Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Annual report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934 (fee
required) For the Year Ended December 31, 2002
OR
|_| Transition report pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934 (no fee
required) For the transition period from ____ to
____
Commission File number 333-47196
ATEL Capital Equipment Fund IX, LLC
California 94-3375584
- ---------- ----------
(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: None
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |X|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|
State the aggregate market value of voting stock held by non-affiliates of
the registrant. Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE
Prospectus dated January 16, 2001, filed pursuant to Rule 424(b)
(Commission File No. 333-47196) is hereby incorporated by reference into Part IV
hereof.
1
PART I
Item 1: BUSINESS
General Development of Business
ATEL Capital Equipment Fund IX, LLC (the Company) was formed under the laws
of the state of California in September 2000. The Company was formed for the
purpose of acquiring equipment to engage in equipment leasing and sales
activities. The Managing Member of the Company is ATEL Financial Services LLC
(ATEL), a California limited liability corporation. Prior to converting to a
limited liability company structure, the Managing Member was formerly known as
ATEL Financial Corporation.
The Company is conducting a public offering of 15,000,000 Limited Liability
Company Units (Units), at a price of $10 per Unit. On February 21, 2001,
subscriptions for the minimum number of Units (120,000, representing $1,200,000)
had been received and ATEL requested that the subscriptions be released to the
Company. On that date, the Company commenced operations in its primary business
(leasing activities). As of April 3, 2001, the Company had received
subscriptions for 753,050 Units ($7,530,500) and ATEL requested that the
remaining funds in escrow (from Pennsylvania investors) be released to the
Company. As of December 31, 2002, the Company had received subscriptions for
11,037,141 Units ($110,371,410), including the Initial Members' Units. All of
the Units were issued and outstanding as of December 31, 2002.
As of January 15, 2003, the Company's offering was terminated.
Subscriptions for a total of 12,110,460 ($121,104,600) Units had been received
and accepted.
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 partners 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 72 months after the end of the year in which the
Final Closing occurs (which will be December 31, 2009) 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).
Narrative Description of Business
The Company has acquired and intends to acquire various types of equipment and
to lease such equipment pursuant to "Operating" leases and "High Payout" leases,
whereby "Operating" leases are defined as being leases in which the minimum
lease payments during the initial lease term do not recover the full cost of the
equipment and "High Payout" leases recover at least 90% of such cost. It is the
intention of ATEL that a majority of the aggregate purchase price of equipment
will represent equipment leased under "High Payout" leases upon final investment
of the Net Proceeds of the Offering and that no more than 20% of the aggregate
purchase price of equipment will be invested in equipment acquired from a single
manufacturer.
The Company will only purchase equipment for which a lease exists or for
which a lease will be entered into at the time of the purchase.
As of December 31, 2002, the Company had purchased equipment with a total
acquisition price of $50,430,079. The Company has also invested $2,619,544 in
notes receivable.
The Company's objective is to lease a minimum of 75% of the equipment
acquired with the net proceeds of the offering to lessees that (i) have an
aggregate credit rating by Moody's Investor service, Inc. of Baa or better, or
the credit equivalent as determined by ATEL, with the aggregate rating weighted
to account for the original equipment cost for each item leased or (ii) are
established hospitals with histories of profitability or municipalities. The
balance of the original equipment portfolio may include equipment leased to
lessees which, although deemed creditworthy by the Managing Member, would not
satisfy the general credit rating criteria for the portfolio. In excess of 75%
of the equipment acquired with the net proceeds of the offering (based on
original purchase cost) has been leased to lessees with an aggregate credit
rating of Baa or better or to such hospitals or municipalities.
During 2002 and 2001, certain lessees generated significant portions of the
Company's total lease revenues as follows:
Lessee Type of Equipment 2002 2001
- ------ ----------------- ---- ----
Basin Electric Walking dragline 23% 54%
Graham Offshore Inc. Off shore supply vessels 17% *
General Electric Aircraft Engines Machine tools 11% *
Photuris, Inc. Various lab, computer and office equipment * 14%
* Less than 10%
These percentages are not expected to be comparable in future periods.
2
The equipment leasing industry is highly competitive. Equipment
manufacturers, corporations, partnerships and others offer users an alternative
to the purchase of most types of equipment with payment terms that vary widely
depending on the lease term and type of equipment. The ability of the Company to
keep the equipment leased and/or operating and the terms of the acquisitions,
leases and dispositions of equipment depends on various factors (many of which
are not in the control of ATEL or the Company), such as general economic
conditions, including the effects of inflation or recession, and fluctuations in
supply and demand for various types of equipment resulting from, among other
things, technological and economic obsolescence.
ATEL will seek to limit the amount invested in equipment to any single
lessee to not more than 20% of the aggregate purchase price of equipment owned
at any time during the reinvestment period.
The business of the Company is not seasonal.
The Company has no full time employees.
Equipment Leasing Activities
The Company has acquired a diversified portfolio of equipment. The
equipment has been leased to lessees in various industries. The following tables
set forth the types of equipment acquired by the Company through December 31,
2002 and the industries to which the assets have been leased. The Company has
purchased certain assets subject to existing non-recourse debt.
Purchase Price Excluding Percentage of Total
Asset Types Acquisition Fees Acquisitions
- ----------- ---------------- ------------
Mining equipment $20,903,212 41.46%
Manufacturing 12,084,745 23.96%
Marine vessels 11,200,000 22.21%
Materials handling 3,132,622 6.21%
Furniture and fixtures 2,143,896 4.25%
Natural gas compressors 696,451 1.38%
Communications 269,153 0.53%
---------------- ----------------
$50,430,079 100.00%
================ ================
Purchase Price Excluding Percentage of Total
Industry of Lessee Acquisition Fees Acquisitions
- ------------------ ---------------- ------------
Manufacturing $16,827,546 33.37%
Electric utilities 11,315,397 22.44%
Marine transportation 11,200,000 22.21%
Mining 9,587,815 19.01%
Retail 802,870 1.59%
Oil and gas 696,451 1.38%
---------------- ----------------
$50,430,079 100.00%
================ ================
For further information regarding the Company's equipment lease portfolio
as of December 31, 2002, see Note 3 to the financial statements, Investments in
equipment and leases, as set forth in Part II, Item 8, Financial Statements and
Supplementary Data.
Item 2. PROPERTIES
The Company does not own or lease any real property, plant or material
physical properties other than the equipment held for lease as set forth in Item
1.
Item 3. LEGAL PROCEEDINGS
Silicon Access Networks, Inc.:
Silicon Access Networks, Inc. (the Debtor) advised the Managing Member on
July 8, 2002, that due to a further decline in expectations of future demand for
the Debtor's products by potential customers in its target markets, the Debtor's
Board of Directors had directed management to close a branch office located in
North Carolina, which occurred in July 2002. As Debtor was current on its Notes
Payable payment obligation to the Company the Managing Member of the Company
declared a technical default in early July on the basis of the termination of
operations. As of December 31, 2002, the Debtor's account was current, except
for late charges.
The Company is monitoring the Debtor's cash position quarterly as it will
run out of cash sometime in the summer of 2003, unless it raises new equity or
debt. If there is no sign the Debtor will be getting a cash infusion in the
latter half of the second quarter of 2003, and the Debtor's cash position falls
below a certain amount, the Company will likely move for a Writ of Attachment
and continue to pursue its claim against the Debtor. The Company's likelihood of
success in recovering the full amount of its claims remains uncertain.
3
Photuris, Inc.:
Photuris, a Debtor of the Company, was on the verge of ceasing operations
as it was unable to secure new equity under favorable terms when the Company
commenced negotiations with the Debtor. As of this date, no legal action has
been initiated against the debtor; however, the account has been restructured.
In concert with several other lessors and lenders, the Company concluded
negotiations and executed a Settlement Agreement with the Debtor. Under the
terms of the Settlement Agreement, the Company received an initial $200,000 in
cash in July 2002. The Company is carrying a promissory note from the Debtor for
$300,000 that is payable interest only at prime plus 1.25% from August 1, 2002
to October 2003, at which time payments will convert to an equal principal plus
interest basis, spread over 36 months.
The Company has been granted $200,000 worth of new equity shares in
Photuris as the final part of the settlement. The Company still retains its
perfected first priority lien on the equipment financed by the Company. As of
early October 2002, the Company became aware that Photuris had not yet closed on
receiving some additional equity and was in danger of running out of operating
capital in early November 2002. The Company has confirmed with the lead investor
in Photuris' latest equity round that the investors have agreed to provide
additional equity to allow Photuris to continue to operate; however, this
commitment, for up to $15 million, is being provided in stages on a quarterly
basis if certain milestones are met. ATEL has confirmed that Photuris received
the first stage of this new equity in November 2002. Another round, which would
allow Photuris to continue operations for at least two to four months, closed in
February 2003. Continued receipt of such funds would allow Photuris to operate
an additional six to seven months.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S LIMITED LIABILITY COMPANY UNITS
AND RELATED MATTERS
Market Information
The Units are transferable subject to restrictions on transfers that have
been imposed under the securities laws of certain states. However, as a result
of such restrictions, the size of the Company and its investment objectives, to
ATEL's knowledge, no established public secondary trading market has developed
and it is unlikely that a public trading market will develop in the future. As a
result, there is no currently ascertainable market value for the Units.
Holders
As of December 31, 2002, a total of 2,829 investors were record holders of
Units in the Company.
Dividends
The Company does not make dividend distributions. However, the Members of
the Company are entitled to certain distributions as provided under the
Operating Agreement.
ATEL has sole discretion in determining the amount of distributions;
provided, however, that the Managing Member will not reinvest in equipment, but
will distribute, subject to payment of any obligations of the Company, such
available cash from operations and cash from sales or refinancing as may be
necessary to cause total distributions to the Members for each year during the
reinvestment period to equal an amount between $0.90 and $1.10 per Unit which
will be determined by the Managing Member.
The rate for monthly distributions from 2002 operations was $0.075 per Unit
for January through December 2002. The distributions were paid in February
through December 2002 and in January 2003. The rate for quarterly distributions
paid in April, July, October 2002 and January 2003 was $0.225, per Unit.
Distributions were from 2002 cash flows from operations.
The rate for monthly distributions from 2001 operations was $0.069167 per
Unit for February (partial month) through September 2001. The distributions were
paid in April through October 2001. The rate for the distributions for October
through December 2001 was $0.075. The distributions were paid in November
through December 2001 and in January 2002. The rates for quarterly distributions
paid in April and July 2001 and January 2002 were $0.09, $0.2075, $0.2075 and
$0.225, respectively, per Unit. Distributions were from 2001 cash flows from
operations.
The following table presents summarized information regarding distributions to
Other Members:
2002 2001
---- ----
Distributions of net income $ 0.0158 $ 0.2242
Return of investment 0.8105 0.3357
---------------- ----------------
Distributions per unit 0.8263 0.5599
Differences due to timing of distributions 0.0737 0.1668
---------------- ----------------
Nominal distribution rates from above $ 0.9000 $ 0.7267
================ ================
4
Information provided pursuant to ss. 228.701 (Item 701(f)) (formerly included in
Form SR):
(1) Effective date of the offering: January 16, 2001; File Number: 333-47196
(2) Offering commenced: January 16, 2001
(3) The offering did not terminate before any securities were sold.
(4) The offering was terminated prior to the sale of all of the securities on
January 15, 2003.
(5) The managing underwriter is ATEL Securities Corporation.
(6) The title of the registered class of securities is "Units of Limited
Liability Company interest". (7) Aggregate amount and offering price of
securities registered and sold as of January 15, 2003:
Aggregate Aggregate
price of price of
offering offering
Units amount Units amount
Title of Security Registered registered sold sold
----------------- ---------- ---------- ---- ----
Limited Company units 15,000,000 $150,000,000 12,110,460 $121,104,600
(8) Costs incurred for the issuer's account in connection with the issuance and
distribution of the securities registered for each category listed below:
Direct or
indirect
payments to
directors,
officers,
managing
members of the
issuer or
their
associates; to
persons owning
ten percent or more of any Direct or
class of equity securities of indirect
the issuer; and to affiliates of payments to
the issuer others Total
---------- ------ -----
Underwriting discounts and
commissions $ 1,816,569 $ 9,688,368 $11,504,937
Other expenses - 4,709,641 4,709,641
---------------- ---------------- ----------------
Total expenses $ 1,816,569 $14,398,009 $16,214,578
================ ================ ================
(9) Net offering proceeds to the issuer after the total expenses in item (8) above: $104,890,022
(10) The amount of net offering proceeds to the issuer used for each of the
purposes listed below:
Direct or
indirect
payments to
directors,
officers,
managing
members of the
issuer or
their
associates; to
persons owning
ten percent or more of any Direct or
class of equity securities of indirect
the issuer; and to affiliates of payments to
the issuer others Total
---------- ------ -----
Purchase and installation of
machinery and equipment $ - $104,284,499 $104,284,499
Working capital - 605,523 605,523
---------------- ---------------- ----------------
$ - $104,890,022 $104,890,022
================ ================ ================
(11) The use of the proceeds in item (10) above does not represent a material
change in the uses of proceeds described in the prospectus.
5
Item 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of the Company at
December 31, 2002, 2001 and 2000 and for the periods then ended. This financial
data should be read in conjunction with the financial statements and related
notes included under Part II Item 8.
2002 2001 2000
---- ---- ----
Gross revenues $ 7,073,495 $ 3,393,685 $ -
Net income $ 603,150 $ 584,176 $ -
Weighted average Units 7,280,533 2,167,171 50
Net income allocated to Other Members $ 115,396 $ 485,897 $ -
Net income per Unit, based on weighted
average Units outstanding $ 0.02 $ 0.22 $ -
Distributions per Unit, based on weighted average
Units outstanding $ 0.83 $ 0.56 $ -
Total Assets $89,419,224 $36,828,411 $ 600
Total Members' Capital $88,816,997 $36,550,603 $ 600
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Statements contained in this Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and elsewhere in this Form
10-K, which are not historical facts, may be forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Investors are cautioned not
to attribute undue certainty to these forward-looking statements, which speak
only as of the date of this Form 10-K. 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-K or to reflect the occurrence of
unanticipated events, other than as required by law.
Capital Resources and Liquidity
The Company commenced its offering of Units on January 16, 2001. On
February 21, 2001, the Company commenced operations in its primary business
(leasing activities). Until the Company's initial portfolio of equipment has
been purchased, funds that have been received, but that have not yet been
invested in leased equipment, are invested in interest-bearing accounts or
high-quality/short-term commercial paper. The Company's public offering provided
for a total maximum capitalization of $150,000,000.
During the funding period, the Company's primary source of liquidity was
subscription proceeds from the public offering of Units. The liquidity of the
Company will vary in the future, increasing to the extent cash flows from leases
and proceeds of asset sales exceed expenses, and decreasing as lease assets are
acquired, as distributions are made to the other members and to the extent
expenses exceed cash flows from leases and proceeds from asset sales.
As another source of liquidity, the Company is expected to have 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 ATEL's 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 $55,645,837 revolving line of credit (comprised of an
acquisition facility and a warehouse facility) with a financial institution that
includes certain financial covenants. The line of credit expires on June 28,
2004. As of December 31, 2002, borrowings under the facility were as follows:
Amount borrowed by the Company under the acquisition facility $ -
Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition
facility 29,000,000
----------------
Total borrowings under the acquisition facility 29,000,000
Amounts borrowed by the Managing Member and its sister corporation under the warehouse facility -
----------------
Total outstanding balance $ 29,000,000
================
Total available under the line of credit $ 55,645,837
Total outstanding balance (29,000,000)
----------------
Remaining availability $ 26,645,837
================
6
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 Company and the
Managing Member.
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 to the Managing Member and providing for
cash distributions to the Other Members. At December 31, 2002, the Company had
commitments to purchase lease assets totaling approximately $10,460,000.
ATEL 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 ATEL 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 ATEL or affiliate and the time acquired by the Company;
(iv) there is no benefit arising out of such transaction to ATEL 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. ATEL
envisions no such requirements for operating purposes.
In August 2002, the Company established a $100 million receivables funding
program with a receivables financing company that issues commercial paper rated
A1 from Standard and Poors and P1 from Moody's Investor Services. In this
receivables funding program, the lenders would receive liens against the
Company's assets. The lender will be in a first position against certain
specified assets and will be in either a subordinated or shared position against
the remaining assets. The program provides for borrowing at a variable interest
rate and requires the Managing Member, on behalf of the Company, to enter into
interest rate swap agreements with certain hedge counterparties (also rated
A1/P1) to mitigate the interest rate risk associated with a variable interest
rate note. The Managing Member anticipates that this program will allow the
Company to have a more cost effective means of obtaining debt financing than
available for individual non-recourse debt transactions. As of December 31,
2002, the Company had not borrowed under the facility.
It is the intention of the Company to use the receivables funding program
as its primary source of debt financing. The Company will continue to use its
sources of non-recourse secured debt financing on a transaction basis as a means
of mitigating credit risk.
ATEL expects that aggregate borrowings in the future will be approximately
50% of aggregate equipment cost. In any event, the Operating Agreement limits
such borrowings to 50% of the total cost of equipment, in aggregate.
The Company commenced regular distributions, based on cash flows from
operations, beginning with the month of February 2001. The distribution was made
in April 2001 and additional distributions have been consistently made through
December 2002.
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.
Cash Flows
In 2002 and 2001, operating lease rents were the primary source of cash
flows from operations. The Company's primary source of cash in both years was
the proceeds of its offering of Limited Liability Company Units.
Sources of cash from investing activities included amounts received for
notes receivable principal payments and direct finance lease payments in both
2002 and 2001. In 2002, the Company also received proceeds from the sales of
lease assets.
Cash was used to purchase assets on operating and direct finance leases.
Cash was also used to pay initial direct lease costs and to pay syndication
costs (associated with the offering) to the Managing Member and one of its
affiliates. Cash was also used to make distributions to the members.
7
Results of Operations
As of February 21, 2001, subscriptions for the minimum amount of the
offering ($1,200,000) had been received and accepted by the Company. As of that
date, the Company commenced operations in its primary business (leasing
activities). There were no operations in 2000. Because of the timing of the
commencement of operations and the fact that the initial portfolio acquisitions
were not completed at December 31, 2002, the results of operations in 2002 and
2001 are not expected to be comparable to future periods. After the Company's
public offering and its initial asset acquisition stage terminate, the results
of operations are expected to change significantly.
Substantially all employees of ATEL track time incurred in performing
administrative services on behalf of the Company. ATEL 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.
Operations in 2002 and 2001 resulted in net income of $603,150 and
$584,176, respectively. The primary source of revenues was rents from operating
leases. The Company is continuing to acquire significant amounts of lease
assets. As a result, results of operations in future periods are not expected to
be comparable to 2002 or 2001.
Derivative Financial Instruments
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, which established new accounting
and reporting standards for derivative instruments. SFAS No. 133 has been
amended by SFAS No. 137, issued in June 1999, and by SFAS No. 138, issued in
June 2000.
SFAS No. 133, as amended, requires the Company to recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value. It further provides criteria for derivative
instruments to be designated as fair value, cash flow, or foreign currency
hedges, and establishes accounting standards for reporting changes in the fair
value of the derivative instruments. If derivative financial instruments are
utilized, the Company will be required to record derivative instruments at fair
value in the balance sheet and recognize the offsetting gains or losses as
adjustments to net income or other comprehensive income, as appropriate.
The Company adopted SFAS No. 133, as amended, on January 1, 2001, which had
no impact as the Company did not utilize derivatives in 2002. However, the
Company expects to enter into interest rate swap agreements in future periods.
Recent Accounting Pronouncements
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS 144), which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations, for a
disposal of a segment of a business. SFAS 144 is effective for fiscal years
beginning after December 15, 2001, with earlier application encouraged. The
Company adopted SFAS 144 as of January 1, 2002. The adoption of the Statement
did not have a significant impact on the Company's financial position and
results of operations.
Internal Controls
As of December 31, 2002, an evaluation was performed under the supervision
and with the participation of the Company's management, including the CEO and
CFO of the Managing Member, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. Based on that evaluation, the
Company's management, including the CEO and CFO of the Managing Member,
concluded that the Company's disclosure controls and procedures were effective
as of December 31, 2002. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to December 31, 2002.
Critical Accounting Policies
The policies discussed below are considered by management of the
Partnership to be critical to an understanding of the Partnership's financial
statements because their application requires significant complex or subjective
judgments, decisions, or assessments, with financial reporting results relying
on estimation about the effect of matters that are inherently uncertain.
Specific risks for these critical accounting policies are described in the
following paragraphs. The Partnership also states these accounting policies in
the notes to the financial statements and in relevant sections in this
discussion and analysis. For all of these policies, management cautions that
future events rarely develop exactly as forecast, and the best estimates
routinely require adjustment.
8
Use of Estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Such estimates primarily relate to the determination of residual values at the
end of the lease term.
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.
Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT 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 expects to manage 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 Managing Member 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 expects to frequently fund leases with its floating interest rate
line of credit and will, therefore, be exposed to interest rate risk until fixed
rate financing is arranged, or the floating interest rate line of credit is
repaid. As of December 31, 2002, there was no outstanding balance on the
floating interest rate line of credit.
Also, as described in the caption "Capital Resources and Liquidity," the
Company entered into a receivables funding facility in 2002. Since interest on
the outstanding balances under the facility will vary, the Company will be
exposed to market risks associated with changing interest rates. To hedge its
interest rate risk, the Company expects to enter into interest rate swaps, which
will effectively convert the underlying interest characteristic on the facility
from floating to fixed. Under the swap agreements, the Company expects to make
or receive 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 will represent 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. There were no borrowings
under this facility as of December 31, 2002.
In general, it is anticipated that these swap agreements will eliminate the
Company's interest rate risk associated with variable rate borrowings. However,
the Company would be exposed to and would manage credit risk associated with the
counterparty by dealing only with institutions it considers financially sound.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Report of Independent Auditors, Financial Statements and Notes to
Financial Statements attached hereto at pages 10 through 23.
9
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Members
ATEL Capital Equipment Fund IX, LLC
We have audited the accompanying balance sheets of ATEL Capital Equipment
Fund IX, LLC (Company) as of December 31, 2002 and 2001, the related statements
of income for the two years ended December 31, 2002, and the related statements
of changes in members' capital and cash flows for the two years ended December
31, 2002 and for the period from September 27, 2000 (inception) through December
31, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ATEL Capital Equipment Fund
IX, LLC at December 31, 2002 and 2001, the results of its operations for the two
years ended December 31, 2002, and its cash flows for the two years ended
December 31, 2002 and for the period from September 27, 2000 (inception) through
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
San Francisco, California
February 7, 2003
10
ATEL CAPITAL EQUIPMENT FUND IX, LLC
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
2002 2001
---- ----
ASSETS
Cash $39,722,496 $13,568,058
Accounts receivable 1,197,760 1,186,719
Notes receivable 1,055,609 982,262
Other assets 465,157 -
Investment in equipment and leases 46,978,202 21,091,372
---------------- ----------------
$89,419,224 $36,828,411
================ ================
LIABILITIES AND MEMBERS' CAPITAL
Accounts payable:
Managing Member $ 434,516 $ 157,719
Other 90,667 24,471
Unearned operating lease income 77,044 95,618
---------------- ----------------
Total liabilities 602,227 277,808
Total members' capital $88,816,997 36,550,603
---------------- ----------------
Total liabilities and members' capital $89,419,224 $36,828,411
================ ================
See accompanying notes.
11
ATEL CAPITAL EQUIPMENT FUND IX, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED
DECEMBER 31, 2002 AND 2001
Revenues: 2002 2001
---- ----
Leasing activities:
Operating leases $ 6,269,908 $ 3,102,265
Direct financing leases 114,980 53,589
Gain on sales of assets 107,353 -
Interest 579,486 232,116
Other 1,768 5,715
---------------- ----------------
7,073,495 3,393,685
Expenses:
Depreciation and amortization 5,178,087 2,078,895
Cost reimbursements to Managing Member 343,120 374,507
Interest expense 336,696 199,230
Asset management fees to Managing Member 264,322 83,341
Professional fees 99,730 39,384
Other 248,390 34,152
---------------- ----------------
6,470,345 2,809,509
---------------- ----------------
Net income $ 603,150 $ 584,176
================ ================
Net income:
Managing Member $ 487,754 $ 98,279
Other Members 115,396 485,897
---------------- ----------------
$ 603,150 $ 584,176
================ ================
Net income per Limited Liability Company Unit
(Other Members) $ 0.02 $ 0.22
Weighted average number of Units outstanding 7,280,533 2,167,171
See accompanying notes.
12
ATEL CAPITAL EQUIPMENT FUND IX, LLC
STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
FOR THE YEARS ENDED
DECEMBER 31, 2002 AND 2001 AND
FOR THE PERIOD FROM SEPTEMBER 27, 2000 (INCEPTION)
THROUGH DECEMBER 31, 2000
Other Members Managing
-------------
Units Amount Member Total
----- ------ ------ -----
Initial capital contributions, September 2000 50 $ 500 $ 100 $ 600
---------------- ---------------- ---------------- ----------------
Balance December 31, 2000 50 500 100 600
Capital contributions 4,363,359 43,633,590 - 43,633,590
Less selling commissions to affiliates (4,145,191) - (4,145,191)
Other syndication costs to affiliates (2,210,852) - (2,210,852)
Distributions to Other Members ($0.56 per Unit) (1,213,341) - (1,213,341)
Distributions to Managing Member - (98,379) (98,379)
Net income 485,897 98,279 584,176
---------------- ---------------- ---------------- ----------------
Balance December 31, 2001 4,363,409 36,550,603 - 36,550,603
Capital contributions 6,673,732 66,737,320 - 66,737,320
Less selling commissions to affiliates (6,340,045) - (6,340,045)
Other syndication costs to affiliates (2,230,650) - (2,230,650)
Distributions to Other Members ($0.83 per Unit) (6,015,627) - (6,015,627)
Distributions to Managing Member - (487,754) (487,754)
Net income 115,396 487,754 603,150
---------------- ---------------- ---------------- ----------------
Balance December 31, 2002 11,037,141 $88,816,997 $ - $88,816,997
================ ================ ================ ================
See accompanying notes.
13
ATEL CAPITAL EQUIPMENT FUND IX, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 2002 AND 2001 AND
FOR THE PERIOD FROM SEPTEMBER 27, 2000 (INCEPTION)
THROUGH DECEMBER 31, 2000
Operating activities: 2002 2001 2000
---- ---- ----
Net income $ 603,150 $ 584,176 $ -
Adjustments to reconcile net income to cash provided by operating
activities:
Gain on sales of lease assets (107,353) - -
Depreciation and amortization 5,178,087 2,078,895 -
Residual value income (201) (9,890) -
Changes in operating assets and liabilities:
Other assets (465,157) - -
Accounts receivable (11,041) (1,186,719) -
Accounts payable, Managing Member 276,797 157,719 -
Accounts payable, other 66,196 24,471 -
Unearned operating lease income (18,574) 95,618 -
---------------- ---------------- ----------------
Net cash provided by operations 5,521,904 1,744,270 -
---------------- ---------------- ----------------
Investing activities:
Purchases of equipment on operating leases (29,839,551) (22,025,405) -
Note receivable advances (1,031,605) (1,587,939) -
Purchases of equipment on direct financing leases (995,270) (819,124) -
Proceeds from sales of lease assets 749,408 - -
Payments received on notes receivable 958,258 605,677 -
Investment in residuals - (66,093) -
Payments of initial direct costs to Managing Member (1,092,641) (317,985) -
Reduction of net investment in direct financing leases 220,691 68,230 -
---------------- ---------------- ----------------
Net cash used in investing activities (31,030,710) (24,142,639) -
---------------- ---------------- ----------------
Financing activities:
Capital contributions received 66,737,320 43,633,590 600
Payment of syndication costs to Managing Member (8,570,695) (6,356,043) -
Distributions to Other Members (6,015,627) (1,213,341) -
Distributions to Managing Member (487,754) (98,379) -
---------------- ---------------- ----------------
Net cash provided by financing activities 51,663,244 35,965,827 600
---------------- ---------------- ----------------
Net increase in cash and cash equivalents 26,154,438 13,567,458 600
Cash and cash equivalents at beginning of period 13,568,058 600 -
---------------- ---------------- ----------------
Cash and cash equivalents at end of period $39,722,496 $13,568,058 $ 600
================ ================ ================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 336,696 $ 199,230 $ -
================ ================ ================
See accompanying notes.
14
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
1. Organization and Limited Liability Company matters:
ATEL Capital Equipment Fund IX, LLC (the Company) was formed under the laws
of the state of California on September 27, 2000 for the purpose of acquiring
equipment to engage in equipment leasing and sales activities, primarily in the
United States. The Managing Member of the Company is ATEL Financial Services LLC
(ATEL), a California limited liability corporation. The Company may continue
until December 31, 2019. Contributions in the amount of $600 were received as of
December 31, 2000, $100 of which represented the Managing Member's continuing
interest, and $500 of which represented the Initial Member's capital investment.
The Company conducted a public offering of 15,000,000 Limited Liability
Company Units (Units), at a price of $10 per Unit. On February 21, 2001,
subscriptions for the minimum number of Units (120,000, representing $1,200,000)
had been received and ATEL requested that the subscriptions be released to the
Company. On that date, the Company commenced operations in its primary business
(leasing activities). As of April 3, 2001, the Company had received
subscriptions for 753,050 Units ($7,530,500) and ATEL requested that the
remaining funds in escrow (from Pennsylvania investors) be released to the
Company. As of December 31, 2002, the Company had received subscriptions for
11,037,141 ($110,371,410) Units, including the Initial Members' Units. All of
the Units were issued and outstanding as of December 31, 2002.
As of January 15, 2003, the offering was terminated. As of that date, the
Company had received subscriptions for 12,110,460 Units ($121,104,600).
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 partners 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 72 months after the end of the year in which the
Final Closing occurs (December 31, 2009) 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).
2. Summary of significant accounting policies:
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.
Revenues from operating leases are recognized evenly over the lives of the
related leases.
Direct financing 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.
15
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
2. Summary of significant accounting policies (continued):
Investment in 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. To date, the Company has made no provisions for losses on
notes receivable nor has the Company written off any notes receivables.
Accounts receivable:
Accounts receivable represent the amounts billed under lease contracts and
currently due to the Partnership. Allowances for doubtful accounts are typically
established based on historical charge offs and collection experience and are
usually determined by specifically identified lessees and invoiced amounts.
Statements of cash flows:
For purposes of the Statements of Cash Flows, cash and cash equivalents
includes cash in banks and cash equivalent investments with original maturities
of ninety days or less.
Income taxes:
The Company does not provide for income taxes since all income and losses
are the liability of the individual members and are allocated to the members for
inclusion in their individual tax returns.
The tax basis of the Company's net assets and liabilities varies from the
amounts presented in these financial statements (unaudited):
2002 2001
---- ----
Financial statement basis of net assets $ 88,816,997 $ 36,550,603
Tax basis of net assets 99,145,193 42,430,089
---------------- ----------------
Difference $ 10,328,196 $ 5,879,486
================ ================
The primary differences between the tax basis of net assets and the amounts
recorded in the financial statements are the result of differences in accounting
for syndication costs and differences between the depreciation methods used in
the financial statements and the Company's tax returns.
The following reconciles the net income reported in these financial
statements to the loss reported on the Company's federal tax return (unaudited):
2002 2001 2000
---- ---- ----
Net income per financial statements $ 603,150 $ 584,176 $ -
Adjustment to depreciation expense (4,486,980) (640,404) -
Adjustments to lease revenues (64,120) 163,847 -
---------------- ---------------- ----------------
Net income (loss) per federal tax return $ (3,947,950) $ 107,619 $ -
================ ================ ================
16
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
2. Summary of significant accounting policies (continued):
Per unit data:
Net income and distributions per unit are based upon the weighted average
number of units outstanding during the period.
Initial direct costs:
The Company capitalizes initial direct costs associated with the
acquisition of lease assets. The costs are amortized over a five year period
using a straight line method.
Credit risk:
Financial instruments that potentially subject the Company to
concentrations of credit risk include cash and cash equivalents, notes
receivable, direct finance lease receivables and accounts receivable. The
Company places its cash deposits and temporary cash investments with
creditworthy, high quality financial institutions. The concentration of such
deposits and temporary cash investments is not deemed to create a significant
risk to the Company. Accounts receivable and notes receivable represent amounts
due from lessees and debtors in various industries, related to equipment on
operating and direct financing leases or equipment financed through notes
receivable. See Note 7 for a description of lessees and debtors by industry as
of December 31, 2002 and 2001.
Basis of presentation:
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. Certain prior
year amounts have been reclassified to conform to the current year presentation.
Use of estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Such estimates primarily relate to the determination of residual values at the
end of the lease term.
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.
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
2. Summary of significant accounting policies (continued):
Derivative financial instruments:
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, which established new accounting
and reporting standards for derivative instruments. SFAS No. 133 has been
amended by SFAS No. 137, issued in June 1999, and by SFAS No. 138, issued in
June 2000.
SFAS No. 133, as amended, requires the Company to recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value. It further provides criteria for derivative
instruments to be designated as fair value, cash flow, or foreign currency
hedges, and establishes accounting standards for reporting changes in the fair
value of the derivative instruments.
The Company adopted SFAS No. 133, as amended, on January 1, 2001, which had
no impact as the Company did not utilize derivatives during 2002 or 2001.
Recent accounting pronouncement:
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS 144), which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations, for a
disposal of a segment of a business. SFAS 144 is effective for fiscal years
beginning after December 15, 2001, with earlier application encouraged. The
Company adopted SFAS 144 as of January 1, 2002. The adoption of the Statement
did not have a significant impact on the Company's financial position and
results of operations.
3. Investment in leases:
The Company's investment in leases consists of the following:
Depreciation
Balance Expense and Reclassi- Balance
December 31, Amortization fications or December 31,
2001 Additions of Leases Dispositions 2002
---- --------- --------- ------------ ----
Net investment in operating leases $ 19,971,408 $ 29,839,551 $ (5,019,123) $ (642,055) $ 44,149,781
Net investment in direct financing leases 750,894 995,270 (220,691) - 1,525,473
Residual values, other 75,983 - 201 - 76,184
Initial direct costs, net of accumulated
amortization of $183,862 in 2002 and
$24,898 in 2001 293,087 1,092,641 (158,964) - 1,226,764
----------------- ---------------- ---------------- ---------------- ----------------
$ 21,091,372 $ 31,927,462 $ (5,398,577) $ (642,055) $ 46,978,202
================= ================ ================ ================ ================
17
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
3. Investment in leases (continued):
Operating leases:
Property on operating leases consists of the following:
Reclass-
December 31, ifications or December 31,
2001 Additions Dispositions 2002
---- --------- ------------ ----
Mining $ 13,421,219 $ 7,481,993 $ - $20,903,212
Manufacturing 989,709 14,062,257 - 15,051,966
Marine vessels 5,712,000 5,488,000 - 11,200,000
Materials handling 207,486 2,211,916 - 2,419,402
Natural gas compressors 696,451 - - 696,451
Office furniture 998,540 326,232 (762,524) 562,248
Communications - 269,153 - 269,153
---------------- ---------------- ---------------- ----------------
22,025,405 29,839,551 (762,524) 51,102,432
Less accumulated depreciation (2,053,997) (5,019,123) 120,469 (6,952,651)
---------------- ---------------- ---------------- ----------------
$ 19,971,408 $ 24,820,428 $ (642,055) $ 44,149,781
================ ================ ================ ================
The average assumed residual value for assets on operating leases at
December 31, 2002 and 2001 were 30% and 26% of the assets original cost,
respectively.
Direct financing leases:
As of December 31, 2002, investment in direct financing leases consists of
materials handling equipment and office furniture. The following lists the
components of the Company's investment in direct financing leases as of December
31, 2002 and 2001:
2002 2001
---- ----
Total minimum lease payments receivable $ 1,621,790 $ 845,532
Estimated residual values of leased equipment (unguaranteed) 211,527 122,869
---------------- ----------------
Investment in direct financing leases 1,833,317 968,401
Less unearned income (307,844) (217,507)
---------------- ----------------
Net investment in direct financing leases $ 1,525,473 $ 750,894
================ ================
All of the property on leases was acquired in 2002 and 2001.
At December 31, 2002, the aggregate amounts of future minimum lease
payments are as follows:
Direct
Year ending Operating Financing
December 31, Leases Leases Total
------------ ------ ------ -----
2003 $ 7,870,498 $ 373,337 $ 8,243,835
2004 7,785,688 373,337 8,159,025
2005 7,734,909 373,337 8,108,246
2006 7,279,480 363,473 7,642,953
2007 2,818,437 135,492 2,953,929
Thereafter 2,399,528 2,814 2,402,342
---------------- ---------------- ----------------
$ 35,888,540 $ 1,621,790 $ 37,510,330
================ ================ ================
At December 31, 2002, there were commitments to purchase lease assets
totaling approximately $10,460,000.
18
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
4. Notes receivable:
The Company has various notes receivable from parties who have financed the
purchase of equipment through the Company. The terms of the notes receivable are
36 months and bear interest at rates ranging from 17.633% to 21.459%. The notes
are secured by the equipment financed. As of December 31, 2002, the minimum
future payments receivable are as follows:
Year ending
December 31,
------------
2003 $ 780,378
2004 208,020
2005 100,000
2006 75,000
----------------
1,163,398
Less portion representing interest (107,789)
----------------
$ 1,055,609
================
5. Related party transactions:
The terms of the Limited Liability 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 whereby 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.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation
("AEC"), ATEL Investor Services ("AIS") and ATEL Financial Services LLC 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 ATEL Financial
Services LLC.
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.
19
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
5. 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
---- ----
Selling commissions (equal to 9.5% of the selling price of the Limited
Liability Company units, deducted from Other Members' capital) $ 6,340,045 $ 4,145,191
Reimbursement of other syndication costs to Managing Member 2,230,650 2,210,852
Administrative costs reimbursed to Managing Member 343,120 374,507
Initial direct costs paid to Managing Member 1,092,641 317,985
Asset management fees to Managing Member 264,322 83,341
---------------- ----------------
$ 10,270,778 $ 7,131,876
================ ================
6. Members' capital:
As of December 31, 2002, 11,037,141 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 Limited Liability Company Operating Agreement, the
Company's Net Income, Net Losses, and Distributions are to be allocated 92.5% to
the Members and 7.5% to ATEL. In accordance with the terms of the of Operating
Agreement, additional allocations of income were made to the Managing Member in
2002 and 2001. The amounts allocated were determined to bring the Managing
Member's ending capital account balance to zero at the end of each year.
7. Concentration of credit risk and major customers:
The Company leases equipment to lessees and provides debt financing to
borrowers in diversified industries. Leases and notes receivable are subject to
the Managing Member's credit committee review. The leases and notes receivable
provide for the return of the equipment upon default.
As of December 31, 2002 and 2001, there were concentrations (greater than
10%) of equipment leased to lessees and/or financial borrowers in certain
industries (as a percentage of total equipment cost) as follows:
2002 2001
---- ----
Manufacturing 37% *
Electric utilities 21% 50%
Marine transportation 21% 25%
Mining 18% *
* Less than 10%
During 2002, three customers comprised 23%, 17% and 11% of the Company's
revenues from leases. During 2001, two customers comprised 54% and 14% of the
Company's revenues from leases.
20
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
8. Line of credit:
The Company participates with the Managing Member and certain of its
affiliates in a $55,645,837 revolving line of credit (comprised of an
acquisition facility and a warehouse facility) with a financial institution that
includes certain financial covenants. The line of credit expires on June 28,
2004. As of December 31, 2002, borrowings under the facility were as follows:
Amount borrowed by the Company under the acquisition facility $ -
Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition
facility 29,000,000
----------------
Total borrowings under the acquisition facility 29,000,000
Amounts borrowed by the Managing Member and its sister corporation under the warehouse facility -
----------------
Total outstanding balance $ 29,000,000
================
Total available under the line of credit $ 55,645,837
Total outstanding balance (29,000,000)
----------------
Remaining availability $ 26,645,837
================
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 Company and the
Managing Member.
The Company has not borrowed under the line of credit. Interest on the line
of credit is based on either the thirty day LIBOR rate or the bank's prime rate.
The credit agreement includes certain financial covenants applicable to
each borrower. The Company was in compliance with its covenants as of December
31, 2002.
9. Fair value of financial instruments:
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that value.
Cash and cash equivalents:
The carrying amount of cash and cash equivalents approximates fair value
because of the short-term maturity of these instruments.
Notes receivable:
The fair value of the Company's notes receivable is estimated using
discounted cash flow analyses, based on the Company's current incremental
lending rates for similar types of lending arrangements. The estimated fair
value of the Company's notes receivable at December 31, 2002 is $899,418.
21
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
10. Selected quarterly data (unaudited):
March 31, June 30, September 30, December 31,
Quarter ended 2001 2001 2001 2001
---- ---- ---- ----
Total revenues $ 94,283 $ 1,196,834 $ 1,316,784 $ 785,784
Net ncome (loss) $ (37,181) $ 304,136 $ 193,622 $ 123,599
Net income (loss) per limited partnership unit $ (0.17) $ 0.09 $ 0.19 $ 0.11
March 31, June 30, September 30, December 31,
Quarter ended 2002 2002 2002 2002
---- ---- ---- ----
Total revenues $ 1,079,746 $ 1,540,510 $ 2,255,724 $ 2,197,515
Net ncome (loss) $ 78,721 $ 336,926 $ (27,874) $ 215,377
Net income (loss) per limited partnership unit $ - $ 0.04 $ (0.02) $ 0.00
22
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
The registrant is a Limited Liability Company and, therefore, has no
officers or directors.
All of the outstanding capital stock of ATEL Financial Services LLC (the
Managing Member) is held by ATEL Capital Group ("ACG"), a holding company formed
to control ATEL and affiliated companies. The outstanding voting capital stock
of ATEL Capital Group is owned 5% by A. J. Batt and 95% by Dean Cash.
Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation
("AEC"), ATEL Investor Services ("AIS") and ATEL Financial Services LLC ("AFS")
is a wholly-owned subsidiary of ATEL Capital Group and performs services for the
Partnership. Acquisition services are performed for the Partnership 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 Partnership are performed by
AFS. ATEL Securities Corporation ("ASC") is a wholly-owned subsidiary of AFS.
The officers and directors of ATEL Capital Group and its affiliates are as
follows:
Dean L. Cash Chairman of the Board of Directors of ACG, AFS, ALC, AEC,
AIS and ASC; President and Chief Executive Officer of
ACG, AFS and AEC
Paritosh K. Choksi Director, Executive Vice President, Chief Operating
Officer and Chief Financial Officer of ACG, AFS, ALC,
AEC and AIS
Donald E. Carpenter Vice President and Controller of ACG, AFS, ALC, AEC and
AIS; Chief Financial Officer of ASC
Vasco H. Morais Senior Vice President, Secretary and General Counsel for
ACG, AFS, ALC, AIS and AEC
Dean L. Cash, age 52, joined ATEL as director of marketing in 1980 and has
been a vice president since 1981, executive vice president since 1983 and a
director since 1984. He has been President and CEO since April 2001. Prior to
joining ATEL, Mr. Cash was a senior marketing representative for Martin Marietta
Corporation, data systems division, from 1979 to 1980. From 1977 to 1979, he was
employed by General Electric Corporation, where he was an applications
specialist in the medical systems division and a marketing representative in the
information services division. Mr. Cash was a systems engineer with Electronic
Data Systems from 1975 to 1977, and was involved in maintaining and developing
software for commercial applications. Mr. Cash received a B.S. degree in
psychology and mathematics in 1972 and an M.B.A. degree with a concentration in
finance in 1975 from Florida State University. Mr. Cash is an arbitrator with
the American Arbitration Association.
Paritosh K. Choksi, age 49, joined ATEL in 1999 as a director, senior vice
president and its chief financial officer. He became its executive vice
president and COO in April 2001. Prior to joining ATEL, Mr. Choksi was chief
financial officer at Wink Communications, Inc. from 1997 to 1999. From 1977 to
1997, Mr. Choksi was with Phoenix American Incorporated, a financial services
and management company, where he held various positions during his tenure, and
was senior vice president, chief financial officer and director when he left the
company. Mr. Choksi was involved in all corporate matters at Phoenix and was
responsible for Phoenix's capital market needs. He also served on the credit
committee overseeing all corporate investments, including its venture lease
portfolio. Mr. Choksi was a part of the executive management team which caused
Phoenix's portfolio to increase from $50 million in assets to over $2 billion.
Mr. Choksi received a bachelor of technology degree in mechanical engineering
from the Indian Institute of Technology, Bombay; and an M.B.A. degree from the
University of California, Berkeley.
Donald E. Carpenter, age 54, joined ATEL in 1986 as controller. Prior to
joining ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath,
certified public accountants in San Francisco, California, from 1983 to 1986.
From 1979 to 1983, Mr. Carpenter was an audit senior with Deloitte, Haskins &
Sells, certified public accountants, in San Jose, California. From 1971 to 1975,
Mr. Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter
received a B.S. degree in mathematics (magna cum laude) from California State
University, Fresno in 1971 and completed a second major in accounting in 1978.
Mr. Carpenter has been a California certified public accountant since 1981.
23
Vasco H. Morais, age 44, joined ATEL in 1989 as general counsel to provide
legal support in the drafting and reviewing of lease documentation, advising on
general corporate law matters, and assisting on securities law issues. From 1986
to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of
America's equipment leasing subsidiaries, providing in-house legal support on
the documentation of tax-oriented and non-tax oriented direct and leveraged
lease transactions, vendor leasing programs and general corporate matters. Prior
to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital
Companies in the corporate and securities legal department involved in drafting
and reviewing contracts, advising on corporate law matters and securities law
issues. Mr. Morais received a B.A. degree in 1982 from the University of
California in Berkeley, a J.D. degree in 1986 from Golden Gate University Law
School and an M.B.A. (Finance) in 1997 from Golden Gate University. Mr. Morais
has been an active member of the State Bar of California since 1986.
Item 11. EXECUTIVE COMPENSATION
The registrant is a Limited Liability Company and, therefore, has no
officers or directors.
Set forth hereinafter is a description of the nature of remuneration paid
and to be paid to ATEL and its Affiliates. The amount of such remuneration paid
in 2002 and 2001 is set forth in Item 8 of this report under the caption
"Financial Statements and Supplementary Data - Notes to the Financial Statements
- - Related party transactions," at Note 5 thereof, which information is hereby
incorporated by reference.
Selling Commissions
The Company paid selling commissions in the amount of 9.5% of Gross
Proceeds, as defined, to ATEL Securities Corporation, an affiliate of ATEL.
Through December 31, 2002, $10,485,236 of such commissions had been paid to
ATEL or its affiliates. Of that amount, $8,829,673 has been re-allowed to other
broker/dealers.
Asset Management Fee
The Company will pay ATEL an Asset Management Fee in an amount equal to 4%
of Operating Revenues, which will include Gross Lease Revenues and Cash From
Sales or Refinancing. The Asset Management Fee will be paid on a monthly basis.
The amount of the Asset Management Fee payable in any year will be reduced for
that year to the extent it would otherwise exceed the Asset Management Fee
Limit, as described below. The Asset Management Fee will be paid for services
rendered by ATEL and its Affiliates in determining portfolio and investment
strategies (i.e., establishing and maintaining the composition of the Equipment
portfolio as a whole and the Company's overall debt structure) and generally
managing or supervising the management of the Equipment.
ATEL will supervise performance of among others activities, collection of
lease revenues, monitoring compliance by lessees with the lease terms, assuring
that Equipment is being used in accordance with all operative contractual
arrangements, paying operating expenses and arranging for necessary maintenance
and repair of Equipment in the event a lessee fails to do so, monitoring
property, sales and use tax compliance and preparation of operating financial
data. ATEL intends to delegate all or a portion of its duties and the Asset
Management Fee to one or more of its Affiliates who are in the business of
providing such services.
Asset Management Fee Limit:
The Asset Management Fee will be subject to the Asset Management Fee Limit.
The Asset Management Fee Limit will be calculated each year during the Company's
term by calculating the total fees that would be paid to ATEL if the Managing
Member were to be compensated on the basis of an alternative fee schedule, to
include an Equipment Management Fee, Incentive Management Fee, and Equipment
Resale/Re-Leasing Fee, plus ATEL's Carried Interest, as described below. To the
extent that the amount paid to ATEL as the Asset Management Fee plus its Carried
Interest for any year would exceed the aggregate amount of fees calculated under
this alternative fee schedule for the year, the Asset Management Fee and/or
Carried Interest for that year will be reduced to equal the maximum aggregate
fees under the alternative fee schedule.
To the extent any such fees are reduced, the amount of such reduction will
be accrued and deferred, and such accrued and deferred compensation would be
paid to ATEL in a subsequent period, but only if and to the extent that such
deferred compensation would be payable within the Asset Management Fee Limit for
the subsequent period. Any deferred fees which cannot be paid under the
applicable limitations in any subsequent period through the date of liquidation
would be forfeited by ATEL upon liquidation.
Alternative Fee Schedule:
For purposes of the Asset Management Fee Limit, the Company will calculate
an alternative schedule of fees, including a hypothetical Equipment Management
Fee, Incentive Management Fee, Equipment Resale/Re- Leasing Fee, and Carried
Interest as follows:
24
An Equipment Management Fee will be calculated to equal the lesser of (i)
3.5% of annual Gross Revenues from Operating Leases and 2% of annual Gross
Revenues from Full Payout Leases which contain Net Lease Provisions), or (ii)
the fees customarily charged by others rendering similar services as an ongoing
public activity in the same geographic location and for similar types of
equipment. If services with respect to certain Operating Leases are performed by
nonaffiliated persons under the active supervision of ATEL or its Affiliate,
then the amount so calculated shall be 1% of Gross Revenues from such Operating
Leases.
An Incentive Management Fee will be calculated to equal 4% of Distributions
of Cash from Operations until Holders have received a return of their Original
Invested Capital plus a Priority Distribution, and, thereafter, to equal a total
of 7.5% of Distributions from all sources, including Sale or Refinancing
Proceeds. In subordinating the increase in the Incentive Management Fee to a
cumulative return of a Holder's Original Invested Capital plus a Priority
Distribution, a Holder would be deemed to have received Distributions of
Original Invested Capital only to the extent that Distributions to the Holder
exceed the amount of the Priority Distribution.
An Equipment Resale/Re-Leasing Fee will be calculated in an amount equal to
the lesser of (i) 3% of the sale price of the Equipment, or (ii) one-half the
normal competitive equipment sale commission charged by unaffiliated parties for
resale services. Such fee would apply only after the Holders have received a
return of their Original Invested Capital plus a Priority Distribution. In
connection with the releasing of Equipment to lessees other than previous
lessees or their Affiliates, the fee would be in an amount equal to the lesser
of (i) the competitive rate for comparable services for similar equipment, or
(ii) 2% of the gross rental payments derived from the re-lease of such
Equipment, payable out of each rental payment received by the Company from such
re-lease.
A Carried Interest equal to 7.5% of all Distributions of Cash from
Operations and Cash from Sales or Refinancing.
See Note 6 to the financial statements included in Item 8 for amounts paid.
Managing Member's Interest in Operating Proceeds
Net income, net loss and investment tax credits are allocated 92.5% to the
Members and 7.5% to ATEL. See financial statements included in Item 8, Part I of
this report for amounts allocated to the Managing Member in 2002 and 2001.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
At December 31, 2002, no investor is known to hold beneficially more than
5% of the issued and outstanding Units.
Security Ownership of Management
The parent of ATEL is the beneficial owner of Limited Liability Company
Units as follows:
(1) (2) (3) (4)
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ---------------- -------------------- --------
Limited Liability ATEL Capital Group Initial Limited Liability 0.0005%
Company Units 600 California Street, 6th Floor Company Units
San Francisco, CA 94108 50 Units ($500)
Changes in Control
The Members have the right, by vote of the Members owning more than 50% of
the outstanding Limited Liability Company Units, to remove a Managing Member.
ATEL may at any time call a meeting of the Members or a vote of the Members
without a meeting, on matters on which they are entitled to vote, and shall call
such meeting or for vote without a meeting following receipt of a written
request therefore of Limited Partners holding 10% or more of the total
outstanding Limited Liability Company Units.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to Item 1 of this report under the caption "Equipment Leasing
Activities," Item 8 of this report under the caption "Financial Statements and
Supplemental Data - Notes to the Financial Statements - Related party
transactions" at Note 5 thereof, and Item 11 of this report under the caption
"Executive Compensation," are hereby incorporated by reference.
25
Item 14. 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 240.13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934] was performed as of a date within ninety days
before the filing date of this annual report. Based upon this evaluation, the
chief executive officer and 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.
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.
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a)Financial Statements and Schedules
1. Financial Statements
Included in Part II of this report:
Report of Independent Auditors
Balance Sheets at December 31, 2002 and 2001
Statements of income for the years ended December 31, 2002 and 2001
Statement of Changes in Members' Capital for the years ended December
31, 2002 and 2001 and for the period from September 27, 2000
(inception) through December 31, 2000
Statement of Cash Flows for the years ended December 31, 2002 and 2001
and for the period from September 27, 2000 (inception) through
December 31, 2000
Notes to Financial Statements
2. Financial Statement Schedules
Allschedules 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)Reports on Form 8-K for the fourth quarter of 2002
Not applicable
(c)Exhibits
(3)and (4) Agreement of Limited Liability Company, included as
Exhibit B to Prospectus, is incorporated herein by reference to the
report on Form 10K for the period ended December 31, 2001 (File
Number 333-47196) (Exhibit 28.1)
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: 3/26/03
ATEL Capital Equipment Fund IX, LLC
(Registrant)
By: ATEL Financial Services LLC,
Managing Member of Registrant
By: /s/ Dean L. Cash
---------------------------------------------------
Dean Cash
President of ATEL Financial Services LLC (Managing Member)
By: /s/ Paritosh K. Choksi
---------------------------------------------------
Paritosh K. Choksi
Executive Vice President of ATEL Financial Services
LLC (Managing Member)
27
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the persons in the capacities and on the dates
indicated.
SIGNATURE CAPACITIES DATE
/s/ Dean L. Cash President, Chairman and Chief 3/26/03
- -------------------------- Executive Officer of ATEL Financial
Dean Cash Services
/s/ Paritosh K. Choksi Principal financial officer of 3/26/03
Paritosh K. Choksi registrant; principal financial officer
and director of ATEL Financial
Services LLC
/s/ Donald E. Carpenter Principal accounting officer of 3/26/03
- -------------------------- registrant; principal accounting C
Donald E. Carpenter officer of ATEL Financial Services LLC
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act:
No proxy materials have been or will be sent to security holders. An annual
report will be furnished to security holders subsequent to the filing of this
report on Form 10-K, and copies thereof will be furnished supplementally to the
Commission when forwarded to the security holders.
28
CERTIFICATIONS
I, Paritosh K. Choksi, certify that:
1. I have reviewed this annual report on Form 10-K of ATEL Cash Distribution
Fund IX, LLC;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 3/26/03
/s/ Paritosh K. Choksi
- ----------------------------------------------------------------
Paritosh K. Choksi
Principal financial officer of registrant, Executive
Vice President of Managing Member
29
CERTIFICATIONS
I, Dean L. Cash, certify that:
1. I have reviewed this annual report on Form 10-K of ATEL Cash Distribution
Fund IX, LLC;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 3/26/03
/s/ Dean L. Cash
- ----------------------------------------------------------------
Dean L. Cash
President and Chief Executive
Officer of Managing Member
30
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 Annual report on Form 10K of ATEL Cash Distribution
Fund IX, LLC, (the "Company") for the period ended December 31, 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: 3/26/03
/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 Annual report on Form 10K of ATEL Cash Distribution
Fund IX, LP, (the "Company") for the period ended December 31, 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: 3/26/03
/s/ Paritosh K. Choksi
- ---------------------------------------------
Paritosh K. Choksi
Executive Vice President of General
Partner, Principal financial officer of registrant
31