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, 2014
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 000-50687

ATEL Capital Equipment Fund X, LLC

(Exact name of registrant as specified in its charter)

California		68-0517690
(State or other jurisdiction of Incorporation or organization)		(I. R. S. Employer Identification No.)

The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111
(Address of principal executive offices)

Registrant’s telephone number, including area code (415) 989-8800

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Limited Liability Company Units

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No 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 Liability Company Units outstanding as of July 31, 2014 was 13,971,486.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
Index

Part I. Financial Information			3
Item 1. Financial Statements (Unaudited)			3
Balance Sheets, June 30, 2014 and December 31, 2013			3
Statements of Income for the three and six months ended June 30, 2014 and 2013			4
Statements of Changes in Members’ Capital for the year ended December 31, 2013 and for the six months ended June 30, 2014			5
Statements of Cash Flows for the three and six months ended June 30, 2014 and 2013			6
Notes to the Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 4. Controls and Procedures			27
Part II. Other Information			28
Item 1. Legal Proceedings			28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			28
Item 4. Mine Safety Disclosures			28
Item 5. Other Information			28
Item 6. Exhibits			28

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ATEL CAPITAL EQUIPMENT FUND X, LLC

BALANCE SHEETS
 

JUNE 30, 2014 AND DECEMBER 31, 2013
(in thousands)

		June 30, 2014				December 31, 2013
		(Unaudited)
ASSETS
Cash and cash equivalents		$	7,645			$	8,478
Accounts receivable, net of allowance for doubtful accounts of $5 at June 30, 2014 and $138 at December 31, 2013			611				617
Notes receivable, net of unearned interest income of $37 as of June 30, 2014 and $57 as of December 31, 2013			427				518
Prepaid expenses and other assets			97				115
Investment in securities			85				85
Investments in equipment and leases, net of accumulated depreciation of $41,945 at June 30, 2014 and $49,542 at December 31, 2013			27,811				33,207
Total assets		$	36,676			$	43,020
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member		$	600			$	728
Accrued distributions to Other Members			5,589				5,589
Other			385				630
Accrued interest payable			53				63
Non-recourse debt			11,506				14,004
Unearned operating lease income			392				550
Total liabilities			18,525				21,564
Commitments and contingencies
Members’ capital:
Managing Member			—				—
Other Members			18,151				21,456
Total Members’ capital			18,151				21,456
Total liabilities and Members’ capital		$	36,676			$	43,020

See accompanying notes.

3

ATEL CAPITAL EQUIPMENT FUND X, LLC

STATEMENTS OF INCOME
 

FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2014 AND 2013
(in thousands, except for units and per unit data)
(Unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Revenues:
Leasing and lending activities:
Operating leases		$	1,791			$	3,107			$	3,786			$	6,271
Direct financing leases			656				788				1,356				1,585
Interest on notes receivable			10				14				20				30
Gain on sales of lease assets and early termination of notes			353				1,167				1,252				1,592
Gain on sales or dispositions of securities			73				—				73				—
Other			20				42				43				162
Total revenues			2,903				5,118				6,530				9,640
Expenses:
Depreciation of operating lease assets			920				1,613				1,967				3,336
Asset management fees to Managing Member			163				357				251				481
Cost reimbursements to Managing Member			198				274				597				925
Amortization of initial direct costs			8				15				18				32
Interest expense			179				252				376				558
Impairment losses on equipment			4				88				4				108
Railcar maintenance			96				137				349				334
Reversal of provision for credit losses			(76	)			(4	)			(133	)			(25	)
Professional fees			21				19				94				95
Franchise fees and taxes			46				46				92				91
Outside services			18				19				40				42
Other			67				58				139				129
Total operating expenses			1,644				2,874				3,794				6,106
Other income, net			—				73				1				108
Net income		$	1,259			$	2,317			$	2,737			$	3,642
Net income:
Managing Member		$	453			$	453			$	453			$	453
Other Members			806				1,864				2,284				3,189
		$	1,259			$	2,317			$	2,737			$	3,642
Net income per Limited Liability Company Unit (Other Members)		$	0.06			$	0.13			$	0.16			$	0.23
Weighted average number of Units outstanding			13,971,486				13,971,486				13,971,486				13,971,486

See accompanying notes.

4

ATEL CAPITAL EQUIPMENT FUND X, LLC

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
 

FOR THE YEAR ENDED DECEMBER 31, 2013
AND FOR THE SIX MONTHS ENDED JUNE 30, 2014
(in thousands, except for units and per unit data)

		Other Members								Managing Member				Total
		Units				Amount
Balance December 31, 2012			13,971,486			$	26,696			$	—			$	26,696
Distributions to Other Members ($0.80 per Unit)			—				(11,177	)			—				(11,177	)
Distributions to Managing Member			—				—				(906	)			(906	)
Net income			—				5,937				906				6,843
Balance December 31, 2013			13,971,486				21,456				—				21,456
Distributions to Other Members ($0.40 per Unit)			—				(5,589	)			—				(5,589	)
Distributions to Managing Member			—				—				(453	)			(453	)
Net income			—				2,284				453				2,737
Balance June 30, 2014 (Unaudited)			13,971,486			$	18,151			$	—			$	18,151

See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND X, LLC

STATEMENTS OF CASH FLOWS
 

FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2014 AND 2013
(in thousands)
(Unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Operating activities:
Net income		$	1,259			$	2,317			$	2,737			$	3,642
Adjustments to reconcile net income to cash provided by operating activities:
Gain on sales of lease assets and early termination of notes			(353	)			(1,167	)			(1,252	)			(1,592	)
Gain on sales or dispositions of securities			(73	)			—				(73	)			—
Depreciation of operating lease assets			920				1,613				1,967				3,336
Amortization of initial direct costs			8				15				18				32
Impairment losses on equipment			4				88				4				108
Reversal of provision for credit losses			(76	)			(4	)			(133	)			(25	)
Change in fair value of interest rate swap contracts			—				(50	)			—				(76	)
Changes in operating assets and liabilities:
Accounts receivable			122				35				212				39
Prepaid expenses and other assets			8				9				18				29
Accounts payable, Managing Member			51				175				(128	)			(63	)
Accounts payable, other			(81	)			(126	)			(245	)			(251	)
Accrued interest payable			(5	)			(7	)			(10	)			(15	)
Unearned operating lease income			(57	)			(77	)			(158	)			(152	)
Net cash provided by operating activities			1,727				2,821				2,957				5,012
Investing activities:
Purchase of securities			—				—				—				(7	)
Proceeds from sales of lease assets and early termination of notes			737				3,148				3,521				4,171
Principal payments received on direct financing leases			580				467				1,138				966
Principal payments received on notes receivable			46				60				91				133
Net cash provided by investing activities			1,363				3,675				4,750				5,263
Financing activities:
Borrowings under non-recourse debt			—				2,611				—				2,611
Repayments under non-recourse debt			(1,261	)			(1,375	)			(2,498	)			(2,551	)
Repayments under receivables funding program			—				(2,549	)			—				(3,308	)
Distributions to Other Members			—				—				(5,589	)			(6,986	)
Distributions to Managing Member			—				—				(453	)			(566	)
Net cash used in financing activities			(1,261	)			(1,313	)			(8,540	)			(10,800	)

See accompanying notes.

6

ATEL CAPITAL EQUIPMENT FUND X, LLC

STATEMENTS OF CASH FLOWS – (continued)
 

FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2014 AND 2013
(in thousands)
(Unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Net increase (decrease) in cash and cash equivalents			1,829				5,183				(833	)			(525	)
Cash and cash equivalents at beginning of period			5,816				2,927				8,478				8,635
Cash and cash equivalents at end of period		$	7,645			$	8,110			$	7,645			$	8,110
Supplemental disclosures of cash flow information:
Cash paid during the period for interest		$	184			$	259			$	386			$	573
Cash paid during the period for taxes		$	50			$	117			$	153			$	118
Schedule of non-cash transactions:
Distributions declared and payable to Managing Members at period-end		$	453			$	453			$	453			$	453
Distributions declared and payable to Other Members at period-end		$	5,589			$	5,589			$	5,589			$	5,589

See accompanying notes.

7

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund X, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on August 12, 2002 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to engage in equipment leasing, lending and sales activities, primarily in the United States. The Managing Member or Manager of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company. The Company may continue until December 31, 2022.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. On April 9, 2003, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business. As of March 11, 2005, the offering was terminated. As of that date, subscriptions for 14,059,136 Units ($140.6 million) had been received, of which 87,650 Units ($720 thousand) were subsequently rescinded or repurchased (net of distributions paid and allocated syndication costs, as applicable) by the Company through June 30, 2014. As of June 30, 2014, 13,971,486 Units remain issued and outstanding.

The Company’s principal objectives are to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Company’s invested capital; (ii) generates regular distributions to the members of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated) which ended on December 31, 2011 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by the Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2012, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement.

Pursuant to the terms of the Operating Agreement, AFS receives compensation and reimbursements for services rendered on behalf of the Company (See Note 6). The Company 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.

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, 2013, 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 Managing Member, 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, 2014 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 significant effect on the reported financial position or results of operations.

8

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.

In preparing the accompanying unaudited financial statements, the Managing Member has reviewed events that have occurred after June 30, 2014, 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.

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 allowances for doubtful accounts and notes receivable.

Segment reporting:

The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.

The primary geographic regions in which the Company seeks leasing opportunities are North America and Europe. The table below summarizes geographic information relating to the sources, by nation, of the Company’s total revenues for the six months ended June 30, 2014 and 2013 and long-lived tangible assets as of June 30, 2014 and December 31, 2013 (dollars in thousands):

		Six Months Ended June 30,
		2014				% of Total				2013				% of Total
Revenue
United States		$	6,461				99	%		$	8,870				92	%
Canada			—				0	%			415				4	%
United Kingdom			69				1	%			355				4	%
Total International			69				1	%			770				8	%
Total		$	6,530				100	%		$	9,640				100	%

		As of June 30,								As of December 31,
		2014				% of Total				2013				% of Total
Long-lived assets
United States		$	27,811				100	%		$	31,509				95	%
Canada			—				0	%			1,675				5	%
United Kingdom			—				0	%			23				0	%
Total International			—				0	%			1,698				5	%
Total		$	27,811				100	%		$	33,207				100	%

Investment in securities:

From time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements.

9

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

Purchased securities

Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. Based upon the Company’s review of its portfolio, no fair value adjustment was deemed necessary for the three and six months ended June 30, 2014 and 2013.

Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried at an estimated fair value on the balance sheet at the end of the period, as determined by the Managing Member. At June 30, 2014 and December 31, 2013, the Managing Member estimated the fair value of the warrants to be nominal in amount. During the three months ended June 30, 2014, the Company realized gains of $73 thousand on the net exercise of certain warrants. Such amount also represents total gain for the six months ended June 30, 2014. There was no net exercise of warrants during the three and six months ended June 30, 2013.

Other income, net:

Other income, net consists of fair value changes on interest rate swap contracts and gains and losses on foreign exchange transactions. The table below details the Company’s other income, net for the three and six months ended June 30, 2014 and 2013 (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Change in fair value of interest rate swap contracts		$	—			$	50			$	—			$	76
Foreign currency gain			—				23				1				32
Total		$	—			$	73			$	1			$	108

The Company had no other income or loss, net during the second quarter of 2014 as the Fund’s interest rate swap contracts terminated during the second quarter of 2013; and the leases that required foreign exchange translation transactions terminated during the first quarter of 2014.

Per Unit data:

Net income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the period.

Recent accounting pronouncements:

Recent accounting standards updates as issued by the Financial Accounting Standards Board (FASB) were evaluated and determined to be not applicable to the Company.

3. Notes receivable, net:

The Company has had various notes receivable from borrowers who have financed the purchase of equipment through the Company. The notes were secured by the equipment financed. As of June 30, 2014, only one note receivable remained unsettled with a net balance of $427 thousand outstanding. Such note bears an annual interest rate of 8.51% and matures in 2016.

The Company had neither notes in non-accrual status nor impaired notes at both June 30, 2014 and December 31, 2013.

10

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

3. Notes receivable, net: - (continued)

During the first quarter of 2013, the Company realized a $27 thousand gain on the full settlement of an impaired note prior to its scheduled maturity. Such note was originally deemed impaired during the second quarter of 2012, for which the Company recorded a fair value adjustment of $27 thousand to reduce the cost basis of the impaired note. There have been no additional early terminations of notes receivable subsequent to the first quarter of 2013.

As of June 30, 2014, the minimum future payments receivable are as follows (in thousands):

Six months ending December 31, 2014		$	110
Year ending December 31, 2015			166
2016			188
			464
Less: portion representing unearned interest income			(37	)
Notes receivable, net		$	427

4. Allowance for credit losses:

The Company’s allowance for credit losses are as follows (in thousands):

		Accounts Receivable Allowance for Doubtful Accounts												Valuation Adjustments on Financing Receivables								Total Allowance for Credit Losses
		Notes Receivable				Finance Leases				Operating Leases				Notes Receivable				Finance Leases
Balance December 31, 2012		$	—			$	10			$	17			$	39			$	—			$	66
Provision (reversal of provision)			—				—				111				(12	)			—				99
Asset disposal			—				—				—				(27	)			—				(27	)
Balance December 31, 2013			—				10				128				—				—				138
Reversal of provision			—				(10	)			(123	)			—				—				(133	)
Balance June 30, 2014		$	—			$	—			$	5			$	—			$	—			$	5

Accounts receivable

Accounts receivable represent the amounts billed under operating and direct financing lease contracts, and notes receivable which are currently due to the Company.

Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness of specifically identified lessees and borrowers, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received.

Accounts receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with lease or note payments outstanding less than 90 days. Based upon management’s judgment, such leases or notes may be placed in non-accrual status. Leases or notes placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, revenues on operating leases are recognized on a cash basis. All payments received on amounts billed under direct financing leases and notes receivable are applied only against outstanding principal balances.

11

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Allowance for credit losses: - (continued)

Financing receivables

In addition to the allowance established for delinquent accounts receivable, the total allowance related solely to financing receivables also includes anticipated impairment charges on notes receivable and direct financing leases.

Notes are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the note agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest when due. If it is determined that a loan is impaired with regard to scheduled payments, the Company will perform an analysis of the note to determine if an impairment valuation reserve is necessary. This analysis considers the estimated cash flows from the note, or the collateral value of the property underlying the note when note repayment is collateral dependent. Any required valuation reserve is charged to earnings when determined; and notes are charged off to the allowance as they are deemed uncollectible.

The asset underlying a direct financing lease contract is considered impaired if the estimated undiscounted future cash flows of the asset are less than its 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 marketplace 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.

As of June 30, 2014 and December 31, 2013, the Company’s allowance for credit losses (related solely to financing receivables) and its recorded investment in financing receivables were as follows (in thousands):

June 30, 2014		Notes Receivable				Finance Leases				Total
Allowance for credit losses:
Ending balance		$	—			$	—			$	—
Ending balance: individually evaluated for impairment		$	—			$	—			$	—
Ending balance: collectively evaluated for impairment		$	—			$	—			$	—
Ending balance: loans acquired with deteriorated credit quality		$	—			$	—			$	—
Financing receivables:
Ending balance		$	427			$	10,2241			$	10,651
Ending balance: individually evaluated for impairment		$	427			$	10,224			$	10,651
Ending balance: collectively evaluated for impairment		$	—			$	—			$	—
Ending balance: loans acquired with deteriorated credit quality		$	—			$	—			$	—

12

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Allowance for credit losses: - (continued)

December 31, 2013		Notes Receivable				Finance Leases				Total
Allowance for credit losses:
Ending balance		$	—			$	—			$	—
Ending balance: individually evaluated for impairment		$	—			$	—			$	—
Ending balance: collectively evaluated for impairment		$	—			$	—			$	—
Ending balance: loans acquired with deteriorated credit quality		$	—			$	—			$	—
Financing receivables:
Ending balance		$	518			$	11,2502			$	11,768
Ending balance: individually evaluated for impairment		$	518			$	11,250			$	11,768
Ending balance: collectively evaluated for impairment		$	—			$	—			$	—
Ending balance: loans acquired with deteriorated credit quality		$	—			$	—			$	—

The Company evaluates the credit quality of its financing receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:

Pass – Any account whose lessee/debtor, co-lessee/debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moody’s or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the Manager to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the Manager and the account is not considered by the Chief Credit Officer of the Manager to fall into one of the three risk profiles below.

Special Mention – Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Fund’s receivable at some future date.

Substandard – Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the Manager’s Credit Watch List.

Doubtful – Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the Manager’s Credit Watch List, and has been declared in default and the Manager has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired notes and leases as applicable.

13

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Allowance for credit losses: - (continued)

At June 30, 2014 and December 31, 2013, the Company’s financing receivables by credit quality indicator and by class of financing receivables are as follows (excludes initial direct costs) (in thousands):

		Notes Receivable								Finance Leases
		June 30, 2014				December 31, 2013				June 30, 2014				December 31, 2013
Pass		$	427			$	518			$	10,215			$	11,237
Special mention			—				—				—				—
Substandard			—				—				—				—
Doubtful			—				—				—				—
Total		$	427			$	518			$	10,215			$	11,237

At June 30, 2014 and December 31, 2013, the investment in financing receivables is aged as follows (in thousands):

June 30, 2014		31 – 60 Days Past Due				61 – 90 Days Past Due				Greater Than 90 Days				Total Past Due				Current				Total Financing Receivables				Recorded Investment >90 Days and Accruing
Notes receivable		$	—			$	—			$	—			$	—			$	427			$	427			$	—
Finance leases			51				13				—				64				10,151				10,215				—
Total		$	51			$	13			$	—			$	64			$	10,578			$	10,642			$	—

December 31, 2013		31 – 60 Days Past Due				61 – 90 Days Past Due				Greater Than 90 Days				Total Past Due				Current				Total Financing Receivables				Recorded Investment >90 Days and Accruing
Notes receivable		$	—			$	—			$	—			$	—			$	518			$	518			$	—
Finance leases			—				—				22				22				11,215				11,237				22
Total		$	—			$	—			$	22			$	22			$	11,733			$	11,755			$	22

No financing receivables were impaired or in non-accrual status as of June 30, 2014 and December 31, 2013.

As of June 30, 2014, there were no investments in financing receivables with related accounts receivable past due more than 90 days which were still on an accrual basis. As of December 31, 2013, certain investments in financing receivables with related accounts receivable past due more than 90 days were still on an accrual basis based on management’s assessment of the collectability of such receivables. However, these accounts receivable were fully reserved and included in the allowance for doubtful accounts presented above.

5. Investment in equipment and leases, net:

The Company’s investment in equipment leases consists of the following (in thousands):

		Balance December 31, 2013				Reclassifications, Additions/ Dispositions and Impairment Losses				Depreciation/ Amortization Expense or Amortization of Leases				Balance June 30, 2014
Net investment in operating leases		$	20,338			$	(2,298	)		$	(1,957	)		$	16,083
Net investment in direct financing leases			11,237				116				(1,138	)			10,215
Assets held for sale or lease, net			1,579				(92	)			(10	)			1,477
Initial direct costs, net of accumulated amortization of $184 at June 30, 2014 and $236 at December 31, 2013			53				—				(17	)			36
Total		$	33,207			$	(2,274	)		$	(3,122	)		$	27,811

14

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

5. Investment in equipment and leases, net: - (continued)

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 for impairment. The fair value of the assets is determined based on the sum of the discounted estimated future cash flows of the assets. Impairment losses are recorded as an adjustment to the net investment in operating leases. During the three months ended June 30, 2014, the Company deemed certain lease equipment to be impaired and recorded fair value adjustments of $4 thousand to reduce the cost basis of the impaired equipment. Such amount also represents total impairment loss for the six months ended June 30, 2014. By comparison, the Company recorded fair value adjustments totaling $88 thousand and $108 thousand for the respective three and six month-periods ended June 30, 2013.

The Company utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of operating lease transactions. Depreciation expense on the Company’s equipment was approximately $920 thousand and $1.6 million for the respective three months ended June 30, 2014 and 2013, and was approximately $2.0 million and $3.3 million for the respective six months ended June 30, 2014 and 2013.

Initial direct costs amortization expense related to the Company’s operating and direct financing leases totaled $8 thousand and $15 thousand for the respective three months ended June 30, 2014 and 2013, and $18 thousand and $32 thousand for the respective six months ended June 30, 2014 and 2013.

All of the remaining property on lease was acquired during the years 2005 through 2011.

As of June 30, 2014 and December 31, 2013, there were no lease contracts placed in non-accrual status. As of the same dates, the Company has certain leases that have related accounts receivables aged 90 days or more that have not been placed on non-accrual status. In accordance with Company policy, such receivables are fully reserved. Management continues to closely monitor these leases, and all other lease contracts, for any actual change in collectability status and indication of necessary valuation adjustments.

Operating leases:

Property on operating leases consists of the following (in thousands):

		Balance December 31, 2013				Additions				Reclassifications, Dispositions				Balance June 30, 2014
Transportation, rail		$	25,050			$	—			$	279			$	25,329
Transportation, other			20,374				—				(5,387	)			14,987
Materials handling			5,778				—				(1,943	)			3,835
Aircraft			3,026				—				—				3,026
Petro/natural gas			2,446				—				—				2,446
Construction			2,242				—				(321	)			1,921
Manufacturing			5,756				—				(5,132	)			624
Agriculture			350				—				—				350
Research			207				—				(202	)			5
Logging & lumber			248				—				(248	)			—
Data processing			113				—				(113	)			—
			65,590				—				(13,067	)			52,523
Less accumulated depreciation			(45,252	)			(1,957	)			10,769				(36,440	)
Total		$	20,338			$	(1,957	)		$	(2,298	)		$	16,083

15

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

5. Investment in equipment and leases, net: - (continued)

The average estimated residual value for assets on operating leases was 23% and 22% of the assets’ original cost at June 30, 2014 and December 31, 2013, respectively. There were no operating leases placed in non-accrual status as of June 30, 2014 and December 31, 2013.

Direct financing leases:

As of June 30, 2014, investment in direct financing leases generally consists of materials handling, mining, construction, research, computers and agriculture equipment. As of December 31, 2013, such investment consisted of materials handling, mining, construction and agriculture equipment.

The components of the Company’s investment in direct financing leases as of June 30, 2014 and December 31, 2013 are as follows (in thousands):

		June 30, 2014				December 31, 2013
Total minimum lease payments receivable		$	10,791			$	13,064
Estimated residual values of leased equipment (unguaranteed)			3,588				3,590
Investment in direct financing leases			14,379				16,654
Less unearned income			(4,164	)			(5,417	)
Net investment in direct financing leases		$	10,215			$	11,237

There were no direct financing leases placed in non-accrual status as of June 30, 2014 and December 31, 2013.

At June 30, 2014, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

		Operating Leases				Direct Financing Leases				Total
Six months ending December 31, 2014		$	2,326			$	2,357			$	4,683
Year ending December 31, 2015			2,361				4,612				6,973
2016			826				3,777				4,603
2017			630				24				654
2018			199				19				218
2019			53				2				55
Thereafter			7				—				7
		$	6,402			$	10,791			$	17,193

6. Related party transactions:

The terms of the Operating Agreement provide that AFS and/or affiliates are entitled to receive certain fees for equipment management and resale and for management of the Company.

The Operating Agreement allows for the reimbursement of costs incurred by AFS in providing administrative services to the Company. Administrative services provided include Company accounting, finance/treasury, 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 management of equipment. The Company would be liable for certain future costs to be incurred by AFS to manage the administrative services provided to the Company.

16

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

6. Related party transactions: - (continued)

Each of ATEL Leasing Corporation (“ALC”) and AFS is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Company. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications services and general administrative services for the Company are performed by AFS.

Cost reimbursements to the Managing Member are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred.

The Fund’s Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or affiliates. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be recovered in future years to the extent of the cumulative limit. As of June 30, 2014, the Company has not exceeded the annual and/or cumulative limitations discussed above.

During the three and six months ended June 30, 2014 and 2013, AFS and/or affiliates earned fees and billed for reimbursements pursuant to the Operating Agreement as follows (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Costs reimbursed to Managing Member and/or affiliates		$	198			$	274			$	597			$	925
Asset management fees to Managing Member and/or affiliates			163				357				251				481
		$	361			$	631			$	848			$	1,406

7. Non-recourse debt:

At June 30, 2014, non-recourse debt consists of notes payable to financial institutions. The notes are due in monthly installments. Interest on the notes is at fixed rates ranging from 1.41% to 6.66%. The notes are secured by assignments of lease payments and pledges of assets. At June 30, 2014, gross operating lease rentals and future payments on direct financing leases totaled approximately $11.7 million over the remaining lease terms; and the carrying value of the pledged assets is $13.1 million. The notes mature at various dates from 2014 through 2018.

The non-recourse debt does not contain any material financial covenants. The debt is secured by a specific lien granted by the Company to the non-recourse lenders on (and only on) the discounted lease transactions. The lenders have recourse only to the following collateral: the leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items. The non-recourse obligation is payable solely out of the respective specific security and the Company does not guarantee (nor is the Company otherwise contractually responsible for) the payment of the non-recourse debt as a general obligation or liability of the Company. Although the Company does not have any direct or general liability in connection with the non-recourse debt apart from the security granted, the Company is directly and generally liable and responsible for certain representations, warranties, and covenants made to the lenders, such as warranties as to genuineness of the transaction parties’ signatures, as to the genuineness of the respective lease chattel paper or the transaction as a whole, or as to the Company’s good title to or perfected interest in the secured collateral, as well as similar representations, warranties and covenants typically provided by non-recourse borrowers and customary in the equipment finance industry, and are viewed by such industry as being consistent with non-recourse discount financing obligations. Accordingly, as there are no financial covenants or ratios imposed on the Company in connection with the non-recourse debt, the Company has determined that there are no material covenants with respect to the non-recourse debt that warrant footnote disclosure.

17

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

7. Non-recourse debt: - (continued)

Future minimum payments of non-recourse debt are as follows (in thousands):

		Principal				Interest				Total
Six months ending December 31, 2014		$	2,506			$	317			$	2,823
Year ending December 31, 2015			4,508				424				4,932
2016			3,984				142				4,126
2017			425				5				430
2018			83				—				83
		$	11,506			$	888			$	12,394

8. Receivables funding program:

Prior to April 2013, the Company had an $80 million receivables funding program (the “RF Program”) with a receivables financing company that issued commercial paper rated A1 from Standard and Poor’s and P1 from Moody’s Investors Service. Under the RF Program, the lender held liens against the Company’s assets. The lender was in a first position against certain specified assets and was in either a subordinated or shared position against the remaining assets. The RF Program provided for borrowing at a variable interest rate; and, for 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 RF Program did not contain any credit risk related default contingencies. As of April 4, 2013, all advances under the RF Program were repaid in full and the program was terminated.

The Company previously had interest rate swap agreements that effectively fixed the variable interest rates on its borrowings. Such interest rate swaps were not designated as hedging instruments and were carried at fair value on the balance sheet with unrealized gain/loss included in the statements of income in other (expense) income, net. The interest paid or received on the swap contracts were accrued as interest rates changed. As of April 4, 2013, all such agreements have terminated.

Interest paid on the RF Program from January 2013 through its termination in April 2013 was nominal. The RF Program discussed above included certain financial and non-financial covenants applicable to the Company as borrower. The Company was in compliance with all covenants during the first quarter of 2013 through the date of program termination.

9. Commitments:

At June 30, 2014, there were no commitments to purchase lease assets or fund investments in notes receivable.

10. Guarantees:

The Company enters into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

The Managing Member knows of no facts or circumstances that would make the Company’s contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Company believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability under the Company’s similar commitments is remote. Should any such indemnification obligation become payable, the Company would separately record and/or disclose such liability in accordance with GAAP.

18

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

11. Members’ capital:

Units issued and outstanding were 13,971,486 at both June 30, 2014 and December 31, 2013. The Company was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial Members (50 Units). The Company ceased offering Units on March 11, 2005.

The Company has the right, exercisable in the Manager’s 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 holder’s capital account. The Company is otherwise permitted, but not required, to repurchase Units upon a holder’s request. The repurchase of Fund Units is made in accordance with Section 13 of the Amended and Restated Limited Liability Company Operating Agreement. The repurchase would be at the discretion of the Manager on terms it determines to be appropriate under given circumstances, in the event that the Manager deems such repurchase to be in the best interest of the Company; provided, the Company 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 Operating Agreement, the Company’s Net Income, Net Losses, and Distributions, are to be allocated 92.5% to the Other Members and 7.5% to AFS.

Distributions to the Other Members for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands except Units and per Unit data):

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Distributions declared		$	5,589			$	5,589			$	5,589			$	5,589
Weighted average number of Units outstanding			13,971,486				13,971,486				13,971,486				13,971,486
Weighted average distributions per Unit		$	0.40			$	0.40			$	0.40			$	0.40

12. Fair value measurements:

Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, generally on a national exchange.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

Level 3 – Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability.

19

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

12. Fair value measurements: - (continued)

The Company had no assets or liabilities requiring measurement at fair value on a recurring basis as of June 30, 2014 and December 31, 2013. However, the Company recorded non-recurring adjustments to reflect the fair values of certain impaired off-lease assets during the first six months of 2014, and those of impaired lease and off-lease assets during 2013. Amounts at June 30, 2014 and December 31, 2013 reflect the fair value of the then existing impaired assets.

The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, notes receivable and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.

Such fair value adjustments utilized the following methodology:

Impaired lease and/or off-lease equipment

During the second quarter of 2014, the Company deemed certain lease equipment to be impaired and recorded fair value adjustments of $4 thousand to reduce the cost basis of the impaired equipment. Such amount also represents total impairment loss for the six months ended June 30, 2014. By comparison, the Company recorded fair value adjustments totaling $88 thousand and $108 thousand for the respective three and six month-periods ended June 30, 2013. An additional $476 thousand of fair value adjustments were recorded through December 31, 2013. The fair value adjustments were non-recurring. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of impaired lease assets were classified within Level 3 of the valuation hierarchy as the data sources utilized for the valuation of such assets reflect significant inputs that are unobservable in the market. Such valuation utilizes a market approach technique and uses inputs that reflect the sales price of similar assets sold by affiliates and/or information from third party remarketing agents not readily available in the market.

The following table presents the fair value measurement of assets measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at June 30, 2014 and December 31, 2013 (in thousands):

		June 30, 2014				Level 1 Estimated Fair Value				Level 2 Estimated Fair Value				Level 3 Estimated Fair Value
Assets measured at fair value on a non-recurring basis:
Impaired off-lease equipment		$	4			$	—			$	—			$	4

		December 31, 2013				Level 1 Estimated Fair Value				Level 2 Estimated Fair Value				Level 3 Estimated Fair Value
Assets measured at fair value on a non-recurring basis:
Impaired lease and off-lease equipment		$	79			$	—			$	—			$	79

20

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

12. Fair value measurements: - (continued)

The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s non-recurring fair value adjustments categorized as Level 3 in the fair value hierarchy at June 30, 2014 and December 31, 2013:

June 30, 2014
Name		Valuation Frequency		Valuation Technique		Unobservable Inputs		Range of Input Values
Lease Equipment		Non-recurring		Market Approach		Third Party Agents’ Pricing  Quotes – per equipment		$500 (total of $3,500)
						Equipment Condition		Poor to Average

December 31, 2013
Name		Valuation Frequency		Valuation Technique		Unobservable Inputs		Range of Input Values
Lease Equipment		Non-recurring		Market Approach		Third Party Agents’ Pricing  Quotes – per equipment		$1,000 – $25,000 (total of $79,000)
						Equipment Condition		Poor to Average

The following disclosure of the estimated fair value of financial instruments is made in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification. Fair value estimates, methods and assumptions, set forth below for the Company’s financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Company’s financial statements and related notes.

The Company has determined the estimated fair value amounts by using market information and valuation methodologies that it considers appropriate and consistent with the fair value accounting guidance. Considerable judgment is required to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and cash equivalents

The recorded amounts of the Company’s cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.

Notes receivable

The fair value of the Company’s notes receivable is generally estimated based upon various methodologies deployed by financial and credit management including, but not limited to, credit analysis, third party appraisal and/or discounted cash flow analysis based upon current market valuation techniques and market rates for similar types of lending arrangements, which may consider adjustments for impaired loans as deemed necessary.

Investment in securities

The Company’s investment securities are not registered for public sale and are carried at cost which management believes approximates fair value, as appropriately adjusted for impairment.

Non-recourse debt

The fair value of the Company’s non-recourse debt is estimated using discounted cash flow analyses, based upon current market borrowing rates for similar types of borrowing arrangements.

21

ATEL CAPITAL EQUIPMENT FUND X, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

12. Fair value measurements: - (continued)

Commitments and Contingencies

Management has determined that no recognition for the fair value of the Company’s loan commitments is necessary because their terms are made on a market rate basis and require borrowers to be in compliance with the Company’s credit requirements at the time of funding.

The fair value of contingent liabilities (or guarantees) is not considered material because management believes there has been no event that has occurred wherein a guarantee liability has been incurred or will likely be incurred.

The following tables present a summary of the carrying value and fair value by level of financial instruments on the Company’s balance sheets at June 30, 2014 and December 31, 2013 (in thousands):

		Fair Value Measurements at June 30, 2014
		Carrying Value				Level 1				Level 2				Level 3				Total
Financial assets:
Cash and cash equivalents		$	7,645			$	7,645			$	—			$	—			$	7,645
Notes receivable, net			427				—				—				427				427
Investment in securities			85				—				—				85				85
Financial liabilities:
Non-recourse debt			11,506				—				—				11,808				11,808

		Fair Value Measurements at December 31, 2013
		Carrying Value				Level 1				Level 2				Level 3				Total
Financial assets:
Cash and cash equivalents		$	8,478			$	8,478			$	—			$	—			$	8,478
Notes receivable, net			518				—				—				518				518
Investment in securities			85				—				—				85				85
Financial liabilities:
Non-recourse debt			14,004				—				—				14,409				14,409

22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Statements contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic conditions, including, fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Company’s performance is subject to risks relating to lessee defaults and the creditworthiness of its lessees. The Company’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the market 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 Capital Equipment Fund X, LLC (the “Company” or the “Fund”) is a California limited liability company that was formed in August 2002 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to generate revenues from equipment leasing and sales activities, primarily in the United States. The Managing Member of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. The offering was terminated in March 2005. During 2005, the Company completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. Subsequently, during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), the Company has utilized its credit facilities and reinvested cash flow in excess of certain amounts required to be distributed to the Other Members to acquire additional equipment.

The Company may continue until December 31, 2022. However, pursuant to the guidelines of the Limited Liability Company Operating Agreement (“Operating Agreement”), the Company commenced liquidation phase activities subsequent to the end of the Reinvestment Period which ended on December 31, 2011. Periodic distributions will be paid at the discretion of the Managing Member.

Results of Operations

The three months ended June 30, 2014 versus the three months ended June 30, 2013

The Company had net income of $1.3 million and $2.3 million for the three months ended June 30, 2014 and 2013, respectively. The results for the second quarter of 2014 reflect decreases in both total revenues and total operating expenses when compared to the prior year period.

Revenues

Total revenues for the second quarter of 2014 decreased by $2.2 million, or 43%, as compared to the prior year period. The net reduction in total revenues was primarily a result of decreases in operating lease revenues, gain on sales of lease assets and early termination of notes, and direct financing lease revenues offset, in part, by a gain on sales or disposition of securities.

The decline in operating lease revenues totaled $1.3 million and was mainly a result of run-off and dispositions of lease assets. Gain on sales of lease assets and early termination of notes was reduced by $814 thousand due to a change in the mix of assets sold; and, direct financing lease revenues declined by $132 thousand primarily due to run-off of the portfolio.

Partially offsetting the aforementioned decreases in revenues was a $73 thousand gain on sales or dispositions of securities and warrants. Such gain was solely related to the net exercise of certain warrants during the current year quarter.

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Expenses

Total expenses for the second quarter of 2014 decreased by $1.2 million, or 43%, as compared to the prior year period. The net decline in expenses was primarily due to decreases in depreciation expense, asset management fees paid to AFS, impairment losses on equipment, cost reimbursements to AFS, interest expense, and the provision for credit losses.

The decrease in depreciation expense totaled $693 thousand and was primarily a result of run-off and dispositions of lease assets. Asset management fees paid to AFS was reduced by $194 thousand due to the continued decline in managed assets and related rents. Impairment losses declined by $84 thousand primarily due to a lower amount of fair value adjustments relative to impaired materials handling and transportation equipment based on information and/or pricing quotes from third party remarketing agents.

Moreover, cost reimbursements to AFS declined by $76 thousand mainly due to lower costs allocated by the Manager based on the Company’s declining asset base and operations, consistent with a Fund in liquidation. Interest expense was reduced by $73 thousand as a result of a $5.4 million decrease in outstanding borrowings since June 30, 2013; and, the provision for credit losses decreased by $72 thousand primarily as a result of a decline in delinquent receivables coupled with a period over period increase in recovery of amounts previously reserved.

The six months ended June 30, 2014 versus the six months ended June 30, 2013

The Company had net income of $2.7 million and $3.6 million for the six months ended June 30, 2014 and 2013, respectively. The results for the first half of 2014 reflect decreases in both total revenues and total operating expenses when compared to the prior year period.

Revenues

Total revenues for the first half of 2014 decreased by $3.1 million, or 32%, as compared to the prior year period. The net decline in total revenues was primarily attributable to decreases in operating lease revenues, gains on sales of lease assets and early termination of notes, direct financing lease revenues and other revenue. Such decreases in revenues were partially offset by a gain on sales or disposition of securities.

The reduction in operating lease revenues totaled $2.5 million and was primarily a result of run-off and dispositions of lease assets. Gain on sales of lease assets and early termination of notes was reduced by $340 thousand due to a change in the mix of assets sold; and, direct financing lease revenues declined by $229 thousand primarily due to run-off of the portfolio. In addition, other revenue decreased by $119 thousand as the prior year period amounts included fees collected for additional wear and tear on certain returned equipment.

Partially offsetting the aforementioned decreases in revenues was a $73 thousand gain on sales or dispositions of securities and warrants. Such gain was solely related to the net exercise of certain warrants during the current year period.

Expenses

Total expenses for the first half of 2014 decreased by $2.3 million, or 38%, as compared to the prior year period. The net reduction in expenses was primarily due to decreases in depreciation expense, cost reimbursements to AFS, asset management fees paid to AFS, interest expense, the provision for credit losses, and impairment losses on equipment.

The decrease in depreciation expense totaled $1.4 million and was primarily attributable to run-off and dispositions of lease assets. Cost reimbursements to AFS declined by $328 thousand mainly due to lower costs allocated by the Manager based on the Company’s declining asset base and operations. Asset management fees paid to AFS was reduced by $230 thousand due to the continued decline in managed assets and related rents.

Moreover, interest expense decreased by $182 thousand as a result of a $5.4 million decrease in outstanding borrowings since June 30, 2013; and, the provision for credit losses decreased by $108 thousand largely due to a decline in delinquent receivables coupled with a period over period increase in recovery of amounts

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previously reserved. Finally, impairment losses declined by $104 thousand primarily due to a lower amount of fair value adjustments relative to impaired materials handling and transportation equipment based on information and/or pricing quotes from third party remarketing agents.

Capital Resources and Liquidity

At June 30, 2014 and December 31, 2013, the Company’s cash and cash equivalents totaled $7.6 million and $8.5 million, respectively. The liquidity of the Company varies, increasing to the extent cash flows from leases and proceeds of asset sales exceed expenses and decreasing as distributions are made to the Other Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

The primary source of liquidity for the Company is its cash flow from leasing activities. As the lease terms expire, the Company will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on AFS’s success in remarketing or selling the equipment as it comes off rental.

If inflation in the general economy becomes significant, it may affect the Company in as much 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. In addition, if interest rates increase significantly under such circumstances, 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.

The Company currently believes it has adequate reserves available to meet its immediate cash requirements and those of the next twelve months, but in the event those reserves were found to be inadequate, the Company would likely be in a position to borrow against its current portfolio to meet such requirements. AFS envisions no such requirements for operating purposes.

Cash Flows

The following table sets forth summary cash flow data (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Net cash provided by (used in):
Operating activities		$	1,727			$	2,821			$	2,957			$	5,012
Investing activities			1,363				3,675				4,750				5,263
Financing activities			(1,261	)			(1,313	)			(8,540	)			(10,800	)
Net increase (decrease) in cash and cash equivalents		$	1,829			$	5,183			$	(833	)		$	(525	)

The three months ended June 30, 2014 versus the three months ended June 30, 2013

During the three months ended June 30, 2014 and 2013, the Company’s primary sources of liquidity were cash flows from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company realized $737 thousand and $3.1 million of proceeds from the sale or disposition of equipment and early termination of certain notes during the respective three months ended June 30, 2014 and 2013. During the second quarter of 2013, the Company also utilized borrowings totaling $2.6 million.

During the same respective periods, cash was primarily used to pay down $1.3 million and $3.9 million of debt and to pay invoices related to management fees and expenses, and other payables.

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The six months ended June 30, 2014 versus the six months ended June 30, 2013

During the six months ended June 30, 2014 and 2013, the Company’s primary sources of liquidity were cash flows from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company realized approximately $3.5 million and $4.2 million of proceeds from the sale or disposition of equipment and early termination of certain notes during the respective six-month periods ended June 30, 2014 and 2013. During the first half of 2013, the Company utilized borrowings totaling $2.6 million.

During the same respective periods, cash was primarily used to pay distributions to both the Other Members and the Managing Member – totaling $6.0 million and $7.6 million. Cash was also used to pay down $2.5 million and $5.9 million of debt during the respective six months ended June 30, 2014 and 2013 and, to pay invoices related to management fees and expenses, and other payables.

Receivable funding program

Prior to April 2013, the Company had an $80 million receivables funding program (the “RF Program”) with a receivables financing company that issued commercial paper rated A1 from Standard and Poor’s and P1 from Moody’s Investors Service. Under the RF Program, the lender held liens against the Company’s assets. The lender was in a first position against certain specified assets and was in either a subordinated or shared position against the remaining assets. The ability to draw down on the RF Program terminated on July 31, 2008, and the RF Program matures in July 2014 upon repayment in full of all outstanding amounts due under the Program. However, as of April 4, 2013, all advances under the RF Program were repaid in full and the program was terminated.

The Company previously had interest rate swap agreements that effectively fixed the variable interest rates on its borrowings. As of April 4, 2013, all such agreements also have terminated. The RF Program discussed above included certain financial and non-financial covenants applicable to the Company as borrower. The Company was in compliance with all covenants during the first quarter of 2013 through the date of program termination.

Non-Recourse Long-Term Debt

As of June 30, 2014 and December 31, 2013, the Company had non-recourse long-term debt totaling $11.5 million and $14.0 million, respectively. Such non-recourse notes payable do not contain any material financial covenants. The notes are secured by a specific lien granted by the Company to the non-recourse lenders on (and only on) the discounted lease transactions. The lenders have recourse only to the following collateral: the leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items.

The Operating Agreement limits aggregate borrowings to 50% of the total cost of equipment. For detailed information on the Company’s debt obligations, see Notes 7 and 8 in Item 1. Financial Statements (Unaudited).

Distributions

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of April 2003. The monthly distributions were discontinued in 2012 as the Company entered its liquidation phase. The rates and frequency of periodic distributions paid by the Fund during its liquidation phase are solely at the discretion of the Manager.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At June 30, 2014, there were no commitments to purchase lease assets or fund investments in notes receivable.

Off-Balance Sheet Transactions

None.

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Recent Accounting Pronouncements

Recent accounting standards updates as issued by the Financial Accounting Standards Board (FASB) were evaluated and determined to be not applicable to the Company.

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 Company 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 Company’s critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2013. There have been no material changes to the Company’s critical accounting policies since December 31, 2013.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

The Company’s Managing Member’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Company’s 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 Company’s 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 Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, which is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Member’s disclosure controls and procedures, as it is applicable to the Company, 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 Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, the Managing Member’s internal control over financial reporting, as it is applicable to the Company.

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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 Company. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Company’s financial position or results of operations. No material legal proceedings are currently pending against the Company or against any of its assets.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Documents filed as a part of this report:

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

31.1		Certification of Dean L. Cash
31.2		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
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

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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 13, 2014

ATEL CAPITAL EQUIPMENT FUND X, LLC
(Registrant)

By:

/s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member)

By:

/s/ Paritosh K. Choksi Paritosh K. Choksi Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member)

By:

/s/ Samuel Schussler Samuel Schussler Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (Managing Member)