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 September 30, 2018

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 000-50210

ATEL Capital Equipment Fund IX, LLC

(Exact name of registrant as specified in its charter)

California		94-3375584
(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
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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 October 31, 2018 was 12,055,016.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL CAPITAL EQUIPMENT FUND IX, LLC

Index

Part I. Financial Information			3
Item 1. Financial Statements (Unaudited)			3
Balance Sheets, September 30, 2018 and December 31, 2017			3
Statements of Income for the three and nine months ended September 30, 2018 and 2017			4
Statements of Changes in Members’ Capital for the year ended December 31, 2017 and for the nine months ended September 30, 2018			5
Statements of Cash Flows for the three and nine months ended September 30, 2018 and 2017			6
Notes to the Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 4. Controls and Procedures			19
Part II. Other Information			21
Item 1. Legal Proceedings			21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			21
Item 3. Defaults Upon Senior Securities			21
Item 4. Mine Safety Disclosures			21
Item 5. Other Information			21
Item 6. Exhibits			21

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL CAPITAL EQUIPMENT FUND IX, LLC
 
BALANCE SHEETS
 
SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(in thousands)

		September 30, 2018				December 31, 2017
		(Unaudited)
ASSETS
Cash and cash equivalents		$	887			$	441
Accounts receivable, net			357				112
Due from Managing Member			87				—
Due from affiliates			13				—
Investment in securities			5				5
Investments in equipment and leases, net			3,345				3,703
Prepaid expenses and other assets			88				68
Total assets		$	4,782			$	4,329
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member		$	62			$	18
Due to affiliates			16				39
Other			130				137
Deposits due lessees			6				6
Unearned operating lease income			55				49
Total liabilities			269				249
Commitments and contingencies
Members’ capital:
Managing Member			—				—
Other Members			4,513				4,080
Total Members’ capital			4,513				4,080
Total liabilities and Members’ capital		$	4,782			$	4,329

See accompanying notes.

3

ATEL CAPITAL EQUIPMENT FUND IX, LLC
 
STATEMENTS OF INCOME
 
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2018 AND 2017
(in thousands, except for units and per unit data)
(Unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Revenues:
Leasing and lending activities:
Operating leases		$	666			$	573			$	1,628			$	1,858
(Loss)/gain on sales of lease assets			(58	)			71				39				113
Gain on sales or dispositions of investment in securities			—				—				—				4
Other revenue			—				—				17				4
Total revenues			608				644				1,684				1,979
Expenses:
Depreciation of operating lease assets			99				102				269				328
Asset management fees to Managing Member			18				26				46				80
Cost reimbursements to Managing Member and/or affiliates			29				96				248				322
(Reversal of) provision for credit losses			(21	)			9				45				7
Amortization of initial direct costs			1				—				2				1
Other management fees			27				7				39				21
Professional fees			14				16				87				110
Outside services			28				20				88				82
Insurance			11				14				34				37
Marine vessel maintenance and other operating costs			205				1				220				1
Railcar and equipment maintenance			16				28				88				102
Franchise fees and state taxes			10				29				(3	)			31
Storage fees			6				10				26				36
Printing and photocopying			6				9				10				25
Other			27				8				53				57
Total operating expenses			476				375				1,252				1,240
Other income, net			(1	)			3				1				7
Net income		$	131			$	272			$	433			$	746
Net income:
Managing Member		$	—			$	43			$	—			$	269
Other Members			131				229				433				477
		$	131			$	272			$	433			$	746
Net income per Limited Liability Company Unit (Other Members)		$	0.01			$	0.02			$	0.04			$	0.04
Weighted average number of Units outstanding			12,055,016				12,055,016				12,055,016				12,055,016

See accompanying notes.

4

ATEL CAPITAL EQUIPMENT FUND IX, LLC
 
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
 
FOR THE YEAR ENDED DECEMBER 31, 2017
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2018
(in thousands, except for units and per unit data)

						Amount
		Units				Other Members				Managing Member				Total
Balance December 31, 2016			12,055,016			$	7,361			$	—			$	7,361
Distributions to Other Members ($0.32 per Unit)			—				(3,842	)			—				(3,842	)
Distributions to Managing Member			—				—				(312	)			(312	)
Net income			—				561				312				873
Balance December 31, 2017			12,055,016				4,080				—				4,080
Net income			—				433				—				433
Balance September 30, 2018 (unaudited)			12,055,016			$	4,513			$	—			$	4,513

See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND IX, LLC
 
STATEMENTS OF CASH FLOWS
 
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2018 AND 2017
(in thousands)
(Unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Operating activities:
Net income		$	131			$	272			$	433			$	746
Adjustment to reconcile net income to cash (used in) provided by operating activities:
Loss (gain) on sales of lease assets			58				(71	)			(39	)			(113	)
Gain on sales or dispositions of investment in securities			—				—				—				(4	)
Depreciation of operating lease assets			99				102				269				328
Amortization of initial direct costs			1				—				2				1
(Reversal of) provision for credit losses			(21	)			9				45				7
Changes in operating assets and liabilities:
Accounts receivable			(230	)			(1	)			(290	)			(4	)
Due from Managing Member and affiliates			(100	)			—				(100	)			—
Prepaid expenses and other assets			(25	)			(20	)			(20	)			(8	)
Accounts payable, Managing Member and affiliates			63				3				21				19
Accounts payable, other			18				10				(7	)			(183	)
Deposits due lessees			—				—				—				2
Unearned operating lease income			(9	)			4				6				(62	)
Net cash (used in) provided by operating activities			(15	)			308				320				729
Investing activities:
Purchases and improvements to operating leases			(162	)			—				(162	)			—
Proceeds from sales of lease assets			44				85				288				172
Proceeds from sales or dispositions of investment in securities			—				—				—				4
Payments of initial direct costs			—				(9	)			—				(9	)
Principal payments received on direct financing leases			—				—				—				1
Net cash (used in) provided by investing activities			(118	)			76				126				168
Financing activities:
Distributions to Other Members			—				(527	)			—				(3,315	)
Distributions to Managing Member			—				(43	)			—				(269	)
Net cash used in financing activities			—				(570	)			—				(3,584	)
Net (decrease) increase in cash and cash equivalents			(133	)			(186	)			446				(2,687	)
Cash and cash equivalents at beginning of period			1,020				920				441				3,421
Cash and cash equivalents at end of period		$	887			$	734			$	887			$	734
Supplemental disclosures of cash flow information:
Cash paid during the period for taxes		$	—			$	3			$	17			$	42

See accompanying notes.

6

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

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on September 27, 2000 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, 2020. Contributions in the amount of $600 were received as of December 31, 2000, $100 of which represented AFS’s continuing interest, and $500 of which represented the initial Member’s capital investment.

As of January 15, 2003, the offering was terminated. As of that date, the Company had received subscriptions for 12,065,266 Units ($120.7 million). Subsequent to January 15, 2003, Units totaling 10,250 were rescinded or repurchased and funds returned to investors (net of distributions paid and allocated syndication costs, as applicable). As of September 30, 2018, 12,055,016 Units remain issued and outstanding.

The Company is governed by the Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2010, 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 5). The Company is required to maintain reasonable cash reserves for working capital, for the repurchase of Units and for 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, 2017, 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 nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year.

Certain prior period amounts may have been reclassified to conform to the current period presentation. These reclassifications had no significant impact on the reported financial position or results of 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 Managing Member has reviewed events that have occurred after September 30, 2018, up until the issuance of the financial statements. No events were noted which would require additional disclosure in the footnotes to the financial statements, or 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 for determination of the allowance for doubtful accounts.

7

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

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

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 nine months ended September 30, 2018 and 2017, and long-lived tangible assets as of September 30, 2018 and December 31, 2017 (dollars in thousands):

		Nine Months Ended September 30,
		2018				% of Total				2017				% of Total
Revenue
North America		$	1,626				97	%		$	1,920				97	%
Canada			58				3	%			46				2	%
United Kingdom			—				0	%			13				1	%
Total International			58				3	%			59				3	%
Total		$	1,684				100	%		$	1,979				100	%

		As of September 30,								As of December 31,
		2018				% of Total				2017				% of Total
Long-lived assets
North America		$	3,254				97	%		$	3,610				97	%
Canada			91				3	%			91				3	%
United Kingdom			—				0	%			2				0	%
Total International			91				3	%			93				3	%
Total		$	3,345				100	%		$	3,703				100	%

Investment in securities:

Purchased securities

The Company's investment securities not registered for public sale that do not have readily determinable fair values are measured at cost minus impairment, and adjusted for changes in observable prices. There were neither impaired securities at September 30, 2018 and December 31, 2017 nor investment securities sold or disposed of during the three and nine months ended September 30, 2018 and 2017.

Other income, net:

Other income, net consisted solely of net gains and losses on foreign exchange transactions.

Per Unit data:

The Company issues only one class of Units, none of which are considered dilutive. Net income and distributions per Unit are based upon the weighted average number of Other Members’ Units outstanding during the period.

8

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

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

Fair value:

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.

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, 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.

Recent accounting pronouncements:

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (“ASU 2018-13”), which amends the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. This ASU modifies disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. Management is currently evaluating the impact of this standard on the financial statements and related disclosure requirements.

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-15 — Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses specific cash flow issues with the objective of reducing the

9

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

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

existing diversity in practice. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on its financial statements and disclosures.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. Management is currently evaluating the standard and expects the Update may potentially result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). The new standard will require lessees to recognize lease assets and lease liabilities arising from operating leases with lease terms greater than 12 months in the statement of financial position. Lessor accounting per ASU 2016-02 is mostly unchanged from the previous lease accounting under GAAP. Certain changes were made to the lessor accounting guidance in order to align the lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Similar to the previous guidance, lessors will classify leases as operating, direct financing, or sales-type. Lessors in operating leases will continue to recognize the underlying asset and recognize income on a straight-line basis. Lessors determine whether a lease is a sale of the underlying asset based on whether the lessee effectively obtains control of the underlying assets. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. While early adoption is permitted, the Company does not expect to elect that option. The Company expects to adopt the guidance in the first quarter 2019 using the modified retrospective method. Management is currently evaluating the impact of this standard on the financial statements and its operational and related disclosure requirements, including the impact on the Company’s current lease portfolio from a lessor perspective. As part of the adoption of the standard, the Company has selected and is in the process of implementing new lease accounting software. The Company is in the process of identifying and designing appropriate changes to its business processes, systems and controls to support the new standard. Given the limited changes to lessor accounting, Management does not expect material changes to recognition or measurement.

In July 2018, the FASB issued Accounting Standards Update 2018-11, Leases (Topic 842) Targeted Improvements (“ASU 2018-11”). The new standard provides a new transition method and practical expedient to simplify the application of the new leasing standard. Under the new transition method, comparative periods presented in the financial statements in the period of adoption will not need to be restated. Instead, a Company would initially apply the new lease requirements at the effective date, and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company would continue to report comparative periods presented in the financial statements in the period of adoption under current GAAP and provide the applicable required disclosures for such periods. The new practical expedient allows lessors to avoid separating lease and associated nonlease components within a

10

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

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

contract if certain criteria are met. If elected, lessors will be able to aggregate nonlease components that otherwise would be accounted for under the new revenue standard with the associated lease component if the following conditions are met (1) the timing and pattern of transfer of the nonlease component and the associated lease component are the same and (2) the stand-alone lease component would be classified as an operating lease if accounted for separately. For entities that have not adopted Topic 842 before the issuance of this Update, the effective date and transition requirements for the amendments in this Update related to separating components of a contract are the same as the effective date and transition requirements in Update 2016-02. The practical expedient may be elected either in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity. The practical expedient may be applied either retrospectively or prospectively. Management is currently evaluating the impact of the standard on the financial statements and related disclosure requirements. The Company plans to adopt this guidance on January 1, 2019 and will prospectively apply the new lease requirements and recognize a cumulative effect adjustment upon adoption. The Company expects to utilize the package of practical expedients as provided in the standard.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The new standard provides guidance related to accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and (v) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on its financial statements and disclosures. The Company elected to record equity investments without readily determinable fair values at cost, less impairment, and adjusted for changes in observable prices. Any changes in the basis of these equity investments are reported in current earnings.

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year and in August 2015, issued Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. This guidance was effective for the Company beginning on January 1, 2018. The adoption of ASU 2014-09 did not have a material impact on the Company’s financial statements and disclosures as the new revenue guideline does not affect revenue from leases, which comprise the majority of the Company’s revenues.

11

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

3. Allowance for credit losses:

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

		Accounts Receivable Allowance for Doubtful Accounts
		Operating Leases
Balance December 31, 2016		$	2
Provision			10
Balance December 31, 2017			12
Provision			45
Balance September 30, 2018		$	57

4. Investment in equipment and leases, net:

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

		Balance December 31, 2017				Reclassifications, Additions/ Dispositions				Depreciation/ Amortization Expense or Amortization of Leases				Balance September 30, 2018
Net investment in operating leases		$	3,079			$	237			$	(269	)		$	3,047
Assets held for sale or lease, net			616				(324	)			—				292
Initial direct costs, net of accumulated amortization of $3 at September 30, 2018 and $2 at December 31, 2017			8				—				(2	)			6
Total		$	3,703			$	(87	)		$	(271	)		$	3,345

Impairment of investments in leases and assets held for sale or lease:

Recorded values of the Company’s leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the Company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the asset’s lease contract and undiscounted future rents from the existing lease contract, if any. 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 simultaneously, if held in quantity, or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.

As a result of these reviews, management determined that no impairment losses existed during the three and nine months ended September 30, 2018 and 2017.

12

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

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

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 $99 thousand and $102 thousand for the respective three months ended September 30, 2018 and 2017, and was $269 thousand and $328 thousand for the respective nine months ended September 30, 2018 and 2017. The Company recorded $1 thousand and $0 initial direct cost amortization during the respective three months ended September 30, 2018 and 2017. The Company recorded initial cost amortization of $2 thousand and $1 thousand for the nine months ended September 30, 2018 and 2017.

All of the leased property was acquired beginning in 2001 through 2010.

Operating leases:

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

		Balance December 31, 2017				Additions				Reclassifications or Dispositions				Balance September 30, 2018
Transportation, rail		$	11,996			$	—			$	(79	)		$	11,917
Marine vessels			9,700				162				1,500				11,362
Transportation, other			1,371				—				—				1,371
Materials handling			615				—				(42	)			573
Construction			417				—				(417	)			—
Manufacturing			124				—				(124	)			—
Other			11				—								11
			24,234				162				838				25,234
Less accumulated depreciation			(21,155	)			(269	)			(763	)			(22,187	)
Total		$	3,079			$	(107	)		$	75			$	3,047

The average estimated residual value for assets on operating leases was 9% and 11% of the assets’ original cost at September 30, 2018 and December 31, 2017, respectively. There were no operating leases placed in nonaccrual status as of the same dates.

The Company may earn revenues from its containers, marine vessel and certain other assets based on utilization of such assets on a fixed-term lease. Contingent rentals (i.e., short-term, operating charter hire payments) 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 $27 thousand and $20 thousand for the respective three months ended September 30, 2018 and 2017, and $60 thousand and $49 thousand for the respective nine months ended September 30, 2018 and 2017.

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

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

At September 30, 2018, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

		Operating Leases
Three months ending December 31, 2018		$	319
Year Ending December 31, 2019			1,025
2020			586
2021			159
2022			46
2023			8
		$	2,143

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of September 30, 2018, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):

Equipment category		Useful Life
Transportation, rail			35 – 40
Marine vessels			20 – 30
Manufacturing			10 – 15
Construction			7 – 10
Materials handling			7 – 10
Transportation, other			7 – 10

5. 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 for 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.

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 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 managed assets, number of investors or contributed capital based upon the type of cost incurred. The 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 September 30, 2018, the Company has not exceeded the annual and/or cumulative limitations discussed above.

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

5. Related party transactions: - (continued)

During the three and nine months ended September 30, 2018 and 2017, AFS and/or affiliates earned fees and billed for reimbursements of costs and expenses pursuant to the Operating Agreement as follows (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Costs reimbursed to Managing Member and/or affiliates		$	29			$	96			$	248			$	322
Asset management fees to Managing Member and/or affiliates			18				26				46				80
		$	47			$	122			$	294			$	402

6. Commitments and Contingencies:

At September 30, 2018, the Company had no commitments to purchase lease assets or fund investments in notes receivable.

7. Members’ capital:

As of September 30, 2018 and December 31, 2017, 12,055,016 Units were issued and outstanding. The Company was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial Members (50 Units).

Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Distributions declared		$	—			$	527			$	—			$	3,315
Weighted average number of Units outstanding			12,055,016				12,055,016				12,055,016				12,055,016
Weighted average distributions per Unit		$	—			$	0.04			$	—			$	0.27

8. Fair value measurements:

Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

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.

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.

15

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

8. Fair value measurements: - (continued)

The measurement methodologies are as follows:

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.

Commitments and Contingencies

Management has determined that 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 estimated fair values of the Company’s financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at September 30, 2018 and December 31, 2017 (in thousands):

		Fair Value Measurements at September 30, 2018
		Carrying Amount				Level 1				Level 2				Level 3				Total
Financial assets:
Cash and cash equivalents		$	887			$	887			$	—			$	—			$	887

		Fair Value Measurements at December 31, 2017
		Carrying Amount				Level 1				Level 2				Level 3				Total
Financial assets:
Cash and cash equivalents		$	441			$	441			$	—			$	—			$	441

16

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

Statements contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially 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 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 Capital Equipment Fund IX, LLC (the “Company” or the “Fund”) is a California limited liability company that was formed in September 2000 for the purpose of engaging in the sale of limited liability company investment units and acquiring equipment to generate revenues from equipment leasing, lending 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.

Results of Operations

The three months ended September 30, 2018 versus the three months ended September 30, 2017

The Company had net income of $131 thousand, and $272 thousand for the three months ended September 30, 2018 and 2017, respectively. The net results for 2018 reflected a decrease in total revenues and an increase in total operating expenses when compared to the prior year period.

Revenues

Total revenues for the three months ended September 30, 2018 decreased by a $36 thousand, or 6%, as compared to the prior year period. Such decrease was largely due to a $129 thousand, or 182% unfavorable change in loss on sales of lease assets; offset, in part, by a $93 thousand, or 16%, increase in operating lease revenues due to recognition and receipt from short term leases.

Expenses

Total expenses for the three months ended September 30, 2018 increased by a $101 thousand, or 27%, as compared to the prior year period. Such net increase in total expenses was largely the result of a $204 thousand increase in marine vessel maintenance cost, the result of dry dock costs incurred to prepare the vessel for revenue generating charter; partially offset, by a $67 thousand, or 70%, decrease in cost reimbursement to the Managing Member and/or affiliates, the result of a net cost allocation adjustment; and a $30 thousand, or 333%, favorable turnaround in the provision for credit losses, a direct result of the collection of amounts previously reserved as uncollectable.

The nine months ended September 30, 2018 versus the nine months ended September 30, 2017

The Company had net income of $433 thousand and $746 thousand for the nine months ended September 30, 2018 and 2017, respectively. The net results for 2018 reflected a decrease in total revenues and an increase in total operating expenses when compared to the prior year period.

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Revenues

Total revenues for the nine months ended September 30, 2018 decreased by $295 thousand, or 15%, as compared to the prior year period. Such decrease was largely due to a $230 thousand, or 12%, decrease in operating lease revenues, the result of continued portfolio run-off and the sales of lease assets; and a $74 thousand, or 65%, decrease in gain on sales of lease assets primarily due to a change in the volume and mix of assets sold.

Expenses

Total expenses for the nine months ended September 30, 2018 increased by $12 thousand, or 1%, as compared to the prior year period. Such net increase in total expenses was largely the result of a $219 thousand, increase of marine vessel maintenance cost, the result of dry dock costs incurred to prepare the vessel for revenue generating charter; partially offset, by a $74 thousand, or 23%, decrease in cost reimbursement to the Managing Member and/or affiliates, the result of a net cost allocation adjustment; a $59 thousand, or 18%, decrease in depreciation of operating lease assets, a result of lease portfolio run-off and sales of lease assets; and a $34 thousand, or 43% decrease in asset management fees to Managing Member, the result of lower asset balances under management and related revenue.

Capital Resources and Liquidity

The Company’s cash and cash equivalents totaled $887 thousand and $441 thousand at September 30, 2018 and December 31, 2017, 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 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 initial lease terms expire, the Company re-leases or sells the equipment. The future liquidity beyond the contractual minimum rentals will depend on the Company’s success in remarketing or selling the equipment as it comes off-rental.

The Company 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 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 September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Net cash (used in) provided by:
Operating activities		$	(15	)		$	308			$	320			$	729
Investing activities			(118	)			76				126				168
Financing activities			—				(570	)			—				(3,584	)
Net (decrease) increase in cash and cash equivalents		$	(133	)		$	(186	)		$	446			$	(2,687	)

The three months ended September 30, 2018 versus the three months ended September 30, 2017

During the three months ended September 30, 2018 and 2017, the Company’s primary sources of liquidity were cash flows from its portfolio of operating lease contracts. In addition, the Company realized $44 thousand and $85 thousand of proceeds from sales or dispositions of equipment during the respective three months ended September 30, 2018 and 2017.

During the three months ended September 30, 2018, cash was primarily used to pay improvements to operating lease equipment and distributions to both Other Members and the Managing Member. Operating lease equipment improvements totaled $162 thousand and $0 during the respective three months ended

18

September 30, 2018 and 2017. Distributions paid to Members totaled $0 and $570 thousand during the respective three months ended September 30, 2018 and 2017. In addition, cash was also used to pay invoices related to management fees and expenses, and other payables.

The nine months ended September 30, 2018 versus the nine months ended September 30, 2017

During the nine months ended September 30, 2018 and 2017, the Company’s primary sources of liquidity were cash flows from its portfolio of operating lease contracts. In addition, the Company realized $288 thousand and $172 thousand of proceeds from sales or dispositions of equipment during the respective nine months ended September 30, 2018 and 2017.

No distributions were paid during the nine months ended September 30, 2018. During the nine months ended September 30, 2017, cash was primarily used to pay distributions to Members totaling $3.6 million. In addition, cash was also used to pay invoices related to management fees and expenses, and other payables.

Distributions

Beginning with the month of February 2001, the Company commenced periodic distributions based on cash flows from operations. The monthly distributions were discontinued in 2010 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 September 30, 2018, the Company had no commitments to purchase lease assets or fund investments in notes receivable.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

For detailed information on recent accounting pronouncements, see Note 2, Summary of significant accounting policies.

Significant 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 significant accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes to the Company’s significant accounting policies since December 31, 2017.

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) and 15d-15(e)) as

19

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, who 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 they are applicable to the Company, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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 September 30, 2018 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.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation 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: November 8, 2018

ATEL CAPITAL EQUIPMENT FUND IX, LLC
(Registrant)

				By: ATEL Financial Services, LLC Managing Member of Registrant
By:		/s/ Dean L. Cash Dean L. Cash President and Chief Executive Officer of 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 Senior Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (Managing Member)

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