Attached files
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EXCEL - IDEA: XBRL DOCUMENT - ATEL CASH DISTRIBUTION FUND VI LP | Financial_Report.xls |
EX-31.1 - EXHIBIT 31.1 - ATEL CASH DISTRIBUTION FUND VI LP | v229608_ex31x1.htm |
EX-31.2 - EXHIBIT 31.2 - ATEL CASH DISTRIBUTION FUND VI LP | v229608_ex31x2.htm |
EX-32.2 - EXHIBIT 32.2 - ATEL CASH DISTRIBUTION FUND VI LP | v229608_ex32x2.htm |
EX-32.1 - EXHIBIT 32.1 - ATEL CASH DISTRIBUTION FUND VI LP | v229608_ex32x1.htm |
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended June 30, 2011
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the transition period from to
Commission File number 000-28368
ATEL Cash Distribution Fund VI, L.P.
(Exact name of registrant as specified in its charter)
California | 94-3207229 | |
(State or other jurisdiction of Incorporation or organization) |
(I. R. S. Employer Identification No.) |
600 California Street, 6th Floor, San Francisco, California 94108-2733
(Address of principal executive offices)
Registrants telephone number, including area code (415) 989-8800
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Limited Partnership Units
Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The number of Limited Partnership Units outstanding as of July 31, 2011 was 12,478,676.
DOCUMENTS INCORPORATED BY REFERENCE
None.
ATEL CASH DISTRIBUTION FUND VI, L.P.
Index
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
ATEL CASH DISTRIBUTION FUND VI, L.P.
BALANCE SHEETS
JUNE 30, 2011 AND DECEMBER 31, 2010
(in thousands)
(Unaudited)
June 30, 2011 |
December 31, 2010 |
|||||||
ASSETS |
||||||||
Cash and cash equivalents | $ | 1,175 | $ | 446 | ||||
Accounts receivable, net of allowance for doubtful accounts of $1 as of June 30, 2011 and $0 as of December 31, 2010 | 206 | 183 | ||||||
Prepaid expenses and other assets | 1 | 4 | ||||||
Investments in equipment and leases, net of accumulated depreciation of $20,918 at June 30, 2011 and $20,773 at December 31, 2010 | 3,983 | 4,410 | ||||||
Total assets | $ | 5,365 | $ | 5,043 | ||||
LIABILITIES AND PARTNERS CAPITAL |
||||||||
Accounts payable and accrued liabilities: |
||||||||
General Partner | $ | 22 | $ | 49 | ||||
Lessees and other | 90 | 132 | ||||||
Unearned operating lease income | 19 | 33 | ||||||
Total liabilities | 131 | 214 | ||||||
Commitments and contingencies |
||||||||
Partners capital: |
||||||||
General Partner | | | ||||||
Limited Partners | 5,234 | 4,829 | ||||||
Total Partners capital | 5,234 | 4,829 | ||||||
Total liabilities and Partners capital | $ | 5,365 | $ | 5,043 |
See accompanying notes.
3
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2011 AND 2010
(in thousands except units and per unit data)
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Leasing activities: |
||||||||||||||||
Operating leases | $ | 656 | $ | 593 | $ | 1,281 | $ | 1,254 | ||||||||
Direct financing leases | | 4 | | 9 | ||||||||||||
Gain on sales of assets | 12 | 17 | 37 | 47 | ||||||||||||
Other revenue | | 2 | | 2 | ||||||||||||
Total revenues | 668 | 616 | 1,318 | 1,312 | ||||||||||||
Expenses: |
||||||||||||||||
Depreciation of operating lease assets | 183 | 220 | 371 | 456 | ||||||||||||
Cost reimbursements to General Partner | 60 | 74 | 127 | 154 | ||||||||||||
Railcar maintenance | 121 | 166 | 220 | 321 | ||||||||||||
Equipment and incentive management fees to General Partner |
18 | 25 | 35 | 55 | ||||||||||||
Taxes on income and franchise fees | 1 | (2 | ) | 2 | 3 | |||||||||||
Other management fees | 26 | 29 | 56 | 64 | ||||||||||||
Professional fees | 3 | 13 | 19 | 37 | ||||||||||||
Outside services | 14 | 22 | 25 | 38 | ||||||||||||
(Reversal of provision) provision for doubtful accounts | (1 | ) | | 1 | | |||||||||||
Other | 33 | 38 | 57 | 68 | ||||||||||||
Total operating expenses | 458 | 585 | 913 | 1,196 | ||||||||||||
Net income | $ | 210 | $ | 31 | $ | 405 | $ | 116 | ||||||||
Net income: |
||||||||||||||||
General Partner | $ | | $ | | $ | | $ | 6 | ||||||||
Limited Partners | 210 | 31 | 405 | 110 | ||||||||||||
$ | 210 | $ | 31 | $ | 405 | $ | 116 | |||||||||
Net income per Limited Liability Partnership Unit | $ | 0.02 | $ | 0.00 | $ | 0.03 | $ | 0.01 | ||||||||
Weighted average number of Units outstanding | 12,478,676 | 12,478,676 | 12,478,676 | 12,478,676 |
See accompanying notes.
4
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CHANGES IN PARTNERS CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2010
AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011
(in thousands, except units and per unit data)
(Unaudited)
Limited Partners | General Partner |
Total | ||||||||||||||
Units | Amount | |||||||||||||||
Balance December 31, 2009 | 12,478,676 | $ | 6,247 | $ | | $ | 6,247 | |||||||||
Distributions to Limited Partners ($0.15 per Unit) | | (1,872 | ) | | (1,872 | ) | ||||||||||
Distributions to General Partner | | | (19 | ) | (19 | ) | ||||||||||
Net income | | 454 | 19 | 473 | ||||||||||||
Balance December 31, 2010 | 12,478,676 | 4,829 | | 4,829 | ||||||||||||
Net income | | 405 | | 405 | ||||||||||||
Balance June 30, 2011 | 12,478,676 | $ | 5,234 | $ | | $ | 5,234 |
See accompanying notes.
5
ATEL CASH DISTRIBUTION FUND VI, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2011 AND 2010
(in thousands)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Operating activities: |
||||||||||||||||
Net income | $ | 210 | $ | 31 | $ | 405 | $ | 116 | ||||||||
Adjustment to reconcile net income to cash provided by operating activities: |
||||||||||||||||
Depreciation of operating lease assets | 183 | 220 | 371 | 456 | ||||||||||||
(Reversal of provision) provision for doubtful accounts | (1 | ) | | 1 | | |||||||||||
Gain on sales of assets | (12 | ) | (17 | ) | (37 | ) | (47 | ) | ||||||||
Changes in operating assets and liabilities: |
||||||||||||||||
Accounts receivable | 6 | 17 | (24 | ) | (80 | ) | ||||||||||
Prepaid expenses and other assets | 2 | 3 | 3 | 5 | ||||||||||||
Accounts payable, General Partner | 13 | (6 | ) | (27 | ) | (6 | ) | |||||||||
Accounts payable, other | (28 | ) | (23 | ) | (42 | ) | (1 | ) | ||||||||
Unearned operating lease income | (7 | ) | (4 | ) | (14 | ) | (7 | ) | ||||||||
Net cash provided by operating activities | 366 | 221 | 636 | 436 | ||||||||||||
Investing activities: |
||||||||||||||||
Proceeds from sales of assets | 31 | 72 | 93 | 159 | ||||||||||||
Principal payments received on direct financing leases | | 14 | | 26 | ||||||||||||
Net cash provided by investing activities | 31 | 86 | 93 | 185 | ||||||||||||
Financing activities: |
||||||||||||||||
Distributions to Limited Partners | | | | (624 | ) | |||||||||||
Distributions to General Partner | | | | (6 | ) | |||||||||||
Net cash used in financing activities | | | | (630 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | 397 | 307 | 729 | (9 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 778 | 663 | 446 | 979 | ||||||||||||
Cash and cash equivalents at end of period | $ | 1,175 | $ | 970 | $ | 1,175 | $ | 970 | ||||||||
Supplemental disclosures of cash flow information: |
||||||||||||||||
Cash paid during the period for taxes | $ | 6 | $ | | $ | 6 | $ | 7 |
See accompanying notes.
6
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Organization and partnership matters:
ATEL Cash Distribution Fund VI, L.P. (the Partnership) was formed under the laws of the State of California on June 29, 1994 for the purpose of engaging in the sale of limited liability investment units and acquiring equipment to engage in equipment leasing and sales activities, primarily in the United States. The Partnership may continue until December 31, 2015. The General Partner of the Partnership is ATEL Financial Services, LLC (AFS). Prior to converting to a limited liability company structure, AFS was formerly known as ATEL Financial Corporation.
The Partnership conducted a public offering of 12,500,000 Limited Partnership Units (Units), at a price of $10 per Unit. Upon the sale of the minimum amount of Units of $1.2 million and the receipt of the proceeds thereof on January 3, 1995, the Partnership commenced operations in its primary business (acquiring equipment to engage in equipment leasing and sales activities). On November 23, 1996, subscriptions for 12,500,000 ($125 million) Limited Partnership Units had been received, in addition to the Initial Limited Partners Units, and the offering terminated. As of June 30, 2011, 12,478,676 Units were issued and outstanding.
The Partnerships principal objectives have been to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Partnerships invested capital; (ii) generates 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 (Reinvestment Period) (defined as six full years following the year the offering was terminated), which ended December 31, 2002 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Partnership is governed by its Limited Partnership Agreement (Partnership Agreement).
Pursuant to the Partnership Agreement, AFS receives compensation for services rendered and reimbursements for costs incurred on behalf of the Partnership (Note 5). The Partnership is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.
As of June 30, 2011, the Partnership is in the liquidation phase of its life cycle as defined in the Partnership Agreement and is making distributions on an annual basis or at the discretion of the General Partner.
These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission.
2. Summary of significant accounting policies:
Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the General Partner, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year.
Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on the reported financial position or results from operations.
Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.
In preparing the accompanying unaudited financial statements, the General Partner has reviewed events that have occurred after June 30, 2011, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements, and adjustments thereto.
7
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of significant accounting policies: - (continued)
Use of estimates:
The preparation of financial statements in conformity with GAAP 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 and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.
Segment reporting:
The Partnership is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Partnership operates in one reportable operating segment in the United States.
Certain of the Partnerships lessee customers may have international operations. In these instances, the Partnership is aware that certain equipment, primarily rail and transportation, may periodically exit the country. However, these lessee customers are US-based, and it is impractical for the Partnership to track, on an asset-by-asset, day-by-day basis, where these assets are deployed.
The primary geographic regions in which the Partnership sought leasing opportunities were North America and Europe. Currently, 100% of the Partnerships operating revenues are from customers domiciled in North America.
Per Unit data:
Net income and distributions per Unit are based upon the weighted average number of Limited Partners Units outstanding during the period.
Recent accounting pronouncements:
In April 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-02, A Creditors Determination of Whether a Restructuring Is a Troubled Debt Restructuring. ASU 2011-02 clarifies guidance on a creditors evaluation of whether it has granted a concession to a borrower and a creditors evaluation of whether a borrower is experiencing financial difficulties. The amendments in this update are effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011. In addition, an entity should disclose the information required by Accounting Standards Codification paragraphs 310-10-50-33 through 50-34, which was deferred by ASU 2011-01, for interim and annual periods beginning on or after June 15, 2011. The Partnership anticipates that adoption of this update will not have a material impact on its financial position or results of operations.
In January 2011, the FASB issued ASU No. 2011-01, Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. ASU 2011-01 temporarily delays the effective date of the disclosures about troubled debt restructurings in Update 2010-20 for public entities. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. The guidance will be effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The Partnership anticipates that adoption of these additional disclosures will not have a material effect on its financial position or results of operations.
8
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Provision for credit losses:
Activity in the allowance for doubtful accounts consists of the following (in thousands):
Accounts Receivable Allowance for Doubtful Accounts |
Valuation Adjustments on Financing Receivables | Total Allowance for Credit Losses |
||||||||||||||||||
Finance Leases |
Operating Leases |
Finance Leases |
Operating Leases |
|||||||||||||||||
Balance December 31, 2009 | $ | | $ | | $ | | $ | | $ | | ||||||||||
Provision | | | | | | |||||||||||||||
Balance December 31, 2010 | | | | | | |||||||||||||||
Provision | | 1 | | | 1 | |||||||||||||||
Balance June 30, 2011 | $ | | $ | 1 | $ | | $ | | $ | 1 |
At June 30, 2011, the entire allowance for doubtful accounts represents reserves against operating lease receivables. There was no such allowance at December 31, 2010. As of June 30, 2011, the Partnership had no investment in financing receivables. Such net investment in financing receivables was nominal at December 31, 2010.
4. Investment in equipment and leases, net:
The Partnerships investments in equipment and leases consists of the following (in thousands):
Balance December 31, 2010 |
Reclassifications & Additions/ Dispositions |
Depreciation/ Amortization Expense or Amortization of Leases |
Balance June 30, 2011 |
|||||||||||||
Net investment in operating leases | $ | 4,390 | $ | (36 | ) | $ | (371 | ) | $ | 3,983 | ||||||
Net investment in direct financing leases | 20 | (20 | ) | | | |||||||||||
Total | $ | 4,410 | $ | (56 | ) | $ | (371 | ) | $ | 3,983 |
Impairment of investments in leases and assets held for sale or lease:
Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. No assets were identified as impaired during managements review for the respective six months ended June 30, 2011 and 2010.
The Partnership utilizes a straight-line depreciation method over the term of the equipment lease for equipment in all of the categories currently in its portfolio of lease transactions. Depreciation expense on the Partnerships equipment totaled $183 thousand and $220 thousand for the respective three months ended June 30, 2011 and 2010, and was $371 thousand and $456 thousand for the respective six months ended June 30, 2011 and 2010.
All of the equipment on leases was acquired in the years 1995 through 1997.
Net investment in operating leases:
Property on operating leases consists of the following (in thousands):
Balance December 31, 2010 |
Additions | Reclassifications or Dispositions |
Balance June 30, 2011 |
|||||||||||||
Transportation, rail | $ | 24,679 | $ | | $ | (282 | ) | $ | 24,397 | |||||||
Transportation, other | 285 | | 20 | 305 | ||||||||||||
Materials handling | 199 | | | 199 | ||||||||||||
25,163 | | (262 | ) | 24,901 | ||||||||||||
Less accumulated depreciation | (20,773 | ) | (371 | ) | 226 | (20,918 | ) | |||||||||
Total | $ | 4,390 | $ | (371 | ) | $ | (36 | ) | $ | 3,983 |
9
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Investment in equipment and leases, net: - (continued)
The average estimated residual value for assets on operating leases was 14% and 15% of the assets original cost at June 30, 2011 and December 31, 2010, respectively.
The Partnership earns revenues from certain lease assets based on utilization of such assets. Such contingent rentals and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of Operating Lease Revenues, and totaled $131 thousand and $128 thousand for the respective three months ended June 30, 2011 and 2010, and $232 thousand and $300 thousand for the respective six months ended June 30, 2011 and 2010.
At June 30, 2011, the aggregate amounts of future minimum lease payments under operating leases are as follows (in thousands):
Operating Leases | ||||
Six months ending December 31, 2011 | $ | 752 | ||
Year ending December 31, 2012 | 312 | |||
2013 | 63 | |||
$ | 1,127 |
Net investment in direct financing leases:
The Partnerships remaining direct financing lease terminated during the second half of 2010. However, at December 31, 2010, the Partnership retained a $20 thousand residual position in the equipment underlying the terminated direct financing lease. During the first quarter of 2011, such equipment was re-leased under short-term operating leases. At June 30, 2011, the Partnership had no remaining investments in direct financing leases.
5. Related party transactions:
The terms of the Partnership Agreement provide that AFS and/or affiliates are entitled to receive certain fees for equipment acquisition, management and resale and for management of the Partnership.
The Partnership Agreement allows for the reimbursement of costs incurred by AFS in providing administrative services to the Partnership. Administrative services provided include Partnership accounting, investor relations, legal counsel and lease and equipment documentation. AFS is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as acquisition and disposition of equipment. The Partnership is contingently liable for certain future costs to be incurred by AFS to manage the administrative services provided to the Partnership.
Each of ATEL Leasing Corporation (ALC) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Partnership. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications and general administrative services are performed by AFS.
Cost reimbursements to the General Partner are based on its costs incurred in performing administrative services for the Partnership. These costs are allocated to each managed entity based on certain criteria such as managed assets, number of investors or contributed capital based upon the type of cost incurred.
Incentive management fees are computed as 4% of distributions of cash from operations, as defined in the Partnership Agreement. Equipment management fees are computed as 3.5% of gross revenues from operating leases, as defined in the Partnership Agreement plus 2% of gross revenues from full payout leases, as defined in the Partnership Agreement.
10
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. Related party transactions: - (continued)
During the three and six months ended June 30, 2011 and 2010, AFS and/or affiliates earned fees and commissions, and billed for reimbursements, pursuant to the Limited Partnership Agreement, as follows (in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cost reimbursements to General Partner | $ | 60 | $ | 74 | $ | 127 | $ | 154 | ||||||||
Equipment and incentive management fees to General Partner | 18 | 25 | 35 | 55 | ||||||||||||
$ | 78 | $ | 99 | $ | 162 | $ | 209 |
6. Guarantees:
The Partnership enters into contracts that contain a variety of indemnifications. The Partnerships maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
The General Partner knows of no facts or circumstances that would make the Partnerships contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Partnership believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability under the Partnerships similar commitments is remote. Should any such indemnification obligation become payable, the Partnership would separately record and/or disclose such liability in accordance with GAAP.
7. Partners capital:
As of June 30, 2011 and December 31, 2010, 12,478,676 Units were issued and outstanding. The Partnership was authorized to issue up to 12,500,000 Units, in addition to the 50 Units issued to the Initial Limited Partners, as defined.
The Partnership has the right, exercisable at the General Partners discretion, but not the obligation, to repurchase Units of a Unitholder who ceases to be a U.S. Citizen, for a price equal to 100% of the holders capital account. The Partnership is otherwise permitted, but not required, to repurchase Units upon a holders request. The repurchase of Fund Units is made in accordance with Section 13 of the Amended and Restated Agreement of Limited Partnership. The repurchase would be at the discretion of the General Partner on terms it determines to be appropriate under given circumstances, in the event that the General Partner deems such repurchase to be in the best interest of the Partnership; provided, the Partnership is never required to repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered Units are cancelled. Units repurchased in prior periods were repurchased at amounts representing the original investment less cumulative distributions made to the Unitholder with respect to the Units. All Units repurchased during a quarter are deemed to be repurchased effective the last day of the preceding quarter, and are not deemed to be outstanding during, or entitled to allocations of net income, net loss or distributions for the quarter in which such repurchase occurs.
As defined in the Limited Partnership Agreement, the Partnerships Net Income, Net Losses, and Tax Credits are to be allocated 99% to the Limited Partners and 1% to AFS. The Limited Partnership Agreement allows the Partnership to make an allocation of income to AFS in order to maintain the capital account of AFS at zero. In accordance with the terms of the Limited Partnership Agreement, additional allocations of income were made to AFS for the year ended December 31, 2010. The amounts allocated were determined so as to bring AFSs ending capital account balance to zero at the end of the year.
11
ATEL CASH DISTRIBUTION FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. Partners capital: - (continued)
As defined in the Limited Partnership Agreement, available Cash from Operations and Cash from Sales and Refinancing are to be distributed as follows:
Cash from Operations
Cash from Operations is distributed 95% to the Limited Partners, 1% to AFS and 4% to an affiliate of AFS as an Incentive Management Fee.
Cash from Sales and Refinancing
First, 99% to the Limited Partners and 1% to AFS until each Limited Partner has received Aggregate Distributions in an amount equal to their Original Invested Capital, as defined, plus a 10% per annum cumulative (compounded daily) return on their Adjusted Invested Capital; and
Thereafter, 95% to the Limited Partners, 1% to AFS and 4% to an affiliate of AFS as an Incentive Management Fee.
Distributions to the Limited Partners were as follows (in thousands except units and per unit data):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Distributions | $ | | $ | | $ | | $ | 624 | ||||||||
Weighted average number of Units outstanding | 12,478,676 | 12,478,676 | 12,478,676 | 12,478,676 | ||||||||||||
Weighted average distributions per Unit | $ | | $ | | $ | | $ | 0.05 |
12
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Statements contained in this Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations, (MD&A) and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, the economic recession and changes in general economic conditions, including, fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Partnerships performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Partnerships performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other than as required by law.
Overview
ATEL Cash Distribution Fund VI, L.P. (the Partnership) is a California partnership that was formed in June 1994 for the purpose of engaging in the sale of limited liability investment units and acquiring equipment to generate revenues from equipment leasing and sales activities, primarily in the United States. The General Partner of the Partnership is ATEL Financial Services, LLC (AFS), a California limited liability company.
The Partnership conducted a public offering of 12,500,000 Limited Partnership Units (Units), at a price of $10 per Unit. The offering was terminated in November 1996. During early 1997, the Partnership completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, throughout the reinvestment period (Reinvestment Period) (defined as six full years following the year the offering was terminated), the Partnership reinvested cash flow in excess of certain amounts required to be distributed to the Limited Partners and/or utilized its credit facilities to acquire additional equipment.
The Partnership may continue until December 31, 2015. Pursuant to the guidelines of the Limited Partnership Agreement (Partnership Agreement), the Partnership began to liquidate its assets and distribute the proceeds thereof after the end of the Reinvestment Period which ended in December 2002.
As of June 30, 2011, the Partnership remains in its liquidation phase. Accordingly, assets that mature will be returned to inventory and most likely will be subsequently sold, which will result in decreasing revenue as earning assets decrease. The Partnership continues to generally make distributions on an annual basis or at the discretion of the General Partner.
Results of Operations
The three months ended June 30, 2011 versus the three months ended June 30, 2010
The Partnership had net income of $210 thousand and $31 thousand for the three months ended June 30, 2011 and 2010, respectively. The results for the second quarter of 2011 reflect a decrease in total expenses coupled with an increase in total revenues when compared to the prior year period.
Revenues
Total revenues for the second quarter of 2011 increased by $52 thousand, or 8%, as compared to the prior year period largely due to a $63 thousand increase in operating lease revenues.
Operating lease revenues increased as a direct financing lease which matured at the end of 2010 was renewed as an operating lease during the first quarter of 2011, coupled with the impact of certain off-lease equipment which were re-leased under operating leases subsequent to June 30, 2010. Such increases were partially offset by continued run-off and disposition of lease assets.
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Expenses
Total expenses for the second quarter of 2011 decreased by $127 thousand, or 22%, as compared to the prior year period. The net decrease in expenses was primarily due to decreases in railcar maintenance costs, depreciation expense, professional fees and outside services expense, and costs reimbursed to AFS.
Railcar maintenance costs declined by $45 thousand largely due to the continued decline in the number of railcars owned by the Partnership, consistent with a Fund in liquidation. Depreciation expense decreased by $37 thousand mainly as a result of continued run-off and disposition of lease assets.
Combined, professional fees and outside services expense declined by $18 thousand largely due to lower audit and tax related fees; and, costs reimbursed to AFS was reduced by $14 thousand mainly due to lower administrative costs allocated to the Fund to better align costs with the Partnerships declining operations.
The six months ended June 30, 2011 versus the six months ended June 30, 2010
The Partnership had net income of $405 thousand and $116 thousand for the six months ended June 30, 2011 and 2010, respectively. The results for the first half of 2011 reflect a decrease in total operating expenses and a nominal increase in total revenues when compared to the prior year period.
Revenues
Total revenues for the first half of 2011 was comparable to that of the prior year period. The $6 thousand period over period variance was mainly comprised of a $27 thousand increase in operating lease revenues offset, in part, by a $10 thousand decline in recognized gain on sales of assets and a $9 thousand decrease in direct financing lease revenues.
Operating lease revenues increased as a direct financing lease which matured at the end of 2010 was renewed as an operating lease during the first quarter of 2011, coupled with the impact of certain off-lease equipment which were re-leased under operating leases subsequent to June 30, 2010. Such increases were partially offset by a period over period decline in usage-based rental revenues and continued run-off and disposition of lease assets.
Gain on sales of assets declined primarily due to lower volume and the change in the mix of assets sold; and, direct financing lease revenues decreased mainly as a result of continued run-off of the portfolio.
Expenses
Total expenses for the first half of 2011 decreased by $283 thousand, or 24%, as compared to the prior year period. The net decrease in expenses was primarily due to decreases in railcar maintenance costs, depreciation expense, professional fees and outside services expense, costs reimbursed to AFS and management fees paid to AFS.
Railcar maintenance costs declined by $101 thousand primarily as a result of the continued decline in the number of railcars owned by the Partnership. Likewise, depreciation expense decreased by $85 thousand largely due to continued run-off and disposition of lease assets.
Professional fees and outside services expense declined by $31 thousand primarily due to lower audit and tax related fees. Costs reimbursed to AFS decreased by $27 thousand largely as a result of lower administrative costs allocated to the Fund to better align costs with the Partnerships declining operations. Finally, management fees paid to AFS declined by $20 thousand primarily due to the absence of distributions of cash from operations paid to investors during the current year period, which impacted the calculation of management fees, coupled with the continued decline in managed assets and related rents.
Capital Resources and Liquidity
At June 30, 2011 and December 31, 2010, the Partnerships cash and cash equivalents totaled $1.2 million and $446 thousand, respectively. The liquidity of the Partnership varies, increasing to the extent cash flows from leases and proceeds from lease asset sales exceed expenses and decreasing as distributions are made to the partners and to the extent expenses exceed cash flows from leases and proceeds from asset sales.
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The primary source of liquidity for the Partnership has been its cash flow from leasing activities. As the initial lease terms have expired, the Partnership ventured to re-lease or sell the equipment. Future liquidity will depend on the Partnerships success in remarketing or selling the equipment as it comes off rental.
In a normal economy, if inflation in the general economy becomes significant, it may affect the Partnership in as much as the residual (resale) values of the Partnerships leased assets may increase as the costs of similar assets increase. However, the Partnerships revenues from existing leases would not increase as such rates are generally fixed for the terms of the leases without adjustment for inflation. In addition, if interest rates increase significantly under such circumstances, the lease rates that the Partnership can obtain on future leases will be expected to increase as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates.
The Partnership currently believes it 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 Partnership would likely be in a position to borrow against its current portfolio to meet such requirements. AFS envisions no such requirements for operating purposes.
Cash Flows
The following table sets forth summary cash flow data (in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net cash provided by (used in): |
||||||||||||||||
Operating activities | $ | 366 | $ | 221 | $ | 636 | $ | 436 | ||||||||
Investing activities | 31 | 86 | 93 | 185 | ||||||||||||
Financing activities | | | | (630 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | $ | 397 | $ | 307 | $ | 729 | $ | (9 | ) |
The three months ended June 30, 2011 versus the three months ended June 30, 2010
Operating Activities
Cash provided by operating activities for the three months ended June 30, 2011 increased by $145 thousand, or 66%, as compared to the prior year period. The net increase in cash flow was largely due to a period over period increase in net income from operations.
Investing Activities
Cash provided by investing activities for the second quarter of 2011 decreased by $55 thousand, or 64%, as compared to the prior year period. The decrease in cash flow was a result of a $41 thousand decrease in proceeds from sales of lease assets and a $14 thousand decrease in principal payments received on direct financing leases.
The decrease in proceeds from sales of lease assets reflects a period over period decrease in the number and mix of assets sold. Payments received on direct financing leases decreased as the Partnerships sole direct financing lease terminated during the latter half of 2010.
Financing Activities
The Partnership had no financing activities during the second quarters of 2011 and 2010.
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The six months ended June 30, 2011 versus the six months ended June 30, 2010
Operating Activities
Cash provided by operating activities for the first half of 2011 increased by $200 thousand, or 46%, as compared to the prior year period. The net increase in cash flow was largely due to a period over period increase in net income from operations and increased collection of accounts receivable offset, in part, by a decrease in depreciation of lease assets (non-cash item added back to net income) consistent with continued sales and dispositions of lease assets, and increased payments made against accrued expenses relative to railcar maintenance expenses and costs reimbursable to the General Partner.
Investing Activities
Cash provided by investing activities for the first half of 2011 decreased by $92 thousand, or 50%, as compared to the prior year period. The decrease in cash flow was a result of a $66 thousand decrease in proceeds from sales of lease assets and a $26 thousand decrease in principal payments received on direct financing leases.
The decrease in proceeds from sales of lease assets reflects a period over period decrease in volume and the change in the mix of assets sold. Payments received on direct financing leases decreased as the Partnerships sole direct financing lease terminated during the latter half of 2010.
Financing Activities
The Partnership had no financing activities during the first half of 2011. By comparison, an approximate $630 thousand was used in financing activities during the prior year period, representing distributions paid to both Limited Partners and the General Partner totaling $624 thousand and $6 thousand, respectively.
Distributions
The Partnership commenced periodic distributions, based on cash flows from operations, beginning with the month of January 1995. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the General Partner.
Commitments and Contingencies and Off-Balance Sheet Transactions
Commitments and Contingencies
At June 30, 2011, the Partnership had no commitments to purchase lease assets and pursuant to the Partnership Agreement, the Partnership will no longer purchase any new lease assets.
Off-Balance Sheet Transactions
None.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is included in Note 2 to the financial statements, Summary of significant accounting policies, as set forth in Part I, Item 1, Financial Statements (Unaudited).
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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. On an on-going basis, the Partnership evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.
The Partnerships critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2010. There have been no material changes to the Partnerships critical accounting policies since December 31, 2010.
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Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
The Partnerships General Partners President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (Management), evaluated the effectiveness of the Partnerships disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Partnerships disclosure controls and procedures, Management concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.
The Partnership does not control the financial reporting process, and is solely dependent on the Management of the General Partner, which is responsible for providing the Partnership with financial statements in accordance with generally accepted accounting principles in the United States. The General Partners disclosure controls and procedures, as it is applicable to the Partnership, were effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Changes in internal control
There were no changes in the General Partners internal control over financial reporting, as it is applicable to the Partnership, during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, the General Partners internal control over financial reporting, as it is applicable to the Partnership.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Partnership. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Partnerships financial position or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. [Removed and Reserved].
Item 5. Other Information.
None.
Item 6. Exhibits.
Documents filed as a part of this report:
1. | Financial Statement Schedules |
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and therefore have been omitted.
2. | Other Exhibits |
31.1 Rule 13a-14(a)/ 15d-14(a) Certification of Dean L. Cash
31.2 Rule 13a-14(a)/ 15d-14(a) Certification of Paritosh K. Choksi
32.1 Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash
32.2 Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 12, 2011
ATEL CASH DISTRIBUTION FUND VI, L.P.
(Registrant)
By: ATEL Financial Services, LLC |
By: /s/ Dean L. Cash | ||
By: /s/ Paritosh K. Choksi | ||
By: /s/ Samuel Schussler |
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