financing activities:
Repayments of long-term debt (3,684,000) (3,127,000)
Borrowings under line of credit 3,000,000 3,500,000
Repayments of borrowings under line of credit (500,000) (1,000,000)
Repayments of non-recourse debt (303,850) (272,893)
Distributions to Other Members (3,086,495) (3,086,761)
Distributions to Managing Member (250,256) (250,294)
------------------ ---------------
Net cash used in financing activities (4,824,601) (4,236,948)
------------------ ---------------
Net (decrease) increase in cash and cash equivalents (2,021,390) 42,735
Cash and cash equivalents at beginning of period 2,569,911 508,584
------------------ ---------------
Cash and cash equivalents at end of period $ 548,521 $ 551,319
================== ===============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 433,306 $ 866,548
Schedule of non-cash transactions:
Change in fair value of interest rate swap contracts $ 437,774 $ 123,825
================== ===============
See accompanying notes.
6
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(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 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. 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 months ended March 31, 2005 are not necessarily indicative of
the results for the year ending December 31, 2005.
Certain prior year balances have been reclassified to conform to the current
period presentation.
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, 2004, filed with the Securities and
Exchange Commission.
Equipment on operating leases:
Equipment on operating leases is stated at cost. Depreciation is being
provided by use of the straight-line method over the terms of the related
leases to the equipment's estimated residual values at the end of the leases.
Asset Valuation:
Recorded values of the Company's asset portfolio are periodically reviewed for
impairment in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book
value. The estimated undiscounted future cash flows are the sum of the
estimated residual value of the asset at the end of the asset's expected
holding period and estimates of undiscounted future rents. The residual value
assumes, among other things, that the asset is utilized normally in an open,
unrestricted and stable market. Short-term fluctuations in the market place
are disregarded and it is assumed that there is no necessity either to dispose
of a significant number of the assets, if held in quantity, simultaneously or
to dispose of the asset quickly. Impairment is measured as the difference
between the fair value (as determined by the discounted estimated future cash
flows) of the assets and its carrying value on the measurement date.
Revenue recognition:
Operating leases
Operating lease revenue is recognized on a straight-line basis over the term
of the underlying leases. The initial lease terms will vary as to the type of
equipment subject to the leases, the needs of the lessees and the terms to be
negotiated, but initial leases are generally expected to be for 36 to 84
months. Income from step rent provisions, escalation clauses, capital
improvement funding provisions or other lease concessions in lease contracts,
and lease rates subject to variation based on changes in market indexes or
interest rates are recognized on a straight line basis.
7
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
1. Summary of significant accounting policies (continued):
Direct finance leases
Income from direct financing lease transactions is reported using the
financing method of accounting, in which the Company's investment in the
leased property is reported as a receivable from the lessee to be recovered
through future rentals. The income portion of each rental payment is
calculated so as to generate a constant rate of return on the net receivable
outstanding.
Notes receivable
Income from notes receivable is reported using the financing method of
accounting. The Company's investment in notes receivable is reported as the
present value of the future note payments. The income portion of each note
payment is calculated so as to generate a constant rate of return on the net
balance outstanding.
Initial direct costs:
The Company capitalizes initial direct costs associated with the acquisition
of lease assets. These costs are amortized over a five year period, which
approximates average lease term, using a straight line method.
Segment Reporting:
The Company adopted the provisions of SFAS No. 131 Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes annual and
interim standards for operating segments of a company. It also requires
entity-wide disclosures about the products and services an entity provides,
the material countries in which it holds assts and reports revenue, and its
major customers. The Company is not organized by multiple operating segments
for the purpose of making operating decisions or assessing performance.
Accordingly the Company operates in one reportable operating segment in the
United States.
2. Organization and Limited Liability 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, primarily in
the United States. The Company may continue until December 31, 2019. The
Managing Member of the Company is ATEL Financial Services LLC (AFS), a
California limited liability company. Prior to converting to a limited
liability company structure, AFS was formerly known as ATEL Financial
Corporation. Each Member's personal liability for obligations of the Company
generally will be limited to the amount of their respective contributions and
rights to undistributed profits and assets of the Company.
On January 13, 1999, subscriptions for the minimum number of Units (120,000,
$1,200,000) had been received. On that date, the Company commenced operations
in its primary business (leasing activities).
As a limited liability company, the liability of any individual member for the
obligations of the Fund is limited to the extent of capital contributions to
the Fund by the individual member.
Pursuant to the Operating Agreement, AFS receives compensation and
reimbursements for services rendered on behalf of the Company. AFS is required
to maintain in the Company reasonable cash reserves for working capital, the
repurchase of Units and contingencies.
8
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
2. Organization and Limited Liability Company matters (continued):
The Company's principal objectives are to invest in a diversified portfolio of
equipment that will (i) preserve, protect and return the Company's invested
capital; (ii) generate regular distributions to the members of cash from
operations and cash from sales or refinancing, with any balance remaining
after certain minimum distributions to be used to purchase additional
equipment during the Reinvestment Period, ending December 31, 2006 and (iii)
provide additional distributions following the Reinvestment Period and until
all equipment has been sold. The Company is governed by its Limited Liability
Company Operating Agreement (Operating Agreement).
3. Investment in equipment and leases:
The Company's investment in leases consists of the following:
Balance December 31, Depreciation/ Reclassifi-cations Balance March,
Amortization
Expense or
Amortization of
Direct Financing
2004 Leases & Dispositions 31, 2005
---- ------ ------------ ----
Net investment in operating leases $ 51,091,946 $ (2,252,710) $ 567,188 $ 49,406,424
Net investment in direct financing leases 3,092,071 (294,115) - 2,797,956
Assets held for sale or lease, net of
accumulated depreciation of $12,856,578 in
2005 and $16,086,674 in 2004 5,405,497 (960) (364,747) 5,039,790
Initial direct costs, net of accumulated
amortization of $1,424,044 in 2005 and
$1,389,906 in 2004 100,201 (34,137) - 66,064
------------------ ----------------- ---------------- -----------------
$ 59,689,715 $ (2,581,922) $ 202,441 $ 57,310,234
================== ================= ================ =================
Impairment losses are recorded as an addition to accumulated depreciation of
the impaired assets. For the periods ended March 31, 2005 and 2004, no assets
were identified as impaired. Depreciation expense and impairment losses on
property subject to operating leases and property held for lease or sale
consist of the following for the three month periods ended March 31:
2005 2004
---- ----
Depreciation expense $ 2,253,670 $ 4,816,678
================ ================
9
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
3. Investment in equipment and leases (continued):
Operating leases:
Property on operating leases consists of the following:
Balance Depreciation Reclassifications & Balance March
December 31, 31, 2005
----
2004 Expense Dispositions
Transportation, rail $ 45,148,174 $ - $ 733,654 $ 45,881,828
Containers 21,165,000 - - 21,165,000
Aircraft 15,448,037 - - 15,448,037
Natural gas compressors 13,541,303 - - 13,541,303
Manufacturing 4,599,823 - (61,960) 4,537,863
Transportation, other 3,107,988 - - 3,107,988
Materials handling 1,090,279 - - 1,090,279
Other 5,313,054 - - 5,313,054
-------------------- ---------------------- --------------------- ------------------
109,413,658 - 671,694 110,085,352
Less accumulated depreciation (58,321,712) (2,252,710) (104,506) (60,678,928)
-------------------- ---------------------- --------------------- ------------------
$ 51,091,946 $ (2,252,710) $ 567,188 $ 49,406,424
==================== ====================== ===================== ==================
The Company utilizes a straight line depreciation method for equipment in all
of the categories currently in its portfolio of lease transactions. The useful
lives for investment in leases by category are as follows:
Equipment category Useful Life
------------------ -----------
Transportation, rail 30 - 40
Aircraft 20 - 30
Manufacturing 10 - 20
Materials handling 7 - 10
Transportation, other 7 - 10
Natural gas compressors 7 - 10
Containers 7 - 10
Other 3 - 5
10
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
3. Investment in equipment and leases (continued):
Direct financing leases:
As of March 31, 2005, investment in direct financing leases consists of rail
cars, anhydrous ammonia storage tanks, office automation equipment, point of
sale equipment, refrigerated trailers and laundry equipment. The following
lists the components of the Company's investment in direct financing leases as
of March 31, 2005:
Total minimum lease payments receivable $ 2,049,455
Estimated residual values of leased equipment (unguaranteed) 986,704
-----------------
Investment in direct financing leases 3,036,159
Less unearned income (238,203)
-----------------
Net investment in direct financing leases $ 2,797,956
=================
All of the equipment on leases was acquired in 2002, 2001, 2000 and 1999.
At March 31, 2005, the aggregate amounts of future minimum lease payments are
as follows:
Operating Direct Financing
Leases Leases Total
------ ------ -----
Nine months ending December 31, 2005 $ 4,765,955 $ 873,807 $ 5,639,762
Year ending December 31, 2006 2,638,733 846,888 3,485,621
2007 1,980,926 279,959 2,260,885
2008 1,161,780 48,801 1,210,581
2009 993,520 - 993,520
2010 204,090 - 204,090
Thereafter 447,720 - 447,720
---------------- -------------- ----------------
$ 12,192,724 $ 2,049,455 $ 14,242,179
================ ============== ================
11
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
4. Non-recourse debt:
Notes payable to financial institutions are due in varying 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 on the notes is at rates
ranging from 4.96% to 6.845%. The notes are secured by assignments of lease
payments and pledges of assets. At March 31, 2005, the carrying value of the
pledged assets was $10,184,180. The notes mature from 2005 through 2007.
At March 31, 2005, future minimum payments of non-recourse debt are as
follows:
Principal Interest Total
Nine months ending December 31, 2005 $ 4,411,385 $ 102,185 $ 4,513,570
Year ending December 31, 2006 646,128 57,792 703,920
2007 678,583 25,337 703,920
---------------- -------------- ---------------
$ 5,736,096 $ 185,314 $ 5,921,410
================ ============== ===============
5. Other long-term debt:
In 1999, the Company entered into a $70 million receivables funding program
(the Program), (which was subsequently increased to $125 million), with a
receivables financing company that issues commercial paper rated A1 by
Standard and Poor's 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 (3.30% at March 31, 2005). The Program
expired as to new borrowings in April 2002. The Company had $9,508,000
outstanding under this program as of March 31, 2005.
The Program requires AFS, on behalf of the Company, 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
March 31, 2005, the Company receives or pays interest on a notional principal
of $22,819,087 based on the difference between nominal rates ranging from
4.35% to 7.72% and the variable rate under the Program. No actual borrowing or
lending is involved. The termination of the swaps coincides with the maturity
of the debt. Through the swap agreements, the interest rates have been
effectively fixed. 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.
The Partnership had utilized hedge accounting as prescribed under Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, in prior periods. Beginning in the quarter
ended March 31, 2005, the Partnership is discontinuing hedge accounting and
will recognize any future gain/loss in the statement of operations. Previous
amounts recorded in Accumulated Other Comprehensive Income ("AOCI") related to
the interest rate swaps will be recognized in earnings when the previously
hedged items impact earnings. For the quarter ended March 31, 2005, the
reclassification adjustment from AOCI totaled $52,950.
12
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
5. Other long-term debt (continued):
Borrowings under the Program are as follows:
Date Borrowed Original Balance March Notional Swap Payment Rate
-------------
Balance On Interest
March 31, Value Swap
Amount Borrowed 31, 2005 2005 March 31, 2005 Agreement
-------- ----- ---- ----- ---------
11/11/1999 $ 20,000,000 $ 655,000 $ 1,574,040 $ (29,749) 6.84%
12/21/1999 20,000,000 4,523,000 10,161,634 (610,134) 7.41%
12/24/1999 25,000,000 233,000 1,217,089 (37,699) 7.44%
4/17/2000 6,500,000 1,043,000 1,314,179 (39,650) 7.45%
4/28/2000 1,900,000 - 155,519 (5,734) 7.72%
8/3/2000 19,000,000 510,000 5,235,538 (216,559) 7.50%
10/31/2000 7,500,000 874,000 1,796,244 (58,486) 7.13%
1/29/2001 8,000,000 - - - 5.91%
6/1/2001 2,000,000 - - - 5.04%
9/1/2001 9,000,000 685,000 1,364,844 331 4.35%
1/31/2002 3,900,000 985,000 - - *
-- ---------------- -- --------------- -- ------------------ -- ---------------
$ 122,800,000 $ 9,508,000 $ 22,819,087 $ (997,680)
== ================ == =============== == ================== == ===============
* Under the terms of the Program, no interest rate swap agreement was required
for this borrowing.
Other long-term debt borrowings mature from 2005 through 2007. At March 31,
2005, future minimum payments of other long-term debt are as follows:
Debt Debt Interest Total Rates on
-------- -----
Principal Principal Interest Swap
Swapped Not Swapped Agreements*
------- ----------- -----------
Nine months ending
December 31, 2005 $ 4,105,000 $ 879,000 $ 391,496 $ 5,375,496 6.899%-7.172%
Year ending December 31,
2006 3,349,000 60,000 229,873 3,638,873 7.337%-7.348%
2007 1,069,000 46,000 26,606 1,141,606 7.336%
--- -------------- --- ---------------- --- ------------ --- ----------------
$ 8,523,000 $ 985,000 $ 647,975 $ 10,155,975
=== ============== === ================ === ============ === ================
* 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 (3.30% at March 31, 2005).
13
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
6. Related party transactions:
The terms of the Limited Liability Company Operating Agreement provide that
AFS 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 AFS in providing administrative services to the Company.
Administrative services provided include Company accounting, investor
relations, legal counsel and lease and equipment documentation. AFS 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 AFS are allocated to the Company
based upon estimated time incurred by employees working on Company business
and an allocation of rent and other costs based on utilization studies.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"),
ATEL Investor Services ("AIS") and AFS is a wholly-owned subsidiary of ATEL
Capital Group and performs services for the Company. Acquisition services are
performed for the Company by ALC, equipment management, lease administration
and asset disposition services are performed by AEC, investor relations and
communications services are performed by AIS and general administrative
services for the Company are performed by AFS.
Cost reimbursements to the Managing Member are based on costs incurred by AFS
in performing administrative services for the Company that are allocated to
each Company that AFS manages based on certain criteria such as existing or
new leases, number of investors or equity depending on the type of cost
incurred.. AFS believes that the costs reimbursed are the lower of (i) actual
costs incurred on behalf of the Company or (ii) the amount the Company would
be required to pay independent parties for comparable administrative services
in the same geographic location.
During the three month periods ended March 31, 2005 and 2004, AFS and/or
affiliates earned fees, commissions and reimbursements, pursuant to the
Limited Liability Company Agreement as follows:
2005 2004
---- ----
Asset management fees to Managing Member $ 126,337 $ 271,849
Cost reimbursements to Managing Member 691,970 699,215
-- --------------
----- --------------- -- --------------
$ 818,307 $ 971,064
===== =============== == ==============
The Managing Member makes certain payments to third parties on behalf of the
Company for convenience purposes. During the three month periods ended March
31, 2005 and 2004, the Managing Member made such payments of $126,300 and
$96,751, respectively.
14
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
7. Members' capital:
As of March 31, 2005, 13,570,188 Units were issued and outstanding. The
Company is authorized to issue up to 15,000,000 Units in addition to the Units
issued to the initial members (50 Units).
As defined in the Company's Operating Agreement, the Company's Net Income, Net
Losses, and Distributions are to be allocated 92.5% to the Other Members and
7.5% to AFS.
Distributions to the Other Members were as follows:
Three Months Ended
March 31,
2005 2004
---- ----
Distributions $ 3,086,495 $ 3,086,761
Weighted average number of Units outstanding 13,570,188 13,570,188
Weighted average distributions per Unit $ 0.23 $ 0.23
8. Financing Arrangement:
The Company participates with AFS and certain of its affiliates in a financing
arrangement (comprised of a term loan to AFS and a line of credit) with a
group of financial institutions that includes certain financial covenants. The
financial arrangement is $75,000,000 and expires in June 2006. The
availability of borrowings to the Company under this financing arrangement is
reduced by the amount AFS has outstanding as a term loan. As of March 31, 2005
borrowings under the facility were as follows:
Total amount available under the financing arrangement $ 75,000,000
Term loan to AFS as of March 31, 2005 (1,482,182)
-------------------
Total available under the acquisition and warehouse facilities 73,517,818
Amount borrowed by the Company under the acquisition facility (2,500,000)
Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition
facility (13,500,000)
-------------------
Total remaining available under the acquisition and warehouse facilities $ 57,517,818
===================
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
Memberships and limited liability companies, the Company and AFS.
The credit agreement includes certain financial covenants applicable to each
borrower. The Company was in compliance with its covenants as of March 31,
2005.
As of March 31, 2005, the acquisition line of credit consists of two notes in
the amount of $1,000,000 and $1,500,000. Any or the entire principal balances
may be repaid then re-borrowed, on notes with maturities ranging from one day
to six months, until the line is terminated in June 2006. As of March 31, 2005
the interest rates were 5.75% and 4.62% on the $1,000,000 and $1,500,000 note
balances, respectively.
15
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
9. Guarantees:
The Company enters into contracts that contain a variety of indemnifications.
The Company's maximum exposure under these arrangements is unknown. However,
the Company has not had prior claims or losses pursuant to these contracts and
expects the risk of loss to be remote.
In the normal course of business, the Company enters into contracts of various
types, including lease contracts, contracts for the sale or purchase of lease
assets, management contracts, loan agreements, credit lines and other debt
facilities. It is prevalent industry practice for most contracts of any
significant value to include provisions that each of the contracting parties -
in addition to assuming liability for breaches of the representations,
warranties, and covenants that are part of the underlying contractual
obligations - also assume an obligation to indemnify and hold the other
contracting party harmless for such breaches, for harm caused by such party's
gross negligence and willful misconduct, including, in certain instances,
certain costs and expenses arising from the contract. The Managing Member has
substantial experience in managing similar leasing programs subject to similar
contractual commitments in similar transactions, and the losses and claims
arising from these commitments have been insignificant, if any. Generally, to
the extent these contracts are performed in the ordinary course of business
under the reasonable business judgment of the Managing Member, no liability
will arise as a result of these provisions. The Managing Member has no reason
to believe that the facts and circumstances relating to the Company's
contractual commitments differ from those it has entered into on behalf of the
prior programs it has managed. The Managing Member knows of no facts or
circumstances that would make the Company's contractual commitments outside
standard mutual covenants applicable to commercial transactions between
businesses. Accordingly, the Company believes that these indemnification
obligations are made in the ordinary course of business as part of standard
commercial and industry practice, and that any potential liability under the
Company's similar commitments is remote. Should any such indemnification
obligation become payable, the Company would separately record and/or disclose
such liability in accordance with GAAP.
16
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 form those projected. In particular, economic
recession and changes in general economic conditions, including, fluctuations
in demand for equipment, lease rates, and interest rates, may result in delays
in investment and reinvestment, delays in leasing, re-leasing, and disposition
of equipment, and reduced returns on invested capital. The Company's
performance is subject to risks relating to lessee defaults and the
creditworthiness of its lessees. The Fund's performance is also subject to
risks relating to the value of its equipment at the end of its leases, which
may be affected by the condition of the equipment, technological obsolescence
and the markets for new and used equipment at the end of lease terms.
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 quarters of 2005 and 2004, the Company's primary activity was
engaging in equipment leasing and sales activities.
A primary source of liquidity, the Company has contractual obligations with a
diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire, the Company will re-lease or sell the
equipment. The future liquidity beyond the contractual minimum rentals will
depend on AFS's success in re-leasing or selling the equipment as it comes off
lease.
The Company participates with AFS and certain of its affiliates in a financing
arrangement (comprised of a term loan to AFS and a line of credit) with a
group of financial institutions that includes certain financial covenants. The
financial arrangement is $75,000,000 and expires in June 2006. The
availability of borrowings to the Company under this financing arrangement is
reduced by the amount AFS has outstanding as a term loan. As of March 31, 2005
borrowings under the facility were as follows:
Total amount available under the financing arrangement $ 75,000,000
Term loan to AFS as of March 31, 2005 (1,482,182)
-------------------
Total available under the acquisition and warehouse facilities 73,517,818
Amount borrowed by the Company under the acquisition facility (2,500,000)
Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition
facility (13,500,000)
-------------------
Total remaining available under the acquisition and warehouse facilities $ 57,517,818
===================
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
Memberships and limited liability companies, the Company and AFS.
17
To manage the warehousing line of credit for the holding of assets prior to
allocation to specific investor programs, a Warehousing Trust Agreement has
been entered into by the Company, ATEL Financial Services LLC ("AFS"), ATEL
Leasing Corporation ("ALC"), and certain of the affiliated partnerships and
limited liability companies. The warehousing line is used to acquire and hold,
on a short-term basis, certain lease transactions that meet the investment
objectives of each of such entities. Each of the leasing programs sponsored by
AFS and ALC currently in its acquisition stage is a pro rata participant in
the Warehousing Trust Agreement, as described below. When a program no longer
has a need for short term financing provided by the warehousing facility, it
is removed from participation, and as new leasing investment entities are
formed by AFS and ALC and commence their acquisition stages, these new
entities will be added. As of March 31, 2005, the investment program
participants were ATEL Cash Distribution Fund VI, L.P., ATEL Capital Equipment
Fund VII, L.P., ATEL Capital Equipment Fund VIII, LLC, ATEL Capital Equipment
Fund IX, LLC, and ATEL Capital Equipment Fund X, LLC. Pursuant to the
Warehousing Trust Agreement, the benefit of the lease transaction assets, and
the corresponding liabilities under the warehouse borrowing facility, inure to
each of such entities based upon each entity's pro-rata share in the
warehousing trust estate. The "pro-rata share" is calculated as a ratio of the
net worth of each entity over the aggregate net worth of all entities
benefiting from the warehouse trust estate, excepting that the trustees, AFS
and ALC, are both liable for their pro-rata shares of the obligations based on
their respective net worths, and jointly liable for the pro rata portion of
the obligations of each of the affiliated partnerships and limited liability
companies participating under the borrowing facility. Transactions are
financed through this warehousing line only until the transactions are
allocated to a specific program for purchase or are otherwise disposed by AFS
and ALC. When a determination is made to allocate the transaction to a
specific program for purchase by the program, the purchaser repays the debt
associated with the asset, either with cash or by means of the acquisition
facility financing, the asset is removed from the warehouse line collateral,
and ownership of the asset and any debt obligation associated with the asset
are assumed solely by the purchasing entity.
The credit agreement includes certain financial covenants applicable to each
borrower. The Company was in compliance with its covenants as of March 31,
2005.
The Company 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 AFS and providing
for cash distributions to the Limited Members.
AFS or an affiliate may purchase equipment in its own name, the name of an
affiliate or the name of a nominee, a trust or otherwise and hold title
thereto on a temporary or interim basis for the purpose of facilitating the
acquisition of such equipment or the completion of manufacture of the
equipment or for any other purpose related to the business of the Company,
provided, however, that: (i) the transaction is in the best interest of the
Company; (ii) such equipment is purchased by the Company for a purchase price
no greater than the cost of such equipment to AFS or affiliate (including any
out-of-pocket carrying costs), except for compensation permitted by the
Operating Agreement; (iii) there is no difference in interest terms of the
loans secured by the equipment at the time acquired by AFS or affiliate and
the time acquired by the Company; (iv) there is no benefit arising out of such
transaction to AFS or its affiliate apart from the compensation otherwise
permitted by the Operating Agreement; and (v) all income generated by, and all
expenses associated with, equipment so acquired will be treated as belonging
to the Company.
The Company currently has available adequate reserves to meet its immediate
cash requirements and those of the next twelve months, but in the event those
reserves were found to be inadequate, the Company would likely be in a
position to borrow against its current portfolio to meet such requirements.
AFS envisions no such requirements for operating purposes.
In 1999, the Company established a $70 million receivables funding program
(which was subsequently increased to $125 million) with a receivables
financing company that issues commercial paper rated A1 from Standard and
Poor's and P1 from Moody's Investor Services. In this receivables funding
program, the lenders received a general lien against all of the otherwise
unencumbered assets of the Company. The program provided for borrowing at a
variable interest rate and required AFS on behalf of the Company to enter into
interest rate swap agreements with certain counterparties (also rated A1/P1)
to mitigate the interest rate risk associated with a variable rate note. AFS
believes that this program allowed the Company to avail itself of lower cost
debt than that available for individual non- recourse debt transactions. The
program expired as to new borrowings in April 2002.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. There were no such commitments as of
March 31, 2005.
AFS expects that aggregate borrowings in the future will not exceed 50% of
aggregate equipment cost. In any event, the Limited Liability Company
Operating Agreement limits such borrowings to 50% of the total cost of
equipment, in aggregate. AFS does not anticipate any future non-recourse
borrowings.
18
If inflation in the general economy becomes significant, it may affect the
Company inasmuch as the residual (resale) values and rates on re-leases of the
Company's leased assets may increase as the costs of similar assets increase.
However, the Company's revenues from existing leases would not increase, as
such rates are generally fixed for the terms of the leases without adjustment
for inflation.
If interest rates increase significantly, the lease rates that the Company 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.
For detailed information on the Company's debt obligations, see Notes 4, 5,
and 8 in the notes to the financial statements in Item 1.
Cash Flows
During the first quarters of 2005 and 2004, the Company's primary source of
liquidity was rents from operating leases.
In the first quarters of 2005 and 2004, the primary source of cash from
operations was rents from operating leases. Operating leases are expected to
remain as the primary source of cash from operations in future periods.
In both 2005 and 2004, proceeds from sales of assets and rents from direct
financing leases accounted for as reductions of the Company's net investment
in direct financing leases were the primary source of cash from investing
activities. In the first quarter of 2005, proceeds from sales of lease assets
decreased to $274,834 from $1,485,659 compared to the first quarter of 2004.
Proceeds from the sales of lease assets are not expected to be consistent from
one period to another. Asset sales are made as leases expire, as purchasers
can be found and as the sales can be negotiated and completed.
In the first quarters of 2005 and 2004, the only sources of cash from
financing activities were borrowings under the line of credit. Financing uses
of cash included repayments of debt of $4,487,850 and $4,399,893 in the first
quarters of 2005 and 2004, respectively. Distributions were made to Other
Members in amounts of $3,086,495 and $3,086,761 and to AFS in the amounts of
$250,256 and $250,294 in the first quarters of 2005 and 2004, respectively.
Results of operations
Operations resulted in a net loss of $144,474 in the quarter ended March 31,
2005 compared to a net loss of $418,943 in the quarter ended March 31, 2004.
In the first quarters of 2005 and 2004, the Company's primary source of
revenues was from operating leases. Operating lease rents decreased from
$5,944,402 in the first quarter of 2004 to $3,056,749 in the first quarter of
2005. Assets sales over the last twelve months were the largest contributors
to the decrease in operating lease rents. However, the overall decrease was
partially offset by the re-lease of off-lease equipment over the same twelve
months.
Proceeds from sales of lease assets are not expected to be consistent from one
period to another. The Company is a finite life equipment leasing fund, which
will acquire leasing transactions during the period ending six years after
completion of its public offering. On the termination of leases, assets may be
re-leased or sold. Sales of assets are not scheduled and are created by
opportunities within the marketplace. The Company will seek to acquire and
lease a wide variety of assets and to enter into leases on a variety of terms.
Some assets will be expected to have little or no value upon termination of
the related leases, while others will be expected to have substantial value
for re-lease or sale upon termination of the initial leases, and the
anticipated residual values are a key factor in pricing and terms structured
for each lease. The Company's goal is to seek maximum return on its leased
assets and will determine when and under what terms to dispose such assets
during the course of its term.
Depreciation is related to operating lease assets and thus, to operating lease
revenues. Consequently, depreciation decreased to $2,253,670 from $, 4,816,678
during the first quarters of 2005 and 2004, respectively, as a result of
operating lease asset sales over the last year.
Management periodically reviews the carrying values of its assets on leases
and assets held for lease or sale. There were no impairments recognized in the
first quarter of 2005 and 2004. Asset management fees are based on the gross
lease rents of the Company plus proceeds from the sales of lease assets. They
are limited to certain percentages of lease rents, distributions to members
and certain other items. The decrease in asset management fees to $126,337
from $271,849 during the first quarters of 2005 and 2004, respectively, was a
direct result of the decreases in lease revenues.
Interest expense decreased from $878,434 in the quarter ended March 31, 2004
to $393,539 in the quarter ended March 31, 2005. Overall debt has decreased
from $55,155,442 at March 31, 2004 to $17,744,096 at March 31, 2005. This
decrease in the debt balances resulted in decreased interest charges compared
to the same period in 2004.
The provision for doubtful accounts increased from $11,000 in the first
quarter of 2004 to $33,500 in the first quarter of 2005. Provisions for
doubtful accounts are not expected to be consistent from one period to
another.
19
Item 3. Quantitative and Qualitative Disclosures of Market Risk.
The Company, like most other companies, is exposed to certain market risks,
including primarily changes in interest rates. The Company 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 Company 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 Company has historically
been able to maintain a stable spread between its cost of funds and lease
yields in both periods of rising and falling interest rates. Nevertheless, the
Company frequently funds leases with its floating rate line of credit and is,
therefore, exposed to interest rate risk until fixed rate financing is
arranged, or the floating rate line of credit is repaid. As of March 31, 2005,
there was $2,500,000 outstanding on the floating rate line of credit.
Also, the Company entered into a receivables funding facility in 1999. Since
interest on the outstanding balances under the facility varies, the Company is
exposed to market risks associated with changing interest rates. To hedge its
interest rate risk, the Company enters into interest rate swaps that
effectively convert the underlying interest characteristic on the facility
from floating to fixed. Under the swap agreements, the Company makes or
receives variable interest payments to or from the counterparty based on a
notional principal amount. The net differential paid or received by the
Company is recognized as an adjustment to interest expense related to the
facility balances. The amount paid or received represents the difference
between the payments required under the variable interest rate facility and
the amounts due under the facility at the fixed (hedged) interest rate. As of
March 31, 2005, borrowings on the facility were $9,508,000 and the associated
variable interest rate was 3.30%. The average fixed interest rate achieved
with the swap agreements was 6.792%.
Item 4. Controls and procedures.
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management (ATEL
Financial Services, LLC as Managing Member of the registrant, including the
chief executive officer and chief financial officer), an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures [as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934] was performed as of March 31, 2005. Based
upon this evaluation, the chief executive officer and the chief financial
officer concluded that, as of the evaluation date, our disclosure controls and
procedures were effective for the purposes of recording, processing,
summarizing, and timely reporting information required to be disclosed by us
in the reports that we file under the Securities Exchange Act of 1934; and
that such information is accumulated and communicated to our management in
order to allow timely decisions regarding required disclosure.
20
As disclosed in the Company's annual report on Form 10-K for the year ended
December 31, 2003, the chief executive and chief financial officer of the
Managing Member had identified certain enhanced controls needed to facilitate
a more effective closing of the Company's financial statements. Specifically,
the Company's auditors advised management of a material weakness surrounding
the financial statement closing process that they believe arose because ATEL's
accounting resources were not adequate to complete the closing of the books
and preparation of financial statements in a timely manner. However, it should
be noted that the financial statements for that period were nevertheless
issued with an unqualified opinion. Since the beginning of 2004, ATEL hired a
new corporate controller, added two assistant controllers and additional
accounting staff personnel, and has instituted new procedures or revised
existing procedures to ensure that the Company's ability to execute internal
controls in accounting and reconciliation in the closing process is adequate
in all respects. In connection with management's review of the effectiveness
of internal disclosure controls and procedures of the Company as of March 31,
2005, including communication with its auditors regarding the audit process,
ATEL management has determined that it has successfully taken all steps
necessary to resolve any outstanding issues with respect to its annual
financial statement closing process and that its accounting resources are
adequate to perform this process in a timely and accurate manner. In
connection with their audit of the Company and related programs for the year
ended December 31, 2004, the independent accountants issued a no material
weakness letter which indicates that no matters were noted involving internal
control and its operation that the auditor considered to be material
weaknesses as defined by the Public Company Accounting Oversight Board (United
States). Furthermore, all financial statements for the Company and related
programs for 2004 were issued with unqualified opinions of the independent
accountants. The Managing Member will continue to review its accounting
procedures and practices to determine their effectiveness and adequacy and
will take any steps deemed necessary in the opinion of the Managing Member's
chief executive and chief financial officers to ensure the adequacy of the
Company's disclosure and accounting controls and procedures. The Managing
Member's chief executive officer and chief financial officer have determined
that no weakness in financial and accounting controls and procedures had any
material effect on the accuracy and completeness of the Company's financial
reporting and disclosure included in this report.
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, except as described in the
prior paragraphs.
21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of conducting business, there may be certain claims,
suits, and complaints filed against the Company. In the opinion of management,
the outcome of such matters, if any, will not have a material impact on the
Company's financial position or results of operations. No material legal
proceedings are currently pending against the Company or against any of its
assets.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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.
Documents filed as a part of this report
1. 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.
2. Other Exhibits
31.1 Certification of Paritosh K. Choksi
31.2 Certification of Dean L. Cash
32.1 Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash
32.2 Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K.
Choksi
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
May 13, 2005
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
(Registrant)
By: ATEL Financial Services LLC
Managing Member of Registrant
By: /s/ Dean L. Cash_____________
Dean L. Cash
President and Chief Executive Officer
of Managing Member
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
By: /s/ Elif A Kuvvetli________
Elif A Kuvvetli
Vice President and
Corporate Controller
23