-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GXgwPzGUP/aiHLASxQm/52ih9c1p9sPr2lb4r8zI0KdRrHpsxj392MSNn65IfVDl 496ouVum66P5fhjt4YNteQ== 0000892875-00-000001.txt : 20000411 0000892875-00-000001.hdr.sgml : 20000411 ACCESSION NUMBER: 0000892875-00-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATEL CASH DISTRIBUTION FUND V L P CENTRAL INDEX KEY: 0000892875 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943165807 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-23842 FILM NUMBER: 581683 BUSINESS ADDRESS: STREET 1: 235 PINE ST 6TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159898800 MAIL ADDRESS: STREET 1: 235 PINE ST STREET 2: 6TH FL CITY: SAN FRANCISCO STATE: CA ZIP: 94104 10-K 1 ANNUAL REPORT FOR 1999 Form 10K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |X| Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 (no fee required) For the Year Ended December 31, 1999 OR |_| Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 (no fee required) For the transition period from ____ to ____ Commission File number 0-23842 ATEL Cash Distribution Fund V, L.P. California 94-3165807 - ---------- ---------- (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 235 Pine Street, 6th Floor, San Francisco, California 94104 (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 Partnership Units Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| State the aggregate market value of voting stock held by non-affiliates of the registrant. Inapplicable DOCUMENTS INCORPORATED BY REFERENCE None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| 1 PART I Item 1: BUSINESS General Development of Business ATEL Cash Distribution Fund V, L.P. (the Partnership), was formed under the laws of the State of California in September 1992. The Partnership was formed for the purpose of acquiring equipment to engage in equipment leasing and sales activities. The Partnership conducted a public offering of 12,500,000 units of Limited Partnership interest (Units), at a price of $10 per Unit. As of November 15, 1994, the Partnership had received and accepted subscriptions for 12,500,000 ($125,000,000) Limited Partnership Units in addition to the Initial Limited Partners' Units and the offering was terminated. Of those Units, 12,497,000 were issued and outstanding as of December 31, 1999 and 1998. Of the proceeds received, $11,875,000 was paid to ATEL Securities Corporation, a wholly-owned subsidiary of ATEL Financial Corporation (ATEL) (the General Partner), as sales commissions, $5,738,415 was paid to the General Partner as reimbursements of organization and other syndication costs, $1,875,000 was reserved for repurchases of Units and working capital and $105,511,585 has been used to acquire leased equipment, including acquisition fees paid or to be paid to the General Partner. The Partnership's principal objectives are to invest in a diversified portfolio of equipment which will (i) preserve, protect and return the Partnership's invested capital; (ii) generate substantial distributions to the partners of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period, ending December 31, 2000 and (iii) provide significant distributions following the reinvestment period and until all equipment has been sold. The Partnership is governed by its Limited Partnership Agreement. Narrative Description of Business The Partnership has acquired and intends to acquire various types of equipment and to lease such equipment pursuant to "Operating" leases and "Full Payout" leases, where "Operating" leases are defined as being leases in which the minimum lease payments during the initial lease term do not recover the full cost of the equipment and "Full Payout" leases recover such cost. It is the intention of the General Partner that no more than 25% of the aggregate purchase price of equipment will be subject to "Operating" leases upon final investment of the Net Proceeds of the Offering and that no more than 20% of the aggregate purchase price of equipment will be invested in equipment acquired from a single manufacturer. The Partnership only purchases equipment for which a lease exists or for which a lease will be entered into at the time of the purchase. The Partnership has completed its initial acquisition stage with the investment of the net proceeds from the public offering of Units. As noted above, however, it intends to continue to invest any cash flow in excess of certain amounts required to be distributed to the Limited Partners in additional items of leased equipment through December 31, 2000. As of December 31, 1999, the Partnership had purchased equipment with a total acquisition price of $186,995,157. 2 The Partnership's objective is to lease a minimum of 75% of the equipment acquired with the net proceeds of the offering to lessees which (i) have an aggregate credit rating by Moody's Investor Service, Inc. of Baa or better, or the credit equivalent as determined by the General Partner, with the aggregate rating weighted to account for the original equipment cost for each item leased or (ii) are established hospitals with histories of profitability or municipalities. The balance of the original equipment portfolio may include equipment leased to lessees which, although deemed creditworthy by the General Partner, would not satisfy the general credit rating criteria for the portfolio. In excess of 75% of the equipment acquired with the net proceeds of the offering (based on original purchase cost) had been leased to lessees with an aggregate credit rating of Baa or better or to such hospitals or municipalities. During 1999, no single lessee generated 10% of the Partnership's lease revenues. During 1998 and 1997, certain lessees generated significant portions of the Partnership's total lease revenues as follows: Percentage of Total Lease Revenues Lessee Type of Equipment 1998 1997 ------ ----------------- ---- ---- Burlington Northern Railroad Locomotives 14% 19% The Pittston Company Mining 11% 14% These percentages are not expected to be comparable in future periods. The equipment leasing industry is highly competitive. Equipment manufacturers, corporations, partnerships and others offer users an alternative to the purchase of most types of equipment with payment terms which vary widely depending on the lease term and type of equipment. The ability of the Partnership to keep the equipment leased and/or operating and the terms of the acquisitions, leases and dispositions of equipment depends on various factors (many of which are not in the control of the General Partner or the Partnership), such as general economic conditions, including the effects of inflation or recession, and fluctuations in supply and demand for various types of equipment resulting from, among other things, technological and economic obsolescence. The General Partner will seek to limit the amount invested in equipment to any single lessee to not more than 20% of the aggregate purchase price of equipment owned at any time during the reinvestment period. The business of the Partnership is not seasonal. The Partnership has no full time employees. Equipment Leasing Activities: Through December 31, 1999, the Partnership has disposed of certain leased assets as set forth below: Original Equipment Cost, Excess of Type of Excluding Rents Over Equipment Acquisition Fees Sale Price Expenses * --------- ---------------- ---------- ---------- Transportation $ 29,949,497 $15,065,548 $21,949,526 Furniture, fixtures and office equipment 15,131,313 6,675,396 11,299,693 Mining equipment 10,338,298 5,987,744 6,003,264 Materials handling 2,779,975 833,204 2,208,665 Office automation 2,635,065 507,086 2,436,378 Other 6,568,932 3,451,846 6,284,890 ---------------- ---------------- --------------- $ 67,403,080 $32,520,824 $50,182,416 ================ ================ =============== * Includes only those expenses directly related to the production of the related rents. 3 The Partnership has acquired a diversified portfolio of equipment. The equipment has been leased to lessees in various industries. The following tables set forth the types of equipment acquired by the Partnership through December 31, 1999 and the industries to which the assets have been leased.
Purchase price excluding Percentage of total Asset types acquisition fees acquisitions ----------- ---------------- ------------ Transportation, over-the-road tractors and trailers $ 34,546,518 18.47% Furniture and fixtures 24,145,180 12.91% Transportation, other 18,454,853 9.87% Mining 15,986,308 8.55% Transportation, intermodal containers 15,484,688 8.28% Construction 15,335,327 8.20% Materials handling 14,469,358 7.74% Railroad locomotives 12,350,000 6.60% Earth moving 11,943,745 6.39% Transportation, rail cars 7,180,000 3.84% Printing 4,707,508 2.52% Other * 12,391,672 6.63% ---------------- ---------------- $ 186,995,157 100.00% ================ ================
Purchase price excluding Percentage of total Industry of lessee acquisition fees acquisitions ------------------ ---------------- ------------ Transportation, rail $ 45,670,556 24.42% Mining 29,823,055 15.95% Oil & gas 21,301,523 11.39% Retail, foods 11,215,586 6.00% Food processing 9,828,623 5.26% Construction 9,410,789 5.03% Chemicals 9,075,487 4.85% Retail, restaurant 8,528,067 4.56% Transportation, other 8,311,346 4.44% Primary metals 7,526,037 4.02% Manufacturing, other 6,815,862 3.64% Manufacturing, auto/truck 6,690,185 3.58% Printing 4,707,508 2.52% Other * 8,090,533 4.34% ---------------- ---------------- $ 186,995,157 100.00% ================ ================
* Individual amounts included in "Other" represent less than 2.5% of the total. For further information regarding the Partnership's equipment lease portfolio as of December 31, 1999, see Note 3 to the financial statements, Investments in equipment and leases, set forth in Item 8, Financial Statements and Supplementary Data. Item 2. PROPERTIES The Partnership does not own or lease any real property, plant or materially important physical properties other than the equipment held for lease as set forth in Item 1. 4 Item 3. LEGAL PROCEEDINGS No material legal proceedings are currently pending against the Partnership or against any of its assets. In October 1997, Schwegmann's Giant Supermarkets, one of the Partnership's lessees, defaulted on two of five locations of retail grocery store fixtures and equipment, the lease payments, and certain other obligations under the lease, with a receivable balance currently totaling approximately $1.7 million. The remaining portion of the lease payments with respect to three of five stores was assumed by SGSM Acquisition Company ("SGSM"). Payments with respect to these leases remained current until February 1999; however, on March 26, 1999, SGSM filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The Partnership is currently pursuing damages in the amount of $2.8 million, representing amounts due under the lease. The lessee claims that it has sufficient assets to satisfy the claims of all secured creditors of the lessee; however, as the lessee's assets are primarily relatively illiquid real property investments, the timing of the liquidation of such assets have resulted in delays in the payments to the lessee's creditors. As of this date, the General Partner believes that it has a reasonable basis for asserting a likelihood of recovering most or all of the amounts claimed. On January 16, 1998, Pegasus Gold Corporation filed for protection under Chapter 11. The initial meeting of creditors established by the Bankruptcy Court was held on March 9, 1998. The lessee's lease with the Partnership had previously been leveraged on a non-recourse basis with The CIT Group/Equipment Financing, Inc. ("CIT"), and all lease receivables (estimated at $6,032,460) were assigned to the lender. Consequently, the Partnership's exposure is no greater than the fair market residual value of the equipment under lease, estimated at $1,101,803. The reorganized lessee/debtor has assumed the Partnership's lease in the Bankruptcy Court and, made all past due payments. The Partnership has entered into an Escrow Agreement with CIT, wherein CIT has agreed not to foreclose on the Partnership's interest so long as the lessee continues to perform under the lease. At this time, the lessee is current in its lease obligations. The ultimate recovery under this lease is dependent on the price of gold remaining On December 31, 1997, Quaker Coal Company requested a moratorium on lease payments from January through March 1998. No lease payments were made through June of 1998. As a result, the General Partner declared the lease in default. Subsequently, the lessee made the outstanding payments, however, the General Partner refused to waive the default and insisted on additional damages in the range of $993,000 to $1,370,000. The General Partner sued the lessee for damages and is currently awaiting judgement from the court. The General Partner believes that an adverse ruling would not have a material impact on the operations of the Partnership. The amounts of these damages have not been included in the financial statements included in Item 8 of this report. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Inapplicable. PART II Item 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED MATTERS Market Information The Units are transferable subject to restrictions on transfers which have been imposed under the securities laws of certain states. However, as a result of such restrictions, the size of the Partnership and its investment objectives, to the General Partner's knowledge, no established public secondary trading market has developed and it is unlikely that a public trading market will develop in the future. 5 Holders As of December 31, 1999, a total of 7,364 investors were record holders of Units in the Partnership. Dividends The Partnership does not make dividend distributions. However, the Limited Partners of the Partnership are entitled to certain distributions as provided under the Limited Partnership Agreement. The General Partner shall have sole discretion in determining the amount of distributions; provided, however, that the General Partner will not reinvest in equipment, but will distribute, subject to payment of any obligations of the Partnership, such available cash from operations and cash from sales or refinancing as may be necessary to cause total distributions to the Limited Partners for each year during the reinvestment period to equal the following amounts per unit: $1.05 in 1995 and 1996; $1.10 in 1997 and 1998; and $1.20 in 1999 and 2000. The rate for monthly distributions from 1997 operations was $0.09166 per Unit. The distributions were made in February 1997 through December 1997 and in January 1998. For each quarterly distribution (made in April, July and October 1997 and in January 1998) the rate was $0.275 per Unit. Distributions were from 1997 cash flows from operations. The amounts paid to holders of Units were adjusted based on the length of time within the previous calendar month or quarter that the Units were outstanding. The rate for monthly distributions from 1998 operations was $0.10 per Unit. The distributions were made in February 1998 through December 1998 and in January 1999. For each quarterly distribution (made in April, July and October 1998 and in January 1999) the rate was $0.30 per Unit. Distributions were from 1998 cash flows from operations. The amounts paid to holders of Units were adjusted based on the length of time within the previous calendar month or quarter that the Units were outstanding. The rate for monthly distributions from 1999 operations was $0.10 per Unit. The distributions were made in February 1999 through December 1999 and in January 2000. For each quarterly distribution (made in April, July and October 1999 and in January 2000) the rate was $0.30 per Unit. Distributions were from 1999 cash flows from operations. The amounts paid to holders of Units were adjusted based on the length of time within the previous calendar month or quarter that the Units were outstanding. The following table presents summarized information regarding distributions to Limited Partners:
1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Distributions of net income $ 0.41 $ 0.39 $ 0.14 $ 0.23 $ 0.13 Return of investment 0.79 0.80 0.96 0.86 0.92 ---------------- --------------- ---------------- --------------- ---------------- Distributions per unit 1.20 1.19 1.10 1.09 1.05 Differences due to timing of distributions - 0.01 - 0.01 - ---------------- --------------- ---------------- --------------- ---------------- Nominal distribution rates from above $ 1.20 $ 1.20 $ 1.10 $ 1.10 $ 1.05 ================ =============== ================ =============== ================
Owners of 1,000 or more units may make the election without charge to receive distributions on a monthly basis. Owners of less than 1,000 units may make the election upon payment of a $20.00 annual fee. 6 Item 6. SELECTED FINANCIAL DATA The following table presents selected financial data of the Partnership for the years ended December 31, 1999, 1998, 1997, 1996 and 1995. This financial data should be read in conjunction with the financial statements and related notes included under Item 8 of this report.
1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Gross Revenues $ 17,064,600 $ 22,011,168 $23,437,655 $ 24,987,922 $20,884,669 Net income $ 5,198,570 $ 4,861,233 $ 1,813,431 $ 2,851,885 $ 1,627,911 Weighted average Units 12,497,000 12,497,000 12,497,000 12,497,713 12,498,550 Net income per Unit, based on weighted average Units outstanding $ 0.41 $ 0.39 $ 0.14 $ 0.23 $ 0.13 Distributions per Unit, based on weighted average Units outstanding $ 1.20 $ 1.19 $ 1.10 $ 1.09 $ 1.05 Total Assets $ 67,961,144 $ 86,671,855 $106,707,576 $ 130,546,718 $136,475,349 Non-recourse Debt $ 22,138,639 $ 29,331,123 $40,138,400 $ 41,496,203 $19,129,298 Total Partners' Capital $ 44,820,397 $ 54,621,053 $64,614,239 $ 76,545,683 $87,372,135
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital Resources and Liquidity The Partnership's public offering provided for a total maximum capitalization of $125,000,000. The liquidity of the Partnership will vary in the future, increasing to the extent cash flows from leases and proceeds from asset sales exceed expenses, and decreasing as lease assets are acquired, as distributions are made to the limited partners and to the extent expenses exceed cash flows from leases and proceeds from asset sales. As another source of liquidity, the Partnership has contractual obligations with a diversified group of lessees for fixed lease terms at fixed rental amounts. As the initial lease terms expire, the Partnership will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on the General Partner's success in re-leasing or selling the equipment as it comes off lease. The Partnership participates with the General Partner and certain of its affiliates in a $95,000,000 revolving line of credit with a financial institution that includes certain financial covenants. The line of credit expires on April 30, 2000. As of December 31, 1999, the Partnership had no borrowings under this line of credit and the remaining availability was $21,857,103. The Partnership anticipates reinvesting a portion of lease payments from assets owned in new leasing transactions. Such reinvestment will occur only after the payment of all obligations, including debt service (both principal and interest), the payment of management and acquisition fees to the General Partner and providing for cash distributions to the Limited Partners. At December 31, 1999, there were no commitments to purchase lease assets. 7 As of December 31, 1999, cash balances consisted of working capital and amounts reserved for distributions in January 2000, generated from operations in 1999. The Partnership currently has available adequate reserves to meet its immediate cash requirements, but in the event those reserves were found to be inadequate, the Partnership would likely be in a position to borrow against its current portfolio to meet such requirements. The General Partner envisions no such requirements for operating purposes. As of December 31, 1999, the Partnership had borrowed $58,317,911 of non-recourse debt. The remaining unpaid balance as of that date was $22,138,639. The Partnership's long-term borrowings are non-recourse to the Partnership, that is, the only recourse of the lender is to the equipment or corresponding lease acquired with the loan proceeds. The Partnership may only incur additional debt to the extent that the then outstanding balance of all such debt, including the additional debt, does not exceed 40% of the original cost of the lease assets then owned by the Partnership, including any such assets purchased with the proceeds of such additional debt. The Partnership commenced regular distributions, based on cash flows from operations, beginning with the second quarter of 1993. See Items 5 and 6 of this report for additional information regarding the distributions. If inflation in the general economy becomes significant, it may affect the Partnership inasmuch as the residual (resale) values and rates on re-leases of the Partnership's leased assets may increase as the costs of similar assets increase. However, the Partnership's revenues from existing leases would not increase, as such rates are generally fixed for the terms of the leases without adjustment for inflation. If interest rates increase significantly, the lease rates that the Partnership can obtain on future leases will be expected to increase as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates. In future periods, cash flows from operating leases are expected to be the Partnership's primary source of cash flows from operations. Cash Flows 1999 vs. 1998: In 1999, operating lease rents were the Partnership's primary source of cash flows from operating activities. Cash flows from operations decreased from $15,715,879 in 1998 to $10,478,968 in 1999, a decrease of $5,236,911. This decrease resulted from decreases in operating lease revenues from $18,651,503 in 1998 to $13,469,113 in 1999, a decrease of $5,182,390. Sources of cash from investing activities consisted of rents from direct financing leases and proceeds from sales of lease assets. Such financing lease rents decreased from $3,019,154 in 1998 to $2,160,238 in 1999, a decrease of $858,916. Proceeds from sales of lease assets are not expected to be consistent from one year to another and decreased from $13,675,178 in 1998 to $5,186,472 in 1999, a decrease of $8,488,706. There were no financing sources of cash in 1999. Repayments of debt decreased as a result of scheduled debt payments. 1998 vs. 1997: Cash flows from operations decreased by $830,594 compared to 1997. This decrease was primarily due to a decrease in operating lease rents of $1,501,869. Direct financing lease revenues decreased by $643,234 compared to 1997. 8 In 1998, cash flows from investing activities consisted of the proceeds of lease asset sales ($13,675,178) and rents from direct financing leases ($3,019,154). Proceeds from sales of lease assets increased by $10,538,252 compared to 1997. This reflects primarily the increased sales of assets coming off of operating leases. The cost of such assets sold in 1998 was $19,583,222 compared to $1,983,077 in 1997. Proceeds from these sales are not expected to be comparable from one year to another. In 1998, the only source of cash from financing activities was the $1,000,000 borrowed on the line of credit. Cash was used in financing activities to repay non-recourse debt and to make distributions to the limited partners. Results of Operations As of March 19, 1993, subscriptions for the minimum amount of the offering ($1,200,000) had been received and accepted by the Partnership. As of that date, the Partnership commenced operations in its primary business (leasing activities). As of December 31, 1999, 26% of total equipment at cost (21% at December 31,1998) was leased to lessees in the rail transportation industry. As of December 31, 1999, 14% of total equipment at cost (less than 10% at December 31, 1998) was leased to lessees in the petroleum and coal products industry. As of December 31, 1999, 13% of total equipment at cost (14% at December 31, 1998) was leased to lessees in the mining industry. Leases are subject to ATEL's credit committee review. The leases provide for the return of the equipment upon default. The concentration of the Partnership's assets in these industries is not known to have had any effect on the Partnership's results of operations nor is there any known trend regarding these industries that would effect its operations in future periods. 1999 vs. 1998: Overall, net income increased from $4,861,233 in 1998 to $5,198,570 in 1999. The increase of $337,337 was the result of a number of largely offsetting factors. Operating lease revenues declined by $5,182,390 ($18,651,503 in 1998 and $13,469,113 in 1999), but the related depreciation on operating lease assets decreased by $3,655,354 ($11,145,876 in 1998 and $7,490,522 in 1999), a difference of $1,527,036. Both of these decreases are related to the sales of lease assets at the end of the lease terms in both 1998 and 1999. Direct financing lease revenues declined from $2,139,981 in 1998 to $1,905,218 in 1999, a decrease of $234,763. This decrease is also the result of lease asset sales over the last two years. Gains on sales of assets in 1999 increased from $1,050,907 in 1998 to $1,291,920 in 1999, an increase of $241,013. Such gains are not, however, expected to be consistent from one year to another. Interest expense has decreased as a result of scheduled debt payments and the consequent reductions of the outstanding balances. Equipment management fees are based on the revenues of the Partnership. As those revenues have declined, the management fees have decreased as well. 1998 vs. 1997: Operations in 1998 resulted in net income of $4,861,233 compared to $1,813,431 in 1997. Operating lease revenues and depreciation expense decreased by $1,501,869 and $1,463,181, respectively, as a result of the asset sales noted above under the caption "Cash Flows". Revenues from direct financing leases decreased by $643,234 in 1998, as compared to 1997 as a result of asset sales. The decreases in operating and direct financing lease revenues were partially offset by an increase in the gain recognized on sales of assets of $705,567 during 1998. Such gains are not expected to be consistent from one year to another. 9 Interest expense decreased by $861,031 compared to 1997. The decrease resulted from scheduled debt payments and the resulting decreases in debt balances. The provision for losses and impairments decreased by $1,645,693 compared to 1997. The 1997 expense included a provision directly related to the Pegasus Gold lease (see Note 10 to the financial statements included in item 8 of this report). There were no similar defaults in 1998. Impact of the Year 2000 To date, the Partnership has experienced no significant year 2000 problems and the General Partner believes it does not have continued exposure to the year 2000 problem. Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership, like most other companies, is exposed to certain market risks, including primarily changes in interest rates. The Partnership believes its exposure to other market risks including foreign currency exchange rate risk, commodity risk and equity price risk are insignificant to both its financial position and results of operations. In general, the Partnership manages its exposure to interest rate risk by obtaining fixed rate debt. The fixed rate debt is structured so as to match the cash flows required to service the debt to the payment streams under fixed rate lease receivables. The payments under the leases are assigned to the lenders in satisfaction of the debt. Furthermore, the Partnership has historically been able to maintain a stable spread between its cost of funds and lease yields in both periods of rising and falling rates. Nevertheless, the Partnership frequently funds leases with its floating rate line of credit and is therefore exposed to interest rate risk until fixed rate financing is arranged, or the floating rate line of credit is repaid. As of December 31, 1999, there was no outstanding balance on the floating rate line of credit. To hedge its interest rate risk related to this variable rate debt, the Partnership may enter into interest rate swaps. As of December 31, 1999, no swaps or other derivative financial instruments were held by the Partnership. The Partnership does not hold or issue derivative financial instruments for speculative purposes. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the Report of Independent Auditors, Financial Statements and Notes to Financial Statements attached hereto at pages 11 through 24. 10 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Partners ATEL Cash Distribution Fund V, L.P. We have audited the accompanying balance sheets of ATEL Cash Distribution Fund V, L.P. as of December 31, 1999 and 1998, and the related statements of income, changes in partners' capital, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ATEL Cash Distribution Fund V, L.P. at December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP San Francisco, California February 1, 2000 11 ATEL CASH DISTRIBUTION FUND V, L.P. BALANCE SHEETS DECEMBER 31, 1999 AND 1998 ASSETS 1999 1998 ---- ---- Cash and cash equivalents $ 3,330,065 $ 8,872,945 Accounts receivable 2,772,627 2,050,366 Other receivables, net of allowance for doubtful accounts of $100,605 in 1999 and 1998 1,309,783 995,175 Investments in equipment and leases 60,548,669 74,753,369 --------------- --------------- Total assets $ 67,961,144 $86,671,855 =============== =============== LIABILITIES AND PARTNERS' CAPITAL Non-recourse debt $ 22,138,639 $29,331,123 Line of credit - 1,000,000 Accounts payable: Equipment purchases 1,352 178,200 General Partner 117,089 217,385 Other 359,831 348,769 Accrued interest payable 107,182 104,179 Unearned lease income 416,654 871,146 --------------- --------------- Total liabilities 23,140,747 32,050,802 Partners' capital: General Partner 169,819 117,833 Limited Partners 44,650,578 54,503,220 --------------- --------------- Total partners' capital 44,820,397 54,621,053 --------------- --------------- Total liabilities and partners' capital $ 67,961,144 $86,671,855 =============== =============== See accompanying notes. 12 ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997 ---- ---- ---- Revenues: Leasing activities: Operating leases $13,469,113 $ 18,651,503 $20,153,372 Direct financing leases 1,905,218 2,139,981 2,783,215 Leveraged leases 99,758 109,769 107,494 Gain on sales of assets 1,291,920 1,050,907 345,340 Interest income 274,904 22,490 32,575 Other 23,687 36,518 15,659 ---------------- --------------- ---------------- 17,064,600 22,011,168 23,437,655 Expenses: Depreciation and amortization 7,935,060 11,830,276 13,503,318 Interest expense 2,055,475 2,738,745 3,599,776 Equipment and incentive management fees to General Partner 1,022,381 1,318,373 1,647,388 Other 442,298 724,155 571,546 Administrative cost reimbursements to General Partner 355,881 422,293 405,886 Professional fees 54,935 60,684 94,603 Provision for losses and impairments - 55,409 1,701,102 Provision for doubtful accounts - - 100,605 ---------------- --------------- ---------------- 11,866,030 17,149,935 21,624,224 ---------------- --------------- ---------------- Net income $ 5,198,570 $ 4,861,233 $ 1,813,431 ================ =============== ================ Net income: General Partner $ 51,986 $ 48,612 $ 18,134 Limited Partners 5,146,584 4,812,621 1,795,297 ---------------- --------------- ---------------- $ 5,198,570 $ 4,861,233 $ 1,813,431 ================ =============== ================ Net income per Limited Partnership unit $ 0.41 $ 0.39 $ 0.14 Weighted average number of units outstanding 12,497,000 12,497,000 12,497,000
See accompanying notes. 13 ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Limited Partners General Units Amount Partner Total ----- ------ ------- ----- Balance December 31, 1996 12,497,000 $76,494,596 $ 51,087 $76,545,683 Distributions to Limited Partners ($1.10 per Unit) (13,744,875) (13,744,875) Net income 1,795,297 18,134 1,813,431 ---------------- ---------------- --------------- ---------------- Balance December 31, 1997 12,497,000 64,545,018 69,221 64,614,239 Distributions to Limited Partners ($1.19 per Unit) (14,854,419) (14,854,419) Net income 4,812,621 48,612 4,861,233 ---------------- ---------------- --------------- ---------------- Balance December 31, 1998 12,497,000 54,503,220 117,833 54,621,053 Distributions to Limited Partners ($1.20 per Unit) (14,999,226) (14,999,226) Net income 5,146,584 51,986 5,198,570 ---------------- ---------------- --------------- ---------------- Balance December 31, 1999 12,497,000 $44,650,578 $ 169,819 $44,820,397 ================ ================ =============== ================
See accompanying notes. 14 ATEL CASH DISTRIBUTION FUND V, L.P. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Operating activities: 1999 1998 1997 ---- ---- ---- Net income $ 5,198,570 $ 4,861,233 $ 1,813,431 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,935,060 11,830,276 13,503,318 Provision for losses and impairments - 55,409 1,701,102 Provision for doubtful accounts - - 100,605 Leveraged lease income (99,758) (109,769) (107,494) Gain on sales of assets (1,291,920) (1,050,907) (345,340) Changes in operating assets and liabilities: Accounts receivable (722,261) 143,895 695,452 Other receivables - 221,000 (482,653) Other assets - - 10,000 Accounts payable, General Partner (100,296) (100,330) 22,010 Accounts payable, other 11,062 113,701 (49,861) Accrued interest payable 3,003 (115,390) (13,239) Unearned lease income (454,492) (133,239) (301,211) ---------------- --------------- ---------------- Net cash provided by operating activities 10,478,968 15,715,879 16,546,120 Investing activities: Proceeds from sales of assets 5,186,472 13,675,178 3,136,926 Reduction of net investment in direct financing leases 2,160,238 3,019,154 4,476,163 Purchases of equipment on operating leases (176,848) - (286,404) Decrease of net investment in leveraged leases - 391,167 - Purchases of equipment on direct financing leases - - (33,023) ---------------- --------------- ---------------- Net cash provided by investing activities 7,169,862 17,085,499 7,293,662 Financing activities: Distributions to Limited Partners (14,999,226) (14,854,419) (13,744,875) Repayments of non-recourse debt (7,192,484) (10,807,277) (8,175,254) Repayments of borrowings under line of credit (1,000,000) - (10,171,190) Borrowings under line of credit - 1,000,000 250,000 Proceeds of non-recourse debt - - 6,817,451 ---------------- --------------- ---------------- Net cash used in financing activities (23,191,710) (24,661,696) (25,023,868) ---------------- --------------- ---------------- Net (decrease) increase in cash and cash equivalents (5,542,880) 8,139,682 (1,184,086) Cash and cash equivalents at beginning of period 8,872,945 733,263 1,917,349 ---------------- --------------- ---------------- Cash and cash equivalents at end of period $ 3,330,065 $ 8,872,945 $ 733,263 ================ =============== ================ Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 2,052,472 $ 2,854,135 $ 3,613,015 ================ =============== ================ Schedule of non-cash transactions: Direct financing lease assets reclassified to other receivables $ 314,608 $ 834,127 $ 482,653 ================ =============== ================
See accompanying notes. 15 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 1. Organization and Partnership matters: ATEL Cash Distribution Fund V, L.P. (the Partnership), was formed under the laws of the State of California in September 1992, for the purpose of acquiring equipment to engage in equipment leasing and sales activities. Upon the sale of the minimum amount of Units of Limited Partnership interest (Units) of $1,200,000 and the receipt of the proceeds thereof on March 19, 1993, the Partnership commenced operations. The General Partner of the Partnership is ATEL Financial Corporation (ATEL). The Partnership or the General Partner on behalf of the Partnership, incurred costs in connection with the organization, registration and issuance of the Units. The amount of such costs to be borne by the Partnership was limited to 15% of Gross Proceeds of up to $25,000,000 and 14% of Gross Proceeds in excess of $25,000,000. The Partnership's business consists of leasing various types of equipment. As of December 31, 1999, the original terms of the leases ranged from two months to twenty years. Pursuant to the Limited Partnership Agreement, the General Partner receives compensation and reimbursements for services rendered on behalf of the Partnership (Note 5). The General Partner is required to maintain in the Partnership reasonable cash reserves for working capital, the repurchase of Units and contingencies. 2. Summary of significant accounting policies: Equipment on operating leases: Equipment on operating leases is stated at cost. Depreciation is being provided by use of the straight-line method over the terms of the related leases to the equipment's estimated residual values at the end of the leases. Revenues from operating leases are recognized evenly over the life of the related leases. Direct financing leases: Income from direct financing lease transactions is reported on the financing method of accounting, in which the Partnership's investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding. Investment in leveraged leases: Leases which are financed principally with non-recourse debt at lease inception and which meet certain other criteria are accounted for as leveraged leases. Leveraged lease contracts receivable are stated net of the related non-recourse debt service (which includes unpaid principal and aggregate interest on such debt) plus estimated residual values. Unearned income represents the excess of anticipated cash flows (after taking into account the related debt service and residual values) over the investment in the lease and is amortized using a constant rate of return applied to the net investment when such investment is positive. 16 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 2. Summary of significant accounting policies (continued): Reserve for losses and impairments: The Partnership maintains a reserve on its investments in equipment and leases for losses and impairments which are inherent in the portfolio as of the balance sheet date. The General Partner's evaluation of the adequacy of the allowance is a judgmental estimate that is based on a review of individual leases, past loss experience and other factors. While the General Partner believes the allowance is adequate to cover known losses, it is reasonably possible that the allowance may change in the near term. However, such change is not expected to have a material effect on the financial position or future operating results of the Partnership. It is the Partnership's policy to charge off amounts which, in the opinion of the General Partner, are not recoverable from lessees or the disposition of the collateral. Statements of cash flows: For purposes of the Statements of Cash Flows, cash and cash equivalents includes cash in banks and cash equivalent investments with original maturities of ninety days or less. Income taxes: The Partnership does not provide for income taxes since all income and losses are the liability of the individual partners and are allocated to the partners for inclusion in their individual tax returns. The tax basis of the Partnership's net assets and liabilities varies from the amounts presented in these financial statements (unaudited): 1999 1998 ---- ---- Financial statement basis of net assets $ 44,820,397 $54,621,053 Tax basis of net assets 30,533,830 38,059,569 ---------------- ---------------- Difference $ 14,286,567 $16,561,484 ================ ================ The primary differences between the tax basis of net assets and the amounts recorded in the financial statements are the result of differences in accounting for syndication costs and differences between the depreciation methods used in the financial statements and the Partnership's tax returns. The following reconciles the net income reported in these financial statements to the loss reported on the Partnership's federal tax return (unaudited):
1999 1998 1997 ---- ---- ---- Net income per financial statements $ 5,198,570 $ 4,861,233 $ 1,813,431 Adjustment to depreciation expense (2,790,702) (5,867,514) (12,174,736) Adjustments to revenues 5,065,619 16,854,379 7,646,478 Provision for doubtful accounts - - 100,605 Provision for losses and impairments - 55,409 1,701,102 ---------------- --------------- ---------------- Net income (loss) per federal tax return $ 7,473,487 $ 15,903,507 $ (913,120) ================ =============== ================
17 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 2. Summary of significant accounting policies (continued): Credit Risk: Financial instruments which potentially subject the Partnership to concentrations of credit risk include cash and cash equivalents, accounts receivable and other receivables. The Partnership places its cash deposits and temporary cash investments with creditworthy, high quality financial institutions. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Partnership. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating and direct financing leases. See Note 7 for a description of lessees by industry as of December 31, 1999. See Note 10 for a description of the Partnership's other receivables as of December 31, 1999. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles 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. Per unit data: Net income and distributions per unit are based upon the weighted average number of units outstanding during the period. Reclassifications: Certain 1998 balances have been reclassified to conform to the 1999 presentation. 3. Investments in equipment and leases: As of December 31, 1999, the Partnership's investments in equipment and leases consist of the following:
Depreciation Expense or Reclass- Amortization ifications or 1998 of Leases Dispositions 1999 ---- --------- -------------- ---- Net investment in operating leases $ 54,308,897 $ (7,490,522) $ (2,863,342) $43,955,033 Net investment in direct financing leases 17,631,304 (2,160,238) (501,532) 14,969,534 Net investment in leveraged leases 2,628,378 99,758 (605,051) 2,123,085 Assets held for sale or lease 217,819 - (212,811) 5,008 Residual value interests 835,759 - - 835,759 Reserve for losses and impairments (2,254,809) - - (2,254,809) Initial direct costs, net of accumulated amortization of $1,805,948 in 1999 and $2,268,110 in 1998 1,386,021 (444,538) (26,424) 915,059 ---------------- ---------------- --------------- ---------------- $ 74,753,369 $ (9,995,540) $ (4,209,160) $60,548,669 ================ ================ =============== ================
18 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 3. Investments in equipment and leases (continued): Operating leases: Property on operating leases consists of the following as of December 31, 1998, additions and dispositions during 1999 and as of December 31, 1999:
Reclass- ifications or 1998 Additions Dispositions 1999 ---- --------- -------------- ---- Transportation $ 43,582,225 $ (784,039) $42,798,186 Construction 15,603,111 (203,875) 15,399,236 Materials handling 9,324,247 (1,687,939) 7,636,308 Mining 12,378,185 (5,396,387) 6,981,798 Furniture and fixtures 4,820,519 (111,193) 4,709,326 Manufacturing 3,475,585 - 3,475,585 Office automation 1,658,558 (1,512,832) 145,726 Printing 2,325,000 (2,325,000) - Food processing 1,643,101 (1,643,101) - ---------------- ---------------- --------------- ---------------- 94,810,531 (13,664,366) 81,146,165 Less accumulated depreciation (40,501,634) $ (7,490,522) 10,801,024 (37,191,132) ---------------- ---------------- --------------- ---------------- $ 54,308,897 $ (7,490,522) $ (2,863,342) $43,955,033 ================ ================ =============== ================
Direct financing leases: As of December 31, 1999, investment in direct financing leases consists of railroad auto racks, railroad tank cars and retail store fixtures. The following lists the components of the Partnership's investment in direct financing leases as of December 31, 1999 and 1998:
1999 1998 ---- ---- Total minimum lease payments receivable $16,142,453 $ 20,393,209 Estimated residual values of leased equipment (unguaranteed) 5,304,034 5,505,466 ---------------- --------------- Investment in direct financing leases 21,446,487 25,898,675 Less unearned income (6,476,953) (8,267,371) ---------------- --------------- Net investment in direct financing leases $14,969,534 $ 17,631,304 ================ ===============
All of the property on leases was acquired in the years 1993 through 1997. 19 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 3. Investments in equipment and leases (continued): At December 31, 1999, the aggregate amounts of future minimum lease payments under operating and direct financing leases are as follows: Direct Year ending Operating Financing December 31, Leases Leases Total ------------ ------ ------ ----- 2000 $ 8,145,394 $ 3,722,038 $11,867,432 2001 5,429,659 3,114,032 8,543,691 2002 3,574,219 2,766,273 6,340,492 2003 1,713,606 909,333 2,622,939 2004 568,585 622,852 1,191,437 Thereafter 5,460,812 5,007,925 10,468,737 ---------------- --------------- ---------------- $ 24,892,275 $ 16,142,453 $41,034,728 ================ =============== ================ Leveraged leases: As of December 31, 1999, investment in leveraged leases consists of materials handling equipment. The following lists the components of the Partnership's investment in leveraged leases as of December 31, 1999 and 1998:
1999 1998 ---- ---- Aggregate rentals receivable $ 1,529,332 $ 2,664,516 Less aggregate principal and interest payable on non-recourse loans (611,503) (1,355,461) Estimated residual value of leased assets 1,356,686 1,570,511 Less unearned income (151,430) (251,188) ---------------- --------------- Net investment in leveraged leases $ 2,123,085 $ 2,628,378 ================ ===============
Reserves for losses and impairments: Activity in the reserve for losses and impairments consists of the following: Balance 12/31/96 $ 498,298 Provision 1,701,102 ---------------- Balance 12/31/97 2,199,400 Provision 55,409 ---------------- Balance 12/31/98 2,254,809 Provision - ---------------- Balance 12/31/99 $ 2,254,809 ================ 20 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 4. Non-recourse debt: At December 31, 1999, non-recourse debt, other than that related to leveraged leases which is accounted for as a part of the net investment in leveraged leases, consists of notes payable to financial institutions. The notes are due in varying monthly, quarterly and semi-annual payments. Interest on the notes is at rates from 6.6% to 10.7%. The notes are secured by assignments of lease payments and pledges of assets. At December 31, 1999, the carrying value of the pledged assets is approximately $33,789,842. The notes mature from 2000 through 2015. Future minimum payments of non-recourse debt are as follows: Year ending December 31, Principal Interest Total ------------ --------- -------- ----- 2000 $ 5,709,333 $ 1,495,656 $ 7,204,989 2001 4,575,203 1,057,560 5,632,763 2002 2,915,879 699,261 3,615,140 2003 709,048 553,832 1,262,880 2004 453,006 513,642 966,648 Thereafter 7,776,170 2,917,357 10,693,527 ---------------- --------------- ---------------- $ 22,138,639 $ 7,237,308 $29,375,947 ================ =============== ================ 5. Related party transactions: The terms of the Limited Partnership Agreement provide that the General Partner and/or Affiliates are entitled to receive certain fees for equipment acquisition, management and resale and for management of the Partnership. The Limited Partnership Agreement allows for the reimbursement of costs incurred by the General Partner in providing administrative services to the Partnership. Administrative services provided include Partnership accounting, investor relations, legal counsel and lease and equipment documentation. The General Partner is not reimbursed for services where it is entitled to receive a separate fee as compensation for such services, such as acquisition and disposition of equipment. Reimbursable costs incurred by the General Partner are allocated to the Partnership based upon actual time incurred by employees working on Partnership business and an allocation of rent and other costs based on utilization studies. Substantially all employees of the General Partner record time incurred in performing administrative services on behalf of all of the Partnerships serviced by the General Partner. The General Partner believes that the costs reimbursed are the lower of (i) actual costs incurred on behalf of the Partnership or (ii) the amount the Partnership would be required to pay independent parties for comparable administrative services in the same geographic location and are reimbursable in accordance with the Limited Partnership Agreement. 21 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 5. Related party transactions (continued): The General Partner and/or Affiliates earned fees, commissions and reimbursements pursuant to the Limited Partnership Agreement as follows during 1999, 1998 and 1997:
1999 1998 1997 ---- ---- ---- Incentive management fees (computed as 5% of distributions of cash from operations, as defined in the Limited Partnership Agreement) and equipment management fees (computed as 5% of gross revenues from operating leases, as defined in the Limited Partnership Agreement plus 2% of gross revenues from full payout leases, as defined in the Limited Partnership Agreement). $ 1,022,381 $ 1,318,373 $ 1,647,388 Administrative costs reimbursed to General Partner 355,881 422,293 405,886 ---------------- --------------- ---------------- $ 1,378,262 $ 1,740,666 $ 2,053,274 ================ =============== ================
6. Partners' capital: As of December 31, 1999 and 1998, 12,497,000 Units were issued and outstanding (in addition to the Units issued to the Initial Limited Partners). The Partnership is authorized to issue up to 12,500,000 Units of Limited Partnership interest in addition to those issued to the initial Limited Partners. The Partnership Net Profits, Net Losses, and Tax Credits are to be allocated 99% to the Limited Partners and 1% to the General Partner. Available Cash from Operations and Cash from Sales and Refinancing, as defined in the Limited Partnership Agreement, shall be distributed as follows: First, 5% of Distributions of Cash from Operations to the General Partner as Incentive Management Fee. Second, the balance to the Limited Partners until the Limited Partners have received Aggregate Distributions in an amount equal to their Original Invested Capital, as defined, plus a 10% per annum cumulative (compounded daily) return on their Adjusted Invested Capital. Third, the General Partner will receive as Incentive Management Compensation, the following: (A) 10% of remaining Cash from Operations, (B) 15% of remaining Cash from Sales or Refinancing. Fourth, the balance to the Limited Partners. 22 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 7. Concentration of credit risk and major customers: The Partnership leases equipment to lessees in diversified industries. Leases are subject to the General Partner's credit committee review. The leases provide for the return of the equipment upon default. As of December 31, 1999, 1998 and 1997, there were concentrations (greater than 10%) of equipment leased to lessees in certain industries (as a percentage of total equipment cost) as follows: 1999 1998 1997 ---- ---- ---- Rail transportation 26% 21% 25% Petroleum and coal products 14% * 10% Mining 13% 14% 15% * Less than 10%. During 1999, no customers comprised in excess of 10% of the Partnership's revenues from leases. During 1998, two customers comprised 14% and 11% of the Partnership's revenues from leases. During 1997, two customers comprised 19% and 14% of the Partnership's revenues from leases. 8. Line of credit: The Partnership participates with the General Partner and certain of its Affiliates in a $95,000,000 revolving credit agreement with a group of financial institutions which expires on April 30, 2000. The agreement includes an acquisition facility and a warehouse facility which are used to provide bridge financing for assets on leases. Draws on the acquisition facility by any individual borrower are secured only by that borrower's assets, including equipment and related leases. Borrowings on the warehouse facility are recourse jointly to certain of the Affiliates, the Partnership and the General Partner. During 1998, the Partnership borrowed $1,000,000 under the line of credit. There were no repayments on the line of credit during 1998. The balance was repaid in January 1999. Interest on the line of credit is based on either the thirty day LIBOR rate or the bank's prime rate. The credit agreement includes certain financial covenants applicable to each borrower. The Partnership was in compliance with its covenants as of December 31, 1999. At December 31, 1999, $21,857,103 was available under this agreement. 23 ATEL CASH DISTRIBUTION FUND V, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 9. Fair value of financial instruments: The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Cash and cash equivalents: The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments. Non-recourse debt: The fair value of the Partnership's non-recourse debt is estimated using discounted cash flow analyses, based on the Partnership's current incremental borrowing rates for similar types of borrowing arrangements. The estimated fair value of the Partnership's non-recourse debt at December 31, 1999 is $20,711,452. Line of credit: The carrying amount of the Partnership's variable rate line of credit approximates fair value. 10. Provision for losses and impairments: In January 1998, Pegasus Gold, one of the Partnership's lessees, filed for reorganization under Chapter 11 of the United States Bankruptcy Code. The Partnership determined that certain of the assets under this direct financing lease (with a total net book value of $5,826,418) were impaired at December 31,1997. The Partnership's provision for losses and impairments for 1997 includes a reserve for the estimated credit exposure related to the remaining lease assets. In October 1997 and 1999, Schwegmann's Giant Supermarkets, one of the Partnership's lessees, defaulted on its lease obligations. The Partnership has sold the assets relating to the defaulted lease obligation. Subsequent to the sales of the assets, the Partnership reclassified the remaining lease investments to other receivables. The book value of the other receivables was $1,410,388 at December 31, 1999 ($1,095,780 at December 31, 1998). The General Partner has provided for a reserve of $100,605 on the other receivables at December 31, 1999 and 1998. The net book value of the Partnership's defaulted lease obligation related to Schwegmann's Giant Supermarkets which is classified as an investment in direct finance lease was $603,976 at December 31, 1998 (none at December 31, 1999). The Partnership's provision for losses and impairments for 1997 includes a reserve for the estimated credit exposure related to the remaining lease assets. Uncertainties surrounding the lessees' workout proceedings, their credit and collateral and the related bankruptcy court adjudications, among other factors, all affect the Partnership's ability to estimate its future cash flows from lease payments and equipment residual values. As a result, it is reasonably possible that a change in estimate will occur in the near term. However, such change is not expected to have a material effect on the financial position or future operating results of the Partnership. 24 Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURES Inapplicable. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS The registrant is a Limited Partnership and, therefore, has no officers or directors. All of the outstanding capital stock of ATEL Financial Corporation (the General Partner) is held by ATEL Capital Group ("ACG"), a holding company formed to control ATEL and affiliated companies pursuant to a corporate restructuring completed in July 1994. The outstanding capital stock of ATEL Capital Group is owned 73.125% by A. J. Batt and 24.375% by Dean Cash, and was obtained in the restructuring in exchange for their capital interests in ATEL Financial Corporation. The remaining 2.5% is owned by Paritosh K. Choksi. Each of ATEL Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC"), ATEL Investor services ("AIS") and ATEL Financial Corporation ("AFC") is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Partnership. Acquisition services are performed for the Partnership by ALC, equipment management, lease administration and asset disposition services are performed by AEC, investor relations and communications services are performed by AIS and general administrative services for the Partnership are performed by AFC. ATEL Securities Corporation ("ASC"), is a wholly-owned subsidiary of ATEL Financial Corporation. The officers and directors of ATEL Capital Group and its affiliates are as follows: A. J. Batt Chairman of the Board of Directors of ACG, AFC, ALC, AEC, AIS and ASC; President and Chief Executive Officer of ACG, AFC and AEC Dean L. Cash Director, Executive Vice President and Chief Operating Officer of ACG, AFC, and AEC; Director, President and Chief Executive Officer of ALC, AIS and ASC Paritosh K. Choksi Director, Senior Vice President and Chief Financial Officer of ACG, AFC, ALC, AEC and AIS Donald E. Carpenter Vice President and Controller of ACG, AFC, ALC, AEC and AIS; Chief Financial Officer of ASC Vasco H. Morais Senior Vice President, Secretary and General Counsel for ACG, AFC, ALC, AIS and AEC Carl W. Magnuson Vice President - Syndication of ALC Barbara F. Medwadowski Vice President - Syndication of ALC James A. Kamradt Director of Pricing and Syndication of ALC Thomas D. Sbordone Senior Vice President - Marketing of ALC Russell H. Wilder Vice President - Credit of AEC John P. Scarcella Vice President of ASC 25 A. J. Batt, age 63, founded ATEL in 1977 and has been its president and chairman of the board of directors since its inception. From 1973 to 1977, he was employed by GATX Leasing Corporation as manager-data processing and equity placement for the lease underwriting department, which was involved in equipment financing for major corporations. From 1967 to 1973 Mr. Batt was a senior technical representative for General Electric Corporation, involved in sales and support services for computer time-sharing applications for corporations and financial institutions. Prior to that time, he was employed by North American Aviation as an engineer involved in the Apollo project. Mr. Batt received a B.Sc. degree with honors in mathematics and physics from the University of British Columbia in 1961. Dean L. Cash, age 49, joined ATEL as director of marketing in 1980 and has been a vice president since 1981, executive vice president since 1983 and a director since 1984. Prior to joining ATEL, Mr. Cash was a senior marketing representative for Martin Marietta Corporation, data systems division, from 1979 to 1980. From 1977 to 1979, he was employed by General Electric Corporation, where he was an applications specialist in the medical systems division and a marketing representative in the information services division. Mr. Cash was a systems engineer with Electronic Data Systems from 1975 to 1977, and was involved in maintaining and developing software for commercial applications. Mr. Cash received a B.S. degree in psychology and mathematics in 1972 and an M.B.A. degree with a concentration in finance in 1975 from Florida State University. Mr. Cash is an arbitrator with the American Arbitration Association. Paritosh K. Choksi, age 46, joined ATEL in 1999 as a director, senior vice president and its chief financial officer. Prior to joining ATEL, Mr. Choksi was chief financial officer at Wink Communications, Inc. from 1997 to 1999. From 1977 to 1997, Mr. Choksi was with Phoenix American Incorporated, a financial services and management company, where he held various positions during his tenure, and was senior vice president, chief financial officer and director when he left the company. Mr. Choksi was involved in all corporate matters at Phoenix and was responsible for Phoenix's capital market needs. He also served on the credit committee overseeing all corporate investments, including its venture lease portfolio. Mr. Choksi was a part of the executive management team which caused Phoenix's portfolio to increase from $50 million in assets to over $2 billion. Mr. Choksi received a bachelor of technology degree in mechanical engineering from the Indian Institute of Technology, Bombay; and an M.B.A. degree from the University of California, Berkeley. Donald E. Carpenter, age 51, joined ATEL in 1986 as controller. Prior to joining ATEL, Mr. Carpenter was an audit supervisor with Laventhol & Horwath, certified public accountants in San Francisco, California, from 1983 to 1986. From 1979 to 1983, Mr. Carpenter was an audit senior with Deloitte, Haskins & Sells, certified public accountants, in San Jose, California. From 1971 to 1975, Mr. Carpenter was a Supply Corp officer in the U. S. Navy. Mr. Carpenter received a B.S. degree in mathematics (magna cum laude) from California State University, Fresno in 1971 and completed a second major in accounting in 1978. Mr. Carpenter has been a California certified public accountant since 1981. Vasco H. Morais, age 41, joined ATEL in 1989 as general counsel to provide legal support in the drafting and reviewing of lease documentation, advising on general corporate law matters, and assisting on securities law issues. From 1986 to 1989, Mr. Morais was employed by the BankAmeriLease Companies, Bank of America's equipment leasing subsidiaries, providing in-house legal support on the documentation of tax-oriented and non-tax oriented direct and leveraged lease transactions, vendor leasing programs and general corporate matters. Prior to the BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital Companies in the corporate and securities legal department involved in drafting and reviewing contracts, advising on corporate law matters and securities law issues. Mr. Morais received a B.A. degree in 1982 from the University of California in Berkeley, a J.D. degree in 1986 from Golden Gate University Law School and an M.B.A. (Finance) in 1997 from Golden Gate University. Mr. Morais has been an active member of the State Bar of California since 1986. 26 Carl W. Magnuson, age 56, joined ATEL in 1994 and is vice president - syndication for ALC. Mr. Magnuson is responsible for acquiring third party lease transactions and debt placement. Prior to joining ATEL he was a regional group manager and portfolio sales manager for Bell Atlantic Systems Leasing for 10 years. From 1983 to 1984 he was vice president and chief financial officer of the Handi-Kup Company, a plastics manufacturer, and from 1981 to 1982 he was controller for the Cyclotron Corporation, engaged in nuclear medicine research and development. From 1978 to 1981 he was executive vice president of Shannon Financial Corporation, a middle market leasing corporation. From 1975 to 1978 he was a deputy program manager for the Watkins Johnson Company. From 1968 to 1973 Mr. Magnuson was an engineering duty officer in the U. S. Navy. Mr. Magnuson received a B.S. in Engineering Science and an M.S. in applied mathematics from the Rensselaer Polytechnic Institute, an M.S. in industrial engineering/operations research from Stanford University, and an M.B.A. from the University of California at Berkeley. Barbara F. Medwadowski, age 60, joined ATEL in 1997 and is vice president - syndication for ALC. Ms. Medwadoski is responsible for acquiring third party lease transactions. Prior to joining ATEL, she was a syndications manager for Mellon US Leasing (successor to USL Capital and U.S. Leasing Corporation) for nine years. From 1985 to 1987, she was a vice president with Great Western Leasing where she acquired lease and loan transactions from intermediaries. From 1982 through 1984, she was a portfolio manager with U.S. Leasing Corporation. Ms. Medwadowski received an M.B.A. degree from the University of California at Berkeley in 1982. From 1964 through 1979, she was a senior researcher in lipids and lipoproteins at the University of California at Berkeley. In 1964, she earned an M.S. degree in nutrition and in 1961 a B.S. degree in child development, each from the University of California at Berkeley. James A. Kamradt, age 38, director of pricing and syndication for ALC, joined ATEL in 1997. Mr. Kamradt is involved in the pricing of lease transactions and the placement of debt to leverage certain transactions. From 1985 to 1997, Mr. Kamradt managed his own private consulting business, providing underwriting and operational services for numerous leasing companies. Prior to that, Mr. Kamradt was the national operations officer for the computer leasing division of Phoenix American; and regional credit manager for Dana Commercial Credit Corporation. Mr. Kamradt received a B.S. from Michigan Technological University's Engineering School of Business, and an M.B.A. from Haas School of Business of the University of California, Berkeley. Thomas D. Sbordone, age 41, senior vice president - marketing for ALC, joined ATEL in 1993, as a regional vice president in the northeastern United States. Mr. Sbordone is currently responsible for new business development within the eastern U.S., including management of filed sales personnel and directly interfacing with ATEL's existing and prospective clients to achieve the company's lease investment objectives. Prior to joining ATEL, Mr. Sbordone was employed, from 1985, by American Finance Group, a Boston-based equipment lessor. While there, Mr. Sbordone's various responsibilities involved lease origination of vendor finance relationships. Mr. Sbordone earned a B.S., with honors, in finance and marketing from Northeastern University, and has attended Bentley College Graduate School of Business. Russell H. Wilder, age 45, joined ATEL in 1992 as vice president of ATEL Business Credit, a wholly-owned subsidiary of ACG. Immediately prior to joining ATEL, Mr. Wilder was a personal property broker specializing in equipment leasing and financing and an outside contractor in the areas of credit and collections. From 1985 to 1990 he was vice president and manager of leasing for Fireside Thrift Co., a Teledyne subsidiary, and was responsible for all aspects of setting up and managing the department, which operated as a small ticket lease funding source. From 1983 to 1985 he was with Wells Fargo Leasing Corporation as assistant vice president in the credit department where he oversaw all credit analysis on transactions in excess of $2 million. From 1978 to 1983 he was district credit manager with Westinghouse Credit Corporation's Industrial Group and was responsible for all non-marketing operations of various district offices. Mr. Wilder holds a B.S. with honors in agricultural economics and business management from the University of California, Davis. He has been awarded the Certified Lease Professional designation by the Western Association of Equipment Lessors. 27 John P. Scarcella, age 38, joined ATEL Securities as vice president in 1992. He is involved in the marketing of securities offered by ASC. Prior to joining ASC, from 1987 to 1991, he was employed by Lansing Pacific Fund, a real estate investment trust in San Mateo, California and acted as director of investor relations. From 1984 to 1987, Mr. Scarcella acted as broker dealer representative for Lansing Capital Corporation, where he was involved in the marketing of direct participation programs and REITs. Mr. Scarcella received a B.S.C. degree with emphasis in investment finance in 1983 and an M.B.A. degree with a concentration in marketing in 1991 from Santa Clara University. Item 11. EXECUTIVE COMPENSATION The registrant is a Limited Partnership and, therefore, has no officers or directors. Set forth hereinafter is a description of the nature of remuneration paid and to be paid to the General Partner and their affiliates. The amount of such remuneration paid for the years ended December 31, 1999, 1998 and 1997 is set forth in Item 8 of this report under the caption "Financial Statements and Supplementary Data - Notes to the Financial Statements - Related party transactions," at Note 5 thereof, which information is hereby incorporated by reference. Selling Commissions The Partnership paid selling commissions in the amount of 9.5% of Gross Proceeds, as defined, ($11,875,000) to ATEL Securities Corporation, an affiliate of the General Partner. Of this amount, $10,170,534 was reallowed to other broker/dealers. Acquisition Fees Acquisition fees are to be paid to the General Partner for services rendered in finding, reviewing and evaluating equipment to be purchased by the Partnership and rejecting equipment not to be purchased by the Partnership. The total amount of acquisition fees to be paid to the General Partner or their Affiliates is not to exceed 3.5% of the aggregate purchase piece of equipment acquired, not to exceed approximately 4.75% of the Gross Proceeds of the Offering. The maximum amount of such fees to be paid is $5,929,583, all of which had been paid as of December 31, 1996. Equipment Management Fees As compensation for its services rendered generally in managing or supervising the management of the Partnership's equipment and in supervising other ongoing services and activities including, among others, arranging for necessary maintenance and repair of equipment, collecting revenue, paying operating expenses, determining the equipment is being used in accordance with all operative contractual arrangements, property and sales tax monitoring and preparation of financial data, the General Partner or its affiliates are entitled to receive management fees which are payable for each fiscal quarter and are to be in an amount equal to (i) 5% of the gross lease revenues from "operating" leases and (ii) 2% of gross lease revenues from "full payout" leases which contain net lease provisions. See Note 5 to the financial statements included at Item 8 of this report for amounts paid. Incentive Management Fees As compensation for its services rendered in establishing and maintaining the composition of the Partnership's equipment portfolio and its acquisition and debt strategies and supervising fund administration including supervising the preparation of reports and maintenance of financial and operating data of the Partnership, Securities and Exchange Commission and Internal Revenue Service filings, returns and reports, the General Partner shall be entitled to receive the Partnership management fee which shall be payable for each fiscal quarter and shall be an amount equal to 5% of distributions of cash from operations until such time as the Limited Partners have received aggregate distributions of cash from operations in an amount equal to their original invested capital plus a 10% per annum return on their average adjusted invested capital (as defined in the Limited Partnership Agreement). Thereafter, the incentive management fee shall be 15% of all distributions of cash from operations, sales or refinancing. See Note 5 to the financial statements included at Item 8 of this report for amounts paid. 28 Equipment Resale Fees As compensation for services rendered in connection with the sale of equipment, the General Partner shall be entitled to receive an amount equal to the lesser of (i) 3% of the sales price of the equipment, or (ii) one-half the normal competitive equipment sales commission charged by unaffiliated parties for such services. Such fee is payable only after the Limited Partners have received a return of their adjusted invested capital (as defined in the Limited Partnership Agreement) plus 10% of their adjusted invested capital per annum calculated on a cumulative basis, compounded daily, commencing the last day of the quarter in which the limited partner was admitted to the Partnership. To date, none have been accrued or paid. Equipment Re-lease Fee As compensation for providing re-leasing services, the General Partner is entitled to receive fees equal to 2% of the gross rentals or the comparable competitive rate for such services relating to comparable equipment, whichever is less, derived from the re-lease provided that (i) the General Partner or their affiliates have and will maintain adequate staff to render such services to the Partnership, (ii) no such re-lease fee is payable in connection with the re-lease of equipment to a previous lessee or its affiliates, (iii) the General Partner or its affiliates have rendered substantial re-leasing services in connection with such re-lease and (iv) the General Partner or its affiliates are compensated for rendering equipment management services. To date, none have been accrued or paid. General Partner's Interest in Operating Proceeds Net income, net loss and investment tax credits are allocated 99% to the Limited Partners and 1% to the general partner. See the statements of income included in Item 8 of this report for the amounts allocated to the general and Limited Partners in 1999, 1998 and 1997. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership of Certain Beneficial Owners At December 31, 1999 no investor is known to the Partnership to hold beneficially more than 5% of the issued and outstanding Units. Security Ownership of Management The shareholders of the General Partner are beneficial owners of Limited Partnership Units as follows:
(1) (2) (3) (4) Name and Address of Amount and Nature of Percent Title of Class Beneficial Owner Beneficial Ownership of Class -------------- ---------------- -------------------- -------- Limited Partnership Units A. J. Batt Initial Limited Partner Units 0.0002% 235 Pine Street, 6th Floor 25 Units ($250) San Francisco, CA 94104 (owned by wife) Limited Partnership Units Dean Cash Initial Limited Partner Units 0.0002% 235 Pine Street, 6th Floor 25 Units ($250) San Francisco, CA 94104 (owned by wife)
29 Changes in Control The Limited Partners have the right, by vote of the Limited Partners owning more than 50% of the outstanding limited Partnership units, to remove a General Partner. The General Partner may at any time call a meeting of the Limited Partners or a vote of the Limited Partners without a meeting, on matters on which they are entitled to vote, and shall call such meeting or for vote without a meeting following receipt of a written request therefor of Limited Partners holding 10% or more of the total outstanding Limited Partnership units. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The responses to Item 1 of this report under the caption "Equipment Leasing Activities," Item 8 of this report under the caption "Financial Statements and Supplemental Data - Notes to the Financial Statements - Related party transactions" at Note 5 thereof, and Item 11 of this report under the caption "Executive Compensation," are hereby incorporated by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements and Schedules 1. Financial Statements Included in Part II of this report: Report of Independent Auditors Balance Sheets at December 31, 1999 and 1998 Statements of Income for the years ended December 31, 1999, 1998 and 1997 Statements of Changes in Partners' Capital for the years ended December 31, 1999, 1998 and 1997 Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 Notes to Financial Statements 2. Financial Statement Schedules All 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. (b) Reports on Form 8-K for the fourth quarter of 1999 None (c) Exhibits (3) and (4) Agreement of Limited Partnership, included as Exhibit B to Prospectus (Exhibit 28.1), is incorporated herein by reference to the Report on Form 10K for the period ended December 31, 1993 (File No. 33-53162) 30 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: 3/22/2000 ATEL Cash Distribution Fund V, L.P. (Registrant) By: ATEL Financial Corporation, General Partner of Registrant By: /s/ A. J. Batt ------------------------------------------------- A. J. Batt, President and Chief Executive Officer of ATEL Financial Corporation (General Partner) By: /s/ Dean Cash ------------------------------------------------- Dean Cash, Executive Vice President of ATEL Financial Corporation (General Partner) 31 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the persons in the capacities and on the dates indicated. SIGNATURE CAPACITIES DATE /s/ A. J. Batt President, Chairman and Chief Executive 3/22/2000 - ------------------------ Officer of ATEL Financial Corporation A. J. Batt /s/ Dean Cash Executive Vice President and director of 3/22/2000 - ------------------------ ATEL Financial Corporation Dean Cash /s/ Paritosh K. Choksi Principal financial officer of registrant; 3/22/2000 - ------------------------ principal financial officer and director Paritosh K. Choksi of ATEL Financial Corporation /s/ Donald E. Carpenter Principal accounting officer of registrant; 3/22/2000 - ------------------------ principal accounting officer of ATEL Donald E. Carpenter Financial Corporation Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act: No proxy materials have been or will be sent to security holders. An annual report will be furnished to security holders subsequent to the filing of this report on Form 10-K, and copies thereof will be furnished supplementally to the Commission when forwarded to the security holders. 32 EX-27 2 FDS --
5 12-mos dec-31-1999 dec-31-1999 3,330,065 0 2,772,627 0 0 0 0 0 67,961,144 0 0 0 0 0 44,820,397 67,961,144 0 17,064,600 0 0 9,810,555 0 2,055,475 5,198,570 0 5,198,570 0 0 0 5,198,570 0 0
-----END PRIVACY-ENHANCED MESSAGE-----