Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended March 31, 2013

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 000-51858

ATEL Capital Equipment Fund XI, LLC

(Exact name of registrant as specified in its charter)

California	20-1357935
(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 April 30, 2013 was 5,209,307.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL CAPITAL EQUIPMENT FUND XI, LLC
  
Index

Part I. Financial Information		3
Item 1. Financial Statements (Unaudited)		3
Balance Sheets, March 31, 2013 and December 31, 2012		3
Statements of Income for the three months ended March 31, 2013 and 2012		4
Statements of Changes in Members’ Capital for the year ended December 31, 2012 and for the three months ended March 31, 2013		5
Statements of Cash Flows for the three months ended March 31, 2013 and 2012		6
Notes to the Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 4. Controls and Procedures		25
Part II. Other Information		26
Item 1. Legal Proceedings		26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3. Defaults Upon Senior Securities		26
Item 4. Mine Safety Disclosures		26
Item 5. Other Information		26
Item 6. Exhibits		26

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL CAPITAL EQUIPMENT FUND XI, LLC
 
BALANCE SHEETS
 
MARCH 31, 2013 AND DECEMBER 31, 2012
(In Thousands)

	March 31, 2013		December 31, 2012
	(Unaudited)
ASSETS
Cash and cash equivalents	$	874	$	1,502
Accounts receivable, net of allowance for doubtful accounts of $4 as of March 31, 2013 and $6 as of December 31, 2012		352		179
Notes receivable, net of unearned interest income of $95 and allowance for credit losses of $10 at March 31, 2013 and net of unearned interest income of $110 and allowance for credit losses of $10 at December 31, 2012		701		759
Investment in securities		221		219
Investments in equipment and leases, net of accumulated depreciation of $21,030 as of March 31, 2013 and $22,758 as of December 31, 2012		10,088		11,245
Prepaid expenses and other assets		29		32
Total assets	$	12,265	$	13,936
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member	$	78	$	155
Accrued distributions to Other Members		551		551
Other		222		404
Non-recourse debt		3,230		3,651
Unearned operating lease income		202		162
Total liabilities		4,283		4,923
Commitments and contingencies
Members’ capital:
Managing Member		—		—
Other Members		7,982		9,013
Total Members’ capital		7,982		9,013
Total liabilities and Members’ capital	$	12,265	$	13,936

See accompanying notes.

3

ATEL CAPITAL EQUIPMENT FUND XI, LLC
 
STATEMENTS OF INCOME
 
FOR THE THREE MONTHS ENDED
MARCH 31, 2013 AND 2012
(In Thousands Except for Units and Per Unit Data)
(Unaudited)

	Three Months Ended March 31,
	2013			2012
Revenues:
Leasing and lending activities:
Operating leases	$	1,151		$	1,656
Direct financing leases		26			12
Interest on notes receivable		15			22
Gain on sales of lease assets and early termination of notes		32			123
Gain on sales or dispositions of securities		1			—
Unrealized gain on securities		—			53
Other		5			21
Total revenues		1,230			1,887
Expenses:
Depreciation of operating lease assets		658			803
Asset management fees to Managing Member and/or affiliates		69			88
Acquisition expense		—			12
Cost reimbursements to Managing Member and/or affiliates		84			113
(Reversal of) provision for credit losses		(2	)		10
Provision for losses on investment in securities		—			32
Amortization of initial direct costs		5			7
Interest expense		46			69
Professional fees		44			49
Outside services		7			8
Other		44			46
Total operating expenses		955			1,237
Other (loss) income, net		(5	)		1
Net income	$	270		$	651
Net income:
Managing Member	$	97		$	97
Other Members		173			554
	$	270		$	651
Net income per Limited Liability Company Unit (Other Members)	$	0.03		$	0.11
Weighted average number of Units outstanding		5,209,307			5,209,307

See accompanying notes.

4

ATEL CAPITAL EQUIPMENT FUND XI, LLC
 
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
 
FOR THE YEAR ENDED DECEMBER 31, 2012
AND FOR THE THREE MONTHS ENDED MARCH 31, 2013
(In Thousands Except for Units and Per Unit Data)

	Other Members					Managing Member			Total
	Units		Amount
Balance December 31, 2011		5,209,307	$	12,585		$	—		$	12,585
Distributions to Other Members ($0.93 per Unit)		—		(4,819	)		—			(4,819	)
Distributions to Managing Member		—		—			(391	)		(391	)
Net income		—		1,247			391			1,638
Balance December 31, 2012		5,209,307		9,013			—			9,013
Distributions to Other Members ($0.23 per Unit)		—		(1,204	)		—			(1,204	)
Distributions to Managing Member		—		—			(97	)		(97	)
Net income		—		173			97			270
Balance March 31, 2013 (Unaudited)		5,209,307	$	7,982		$	—		$	7,982

See accompanying notes.

5

ATEL CAPITAL EQUIPMENT FUND XI, LLC
 
STATEMENTS OF CASH FLOWS
 
FOR THE THREE MONTHS ENDED
MARCH 31, 2013 AND 2012
(In Thousands)
(Unaudited)

	Three Months Ended March 31,
	2013			2012
Operating activities:
Net income	$	270		$	651
Adjustments to reconcile net income to cash provided by operating activities:
Gain on sales of lease assets and early termination of notes		(32	)		(123	)
Depreciation of operating lease assets		658			803
Amortization of initial direct costs		5			7
(Reversal of) provision for credit losses		(2	)		10
Provision for losses on investment in securities		—			32
Gain on sale or disposition of securities		(1	)		—
Unrealized gain on securities		—			(53	)
Changes in operating assets and liabilities:
Accounts receivable		(164	)		113
Prepaid expenses and other assets		3			3
Accounts payable, Managing Member		(77	)		4
Accounts payable, other		(182	)		(6	)
Unearned operating lease income		40			8
Net cash provided by operating activities		518			1,449
Investing activities:
Purchase of securities		(8	)		—
Proceeds from sales of lease assets and early termination of notes		468			509
Principal payments received on direct financing leases		58			43
Principal payments received on notes receivable		58			80
Net cash provided by investing activities		576			632
Financing activities:
Repayments under non-recourse debt		(421	)		(513	)
Distributions to Other Members		(1,204	)		(1,205	)
Distributions to Managing Member		(97	)		(97	)
Net cash used in financing activities		(1,722	)		(1,815	)
Net (decrease) increase in cash and cash equivalents		(628	)		266
Cash and cash equivalents at beginning of period		1,502			1,416
Cash and cash equivalents at end of period	$	874		$	1,682
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	47		$	82
Cash paid during the period for taxes	$	3		$	—
Schedule of non-cash transactions:
Distributions payable to Other Members at period-end	$	551		$	551
Distributions payable to Managing Member at period-end	$	45		$	45
Securities acquired through conversion of warrants	$	—		$	53

See accompanying notes.

6

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

1. Organization and Limited Liability Company matters:

ATEL Capital Equipment Fund XI, LLC (the “Company” or the “Fund”) was formed under the laws of the State of California on June 25, 2004. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales activities. Also, from time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements. 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, 2025. Each Member’s personal liability for obligations of the Company generally will be limited to the amount of their respective contributions and rights to undistributed profits and assets of the Company.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. On May 31, 2005, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business (acquiring equipment to engage in equipment leasing, lending and sales activities). As of July 13, 2005, the Company had received subscriptions for 958,274 Units ($9.6 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be released to the Company. The Company terminated sales of Units effective April 30, 2006. Life-to-date net contributions through March 31, 2013 totaled $52.2 million, consisting of approximately $52.8 million in gross contributions from Other Members purchasing Units under the public offering less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable) of $636 thousand. As of March 31, 2013, 5,209,307 Units were 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 December 31, 2012, and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by its Limited Liability Company Operating Agreement (“Operating Agreement”), as amended.

Pursuant to the terms of the Operating Agreement, AFS receives compensation for services rendered and reimbursements for costs incurred 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.

The Company’s 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, 2012, 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 months ended March 31, 2013 are not necessarily indicative of the results to be expected for the full year.

7

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

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

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.

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 March 31, 2013 up until the issuance of the financial statements. No events were noted which would require 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 and reserve for credit losses on 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 three months ended March 31, 2013 and 2012 and long-lived assets as of March 31, 2013 and December 31, 2012 (dollars in thousands):

	For The Three Months Ended March 31,
	2013		% of Total			2012		% of Total
Revenue
United States	$	1,222		99	%	$	1,759		93	%
United Kingdom		8		1	%		128		7	%
Total International		8		1	%		128		7	%
Total	$	1,230		100	%	$	1,887		100	%

	As of March 31,					As of December 31,
	2013		% of Total			2012		% of Total
Long-lived assets
United States	$	10,076		100	%	$	11,090		99	%
United Kingdom		12		0	%		155		1	%
Total International		12		0	%		155		1	%
Total	$	10,088		100	%	$	11,245		100	%

8

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

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

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.

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 months ended March 31, 2013. During the first quarter of 2012, the Company deemed certain investment securities to be impaired and recorded fair value adjustments totaling $32 thousand which reduced the cost basis of the investments at March 31, 2012.

Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried at an estimated fair value, as determined by the Managing Member, on the balance sheet as assets or liabilities. At March 31, 2013 and December 31, 2012, the Managing Member estimated the fair value of the warrants to be nominal in amount. During the first quarter of 2012, the Company recorded an unrealized gain of $53 thousand relative to the conversion of warrants associated with shares of a venture company. There were no unrealized gains recorded during the three months ended March 31, 2013. Gains and/or losses recognized on the net exercise of certain warrants were nominal for the three months ended March 31, 2013 and 2012.

Foreign currency transactions:

Foreign currency transaction gains and losses are reported in the results of operations as “other income” or “other loss” in the period in which they occur. Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments as the foreign currency transactions risks to date have not been significant. During the first quarter of 2013, the Company recorded other loss, net totaling $5 thousand relative to net losses from foreign currency transactions. By comparison, the Company recorded other income of $1 thousand during the first quarter of 2012 relative to net gains on foreign currency transactions.

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 various notes receivable from borrowers who have financed the purchase of equipment through the Company. At March 31, 2013, the original terms of the notes receivable are from 17 to 120 months and bear interest at rates ranging from 8.42% to 11.58%. The notes are secured by the equipment financed, and mature from 2013 through 2016.

9

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

3. Notes receivable, net: - (continued)

The Company had no notes in non-accrual status at both March 31, 2013 and December 31, 2012. As of December 31, 2012, the Company did, however, have a note receivable that was deemed impaired. Such impaired note remained outstanding as of March 31, 2013.

The impaired note at December 31, 2012 was placed in non-accrual status in 2010, at which time its term was modified to defer the repayment of principal until April 2012 while maintaining interest-only payments at the original rate of 11.58%. During 2011, the note was deemed impaired relative to its original payment terms. From April 1, 2012 well into the third quarter of 2012, the interest only payment arrangement was continued pending final resolution of the terms of repayment. Prior to the end of the third quarter of 2012, a large dollar amount was received to significantly reduce the then outstanding principal balance by September 30, 2012. During the periods when interest only was being paid, all such payments were made in accordance with the then applicable note modification agreements. The note was returned to accrual status effective October 1, 2012. As of March 31, 2013, $10 thousand of the aforementioned note remains outstanding. As of the same date, the fair value of the impaired note is $0, reflecting previous valuation adjustments of $10 thousand.

The minimum future payments receivable as of March 31, 2013 are as follows (in thousands):

Nine months ending December 31, 2013	$	231
Year ending December 31, 2014		221
2015		166
2016		188
		806
Less: portion representing unearned interest income		(95	)
		711
Less: Reserve for impairment		(10	)
Notes receivable, net	$	701

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, 2011	$	—	$	—	$	58		$	2	$	—	$	60
(Reversal of) provision for credit losses		—		—		(52	)		8		—		(44	)
Balance December 31, 2012		—		—		6			10		—		16
Reversal of provision for credit losses		—		—		(2	)		—		—		(2	)
Balance March 31, 2013	$	—	$	—	$	4		$	10	$	—	$	14

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

10

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

4. Allowance for credit losses: - (continued)

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 contracts and notes receivable are applied only against outstanding principal balances.

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.

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.

11

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

4. Allowance for credit losses: - (continued)

As of March 31, 2013 and December 31, 2012, the Company’s allowance for credit losses (related solely to financing receivables) and its recorded investment in financing receivables were as follows (in thousands):

March 31, 2013	Notes Receivable		Finance Leases		Total
Allowance for credit losses:
Ending balance	$	10	$	—	$	10
Ending balance: individually evaluated for impairment	$	10	$	—	$	10
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—
Financing receivables:
Ending balance	$	711	$	242	$	953
Ending balance: individually evaluated for impairment	$	711	$	242	$	953
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—

December 31, 2012	Notes Receivable		Finance Leases		Total
Allowance for credit losses:
Ending balance	$	10	$	—	$	10
Ending balance: individually evaluated for impairment	$	10	$	—	$	10
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—
Financing receivables:
Ending balance	$	769	$	300	$	1,069
Ending balance: individually evaluated for impairment	$	769	$	300	$	1,069
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.

12

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

4. Allowance for credit losses: - (continued)

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.

At March 31, 2013 and December 31, 2012, 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
	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Pass	$	701	$	—	$	242	$	274
Special mention		—		769		—		26
Substandard		—		—		—		—
Doubtful		10		—		—		—
Total	$	711	$	769	$	242	$	300

As of March 31, 2013 and December 31, 2012, the Company’s impaired loans were as follows (in thousands):

	Impaired Loans
March 31, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded
Notes receivable	$	—	$	—	$	—	$	—	$	—
With an allowance recorded
Notes receivable		10		10		10		10		—
Total	$	10	$	10	$	10	$	10	$	—

	Impaired Loans
December 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded
Notes receivable	$	—	$	—	$	—	$	—	$	—
With an allowance recorded
Notes receivable		10		10		10		14		4
Total	$	10	$	10	$	10	$	14	$	4

13

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

4. Allowance for credit losses: - (continued)

At March 31, 2013 and December 31, 2012, investment in financing receivables is aged as follows (in thousands):

March 31, 2013	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Notes receivable	$	—	$	—	$	—	$	—	$	711	$	711	$	—
Finance leases		—		13		26		39		203		242		26
Total	$	—	$	13	$	26	$	39	$	914	$	953	$	26

December 31, 2012	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Notes receivable	$	—	$	—	$	—	$	—	$	769	$	769	$	—
Finance leases		—		33		—		33		267		300		—
Total	$	—	$	33	$	—	$	33	$	1,036	$	1,069	$	—

The Company had no notes in non-accrual status at both March 31, 2013 and December 31, 2012. As of December 31, 2012, the Company did, however, have a note receivable that was deemed impaired. Such impaired note remained outstanding as of March 31, 2013. See Note 3 for further discussion.

At March 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. As of December 31, 2012, there were no accounts receivable related to net investments in financing receivables placed in non-accrual status.

5. Investment in equipment and leases, net:

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

	Balance December 31, 2012		Reclassifications, Additions/ Dispositions and Impairment Losses			Depreciation/ Amortization Expense or Amortization of Leases			Balance March 31, 2013
Net investment in operating leases	$	10,515	$	(222	)	$	(658	)	$	9,635
Net investment in direct financing leases		300		—			(58	)		242
Assets held for sale or lease, net		371		(214	)		—			157
Initial direct costs, net of accumulated amortization of $80 at March 31, 2013 and $80 at December 31, 2012		59		—			(5	)		54
Total	$	11,245	$	(436	)	$	(721	)	$	10,088

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. Impairment losses are recorded as an adjustment to the net investment in operating leases. The Company had no impairment losses during each of the three months ended March 31, 2013 and 2012.

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

14

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

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

approximately $658 thousand and $803 thousand for the respective three months ended March 31, 2013 and 2012. Initial direct costs amortization expense related to the Company’s operating and direct financing leases totaled $5 thousand and $7 thousand for the three months ended March 31, 2013 and 2012, respectively.

All of the leased property was acquired during the years 2005 through 2011.

Operating leases:

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

	Balance December 31, 2012			Additions			Reclassifications, Dispositions and Impairment Losses			Balance March 31, 2013
Transportation, rail	$	11,626		$	—		$	—		$	11,626
Materials handling		6,089			—			(631	)		5,458
Transportation, other		6,086			—			(1,104	)		4,982
Mining		2,893			—			—			2,893
Aviation		1,658			—			—			1,658
Marine vessels		1,415			—			—			1,415
Manufacturing		953			—			—			953
Construction		898			—			—			898
Other		4			—			(4	)		—
		31,622			—			(1,739	)		29,883
Less accumulated depreciation		(21,107	)		(658	)		1,517			(20,248	)
Total	$	10,515		$	(658	)	$	(222	)	$	9,635

The average estimated residual value for assets on operating leases was 21% of the assets’ original cost at both March 31, 2013 and December 31, 2012. There were no operating lease contracts placed in non-accrual status at March 31, 2013 and December 31, 2012. However, as of March 31, 2013 and December 31, 2012, the Company had certain other 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 for any actual change in collectability status and indication of necessary valuation adjustments.

Direct financing leases:

As of March 31, 2013 and December 31, 2012, investment in direct financing leases primarily consists of materials handling, furniture and fixtures, and research equipment. The components of the Company’s investment in direct financing leases as of March 31, 2013 and December 31, 2012 are as follows (in thousands):

	March 31, 2013			December 31, 2012
Total minimum lease payments receivable	$	241		$	325
Estimated residual values of leased equipment (unguaranteed)		60			60
Investment in direct financing leases		301			385
Less unearned income		(59	)		(85	)
Net investment in direct financing leases	$	242		$	300

There were no investments in direct financing lease assets in non-accrual status at March 31, 2013 and December 31, 2012.

15

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

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

At March 31, 2013, the aggregate amounts of future minimum lease payments to be received are as follows (in thousands):

	Operating Leases		Direct Financing Leases		Total
Nine months ending December 31, 2013	$	2,225	$	135	$	2,360
Year ending December 31, 2014		2,078		75		2,153
2015		1,087		31		1,118
2016		415		—		415
2017		415		—		415
2018		79		—		79
	$	6,299	$	241	$	6,540

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.

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; and investor relations, communications services and general administrative services 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 reimbursable in future years to the extent of the cumulative limit. As of March 31, 2013, the Company has not exceeded the annual and/or cumulative limitations discussed above.

AFS and/or affiliates earned fees and commissions, and billed for reimbursements, pursuant to the Operating Agreement as follows during each of the three months ended March 31, 2013 and 2012 (in thousands):

	Three Months Ended March 31,
	2013		2012
Costs reimbursed to Managing Member and/or affiliates	$	84	$	113
Asset management fees to Managing Member and/or affiliates		69		88
Acquisition and initial direct costs paid to Managing Member and/or affiliates		—		12
	$	153	$	213

16

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

7. Non-recourse debt:

At March 31, 2013, 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 4.40% to 5.95%. The notes are secured by assignments of lease payments and pledges of assets. At March 31, 2013, gross lease rentals totaled approximately $3.4 million over the remaining lease terms; and the carrying value of the pledged assets is approximately $5.9 million. The notes mature from 2013 through 2015.

The non-recourse debt does not contain any material financial covenants. The debt is secured by liens 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 specific 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.

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

	Principal		Interest		Total
Nine months ending December 31, 2013	$	1,278	$	108	$	1,386
Year ending December 31, 2014		1,313		73		1,386
2015		639		17		656
	$	3,230	$	198	$	3,428

8. Borrowing facilities:

Effective as of December 31, 2012, the Company’s participation in a revolving credit facility (the “Credit Facility”) with AFS and certain of its affiliates was terminated. The Company had no related balances outstanding at the time.

Prior to December 31, 2012, the Company participated with AFS and certain of its affiliates in the Credit Facility comprised of a working capital facility to AFS, an acquisition facility (the “Acquisition Facility”) and a warehouse facility (the “Warehouse Facility”) to AFS, the Company and affiliates, and a venture facility available to an affiliate, with a syndicate of financial institutions as lenders. The Credit Facility was for an amount up to $60 million and included certain financial covenants. The interest rate on the Credit Facility was based on either the LIBOR/Eurocurrency rate of 1-, 2-, 3- or 6-month maturity plus a lender designated spread, or the bank’s Prime rate, which re-priced daily. Principal amounts of loans made under the Credit Facility that were prepaid may be re-borrowed on the terms and subject to the conditions set forth under the Credit Facility.

9. Commitments:

At March 31, 2013, the Company had no commitments to either purchase lease assets or fund loans.

17

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

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.

11. Members’ capital:

A total of 5,209,307 Units were issued and outstanding as of March 31, 2013 and December 31, 2012. The Fund was authorized to issue up to 15,000,000 Units. The Company terminated sales of Units effective April 30, 2006.

The Company has the right, exercisable at 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.

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

	Three Months Ended March 31,
	2013		2012
Distributions	$	1,204	$	1,205
Weighted average number of Units outstanding		5,209,307		5,209,307
Weighted average distributions per Unit	$	0.23	$	0.23

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.

18

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

12. Fair value measurements: - (continued)

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 had no assets or liabilities requiring measurement at fair value on a recurring or non-recurring basis at March 31, 2013.

No assets or liabilities required measurement at fair value on a recurring basis at December 31, 2012; however, the Company recorded non-recurring adjustments to reflect the fair values of certain impaired off-lease assets, notes receivable and investment securities during 2012. Amounts at December 31, 2012 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 operating lease and off-lease equipment

The Company had no fair value adjustments relative to impaired equipment during the three months ended March 31, 2013 and 2012.

Subsequent to the first quarter of 2012, the Company recorded $429 thousand of fair value adjustments to reduce the fair value of certain impaired off-lease equipment. The adjustments were non-recurring. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair values of such impaired off-lease equipment are classified within Level 3 of the valuation hierarchy as the data sources utilized for the valuation of the 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.

Impaired notes receivable

The fair value of the Company’s notes receivable, when impairment adjustments are required, is estimated using either third party appraisals or estimations of the value of collateral (for collateral dependent loans) or discounted cash flow analyses (by discounting estimated future cash flows) using the effective interest rate contained in the terms of the original loan. The Company had no fair value adjustments relative to impaired notes receivable during the first quarter of 2013.

During the first quarter of 2012, the Company recorded an additional $8 thousand adjustment to reflect the fair value of a note deemed impaired in 2011. The incremental adjustment was based upon an independent appraisal of the underlying collateral. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the impaired notes receivable was classified within Level 3 of the

19

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

12. Fair value measurements: - (continued)

valuation hierarchy. Such valuation utilized a market approach technique and used inputs from third party appraisers that utilize current market transactions as adjusted for certain factors specific to the underlying collateral. There was no incremental fair value adjustment through December 31, 2012.

Impaired investment securities

The Company’s investment securities are not registered for public sale and are carried at cost. The investment securities are adjusted for impairment, if any, based upon factors which 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. The Company had no fair value adjustments to investment securities during first quarter of 2013.

During 2012, the Company recorded $40 thousand of non-recurring fair value adjustments which reduced the cost basis of two investment securities. Of the total adjustment, $32 thousand was recorded during the first quarter of 2012 and was based on an approximate 66% reduction in the valuation of one of the securities. Such reduction considered the investee’s current liquidity, rate of cash burn and potential for additional capital infusion. The remaining $8 thousand represents an additional adjustment to an investment which was originally deemed impaired in March 2011. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair values of the impaired investment securities were classified within Level 3 of the valuation hierarchy due to the significant inputs that are unobservable in the market.

The following table presents the fair value measurement of impaired assets measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at December 31, 2012 (in thousands):

	December 31, 2012		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	$	405	$	—	$	—	$	405
Impaired investment securities		24		—		—		24

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 approximates 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 estimated using either third party appraisals of collateral or discounted cash flow analyses based upon current market rates for similar types of lending arrangements, with adjustments for impaired loans as deemed necessary.

20

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

12. Fair value measurements: - (continued)

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 the current market borrowing rates for similar types of borrowing arrangements.

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 not recorded at fair value on the Company’s balance sheet at March 31, 2013 and December 31, 2012 (in thousands):

	Fair Value Measurements at March 31, 2013
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	874	$	874	$	—	$	—	$	874
Notes receivable, net		701		—		—		701		701
Investment in securities		221		—		—		221		221
Financial liabilities:
Non-recourse debt		3,230		—		—		3,359		3,359

	Fair Value Measurements at December 31, 2012
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,502	$	1,502	$	—	$	—	$	1,502
Notes receivable, net		759		—		—		759		759
Investment in securities		219		—		—		219		219
Financial liabilities:
Non-recourse debt		3,651		—		—		3,807		3,807

21

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, the economic recession and changes in general economic conditions, including, fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in 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 XI, LLC (the “Company” or the “Fund”) is a California limited liability company that was formed in June 2004 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 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 April 2006. During 2006, 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 reinvested cash flow in excess of certain amounts required to be distributed to the Other Members and/or utilized its credit facilities to acquire additional equipment. Throughout the Reinvestment Period, which ended December 31, 2012, the Company anticipates continued reinvestment of cash flow in excess of minimum distributions and other obligations. The Company is governed by its Limited Liability Company Operating Agreement (“Operating Agreement”), as amended.

The Company may continue until December 31, 2025. Periodic distributions are paid at the discretion of the Managing Member.

Results of Operations

The three months ended March 31, 2013 versus the three months ended March 31, 2012

The Company had net income of $270 thousand and $651 thousand for the three months ended March 31, 2013 and 2012, respectively. Results for the first quarter of 2013 reflect a decrease in total revenues offset, in part, by a reduction in total operating expenses when compared to the prior year period.

Revenues

Total revenues for the first quarter of 2013 declined by $657 thousand, or 35%, as compared to the prior year period. The net reduction in total revenues was largely attributable to decreases in operating lease revenues, gain on sales of lease assets and early termination of notes, and unrealized gain on investment securities.

The decrease in operating lease revenues totaled $505 thousand and was primarily a result of continued run-off and sales of lease assets. Gain on sales of lease assets and early termination of notes declined by $91 thousand largely due to a reduction in volume and a change in the mix of assets sold. In addition, during the prior year period, the Company recorded $53 thousand of unrealized gain relative to the exercise of warrants to obtain shares in certain venture companies. There were no such unrealized gains during the current year period.

22

Expenses

Total expenses for the first quarter of 2013 decreased by $282 thousand, or 23%, as compared to the prior year period. The net reduction in total expenses was primarily due to decreases in depreciation expense, provision for losses on investment in securities, cost reimbursements to AFS, and interest expense.

Depreciation expense decreased by $145 thousand, or 18%, largely due to run-off and sales of lease assets. The provision for losses on investment in securities declined by $32 thousand due to a first quarter 2012 fair value adjustment which reduced the cost basis of an impaired investment security. Moreover, cost reimbursements to AFS declined by $29 thousand primarily due to lower costs allocated by the Manager based on the Company’s declining asset base, and operations, consistent with a fund in liquidation. Finally, interest expense decreased by $23 thousand mainly due to a $1.8 million reduction in outstanding borrowings since March 31, 2012.

Capital Resources and Liquidity

At March 31, 2013 and December 31, 2012, the Company’s cash and cash equivalents totaled $874 thousand and $1.5 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 lease assets are acquired, as distributions are made to the 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.

Throughout the Reinvestment Period (as defined in the Operating Agreement), the Company anticipates reinvesting a portion of lease payments from assets owned, and/or payments received on notes receivable, in new leasing or financing transactions. Such reinvestment will occur only after the payment of all obligations, including debt service (both principal and interest), the payment of management fees to AFS and providing for cash distributions to the Members.

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 and notes would not increase as such rates are generally fixed for the terms of the leases and notes without adjustment for inflation. In addition, if interest rates increase significantly under such circumstances, the rates that the Company can obtain on future lease or financing transactions will be expected to increase as the cost of capital is a significant factor in the pricing of leases and investments in notes receivable. Leases and notes 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 March 31,
	2013			2012
Net cash provided by (used in):
Operating activities	$	518		$	1,449
Investing activities		576			632
Financing activities		(1,722	)		(1,815	)
Net (decrease) increase in cash and cash equivalents	$	(628	)	$	266

23

The three months ended March 31, 2013 versus the three months ended March 31, 2012

During the three months ended March 31, 2013 and 2012, 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 also realized $468 thousand and $509 thousand of cash flows from the sale or disposition of equipment and early termination of certain notes during the respective three months ended March 31, 2013 and 2012.

During the same periods, cash was primarily used to pay distributions to both the Other Members and the Managing Member, totaling $1.3 million for each of the three-month periods ended March 31, 2013 and 2012. In addition, cash was also used to pay down $421 thousand and $513 thousand of debt during the respective three months ended March 31, 2013 and 2012; and, to pay invoices related to management fees and expenses, and other payables.

Revolving credit facility

Effective as of December 31, 2012, the Company’s participation in a revolving credit facility with AFS and certain of its affiliates was terminated. The Company had no related balances outstanding at the time.

Prior to December 31, 2012, the Company participated with AFS and certain of its affiliates in a revolving credit facility comprised of a working capital facility to AFS, an acquisition facility and a warehouse facility to AFS, the Company and affiliates, and a venture facility available to an affiliate, with a syndicate of financial institutions as lenders.

Non-Recourse Long-Term Debt

As of March 31, 2013, the Company had non-recourse long-term debt totaling $3.2 million. Such non-recourse notes payable do not contain any material financial covenants. The notes are secured by a 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 specific leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items.

For detailed information on the Company’s debt obligations, see Notes 7 and 8 to the financial statements as set forth in Part I, Item 1, Financial Statements (Unaudited).

Distributions

The Company commenced periodic distributions, based on cash flows from operations, beginning with the month of June 2005. Such distributions have been consistently made through March 31, 2013.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At March 31, 2013, the Company had no commitments to purchase lease assets or fund loans.

Off-Balance Sheet Transactions

None.

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

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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, 2012. There have been no material changes to the Company’s critical accounting policies since December 31, 2012.

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 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 March 31, 2013 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.

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:

1. Financial Statement Schedules

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

2. Other Exhibits

31.1	Rule 13a-14(a)/15d-14(a) Certification of Dean L. Cash
31.2	Rule 13a-14(a)/15d-14(a) Certification of Paritosh K. Choksi
32.1	Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash
32.2	Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi
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

* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”

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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: May 13, 2013

ATEL CAPITAL EQUIPMENT FUND XI, 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
Vice President and Chief Accounting Officer of
ATEL Financial Services, LLC (Managing Member)